Justia Department Of Health And Human Services Centers For Medicare & Medicaid Services Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program, 27977-28384 [2014-10067]

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program, 27977-28384 [2014-10067]

Download as PDF Vol. 79 Thursday, No. 94 May 15, 2014 Part II Department of Health and Human Services mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Centers for Medicare & Medicaid Services 42 CFR Parts 405, 412, 413, et al. Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program; Proposed Rule VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\15MYP2.SGM 15MYP2 27978 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488 [CMS–1607–P] RIN 0938–AS11 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program Centers for Medicare and Medicaid Services (CMS), HHS. ACTION: Proposed rule. AGENCY: We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems. Some of the proposed changes implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act), the Protecting Access to Medicare Act of 2014, and other legislation. These proposed changes would be applicable to discharges occurring on or after October 1, 2014, unless otherwise specified in this proposed rule. We also are proposing to update the rate-ofincrease limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The proposed updated rate-ofincrease limits would be effective for cost reporting periods beginning on or after October 1, 2014. We also are proposing to update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and to implement certain statutory changes to the LTCH PPS under the Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 and the Protecting Access to Medicare Act of 2014. In addition we mstockstill on DSK4VPTVN1PROD with PROPOSALS2 SUMMARY: VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 are proposing to revise the interruption of stay policy for LTCHs and to retire the ‘‘5 percent’’ payment adjustment for co-located LTCHs. While many of the statutory mandates of the Pathway for SGR Reform Act will apply to discharges occurring on or after October 1, 2014, others will not begin to apply until 2016 and beyond. However, in light of the degree of forthcoming change, we discuss changes infra and request public feedback to inform our proposals for FY 2016 in this proposed rule as well. In addition, we are proposing to make a number of changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments. We are proposing to establish new requirements or revise requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare. We are proposing to update policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. In addition, we are proposing changes to the regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports; updates to the reasonable compensation equivalent (RCE) limits for services furnished by physicians to teaching hospitals excluded from the IPPS; regulatory revisions to broaden the specified uses of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS; and changes to the enforcement procedures for organ transplant centers. We are proposing to align the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions. DATES: Comment Period: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. EDT on June 30, 2014. ADDRESSES: In commenting, please refer to file code CMS–1607–P. Because of staff and resource limitations, we cannot PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to https:// www.regulations.gov. Follow the instructions under the ‘‘submit a comment’’ tab. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1607–P, P.O. Box 8011, Baltimore, MD 21244–1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1607–P, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445–G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244–1850. If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786–7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, we refer readers to the E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules beginning of the SUPPLEMENTARY INFORMATION section. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786–4487, and Tiffany Swygert, (410) 786–4465, Operating Prospective Payment, MS– DRGs, Hospital-Acquired Conditions (HAC), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues. Michele Hudson, (410) 786–4487, and Judith Richter, (410) 786–2590, LongTerm Care Hospital Prospective Payment System and MS–LTC–DRG Relative Weights Issues. Siddhartha Mazumdar, (410) 786– 6673, Rural Community Hospital Demonstration Program Issues. James Poyer, (410) 786–2261, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing— Program Administration, Validation, and Reconsideration Issues. Karen Nakano, (410) 786–6889, Hospital Inpatient Quality Reporting— Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues. Elizabeth Goldstein, (410) 786–6665, Hospital Inpatient Quality Reporting— Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues. Mary Pratt, (410) 786–6867, LTCH Quality Data Reporting Issues. Kim Spalding Bush, (410) 786–3232, Hospital Value-Based Purchasing Efficiency Measures Issues. James Poyer, (410) 786–2261, PPSExempt Cancer Hospital Quality Reporting Issues. Kellie Shannon, (410) 786–0416, Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review Issues. Amelia Citerone, (410) 786–3901, and Robert Kuhl (410) 786–4597, Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided in Providers. Ann Hornsby, (410) 786–1181, and Jennifer Harlow, (410) 786–4549, Medicare Advantage Encounter Data Issues. Thomas Hamilton, (410) 786–6763, Organ Transplant Center Issues. Jennifer Phillips, (410) 786–1023, 2Midnight Rule Benchmark Issues. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All public comments received before the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all public comments received before the close of the comment period on the following Web site as soon as possible after they have been received: https:// www.regulations.gov. Follow the search instructions on that Web site to view public comments. Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at: https://www.gpo.gov/fdsys. Tables Available Only Through the Internet on the CMS Web Site In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables are no longer published in the Federal Register. Instead, these tables are available only through the Internet. The IPPS tables for this proposed rule are available only through the Internet on the CMS Web site at: https://www.cms. hhs.gov/Medicare/medicare-Fee-forService-Payment/AcuteInpatientPPS/ index.html. Click on the link on the left side of the screen titled, ‘‘FY 2015 IPPS Proposed Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. The LTCH PPS tables for this FY 2015 proposed rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/Long TermCareHospitalPPS/ under the list item for Regulation Number CMS–1607–P. For complete details on the availability of the tables referenced in this proposed rule, we refer readers to section VI. of the Addendum to this proposed rule. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Michael Treitel at (410) 786–4552. Acronyms 3M 3M Health Information System AAMC Association of American Medical Colleges ACGME Accreditation Council for Graduate Medical Education ACoS American College of Surgeons PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 27979 AHA American Hospital Association AHIC American Health Information Community AHIMA American Health Information Management Association AHRQ Agency for Healthcare Research and Quality AJCC American Joint Committee on Cancer ALOS Average length of stay ALTHA Acute Long Term Hospital Association AMA American Medical Association AMGA American Medical Group Association AMI Acute myocardial infarction AOA American Osteopathic Association APR DRG All Patient Refined Diagnosis Related Group System APRN Advanced practice registered nurse ARRA American Recovery and Reinvestment Act of 2009, Public Law 111–5 ASCA Administrative Simplification Compliance Act of 2002, Public Law 107– 105 ASITN American Society of Interventional and Therapeutic Neuroradiology ATRA American Taxpayer Relief Act of 2012, Public Law 112–240 BBA Balanced Budget Act of 1997, Public Law 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000, Public Law 106–554 BLS Bureau of Labor Statistics CABG Coronary artery bypass graft [surgery] CAH Critical access hospital CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument] CART CMS Abstraction & Reporting Tool CAUTI Catheter-associated urinary tract infection CBSAs Core-based statistical areas CC Complication or comorbidity CCN CMS Certification Number CCR Cost-to-charge ratio CDAC [Medicare] Clinical Data Abstraction Center CDAD Clostridium difficile-associated disease CDC Center for Disease Control and Prevention CERT Comprehensive error rate testing CDI Clostridium difficile (C. difficile) CFR Code of Federal Regulations CLABSI Central line-associated bloodstream infection CIPI Capital input price index CMI Case-mix index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 99– 272 COLA Cost-of-living adjustment CoP [Hospital] condition of participation COPD Chronis obstructive pulmonary disease E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27980 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules CPI Consumer price index CQM Clinical quality measure CRNA Certified registered nurse anesthetist CY Calendar year DACA Data Accuracy and Completeness Acknowledgement DPP Disproportionate patient percentage DRA Deficit Reduction Act of 2005, Public Law 109–171 DRG Diagnosis-related group DSH Disproportionate share hospital EBRT External Bean Radiotherapy ECI Employment cost index eCQM Electronic clinical quality measure EDB [Medicare] Enrollment Database EHR Electronic health record EMR Electronic medical record EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 99–272 EP Eligible professional FAH Federation of American Hospitals FDA Food and Drug Administration FFY Federal fiscal year FPL Federal poverty line FQHC Federally qualified health center FR Federal Register FTE Full-time equivalent FY Fiscal year GAF Geographic Adjustment Factor GME Graduate medical education HAC Hospital-acquired condition HAI Healthcare-associated infection HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HCFA Health Care Financing Administration HCO High-cost outlier HCRIS Hospital Cost Report Information System HHA Home health agency HHS Department of Health and Human Services HICAN Health Insurance Claims Account Number HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104–191 HIPC Health Information Policy Council HIS Health information system HIT Health information technology HMO Health maintenance organization HPMP Hospital Payment Monitoring Program HSA Health savings account HSCRC [Maryland] Health Services Cost Review Commission HSRV Hospital-specific relative value HSRVcc Hospital-specific relative value cost center HQA Hospital Quality Alliance HQI Hospital Quality Initiative IBR Intern- and Resident-to-Bed Ratio ICD–9–CM International Classification of Diseases, Ninth Revision, Clinical Modification ICD–10–CM International Classification of Diseases, Tenth Revision, Clinical Modification ICD–10–PCS International Classification of Diseases, Tenth Revision, Procedure Coding System ICR Information collection requirement IGI IHS Global Insight, Inc. IHS Indian Health Service IME Indirect medical education I–O Input-Output VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 IOM Institute of Medicine IPF Inpatient psychiatric facility IPFQR Inpatient Psychiatric Facility Quality Reporting [Program] IPPS [Acute care hospital] inpatient prospective payment system IRF Inpatient rehabilitation facility IQR Inpatient Quality Reporting LAMCs Large area metropolitan counties LOS Length of stay LTC–DRG Long-term care diagnosis-related group LTCH Long-term care hospital LTCHQR Long-Term Care Hospital Quality Reporting MA Medicare Advantage MAC Medicare Administrative Contractor MAP Measure Application Partnership MCC Major complication or comorbidity MCE Medicare Code Editor MCO Managed care organization MDC Major diagnostic category MDH Medicare-dependent, small rural hospital MedPAC Medicare Payment Advisory Commission MedPAR Medicare Provider Analysis and Review File MEI Medicare Economic Index MGCRB Medicare Geographic Classification Review Board MIEA–TRHCA Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Public Law 109–432 MIPPA Medicare Improvements for Patients and Providers Act of 2008, Public Law 110–275 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108–173 MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111–309 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110–173 MRHFP Medicare Rural Hospital Flexibility Program MRSA Methicillin-resistant Staphylococcus aureus MSA Metropolitan Statistical Area MS–DRG Medicare severity diagnosisrelated group MS–LTC–DRG Medicare severity long-term care diagnosis-related group MU Meaningful Use [EHR Incentive Program] NAICS North American Industrial Classification System NALTH National Association of Long Term Hospitals NCD National coverage determination NCHS National Center for Health Statistics NCQA National Committee for Quality Assurance NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NHSN National Healthcare Safety Network NOP Notice of Participation NQF National Quality Forum NQS National Quality Strategy NTIS National Technical Information Service NTTAA National Technology Transfer and Advancement Act of 1991, Public Law 104–113 PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 NVHRI National Voluntary Hospital Reporting Initiative OACT [CMS] Office of the Actuary OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99–509 OES Occupational employment statistics OIG Office of the Inspector General OMB [Executive] Office of Management and Budget OPM [U.S.] Office of Personnel Management OQR [Hospital] Outpatient Quality Reporting O.R. Operating room OSCAR Online Survey Certification and Reporting [System] PCH PPS-exempt cancer hospital PCHQR PPS-exempt cancer hospital quality reporting PMSAs Primary metropolitan statistical areas POA Present on admission PPI Producer price index PPS Prospective payment system PRM Provider Reimbursement Manual ProPAC Prospective Payment Assessment Commission PRRB Provider Reimbursement Review Board PRTFs Psychiatric residential treatment facilities PSF Provider-Specific File PSI Patient safety indicator PS&R Provider Statistical and Reimbursement [System] PQRS Physician Quality Reporting System QIG Quality Improvement Group [CMS] QIO Quality Improvement Organization QRDA Quality Reporting Data Architecture RCE Reasonable compensation equivalent RFA Regulatory Flexibility Act, Public Law 96–354 RHC Rural health clinic RHQDAPU Reporting hospital quality data for annual payment update RNHCI Religious nonmedical health care institution RPL Rehabilitation psychiatric long-term care (hospital) RRC Rural referral center RSMR Risk-standardized mortality rate RSRR Risk-standard readmission rate RTI Research Triangle Institute, International RUCAs Rural-urban commuting area codes RY Rate year SAF Standard Analytic File SCH Sole community hospital SCIP Surgical Care Improvement Project SFY State fiscal year SIC Standard Industrial Classification SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSI Surgical site infection SSI Supplemental Security Income SSO Short-stay outlier SUD Substance use disorder TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97– 248 TEP Technical expert panel THA/TKA Total hip arthroplasty/Total knee arthroplasty TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110–90 TPS Total Performance Score UHDDS Uniform hospital discharge data set UMRA Unfunded Mandate Reform Act, Public Law 104–4 VBP [Hospital] Value Based Purchasing [Program] VTE Venous thromboembolism mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Table of Contents I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) 2. Hospitals and Hospital Units Excluded From the IPPS 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) 4. Critical Access Hospitals (CAHs) 5. Payments for Graduate Medical Education (GME) C. Summary of Provisions of Recent Legislation Discussed in This Proposed Rule 1. Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152) 2. American Taxpayer Relief Act of 2012 (Pub. L. 112–240) 3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113– 67) 4. Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) D. Summary of the Provisions of This Proposed Rule II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS–DRG) Classifications and Relative Weights A. Background B. MS–DRG Reclassifications C. Adoption of the MS–DRGs in FY 2008 D. Proposed FY 2015 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS–DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110–90 2. Adjustment to the Average Standardized Amounts Required by Public Law 110– 90 a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110–90 b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Public Law 110–90 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110–90 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110–90 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) 7. Prospective Adjustment for the MS–DRG Documentation and Coding Effect Through FY 2010 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 E. Refinement of the MS–DRG Relative Weight Calculation 1. Background 2. Discussion for FY 2015 F. Proposed Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections 1. Background 2. HAC Selection 3. Present on Admission (POA) Indicator Reporting 4. HACs and POA Reporting in Preparation for Transition to ICD–10–CM and ICD– 10–PCS 5. Proposal Regarding Current HACs and Previously Considered Candidate HACs 6. RTI Program Evaluation 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines G. Proposed Changes to Specific MS–DRG Classifications 1. Discussion of Changes to Coding System and Basis for Proposed MS–DRG Updates a. Conversion of MS–DRGs to the International Classification of Diseases, 10th Edition (ICD–10) b. Basis for FY 2015 MS–DRG Updates 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Intracerebral Therapies: Gliadel® Wafer b. Endovascular Embolization or Occlusion of Head and Neck 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Exclusion of Left Atrial Appendage b. Transcatheter Mitral Valve Repair: MitraClip® c. Endovascular Cardiac Valve Replacement Procedures d. Abdominal Aorta Graft 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Shoulder Replacement Procedures b. Ankle Replacement Procedures c. Back and Neck Procedures 6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyria Metabolism 7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period) 8. Proposed Medicare Code Editor (MCE) Changes 9. Proposed Changes to Surgical Hierarchies 10. Proposed Changes to the MS–DRG Diagnosis Codes for FY 2015 a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CCs) Severity Levels for FY 2015 b. Coronary Atherosclerosis Due to Calcified Coronary Lesion 11. Complications or Comorbidity (CC) Exclusions List a. Background of the CC List and the CC Exclusions List b. Proposed CC Exclusions List for FY 2015 12. Review of Procedure Codes in MS– DRGs 981 Through 983, 984 Through 986, and 987 Through 989 PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 27981 a. Moving Procedure Codes From MS– DRGs 981 Through 983 or MS–DRGs 987 Through 989 Into MDCs b. Reassignment of Procedures Among MS– DRGs 981 Through 983, 984 Through 986, and 987 Through 989 c. Adding Diagnosis or Procedure Codes to MDCs 13. Proposed Changes to the ICD–9–CM Coding System a. ICD–10 Coordination and Maintenance Committee b. Code Freeze H. Recalibration of the Proposed FY 2015 MS–DRG Relative Weights 1. Data Sources for Developing the Proposed Relative Weights 2. Methodology for Calculation of the Proposed Relative Weights 3. Development of National Average CCRs 4. Bundled Payments for Care Improvement (BPCI) Initiative I. Proposed Add-On Payments for New Services and Technologies 1. Background 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments 3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments a. Glucarpidase (Trade Brand Voraxaze®) b. DIFICIDTM (Fidaxomicin) Tablets c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft d. KcentraTM e. Argus® II Retinal Prosthesis System f. Zilver® PTX® Drug Eluting Stent 4. FY 2015 Applications for New Technology Add-On Payments a. Dalbavancin (Durata Therapeutics, Inc.) b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.) c. WATCHMAN® Left Atrial Appendage Closure Technology d. CardioMEMSTM HF (Heart Failure) System e. MitraClip® System f. Responsive Neurostimulator (RNS®) System III. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Proposed Core-Based Statistical Areas for the Hospital Wage Index 1. Background 2. Proposed Implementation of New Labor Market Area Delineations a. Micropolitan Statistical Areas b. Urban Counties That Would Become Rural Under the New OMB Delineations c. Rural Counties That Would Become Urban Under the New OMB Delineations d. Urban Counties That Would Move to a Different Urban CBSA Under the New OMB Delineations e. Proposed Transition Period C. Worksheet S–3 Wage Data for the Proposed FY 2015 Wage Index 1. Included Categories of Costs 2. Excluded Categories of Costs 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals Under the IPPS D. Verification of Worksheet S–3 Wage Data E. Method for Computing the Proposed FY 2015 Unadjusted Wage Index E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27982 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules F. Proposed Occupational Mix Adjustment to the Proposed FY 2015 Wage Index 1. Development of Data for the Proposed FY 2015 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index 3. Calculation of the Proposed Occupational Mix Adjustment for FY 2015 G. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2015 Occupational Mix Adjusted Wage Index 1. Analysis of the Proposed Occupational Mix Adjustment and the Proposed Occupational Mix Adjusted Wage Index 2. Proposed Application of the Rural, Imputed, and Frontier Floors a. Proposed Rural Floor b. Proposed Imputed Floor and Alternative, Temporary Methodology for Computing the Rural Floor for FY 2015 c. Proposed Frontier Floor 3. Proposed FY 2015 Wage Index Tables H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General Policies and Effects of Reclassification and Redesignation 2. FY 2015 MGCRB Reclassifications a. FY 2015 Reclassification Requirements and Approvals b. Effects of Implementation of New OMB Labor Market Area Delineations on Reclassified Hospitals c. Applications for Reclassifications for FY 2016 3. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act a. Proposed New Lugar Areas for FY 2015 b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as Lugar 4. Waiving Lugar Redesignation for the Out-Migration Adjustment 5. Update of Application of Urban to Rural Reclassification Criteria I. Proposed FY 2015 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees J. Process for Requests for Wage Index Data Corrections K. Notice of Change to Wage Index Development Timetable L. Labor-Related Share for the Proposed FY 2015 Wage Index IV. Other Decisions and Proposed Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs A. Proposed Changes to MS–DRGs Subject to the Postacute Care Transfer Policy (§ 412.4) B. Proposed Changes in the Inpatient Hospital Updates for FY 2015 (§§ 412.64(d) and 412.211(c)) 1. Proposed FY 2015 Inpatient Hospital Update 2. Proposed FY 2015 Puerto Rico Hospital Update C. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix Index (CMI) and Discharge Criteria (§ 412.96) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 1. Case-Mix Index (CMI) 2. Discharges D. Proposed Payment Adjustment for LowVolume Hospitals (§ 412.101) 1. Background 2. Provisions of the Protecting Access to Medicare Act of 2014 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015 E. Indirect Medical Education (IME) Payment Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2015 2. Proposed IME Medicare Part C Add-On Payments to Sole Community Hospitals (SCHs) That Are Paid According to Their Hospital-Specific Rates and Proposed Change in Methodology in Determining Payment to SCHs 3. Other Proposed Policy Changes Affecting IME F. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background 2. Impact on Medicare DSH Payment Adjustment of Proposed Implementation of New OMB Labor Market Area Delineations 3. Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (§ 412.106) a. General Discussion b. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments c. Empirically Justified Medicare DSH Payments d. Uncompensated Care Payments e. Limitations on Review G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) 1. Background 2. Provisions of Public Law 113–93 for FY 2015 3. Expiration of the MDH Program H. Hospital Readmissions Reduction Program: Proposed Changes for FY 2015 Through FY 2017 (§§ 412.150 Through 412.154) 1. Statutory Basis for the Hospital Readmissions Reduction Program 2. Regulatory Background 3. Overview of Proposals and Policies for the FY 2015 Hospital Readmissions Reduction Program 4. Proposed Refinement of the Readmissions Measures and Related Methodology for FY 2015 and Subsequent Years Payment Determinations a. Proposed Refinement of Planned Readmission Algorithm for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures b. Proposed Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort c. Anticipated Effect of Proposed Refinements on Measures 5. No Proposed Expansion of the Applicable Conditions for FY 2016 PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 6. Proposed Expansion of the Applicable Conditions for FY 2017 To Include Patients Readmitted Following Coronary Artery Bypass Graft (CABG) Surgery Measure a. Background b. Overview of the Proposed CABG Readmissions Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery c. Proposed Methodology for the CABG Measure: Hospital-Level, 30-Day, AllCause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery 7. Maintenance of Technical Specifications for Quality Measures 8. Waiver From the Hospital Readmissions Reduction Program for Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (§ 412.152 and § 412.154(d)) 9. Floor Adjustment Factor for FY 2015 (§ 412.154(c)(2)) 10. Applicable Period for FY 2015 11. Proposed Inclusion of THA/TKA and COPD Readmissions Measures To Calculate Aggregate Payments for Excess Readmissions Beginning in FY 2015 12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions I. Hospital Value-Based Purchasing (VBP) Program 1. Statutory Background 2. Overview of Previous Hospital VBP Program Rulemaking 3. FY 2015 Payment Details a. Payment Adjustments b. Base Operating DRG Payment Amount Definition for Medicare-Dependent Small Rural Hospitals (MDHs) 4. Measures for the FY 2017 Hospital VBP Program a. Measures Previously Adopted b. Proposed Changes Affecting Topped-Out Measures c. Proposed New Measures for the FY 2017 Hospital VBP Program d. Proposed Adoption of the Current CLABSI Measure (NQF #0139) for the FY 2017 Hospital VBP Program e. Summary of Previously Adopted and Proposed New Measures for the FY 2017 Hospital VBP Program 5. Proposed Additional Measures for the FY 2019 Hospital VBP Program a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) b. PSI–90 Measure 6. Possible Measure Topics for Future Program Years a. Care Transition Measure (CTM–3) Items for HCAHPS Survey b. Possible Future Efficiency and Cost Reduction Domain Measure Topics 7. Previously Adopted and Proposed Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program a. Background b. Previously Adopted Baseline and Performance Periods for the FY 2017 Hospital VBP Program E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules c. Proposed Clinical Care—Process Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program d. Proposed Patient and Caregiver-Centered Experience of Care/Care Coordination Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program e. Proposed Safety Domain Performance Period and Baseline Period for NHSN Measures for the FY 2017 Hospital VBP Program f. Proposed Efficiency and Cost Reduction Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program g. Summary of Previously Adopted and Proposed Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program 8. Previously Adopted and Proposed Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program a. Previously Adopted and Proposed Performance Period and Baseline Period for the FY 2019 Hospital VBP Program for Clinical Care—Outcomes Domain Measures b. Proposed Performance Period and Baseline Period for the PSI–90 Safety Domain Measure for the FY 2019 Hospital VBP Program c. Summary of Previously Adopted and Proposed Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program 9. Proposed Performance Period and Baseline Period for the Clinical Care— Outcomes Domain for the FY 2020 Hospital VBP Program 10. Proposed Performance Standards for the Hospital VBP Program a. Background b. Performance Standards for the FY 2016 Hospital VBP Program c. Previously Adopted Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs d. Proposed Additional Performance Standards for the FY 2017 Hospital VBP Program e. Proposed Performance Standards for the FY 2019 and FY 2020 Hospital VBP Programs f. Proposed Technical Updates Policy for Performance Standards g. Request for Public Comments on ICD– 10–CM/PCS Transition 11. Proposed FY 2017 Hospital VBP Program Scoring Methodology a. Proposed General Hospital VBP Program Scoring Methodology b. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals That Receive a Score on All Domains c. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals Receiving Scores on Fewer than Four Domains 12. Proposed Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program’s Quality Domains a. Previously Adopted Minimum Numbers of Cases and FY 2016 Proposed Minimum Numbers of Cases VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 b. Proposed Minimum Number of Measures—Safety Domain c. Proposed Minimum Number of Measures—Clinical Care Domain d. Proposed Minimum Number of Measures—Efficiency and Cost Reduction Domain e. Proposed Minimum Number of Measures—Patient and Caregiver Centered Experience of Care/Care Coordination (PEC/CC) Domain 13. Applicability of the Hospital VBP Program to Maryland Hospitals 14. Disaster/Extraordinary Circumstance Exception Under the Hospital VBP Program J. Hospital-Acquired Condition (HAC) Reduction Program 1. Background 2. Statutory Basis for the HAC Reduction Program 3. Implementation of the HAC Reduction Program for FY 2015 a. Overview b. Payment Adjustment Under the HAC Reduction Program, Including Exemptions c. Measure Selection and Conditions, Including Risk Adjustment Scoring Methodology d. Criteria for Applicable Hospitals and Performance Scoring Policy e. Reporting Hospital-Specific Information, Including the Review and Correction of Information f. Limitation on Administrative and Judicial Review 4. Proposed Maintenance of Technical Specifications for Quality Measures 5. Extraordinary Circumstances Exceptions/Exemptions 6. Implementation of the HAC Reduction Program for FY 2016 a. Measure Selection and Conditions, Including a Risk-Adjustment Scoring Methodology b. Criteria for Applicable Hospitals and Performance Scoring 7. Future Consideration for the Use of Electronically Specified Measures K. Payments for Indirect and Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 Through 413.83) 1. Background 2. Proposed Changes in the Effective Date of the FTE Resident Cap, 3-Year Rolling Average, and Interim- and Resident-toBed (IRB) Ratio Cap for New Programs in Teaching Hospitals 3. Proposed Changes to IME and Direct GME Policies as a Result of New OMB Labor Market Area Delineations a. New Program FTE Cap Adjustment for Rural Hospitals Redesignated as Urban b. Participation of Redesignated Hospitals in Rural Training Track 4. Proposed Clarification of Policies on Counting Resident Time in Nonprovider Settings Under Section 5504 of the Affordable Care Act 5. Proposed Changes to the Review and Award Process for Resident Slots Under Section 5506 of the Affordable Care Act a. Effective Date of Slots Awarded Under Section 5506 of the Affordable Care Act PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 27983 b. Proposal To Remove Seamless Requirement c. Proposed Revisions to Ranking Criteria One, Seven, and Eight for Applications Under Section 5506 d. Clarification to Ranking Criterion Two Regarding Emergency Medicare GME Affiliation Agreements 6. Proposed Regulatory Clarification Applicable To Direct GME Payments to Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for Training Residents in Approved Programs L. Rural Community Hospital Demonstration Program 1. Background 2. Proposed FY 2015 Budget Neutrality Offset Amount M. Requirement for Transparency of Hospital Charges Under the Affordable Care Act 1. Overview 2. Transparency Requirement Under the Affordable Care Act N. Medicare Payment for Short Inpatient Hospital Stays O. Suggested Exceptions to the 2-Midnight Benchmark V. Proposed Changes to the IPPS for CapitalRelated Costs A. Overview B. Additional Provisions 1. Exception Payments 2. New Hospitals 3. Hospitals Located in Puerto Rico C. Proposed Annual Update for FY 2015 VI. Proposed Changes for Hospitals Excluded From the IPPS A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2015 B. Proposed Updates to the Reasonable Compensation Equivalent (RCE) Limits on Compensation for Physician Services Provided in Providers (§ 415.70) 1. Background 2. Overview of the Current RCE Limits a. Application of the RCE Limits b. Exceptions to the RCE Limits c. Methodology for Establishing the RCE Limits 3. Proposed Changes to the RCE Limits C. Critical Access Hospitals (CAHs 1. Background 2. Proposed Changes Related to Reclassifications as Rural for CAHs 3. Proposed Revision of the Requirements for Physician Certification of CAH Inpatient Services VII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2015 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority 2. Criteria for Classification as an LTCH a. Classification as an LTCH b. Hospitals Excluded From the LTCH PPS 3. Limitation on Charges to Beneficiaries 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights for FY 2015 E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27984 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 1. Background 2. Patient Classifications Into MS–LTC– DRGs a. Background b. Proposed Changes to the MS–LTC–DRGs for FY 2015 3. Development of the Proposed FY 2015 MS–LTC–DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights b. Proposed Development of the MS–LTC– DRG Relative Weights for FY 2015 c. Data d. Hospital-Specific Relative Value (HSRV) Methodology e. Treatment of Severity Levels in Developing the Proposed MS–LTC–DRG Relative Weights f. Proposed Low-Volume MS–LTC–DRGs g. Steps for Determining the Proposed FY 2015 MS–LTC–DRG Relative Weights C. Proposed LTCH PPS Payment Rates for FY 2015 1. Overview of Development of the LTCH Payment Rates 2. Proposed FY 2015 LTCH PPS Annual Market Basket Update a. Overview b. Proposed Revision of Certain Market Basket Updates as Required by the Affordable Care Act c. Proposed Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate Under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background 2. Proposed Reduction to the Annual Update to the LTCH PPS Standard Federal Rate Under the LTCHQR Program d. Proposed Market Basket Under the LTCH PPS for FY 2015 e. Proposed Annual Market Basket Update for LTCHs for FY 2015 3. Proposed Adjustment for the Final Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate Under § 412.523(d)(3) D. Proposed Revision of LTCH PPS Geographic Classifications 1. Background 2. Proposed Use of New OMB Labor Market Area Delineations (‘‘New OMB Delineations’’) a. Micropolitan Statistical Areas b. Urban Counties That Became Rural Under the New OMB Labor Market Area Delineations c. Rural Counties That Became Urban Under the New OMB Labor Market Area Delineations d. Urban Counties Moved to a Different Urban CBSA Under the New OMB Labor Market Area Delineations e. Proposed Transition Period E. Reinstatement and Extension of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment 1. Background 2. Proposed Implementation of Section 1206(b)(1) of Public Law 113–67 F. Proposed Changes to the Fixed-Day Thresholds Under the Greater Than 3Day Interruption of Stay Policy Under the LTCH PPS VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 1. Background 2. Thresholds Used in Recent Statutory Programs 3. Proposed Changes to the Greater Than 3Day Interruption of Stay Policy G. Moratoria on the Establishment of LTCHs and LTCH Satellite Facilities and on the Increase in the Number of Beds in Existing LTCHs or LTCH Satellite Facilities H. Evaluation and Proposed Treatment of LTCHs Classified Under Section 1886(d)(1)(B)(iv)(II) of the Act I. Description of Statutory Framework for Patient-Level Criteria-Based Payment Adjustment Under the LTCH PPS Under Public Law 113–67 1. Overview 2. Provisions of Section 1206(a) of Public Law 113–67 3. Additional LTCH PPS Issues J. Proposed Technical Change VIII. Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review A. Background 1. Payment and Cost Reporting Requirements 2. Administrative Appeals by Providers and Judicial Review 3. Appropriate Claims in Provider Cost Reports B. Proposed Changes Regarding the Claims Required in Provider Cost Reports and for Provider Administrative Appeals 1. Proposed Addition to the Cost Reporting Regulations of the Substantive Reimbursement Requirement of an Appropriate Cost Report Claim 2. Proposed Revisions to the Provider Reimbursement Appeal Regulations C. Proposed Conforming Changes to the Board Appeal Regulations and Corresponding Revisions to the Contractor Hearing Regulations 1. Technical Corrections and Conforming Changes to §§ 405.1801 and 405.1803 2. Technical Corrections and Conforming Changes to §§ 405.1811, 405.1813, and 405.1814 3. Proposed New § 405.1832 4. Proposed Revisions to § 405.1834 5. Technical Corrections and Conforming Changes to §§ 405.1836, 405.1837, and 405.1839 6. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts of 42 CFR Part 413 IX. Quality Data Reporting Requirements for Specific Providers and Suppliers A. Hospital Inpatient Quality Reporting (IQR) Program 1. Background a. History of the Hospital IQR Program b. Maintenance of Technical Specifications for Quality Measures c. Public Display of Quality Measures 2. Removal and Suspension of Hospital IQR Program Measures a. Considerations in Removing Quality Measures From the Hospital IQR Program b. Proposed Removal of Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations 4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program 5. Previously Adopted Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years 6. Proposed Refinements to Existing Measures in the Hospital IQR Program a. Proposed Refinement of Planned Readmission Algorithm for 30-Day Readmission Measures b. Proposed Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures c. Anticipated Effect of Proposed Refinements to Existing Measures 7. Proposed Additional Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years a. Proposed Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery b. Proposed Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery c. Proposed Hospital-level, RiskStandardized 30-Day Episode-of-Care Payment Measure for Pneumonia d. Proposed Hospital-Level, RiskStandardized 30-Day Episode-of-Care Payment Measure for Heart Failure e. Proposed Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500) f. Electronic Health Record-Based Voluntary Measures g. Proposed Readoption of Measures as Voluntarily Reported Electronic Clinical Quality Measures h. Electronic Clinical Quality Measures 8. Possible New Quality Measures and Measure Topics for Future Years a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018 Payment Determination b. Possible Future Electronic Clinical Quality Measures 9. Form, Manner, and Timing of Quality Data Submission a. Background b. Procedural Requirements for the FY 2017 Payment Determination and Subsequent Years c. Data Submission Requirements for Chart-Abstracted Measures d. Alignment of the EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures with Hospital IQR Program Reporting and Submission Timelines e. Sampling and Case Thresholds for the FY 2017 Payment Determination and Subsequent Years f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years g. Data Submission Requirements for Structural Measures for the FY 2017 E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Payment Determination and Subsequent Years h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN 10. Submission and Access of HAI Measures Data Through the CDC’s NHSN Web site 11. Proposed Modifications to the Existing Processes for Validation of Chartabstracted Hospital IQR Program Data a. Eligibility Criteria for Hospitals Selected for Validation b. Number of Charts to be Submitted per Hospital for Validation c. Combining Scores for HAI and Clinical Process of Care Topic Areas d. Processes To Submit Patient Medical Records for Chart-abstracted Measures e. Plans To Validate Electronic Clinical Quality Measure Data 12. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2017 Payment Determination and Subsequent Years 13. Public Display Requirements for the FY 2017 Payment Determination and Subsequent Years 14. Reconsideration and Appeal Procedures for the FY 2017 Payment Determination and Subsequent Years 15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 1. Statutory Authority 2. Covered Entities 3. Previously Finalized PCHQR Program Quality Measures 4. Proposed Update to the Clinical Process/ Oncology Care Measures Beginning With the 2016 Program 5. Proposed New Quality Measures Beginning With the FY 2017 Program a. Considerations in the Selection of Quality Measures b. Proposed New Quality Measure Beginning With the FY 2017 Program 6. Possible New Quality Measure Topics for Future Years 7. Maintenance of Technical Specifications for Quality Measures 8. Public Display Requirements Beginning With the FY 2014 Program 9. Form, Manner, and Timing of Data Submission Beginning With the FY 2017 Program a. Background b. Proposed Reporting Requirements for the Proposed New Measure: External Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning With the FY 2017 Program c. Proposed Reporting Options for the Clinical Process/Cancer Specific Treatment Measures Beginning With the FY 2015 Program and the SCIP and Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program d. Proposed New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program 10. Exceptions From Program Requirements VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program 3. Policy for Retention of LTCHQR Program Measures Adopted for Previous Payment Determinations 4. Policy for Adopting Changes to LTCHQR Program Measures 5. Previously Adopted Quality Measures a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years 6. Proposed Revision to Data Collection Timelines and Submission Deadlines for Previously Adopted Quality Measures a. Proposed Revisions to Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) b. Proposed Revisions to Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674) 7. Proposed New LTCHQR Program Quality Measures for the FY 2018 Payment Determination and Subsequent Years a. Proposed New LTCHQR Program Functional Status Quality Measures for the FY 2018 Payment Determination and Subsequent Years b. Proposed Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure 8. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determinations and Subsequent Years a. Background b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 and FY 2017 Payment Determinations (Except NQF #0680 and NQF #0431) c. Proposed Revision to the Previously Adopted Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #-680) for the FY 2016 Payment Determination and Subsequent Years d. Proposed Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for Proposed New LTCHQR Program Quality Measures and for Proposed Revision to Previously Adopted Quality Measure e. Proposed Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2018 Payment Determination f. Proposed Data Collection Timelines and Submission Deadlines for the PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 27985 Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674) Measure for the FY 2018 Payment Determination and Subsequent Years g. Proposed Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2019 Payment Determination 10. Proposed LTCHQR Program Data Completion Threshold for the FY 2016 Payment Adjustment and Subsequent Years a. Overview b. Proposed LTCHQR Program Data Completion Threshold for the Required LTCH CARE Data Set (LCDS) Data Items c. LTCHQR Program Data Completion Threshold for Measures Submitted Using the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) d. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Proposed Data Completion Thresholds 11. Proposed Data Validation Process for the FY 2016 Payment Determination and Subsequent Years a. Proposed Data Validation Process b. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Proposed Data Accuracy Threshold 12. Public Display of Quality Measure Data for the LTCHQR Program 13. Proposed LTCHQR Program Submission Exception and Extension Requirements for the FY 2017 Payment Determination and Subsequent Years 14. Proposed LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years a. Previously Finalized LTCHQR Program Reconsideration and Appeals Procedures for the FY 2014 and FY 2015 Payment Determinations b. Proposed LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years 15. Electronic Health Records (EHR) and Health Information Exchange (HIE) D. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 1. Background 2. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2015 4. Electronically Specified Clinical Quality Measures (CQMs) Reporting for 2015 5. Clarification Regarding Reporting Zero Denominators 6. Case Threshold Exemption Policy; Clarification for 2014 and Proposed Change for 2015 X. Proposed Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data A. Background E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27986 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules B. Proposed Regulatory Changes 1. Proposed Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data 2. Proposed Conditions for CMS Release of Data 3. Proposed Technical Change XI. Proposed Changes to Enforcement Provisions for Organ Transplant Centers A. Background B. Basis for Proposals in This Proposed Rule 1. Proposed Expansion of Mitigating Factors Based on CMS’ Experience 2. Coordination With Efforts of the Organ Procurement and Transplantation Network (OPTN) and Health Resources and Services Administration C. Provisions of the Proposed Changes 1. Proposed Expansion of Mitigating Factors List 2. Content and Timeframe for Mitigating Factors Requests 3. System Improvement Agreements (SIAs) a. Purpose and Intent of an SIA b. Description and Contents of an SIA c. Effective Period for an SIA XII. MedPAC Recommendations XIII. Other Required Information A. Requests for Data From the Public B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments 2. ICRs for Add-On Payments for New Services and Technologies 3. ICRs for the Occupational Mix Adjustment to the Proposed FY 2015 Wage Index (Hospital Wage Index Occupational Mix Survey) 4. Hospital Applications for Geographic Reclassifications by the MGCRB 5. ICRs for Application for GME Resident Slots 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 8. ICRs for Hospital Value-Based Purchasing (VBP) Program 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 10. ICR Regarding Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 11. ICR Regarding Proposed Revision of Regulations Governing Use and Release of Medicare Advantage (MA) Risk Adjustment Data (§ 422.310(f)) Regulation Text Addendum—Proposed Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2014 and Payment Rates for LTCHs Effective With Discharges Occurring on or After October 1, 2014 I. Summary and Background II. Proposed Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2015 A. Calculation of the Adjusted Standardized Amount B. Proposed Adjustments for Area Wage Levels and Cost-of-Living VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 C. Calculation of the Prospective Payment Rates III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient CapitalRelated Costs for FY 2015 A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update B. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2015 C. Capital Input Price Index IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2015 V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 2015 A. Proposed LTCH PPS Standard Federal Rate for FY 2015 1. Background 2. Development of the Proposed FY 2015 LTCH PPS Standard Federal Rate B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2015 1. Background 2. Proposed Geographic Classifications Based on the New OMB Delineations 3. Proposed LTCH PPS Labor-Related Share 4. Proposed LTCH PPS Wage Index for FY 2015 5. Proposed Budget Neutrality Adjustment for Proposed Changes to the Area Wage Level Adjustment C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background 2. Determining LTCH CCRs Under the LTCH PPS 3. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for FY 2015 4. Application of the Outlier Policy to SSO Cases E. Proposed Update to the IPPS Comparable/Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology F. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for FY 2015 VI. Tables Referenced in This Proposed Rule and Available Through the Internet on the CMS Web site Appendix A—Economic Analyses I. Regulatory Impact Analysis A. Introduction B. Need C. Objectives of the IPPS D. Limitations of Our Analysis E. Hospitals Included in and Excluded From the IPPS F. Effects on Hospitals and Hospital Units Excluded From the IPPS G. Quantitative Effects of the Proposed Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates 2. Analysis of Table I 3. Impact Analysis of Table II H. Effects of Other Proposed Policy Changes 1. Effects of Proposed Policy on MS–DRGs for Preventable HACs, Including Infections PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 2. Effects of Proposed Policy Relating to New Medical Service and Technology Add-On Payments 3. Effects of Proposed Changes to List of MS–DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy 4. Effects of Proposed Payment Adjustment for Low-Volume Hospitals for FY 2015 5. Effects of Proposal Related to IME Medicare Part C Add-On Payments to SCHs Paid According to Their HospitalSpecific Rates 6. Effects of the Extension of the MDH Program for the First Half of FY 2015 7. Effects of Proposed Changes Under the FY 2015 Hospital Value-Based Purchasing (VBP) Program 8. Effects of the Proposed Changes to the HAC Reduction Program for FY 2015 9. Effects of Proposed Policy Changes Relating to Payments for Direct GME and IME 10. Effects of Implementation of Rural Community Hospital Demonstration Program 11. Effects of Proposed Changes Related to Reclassifications as Rural for CAHs 12. Effects of Proposed Revision of the Requirements for Physician Certification of CAH Inpatient Services 13. Effects of Proposed Changes Relating to Administrative Appeals by Providers and Judicial Review for Appropriate Claims in Provider Cost Reports I. Effects of Proposed Changes to Updates to the Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided to Providers J. Effects of Proposed Changes in the Capital IPPS 1. General Considerations 2. Results K. Effects of Proposed Payment Rate Changes and Policy Changes Under the LTCH PPS 1. Introduction and General Considerations 2. Impact on Rural Hospitals 3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes and Policy Changes 4. Effect on the Medicare Program 5. Effect on Medicare Beneficiaries L. Effects of Proposed Requirements for Hospital Inpatient Quality Reporting (IQR) Program M. Effects of Proposed Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2015 N. Effects of Proposed Requirements for the LTCH Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2019 O. Effects of Proposals Regarding Electronic Health Record (EHR) Incentive Program and Hospital IQR Program P. Effects of Proposed Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data Q. Effects of Proposed Changes to Enforcement Provisions for Organ Transplant Centers II. Alternatives Considered III. Overall Conclusion A. Acute Care Hospitals B. LTCHs E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules IV. Accounting Statements and Tables A. Acute Care Hospitals B. LTCHs V. Regulatory Flexibility Act (RFA) Analysis VI. Impact on Small Rural Hospitals VII. Unfunded Mandate Reform Act (UMRA) Analysis VIII. Executive Order 12866 Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2015 A. Proposed FY 2015 Inpatient Hospital Update B. Proposed Update for SCHs for FY 2015 C. Proposed FY 2015 Puerto Rico Hospital Update D. Proposed Update for Hospitals Excluded From the IPPS for FY 2015 E. Proposed Update for LTCHs for FY 2015 III. Secretary’s Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Executive Summary and Background mstockstill on DSK4VPTVN1PROD with PROPOSALS2 A. Executive Summary 1. Purpose and Legal Authority This proposed rule would make payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capitalrelated costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it would make payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). It also would make policy changes to programs associated with Medicare IPPS hospitals, IPPSexcluded hospitals, and LTCHs. Under various statutory authorities, we are proposing to make changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2015 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following: • Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS). • Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 children’s hospitals; cancer hospitals; and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. • Sections 123(a) and (c) of Public Law 106–113 and section 307(b)(1) of Public Law 106–554 (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv) of the Act. • Sections 1814(l), 1820, and 1834(g) of the Act, which specify that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost. • Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as ‘‘PPS-Exempt Cancer Hospitals.’’ • Section 1886(d)(4)(D) of the Act, which addresses certain hospitalacquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidencebased guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not POA. • Section 1886(a)(4) of the Act, which specifies that costs of approved PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 27987 educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. A payment for indirect medical education (IME) is made under section 1886(d)(5)(B) of the Act. • Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase in payments to a subsection (d) hospital for a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary. • Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. • Section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, which establishes an adjustment to hospital payments for hospital-acquired conditions (HACs), or a HospitalAcquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospitalacquired conditions. • Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act, which establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions. • Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act now requires that, for ‘‘fiscal year 2014 and each subsequent fiscal year,’’ ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share payment . . . made under subsection (d)(5)(F)’’ will receive two separate payments: (1) 25 percent of the amount they previously would have received under subsection (d)(5)(F) for DSH (‘‘the empirically justified amount’’), and (2) an additional payment for the DSH hospital’s proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27988 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules percent of the payments that would otherwise be made under subsection (d)(5)(F); (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital’s uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage. • Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for SGR Reform Act of 2013, which provided for the establishment of patient criteria for payment under the LTCH PPS for implementation beginning in FY 2016. • Section 1206(b)(1) of the Pathway for SGR Reform Act of 2013, which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, by retroactively reestablishing and extending the statutory moratorium on the full implementation of the 25percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for ‘‘grandfathered’’ hospitalwithin-hospitals (HwHs), which are permanently exempt from this policy); and section 1206(b)(2) (as amended by section 112(b) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93)), which together further amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish a new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities beginning January 1, 2015 and ending on September 30, 2017; and section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings. • Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206(c) of the Pathway for SGR Reform Act of 2013, which provides for the establishment, no later than October 1, 2015, of a functional status quality measure under the LTCHQR Program for change in mobility among inpatients requiring ventilator support. To conform regulations to the statutory requirements of the Provider VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Reimbursement Review Board (Board) appeals based on untimely determinations of the Medicare Administrative Contractor (MAC), in this proposed rule, we are proposing to amend the regulations to eliminate the provider dissatisfaction requirement as a condition for Board jurisdiction over such appeals. We are proposing a similar amendment to the regulations for appeals to MAC hearing officers, to maintain consistency between the regulations for MAC and Board appeals. We also are proposing to codify in the cost reporting regulations our existing policy, implemented in section 115 of the Provider Reimbursement Manual, requiring providers to include an appropriate claim for an item in its cost report. In addition, we are proposing that providers’ failure to include an appropriate claim for an item in its cost report will result in foreclosure of payment in the notice of program reimbursement and in any decision or order issued by a reviewing entity in an administrative appeal filed by the provider. We are proposing to align the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions. In addition, this proposed rule contains several proposals that are not directly related to these Medicare payment systems, such as regulatory revisions to broaden the specified uses and reasons for disclosure of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS and changes to the enforcement procedures for organ transplant centers. The specific statutory authority for these other proposals is discussed in the relevant sections below. 2. Summary of the Major Provisions a. MS–DRG Documentation and Coding Adjustment Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112–240) amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS–DRG PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimated that a ¥9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we made a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. We are proposing to make an additional ¥0.8 percent recoupment adjustment to the standardized amount in FY 2015. b. Reduction of Hospital Payments for Excess Readmissions We are proposing changes in policies to the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we established additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also established additional readmissions measures, Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be used in the Hospital Readmissions Reduction Program for FY 2015 and future years. We are proposing to expand the readmissions measures for FY 2017 and future years by adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery. We also are proposing to refine the readmission measures and related methodology for FY 2015 and subsequent years payment determinations. In addition, we are proposing that the readmissions payment adjustment factors for FY 2015 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules can be no more than a 3-percent reduction in accordance with the statute. We also are proposing to revise the calculation of aggregate payments for excess readmissions to include THA/ TKA and COPD readmissions measures beginning in FY 2015. c. Hospital Value-Based Purchasing (VBP) Program Section 1886(o) of the Act requires the Secretary to establish a Hospital ValueBased Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. In this proposed rule, we are proposing to adopt quality measures for the FY 2017, FY 2019, and FY 2020 Hospital VBP Program years and to establish performance periods and performance standards for measures to be adopted for those fiscal years. We also are proposing to adopt additional policies related to performance standards and to revise the domain weighting previously adopted for the FY 2017 Hospital VBP Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 d. Hospital-Acquired Condition (HAC) Reduction Program In this proposed rule, we are proposing a change in the scoring methodology with the addition of a previously finalized measure for the FY 2016 payment adjustment under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges beginning on October 1, 2014 and for subsequent program years. This 1percent payment reduction applies to a hospital whose ranking is in the top quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital’s discharges for the specified fiscal year. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 e. Proposed Changes to the DSH Payment Adjustment and the Provision of Additional Payment for Uncompensated Care Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period. In this proposed rule, we are proposing updates to the uncompensated care amount to be distributed for FY 2015, and we are proposing changes to the methodology to calculate the uncompensated care payment amounts to be distributed such that we combine uncompensated care data for hospitals that have underwent a merger in order to calculate their relative share of uncompensated care. f. Hospital Inpatient Quality Reporting (IQR) Program Under section 1886(b)(3)(B)(viii) of the Act, hospitals are required to report data on measures selected by the Secretary for the Hospital IQR Program in order to receive the full annual percentage increase. In past rules, we have established measures for reporting and the process for submittal and validation of the data. In this proposed rule, we are proposing to add nine new measures for the Hospital IQR Program for the FY 2017 payment determination and subsequent years. We are proposing to remove five measures for the FY 2016 payment determination and subsequent years. We also are proposing to remove 15 chart-abstracted measures from the FY 2016 payment determination’s measure set. However, we are proposing to retain an electronic clinical quality measure version of 10 of those chartabstracted measures for the program. g. Proposed Changes to the LTCH PPS Section 1206(b) of the Pathway for SGR Reform Act provides for the retroactive reinstatement and extension, PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 27989 for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment under the LTCH PPS established under section 114(c) of the MMSEA, as further amended by subsequent legislation. In keeping with this mandate, we are proposing to reinstate this payment adjustment retroactively for LTCH cost reporting periods beginning on or after July 1, 2013 or October 1, 2013. Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, provides for new statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities (subject to certain defined exceptions) and a new statutory moratorium on bed increases in existing LTCHs effective for the period beginning April 1, 2014 and ending September 30, 2017. In accordance with section 1206(d) of the Pathway for SGR Reform Act of 2013, we are proposing to apply a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling reasonable cost payments under the TEFRA payment system model. We also are proposing to make changes to the LTCH interruption of stay policy, which is a payment adjustment that is applied when, during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by readmittance to the same LTCH. 3. Summary of Costs and Benefits • Proposed Adjustment for MS–DRG Documentation and Coding Changes. We are proposing a ¥0.8 percent recoupment adjustment to the standardized amount for FY 2015 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represent the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimated that a ¥9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27990 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases and the adjustment we made for FY 2014, we are proposing to make a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2015. We estimated that this level of adjustment, combined with leaving the ¥0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017. • Reduction to Hospital Payments for Excess Readmissions. The provisions of section 1886(q) of the Act which establishes the Hospital Readmissions Reduction Program are not budget neutral. For FY 2015, a hospital’s readmissions payment adjustment factor is the higher of a ratio of a hospital’s aggregate payments for excess readmissions to its aggregate payments for all discharges, or 0.97 (that is, or a 3-percent reduction). In this proposed rule, we estimate that the reduction to a hospital’s base operating DRG payment amount to account for excess readmissions of selected applicable conditions under the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease in payments to hospitals for FY 2015 relative to FY 2014. • Value-Based Incentive Payments Under the Hospital Value-Based Purchasing (VBP) Program. We estimate that there will be no net financial impact to the Hospital VBP Program for FY 2015 in the aggregate because, by law, the amount available for valuebased incentive payments under the program in a given fiscal year must be equal to the total amount of base operating DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating DRG payment amount reductions for FY 2015, and therefore the estimated amount available for value-based incentive payments for FY 2015 discharges, is approximately $1.4 billion. We believe that the program’s benefits will be seen in improved patient outcomes, safety, and in the patient’s experience of care. However, we cannot estimate these benefits in actual dollar and patient terms. • Proposed Payment Adjustment Under the HAC Reduction Program for FY 2015. Under section 1886(p) of the Act, (as added by section 3008 of the Affordable Care Act), the incentive to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reduce hospital-acquired conditions with a payment adjustment to applicable hospitals under the HAC Reduction Program is made beginning FY 2015. We estimate that, under this proposal, 753 hospitals would be subject to the 1-percent reduction, and that overall payments will decrease approximately 0.3 percent or $330 million. • Proposed Changes Relating to the Medicare DSH Payment Adjustment and Provision of Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment to eligible hospitals is made beginning in FY 2014. Hospitals that receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives Medicare DSH payments will receive an additional payment based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral. For FY 2015, we are proposing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 80.4 percent of the amount for changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act are adjusted to approximately 60.3 percent (the product of 75 percent and 80.4 percent) and that resulting payment amount is used to create an additional payment for a hospital’s relative uncompensated care. As a result, we project that the proposed reduction of Medicare DSH payments and the inclusion of the additional payments for uncompensated care will reduced payments overall by 1.1 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2014. The proposed additional payments have redistributive effects based on a hospital’s uncompensated care amount relative to the uncompensated care amount to all hospitals that are PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 estimated to receive Medicare DSH payments, and the payment amount is not tied to a hospital’s discharges. • Hospital Inpatient Quality Reporting (IQR) Program. In this proposed rule, we are proposing to add nine new measures for the FY 2017 payment determination and subsequent years. We are proposing to remove five measures from the hospital IQR Program for the FY 2016 payment determination and subsequent years. We also are proposing to remove 15 chart-abstracted from the FY 2016 payment determination’s measure set, but we are proposing to retain an electronic clinical quality measure version of 10 of those measures for the program. We estimate that our proposals for the adoption and removal of measures will decrease hospital costs by $39.8 million. • Proposed Update to the LTCH PPS Standard Federal Rate and Other Payment Factors. Based on the best available data for the 423 LTCHs in our database, we estimate that the proposed changes to the payment rates and factors we are presenting in the preamble and Addendum of this proposed rule, including the proposed update to the standard Federal rate for FY 2015, the proposed changes to the area wage adjustment for FY 2015, and the expected changes to short-stay outliers and high-cost outliers, would result in an increase in estimated payments from FY 2014 of approximately $44 million (or 0.8 percent). In addition, we estimate that net effect of the projected impact of certain other proposed LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25 percent threshold’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the proposed revision of the ‘‘greater than 3-day interruption of stay’’ policy; the proposed revocation of onsite discharges and readmissions policy; and the proposed payment adjustment for ‘‘subclause (II)’’ LTCHs) is estimated to result in a reduction in LTCH PPS payments of approximately $14 million. The impact analysis of the proposed payment rates and factors presented in this proposed rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other proposed LTCH PPS policy changes would result in a net increase of $30 million to LTCH providers. Additionally, we estimate that the costs to LTCHs associated with the completion of the proposed data for the LTCHQR Program at $3.96 million or approximately $1 million more than FY 2014. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these ‘‘subsection (d) hospitals.’’ Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The laborrelated share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for a new additional Medicare payment that considers the amount of uncompensated care beginning on October 1, 2013. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospitalspecific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. Through and including FY 2006, a Medicare-dependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospitalspecific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before April 1, 2015, an MDH will receive the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the statutory provision for payments to MDHs expires on March 31, 2015, under current law.) SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 27991 or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric hospitals and units; children’s hospitals; certain cancer hospitals; and short-tern acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105–33), the Medicare, Medicaid and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106–113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106–554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children’s hospitals, certain cancer hospitals, short-tern acute care hospitals E:\FR\FM\15MYP2.SGM 15MYP2 27992 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs, as updated annually by the percentage increase in the IPPS operating market basket. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR Parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of section 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH’s payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with FY 2009, annual updates to the LTCH PPS are published in the same documents that update the IPPS (73 FR 26797 through 26798). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Critical Access Hospitals (CAHs) Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts 413 and 415. 5. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the hospital’s number of residents in that period and the hospital’s costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR Part 413. C. Summary of Provisions of Recent Legislation Discussed in This Proposed Rule The Patient Protection and Affordable Care Act (Pub. L. 111–148), enacted on March 23, 2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), enacted on March 30, 2010, made a number of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111–148 and Pub. L. 111–152 are collectively referred to as the ‘‘Affordable Care Act.’’) A number of the provisions of the Affordable Care Act affect the updates to the IPPS and the LTCH PPS and providers and suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010 Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51476). The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240), enacted on January 2, 2013, also made a number of changes that affect the IPPS. We announced changes related to certain IPPS provisions for FY 2013 in accordance with sections 605 and 606 of Public Law 112–240 in a notice issued in the Federal Register on March 7, 2013 (78 FR 14689). The Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, also made a number of changes that affect the IPPS and the LTCH PPS. We implemented changes related to the low-volume hospital payment adjustment and MDH provisions for FY 2014 in accordance with sections 1105 and 1106 of Public Law 113–67 in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022). The Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, also made a number of changes that affect the IPPS and LTCH PPS. 1. The Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152) In this proposed rule, we are proposing policy changes to implement (or, as applicable, continuing to PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 implement in FY 2015) the following provisions (or portions of the following provisions) of the Affordable Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt cancer hospitals for FY 2015: • Section 3001(a) of Public Law 111– 148, which requires the establishment of a hospital inpatient value-based purchasing program under which valuebased incentive payments are made in a fiscal year to hospitals that meet performance standards for the performance period for that fiscal year. • Section 3004 of Public Law 111– 148, which provides for the submission of quality data by LTCHs in order for them to receive the full annual update to the payment rates beginning with the FY 2014 rate year. • Section 3005 of Public Law 111– 148, which provides for the establishment of a quality reporting program for PPS-exempt cancer hospitals beginning with FY 2014, and for subsequent program years. • Section 3008 of Public Law 111– 148, which establishes the HospitalAcquired Condition (HAC) Reduction Program and requires the Secretary to make an adjustment to hospital payments for applicable hospitals, effective for discharges beginning on October 1, 2014, and for subsequent program years. • Section 3025 of Public Law 111– 148, which establishes a hospital readmissions reduction program and requires the Secretary to reduce payments to applicable hospitals with excess readmissions effective for discharges beginning on or after October 1, 2012. • Section 3133 of Public Law 111– 148, as amended by section 10316 of Public Law 111–148 and section 1104 of Public Law 111–152, which modifies the methodologies for determining Medicare DSH payments and creates a new additional payment for uncompensated care effective for discharges beginning on or after October 1, 2013. • Section 3401 of Public Law 111– 148, which provides for the incorporation of productivity adjustments into the market basket updates for IPPS hospitals and LTCHs. • Section 10324 of Public Law 111– 148, which provides for a wage adjustment for hospitals located in frontier States. • Sections 3401 and 10319 of Public Law 111–148 and section 1105 of Public Law 111–152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2015. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules • Section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings. 2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240) In this proposed rule, we are proposing policy changes to implement section 631 of the American Taxpayer Relief Act of 2012 that are applicable to the IPPS for FY 2015, which amended section 7(b)(1)(B) of Public Law 110–90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary’s estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 • Section 5506 of Public Law 111– 148, which added a provision to the Act that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital’s FTE resident caps. In this proposed rule, we are proposing policy changes to implement, or make conforming changes to regulations in accordance with, the following provisions (or portions of the following provisions) of the Protecting Access to Medicare Act of 2014 that are applicable to the IPPS and the LTCH PPS for FY 2015: • Section 105, which extends the temporary changes to the Medicare inpatient hospital payment adjustment for low-volume subsection (d) hospitals through March 31, 2015. • Section 106, which extends the MDH program through March 31, 2015. • Section 112, which makes certain changes to Medicare LTCH provisions, including modifications to the statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities and on increases in bed size in LTCH and LTCH satellite facilities. • Section 212, which prohibits the Secretary from requiring implementation of ICD–10 code sets before October 1, 2015. 3. Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) In this proposed rule, we are proposing policy changes to implement, or the need for future policy changes, to carry out provisions under section 1206 of the Pathway for SGR Reform Act of 2013. These include: • Section 1206(a), which provides the establishment of patient criteria for ‘‘site neutral’’ payment rates under the LTCH PPS, portions of which will begin to be implemented in FY 2016. • Section 1206(b)(1), which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act by retroactively reestablishing, and extending, the statutory moratorium on the full implementation of the 25percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for grandfathered HwHs, which are permanently exempt from this policy). • Section 1206(b)(2), which amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 4. Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) D. Summary of the Provisions of This Proposed Rule In this proposed rule, we are setting forth proposed changes to the Medicare IPPS for operating costs and for capitalrelated costs of acute care hospitals for FY 2015. We also are setting forth proposed changes relating to payments for IME and GME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in this proposed rule, we are setting forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015. Below is a summary of the major changes that we are proposing to make: 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of this proposed rule, we include— • Proposed changes to MS–DRG classifications based on our yearly review, including a discussion of the conversion of MS–DRGs to ICD–10 and the status of the implementation of the ICD–10–CM and ICD–10–PCS systems. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 27993 • Proposed application of the documentation and coding adjustment for FY 2015 resulting from implementation of the MS–DRG system. • Proposed recalibrations of the MS– DRG relative weights. • Proposed changes to hospitalacquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS–DRG payments for FY 2015. • A discussion of the FY 2015 status of new technologies approved for addon payments for FY 2014 and a presentation of our evaluation and analysis of the FY 2015 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108–173, obtained in a town hall meeting). 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble to this proposed rule, we are proposing revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include the following: • Proposed changes in CBSAs as a result of new OMB labor market area delineations and proposed policies related to the proposed changes in CBSAs. • The proposed FY 2015 wage index update using wage data from cost reporting periods beginning in FY 2011. • Analysis and implementation of the proposed FY 2015 occupational mix adjustment to the wage index for acute care hospitals, including the proposed application of the rural floor, the proposed imputed rural floor, and the proposed frontier State floor. • Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications. • The proposed adjustment to the wage index for acute care hospitals for FY 2015 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index. • The timetable for reviewing and verifying the wage data used to compute the proposed FY 2015 hospital wage index and proposed revisions to that timetable. • Determination of the labor-related share for the proposed FY 2015 wage index. E:\FR\FM\15MYP2.SGM 15MYP2 27994 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs In section IV. of the preamble of this proposed rule, we discuss proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR Parts 412 and 413, including the following: • Proposed changes in postacute care transfer policies as a result of proposed new MS–DRGs. • Proposed changes to the inpatient hospital updates for FY 2015, including incorporation of the adjustment for hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. • The proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • Proposed payment adjustment for low-volume hospitals for FY 2015. • The statutorily required IME adjustment factor for FY 2015 and proposed IME Medicare Part C payments to SCHs that are paid according to their hospital-specific rates. • Effect of expiration of the MDH program on April 1, 2015. • Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care. • Proposed changes to the measures and payment adjustments under the Hospital Readmissions Reduction Program. • Proposed changes to the requirements and provision of valuebased incentive payments under the Hospital Value-Based Purchasing Program. • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2015. • Proposed IME and direct GME policy changes regarding the effective date of the FTE resident cap, 3-year rolling average, and IRB ratio cap in new programs in teaching hospitals; effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas; clarification of effective date of provisions on counting resident time in nonprovider settings; proposed changes to the process for reviewing applications for and awarding slots made available under section 5506 of the Affordable Care Act by teaching hospitals that close; and clarification regarding direct GME payment to FQHCs and RHCs that train residents in approved programs. • Discussion of the Rural Community Hospital Demonstration Program and a VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 proposal for making a budget neutrality adjustment for the demonstration program. • Discussion of the requirements for transparency of hospital charges under the Affordable Care Act. • Discussion of and solicitation of comments on an alternative payment methodology under the Medicare program for short inpatient hospital stays. • Discussion of the process for submitting suggested exceptions to the 2-midnight benchmark. 4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs In section V. of the preamble to this proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2015 and other related proposed policy changes. 5. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages In section VI. of the preamble of this proposed rule, we discuss— • Proposed changes to payments to certain excluded hospitals for FY 2015. • Proposed updates to the RCE limits for services furnished by physicians to excluded hospitals. • Proposed CAH related changes regarding reclassifications as rural. • Proposed changes to the physician certification requirements for services furnished in CAHs. 6. Proposed Changes to the LTCH PPS In section VII. of the preamble of this proposed rule, we set forth— • Proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015. • Proposed revisions to the LTCH PPS geographic classifications based on the new OMB delineations. • Proposals to implement section 1206(b)(1) of the Pathway for SGR Reform Act, which provides for the retroactive reinstatement and extension, for an additional 4 years, of the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment established under section 114(c) of the MMSEA, as further amended by subsequent legislation. • Proposals to implement section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, which provides for moratoria (subject to certain defined exceptions) on the establishment of new LTCHs and LTCH satellite facilities and a moratorium on bed increases in PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 LTCHs effective for the period beginning April 1, 2014, and ending September 30, 2017. • Proposed changes to the LTCH interruption of stay policy by revising the fixed-day thresholds under the ‘‘greater than 3-day interruption of stay policy’’ to apply a uniform 30-day threshold as an ‘‘acceptable standard’’ for determining a linkage between an index discharge and a readmission. • Proposal to remove the discharge and readmission requirement, ‘‘Special Payment Provisions for Patients Who Are Transferred to Onsite Providers and Readmitted to an LTCH’’ (the ‘‘5 percent payment threshold’’) beginning in FY 2015. • Proposal to apply a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling reasonable cost payment under the TEFRA payment system model, consistent with the provisions of section 1206(d) of the Pathway for SGR Reform Act of 2013. 7. Proposed Changes to Regulations Governing Administrative Appeals by Providers and Judicial Review of Provider Claims In section VIII. of the preamble of this proposed rule, we set forth proposals to revise the regulations governing administrative appeals and judicial review of provider claims in Medicare cost reports. 8. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers In section IX. of the preamble of this proposed rule, we address— • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program as a condition for receiving the full applicable percentage increase. • Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program). • Proposed changes to the requirements under the LTCH Quality Reporting (LTCHQR) Program. 9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data In section X. of the preamble of this proposed rule, we set forth proposed regulatory revisions to broaden the specified uses of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 10. Proposed Changes to Enforcement Provisions for Organ Transplant Centers In section XI. of the preamble of this proposed rule, we are proposing to revise the regulations governing organ transplant centers that request approval, based on mitigating factors for initial approval and re-approval, for participation in Medicare when the centers have not met one or more of the conditions of participation. 11. Determining Prospective Payment Operating and Capital Rates and Rate-ofIncrease Limits for Acute Care Hospitals In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We also are proposing to establish the threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2015 for certain hospitals excluded from the IPPS. 12. Determining Prospective Payment Rates for LTCHs In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 LTCH PPS standard Federal rate. We are proposing to establish the adjustments for wage levels (including proposed changes to the LTCH PPS labor market area delineations based on the new OMB delineations), the labor-related share, the cost-of-living adjustment, and highcost outliers, including the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 13. Impact Analysis In Appendix A of this proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected acute care hospitals, LTCHs, and PCHs. 14. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of this proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2015 for the following: • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS. • The standard Federal rate for hospital inpatient services furnished by LTCHs. 15. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC’s March 2014 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We address these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2014 report or to obtain a copy of the report, contact MedPAC at (202) 220–3700 or visit MedPAC’s Web site at: https://www.medpac.gov. II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS– DRG) Classifications and Relative Weights A. Background Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary’s stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital’s payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 27995 any other factors that may change the relative use of hospital resources. B. MS–DRG Reclassifications For general information about the MS–DRG system, including yearly reviews and changes to the MS–DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50512). C. Adoption of the MS–DRGs in FY 2008 For information on the adoption of the MS–DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189). D. Proposed FY 2015 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS– DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110–90 In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS–DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS–DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. (In FY 2014, there are 751 MS– DRGs.) By increasing the number of MS–DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS–DRGs encourage hospitals to improve their documentation and coding of patient diagnoses. In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we indicated that the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries E:\FR\FM\15MYP2.SGM 15MYP2 27996 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules estimated that maintaining budget neutrality required an adjustment of ¥4.8 percent to the national standardized amount. We provided for phasing in this ¥4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010. On September 29, 2007, Congress enacted the TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007 (Pub. L. 110–90). Section 7(a) of Public Law 110–90 reduced the documentation and coding adjustment made as a result of the MS– DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009, and we finalized the FY 2008 adjustment through rulemaking, effective October 1, 2007 (72 FR 66886). For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent, and we finalized that adjustment through rulemaking effective October 1, 2008 (73 FR 48447). The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, which reflected the amendments made by section 7(a) of Public Law 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding adjustment for FY 2009 was in addition to the ¥0.6 percent adjustment for FY 2008, yielding a combined effect of ¥1.5 percent. 2. Adjustment to the Average Standardized Amounts Required by Public Law 110–90 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110–90 Section 7(b)(1)(A) of Public Law 110– 90 requires that, if the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years. b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Public Law 110–90 If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110–90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 matched the changes that occurred in those years. Public Law 110–90 requires that the Secretary only make these recoupment or repayment adjustments for discharges occurring during FYs 2010, 2011, and 2012. 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data In order to implement the requirements of section 7 of Public Law 110–90, we performed a retrospective evaluation of the FY 2008 data for claims paid through December 2008 using the methodology first described in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 through 43772). We performed the same analysis for FY 2009 claims data using PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 the same methodology as we did for FY 2008 claims (75 FR 50057 through 50068). The results of the analysis for the FY 2011 IPPS/LTCH PPS proposed and final rules, and subsequent evaluations in FY 2012, supported that the 5.4 percent estimate accurately reflected the FY 2009 increases in documentation and coding under the MS–DRG system. We were persuaded by both MedPAC’s analysis (as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own review of the methodologies recommended by various commenters that the methodology we employed to determine the required documentation and coding adjustments was sound. As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files are available to the public to allow independent analysis of the FY 2008 and FY 2009 documentation and coding effects. Interested individuals may still order these files through the CMS Web site at: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-forOrder/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)Hospital (National). This CMS Web page describes the file and provides directions and further detailed instructions for how to order. Persons placing an order must send the following: A Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check (refer to the Web site for the required payment amount) to: Mailing address if using the U.S. Postal Service: Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. Mailing address if using express mail: Centers for Medicare & Medicaid Services, OFM/Division of Accounting—RDDC, 7500 Security Boulevard, C3–07–11, Baltimore, MD 21244–1850. 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110–90 In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777), we opted to delay the implementation of any documentation and coding adjustment until a full analysis of case-mix changes based on FY 2009 claims data could be completed. We refer readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 50073), we found a total prospective documentation and coding effect of 5.4 percent. After accounting for the ¥0.6 percent and the ¥0.9 percent documentation and coding adjustments in FYs 2008 and 2009, we found a remaining documentation and coding effect of 3.9 percent. As we have discussed, an additional cumulative adjustment of ¥3.9 percent would be necessary to meet the requirements of section 7(b)(1)(A) of Public Law 110–90 to make an adjustment to the average standardized amounts in order to eliminate the full effect of the documentation and coding changes that do not reflect real changes in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law 110–90, section 7(b)(1)(A) does not specify when we must apply the prospective adjustment, but merely requires us to make an ‘‘appropriate’’ adjustment. Therefore, as we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we believed the law provided some discretion as to the manner in which we applied the prospective adjustment of ¥3.9 percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our practice to moderate payment adjustments when necessary to mitigate the effects of significant downward adjustments on hospitals, to avoid what could be widespread, disruptive effects of such adjustments on hospitals. Therefore, we stated that we believed it was appropriate to not implement the ¥3.9 percent prospective adjustment in FY 2011 because we finalized a ¥2.9 percent recoupment adjustment for that fiscal year. Accordingly, we did not propose a prospective adjustment under section 7(b)(1)(A) of Public Law 110–90 for FY 2011 (75 FR 23868 through 23870). We noted that, as a result, payments in FY 2011 (and in each future fiscal year until we implemented the requisite adjustment) would be higher than they would have been if we had implemented an adjustment under section 7(b)(1)(A) of Public Law 110–90. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we indicated that, because further delay of this prospective adjustment would result in a continued accrual of unrecoverable overpayments, it was imperative that we implement a prospective adjustment for FY 2012, while recognizing CMS’ continued desire to mitigate the effects of any significant downward adjustments to hospitals. Therefore, we implemented a ¥2.0 percent prospective adjustment to the standardized amount instead of the full ¥3.9 percent. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53276), we completed the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 by finalizing a ¥1.9 percent adjustment to the standardized amount for FY 2013. We stated that this adjustment would remove the remaining effect of the documentation and coding changes that do not reflect real changes in case-mix that occurred in FY 2008 and FY 2009. We believed that it was imperative to implement the full remaining adjustment, as any further delay would result in an overstated standardized amount in FY 2013 and any future fiscal years until a full adjustment was made. We noted again that delaying full implementation of the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 until FY 2013 resulted in payments in FY 2010 through FY 2012 being overstated. These overpayments could not be recovered by CMS as section 7(b)(1)(B) of Public Law 110–90 limited recoupments to overpayments made in FY 2008 and FY 2009. 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110–90 Section 7(b)(1)(B) of Public Law 110– 90 requires the Secretary to make an adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2008 and FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110–90. This determination must be based on a retrospective evaluation of claims data. Our actuaries estimated that there was a 5.8 percentage point difference resulting in an increase in aggregate payments of approximately $6.9 billion. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined that an aggregate adjustment of ¥5.8 percent in FYs 2011 and 2012 would be necessary in order to meet the requirements of section 7(b)(1)(B) of Public Law 110–90 to adjust the standardized amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of the increase in aggregate payments (including interest) in FYs 2008 and 2009. It is often our practice to phase in payment rate adjustments over more than one year in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 27997 that we have adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an adjustment to the standardized amount of ¥2.9 percent, representing approximately half of the aggregate adjustment required under section 7(b)(1)(B) of Public Law 110–90, for FY 2011. An adjustment of this magnitude allowed us to moderate the effects on hospitals in one year while simultaneously making it possible to implement the entire adjustment within the timeframe required under section 7(b)(1)(B) of Public Law 110–90 (that is, no later than FY 2012). For FY 2012, in accordance with the timeframes set forth by section 7(b)(1)(B) of Public Law 110–90, and consistent with the discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the recoupment adjustment by implementing the remaining ¥2.9 percent adjustment, in addition to removing the effect of the ¥2.9 percent adjustment to the standardized amount finalized for FY 2011 (76 FR 51489 and 51498). Because these adjustments, in effect, balanced out, there was no yearto-year change in the standardized amount due to this recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a final +2.9 percent adjustment to the standardized amount, completing the recoupment portion of section 7(b)(1)(B) of Public Law 110–90. We note that with this positive adjustment, according to our estimates, all overpayments made in FY 2008 and FY 2009 have been fully recaptured with appropriate interest, and the standardized amount has been returned to the appropriate baseline. 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment or adjustments totaling $11 billion by FY 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. As discussed earlier, this delay in implementation resulted in overstated payment rates in FYs 2010, 2011, and 2012. The resulting overpayments could not have been recovered under Public Law 110–90. Similar to the adjustments authorized under section 7(b)(1)(B) of Public Law 110–90, the adjustment required under section 631 of the ATRA is a one-time recoupment of a prior overpayment, not E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 27998 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules a permanent reduction to payment rates. Therefore, any adjustment made to reduce payment rates in one year would eventually be offset by a positive adjustment, once the necessary amount of overpayment is recovered. As we stated in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50515 through 50517), our actuaries estimate that a ¥9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014. It is often our practice to phase in payment rate adjustments over more than one year, in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, and after consideration of the public comments we received, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we implemented a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. We stated that if adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we estimate that the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As estimates of any future adjustments are subject to slight variations in total savings, we did not provide for specific adjustments for FYs 2015, 2016, or 2017 at that time. We stated that we believed that this level of adjustment for FY 2014 was a reasonable and fair approach that satisfies the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again noted that this ¥0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized. Consistent with the approach discussed in the FY 2014 rulemaking for recouping the $11 billion required by section 631 of the ATRA, we are proposing an additional ¥0.8 percent recoupment adjustment to the standardized amount for FY 2015. We estimated that this level of adjustment, combined with leaving the ¥0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017. We continue to believe that if adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 inflation factors, the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As we explained in the FY 2014 rulemaking, estimates of any future adjustments are subject to slight variations in total savings; therefore, we are not proposing specific adjustments for FY 2016 and FY 2017 at this time. We continue to believe that our proposed ¥0.8 percent adjustment for FY 2015 is a reasonable and fair approach that will help satisfy the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again note that this ¥0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized. 7. Prospective Adjustment for the MS– DRG Documentation and Coding Effect Through FY 2010 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we discussed the possibility of applying an additional prospective adjustment to account for the cumulative MS–DRG documentation and coding effect through FY 2010. In that final rule, we stated that if we were to apply such an adjustment, we believe the most appropriate additional adjustment is ¥0.55 percent. However, we decided not to apply such an adjustment in FY 2014, in light of the need to make the retrospective adjustments required by the ATRA. We continue to believe that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, the most appropriate additional adjustment is ¥0.55 percent. However, we are not proposing such an adjustment in FY 2015, in light of the ongoing recoupment required by the ATRA. We will consider whether such an additional adjustment is appropriate in future years’ rulemaking. E. Refinement of the MS–DRG Relative Weight Calculation 1. Background Beginning in FY 2007, we implemented relative weights for DRGs based on cost report data instead of charge information. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed discussion of our final policy for calculating the costbased DRG relative weights and to the FY 2008 IPPS final rule with comment period (72 FR 47199) for information on PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 how we blended relative weights based on the CMS DRGs and MS–DRGs. As we implemented cost-based relative weights, some public commenters raised concerns about potential bias in the weights due to ‘‘charge compression,’’ which is the practice of applying a higher percentage charge markup over costs to lower cost items and services, and a lower percentage charge markup over costs to higher cost items and services. As a result, the cost-based weights would undervalue high-cost items and overvalue low-cost items if a single CCR is applied to items of widely varying costs in the same cost center. To address this concern, in August 2006, we awarded a contract to the Research Triangle Institute, International (RTI) to study the effects of charge compression in calculating the relative weights and to consider methods to reduce the variation in the cost-to-charge ratios (CCRs) across services within cost centers. For a detailed summary of RTI’s findings, recommendations, and public comments that we received on the report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452 through 48453). In addition, we refer readers to RTI’s July 2008 final report titled ‘‘Refining Cost to Charge Ratios for Calculating APC and MS–DRG Relative Payment Weights’’ (https:// www.rti.org/reports/cms/HHSM-5002005-0029I/PDF/Refining_Cost_to_ Charge_Ratios_200807_Final.pdf). In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in response to the RTI’s recommendations concerning cost report refinements, we discussed our decision to pursue changes to the cost report to split the cost center for Medical Supplies Charged to Patients into one line for ‘‘Medical Supplies Charged to Patients’’ and another line for ‘‘Implantable Devices Charged to Patients.’’ We acknowledged, as RTI had found, that charge compression occurs in several cost centers that exist on the Medicare cost report. However, as we stated in the FY 2009 IPPS final rule, we focused on the CCR for Medical Supplies and Equipment because RTI found that the largest impact on the MS–DRG relative weights could result from correcting charge compression for devices and implants. In determining the items that should be reported in these respective cost centers, we adopted the commenters’ recommendations that hospitals should use revenue codes established by the AHA’s National Uniform Billing Committee to determine the items that should be reported in the ‘‘Medical Supplies Charged to Patients’’ and the ‘‘Implantable Devices Charged to E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Patients’’ cost centers. Accordingly, a new subscripted line for ‘‘Implantable Devices Charged to Patients’’ was created in July 2009. This new subscripted cost center has been available for use for cost reporting periods beginning on or after May 1, 2009. As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527), in addition to the findings regarding implantable devices, RTI also found that the costs and charges of computed tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and the OPPS relative weights would better estimate the costs of those services if CMS were to add standard cost centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRIs, and cardiac catheterization, and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS–2552–10. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed discussion of the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization.) The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS–2552–10. In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due to what is typically a 3-year lag between the reporting of cost report data and the availability for use in ratesetting, we anticipated that we might be able to use data from the new ‘‘Implantable Devices Charged to Patients’’ cost center to develop a CCR for ‘‘Implantable Devices Charged to Patients’’ in the FY 2012 or FY 2013 IPPS rulemaking cycle. However, as noted in the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43782), due to delays in the issuance of the revised cost report Form CMS 2552– 10, we determined that a new CCR for ‘‘Implantable Devices Charged to Patients’’ might not be available before VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 FY 2013. Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule to add new cost centers for CT scans, MRIs, and cardiac catheterization, we explained that data from any new cost centers that may be created will not be available until at least 3 years after they are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH PPS rulemaking, we checked the availability of data in the ‘‘Implantable Devices Charged to Patients’’ cost center on the FY 2009 cost reports, but we did not believe that there was a sufficient amount of data from which to generate a meaningful analysis in this particular situation. Therefore, we did not propose to use data from the ‘‘Implantable Devices Charged to Patients’’ cost center to create a distinct CCR for ‘‘Implantable Devices Charged to Patients’’ for use in calculating the MS–DRG relative weights for FY 2012. We indicated that we would reassess the availability of data for the ‘‘Implantable Devices Charged to Patients’’ cost center for the FY 2013 IPPS/LTCH PPS rulemaking cycle and, if appropriate, we would propose to create a distinct CCR at that time. During the development of the FY 2013 IPPS/LTCH PPS proposed and final rules, hospitals were still in the process of transitioning from the previous cost report Form CMS–2552– 96 to the new cost report Form CMS– 2552–10. Therefore, we were able to access only those cost reports in the FY 2010 HCRIS with fiscal year begin dates on or after October 1, 2009, and before May 1, 2010; that is, those cost reports on Form CMS–2552–96. Data from the Form CMS–2552–10 cost reports were not available because cost reports filed on the Form CMS–2552–10 were not accessible in the HCRIS. Further complicating matters was that, due to additional unforeseen technical difficulties, the corresponding information regarding charges for implantable devices on hospital claims was not yet available to us in the MedPAR file. Without the breakout in the MedPAR file of charges associated with implantable devices to correspond to the costs of implantable devices on the cost report, we believed that we had no choice but to continue computing the relative weights with the current CCR that combines the costs and charges for supplies and implantable devices. We stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do have the necessary data for supplies and implantable devices on the claims in the MedPAR file to create distinct CCRs for the PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 27999 respective cost centers for supplies and implantable devices, we hoped that we would also have data for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization, which could then be finalized through rulemaking. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that prior to proposing to create these CCRs, we would first thoroughly analyze and determine the impacts of the data, and that distinct CCRs for these new cost centers would be used in the calculation of the relative weights only if they were first finalized through rulemaking. At the time of the development of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27506 through 27507), we had a substantial number of hospitals completing all, or some, of these new cost centers on the FY 2011 Medicare cost reports, compared to prior years. We stated that we believed that the analytic findings described using the FY 2011 cost report data and FY 2012 claims data supported our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we saw no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in FY 2014, we proposed to calculate the MS–DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization (78 FR 27509). We refer readers to the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27507 through 27509) and final rule (78 FR 50518 through 50523) in which we presented data analyses using distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/LTCH PPS final rule also set forth our responses to public comments we received on our proposal to implement these CCRs. As explained in more detail in the FY 2014 IPPS/ LTCH PPS final rule, we finalized our proposal to use 19 CCRs to calculate MS–DRG relative weights beginning in FY 2014—the then existing 15 cost centers and the 4 new CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Therefore, beginning in FY 2014, we calculated the IPPS MS–DRG relative weights using 19 CCRs, creating distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. 2. Discussion for FY 2015 To calculate the proposed MS–DRG relative weights for FY 2015, we use two data sources: the MedPAR file as the E:\FR\FM\15MYP2.SGM 15MYP2 28000 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules F. Proposed Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Background Section 1886(d)(4)(D) of the Act addresses certain hospital-acquired conditions (HACs), including infections. This provision is part of an array of Medicare tools that we are using to promote increased quality and efficiency of care. Under the IPPS, hospitals are encouraged to treat patients efficiently because they receive the same DRG payment for stays that vary in length and in the services provided, which gives hospitals an incentive to avoid unnecessary costs in the delivery of care. In some cases, conditions acquired in the hospital do not generate higher payments than the hospital would otherwise receive for cases without these conditions. To this 2. HAC Selection Beginning in FY 2007, we have set forth proposals, and solicited and responded to public comments, to implement section 1886(d)(4)(D) of the Act through the IPPS annual rulemaking process. For specific policies addressed VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 extent, the IPPS encourages hospitals to avoid complications. However, the treatment of certain conditions can generate higher Medicare payments in two ways. First, if a hospital incurs exceptionally high costs treating a patient, the hospital stay may generate an outlier payment. Because the outlier payment methodology requires that hospitals experience large losses on outlier cases before outlier payments are made, hospitals have an incentive to prevent outliers. Second, under the MS–DRG system that took effect in FY 2008 and that has been refined through rulemaking in subsequent years, certain conditions can generate higher payments even if the outlier payment requirements are not met. Under the MS–DRG system, there are currently 261 sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a complication or comorbidity (CC) or a major complication or comorbidity (MCC). The presence of a CC or an MCC generally results in a higher payment. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidencebased guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with the CDC, from time to time as long as the list contains at least two conditions. Effective for discharges occurring on or after October 1, 2008, under the authority of section 1886(d)(4)(D) of the Act, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not present on admission (POA). Thus, if a selected condition that was not POA manifests during the hospital stay, it is considered a HAC and the case is paid as though the secondary diagnosis was not present. However, even if a HAC manifests during the hospital stay, if any nonselected CC or MCC appears on the claim, the claim will be paid at the higher MS–DRG rate. In addition, Medicare continues to assign a discharge to a higher paying MS–DRG if a selected condition is POA. When a HAC is not POA, payment can be affected in a manner shown in the diagram below. in each rulemaking cycle, including a detailed discussion of the collaborative interdepartmental process and public input regarding selected and potential candidate HACs, we refer readers to the following rules: the FY 2007 IPPS proposed rule (71 FR 24100) and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR 24716 through 24726) and final rule with comment period (72 FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) and final rule (73 FR 48471); the FY 2010 IPPS/ PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 EP15MY14.000</GPH> claims data source and the HCRIS as the cost report data source. We adjust the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the proposed 19 CCRs and the proposed MS–DRG relative weights for FY 2015 is included in section II.H. of the preamble of this proposed rule. Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 through 53303); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and final rule (78 FR 50523 through 50527). A complete list of the 11 current categories of HACs is included on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/Hospital-Acquired_ Conditions.html. 3. Present on Admission (POA) Indicator Reporting mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Collection of POA indicator data is necessary to identify which conditions were acquired during hospitalization for the HAC payment provision as well as for broader public health uses of Medicare data. In previous rulemaking, we provided both CMS and CDC Web site resources that are available to hospitals for assistance in this reporting effort. For detailed information regarding these sites and materials, including the application and use of POA indicators, we refer the reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 51507). Currently, as we have discussed in the prior rulemaking cited under section II.I.2. of the preamble of this proposed rule, the POA indicator reporting requirement only applies to IPPS hospitals because they are subject to this HAC provision. Non-IPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children’s hospitals, RNHCIs, and the Department of Veterans Affairs/Department of Defense hospitals, are exempt from POA reporting. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we noted that hospitals in Maryland operating under a statutory waiver are not paid under the IPPS, but rather were paid under the provisions of section 1814(b)(3) of the Act and therefore exempt from reporting POA indicators. However, we believed it was appropriate to require them to use POA indicator reporting on their claims so that we can include their data and have as complete a dataset as possible when we analyze trends and make further payment policy determinations, such as those authorized under section 1886(p) of the Act. Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we finalized our policy that hospitals in Maryland that formerly operated under section 1814(b)(3) of the Act were no longer exempted from the POA indicator reporting requirement beginning with claims submitted on or after October 1, 2013, including all claims for discharges on or after October 1, 2013. We note that, while this requirement was not effective until October 1, 2013, hospitals in Maryland could submit data with POA indicators before that date with the expectation that these data will be accepted by Medicare’s claims processing systems. (We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50707 through 50712) for a discussion of our FY 2014 final policies to implement section 1886(p) of the Act that are applicable to Maryland hospitals.) Subsequent to our FY 2014 rulemaking, the State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to 28001 implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare make payments to Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to section 1814(b)(3) hospitals. Although CMS has waived certain provisions of the Act for Maryland hospitals, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement, CMS has not waived the POA indicator reporting requirement. In other words, the changes to the status of Maryland hospitals under section 1814(b)(3) of the Act as described above do not in any way change the POA indicator reporting requirement for Maryland hospitals. There are currently four POA indicator reporting options, ‘‘Y’’, ‘‘W’’, ‘‘N’’, and ‘‘U’’, as defined by the ICD– 9–CM Official Guidelines for Coding and Reporting. We note that prior to January 1, 2011, we also used a POA indicator reporting option ‘‘1’’. However, beginning on or after January 1, 2011, hospitals were required to begin reporting POA indicators using the 5010 electronic transmittal standards format. The 5010 format removes the need to report a POA indicator of ‘‘1’’ for codes that are exempt from POA reporting. We issued CMS instructions on this reporting change as a One-Time Notification, Pub. No. 100–20, Transmittal No. 756, Change Request 7024, effective on August 13, 2010, which can be located at the following link on the CMS Web site: https:// www.cms.gov/manuals/downloads/ Pub100_20.pdf.) The POA indicator reporting process will not change when ICD–10–CM and ICD–10–PCS are implemented on October 1, 2014. The current POA indicators and their descriptors are shown in the chart below: Indicator Descriptor Y .............................. W ............................. Indicates that the condition was present on admission. Affirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the onset of the condition occurred. Indicates that the condition was not present on admission. Indicates that the documentation is insufficient to determine if the condition was present at the time of admission. N ............................. U ............................. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28002 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Under the HAC payment policy, we treat HACs coded with ‘‘Y’’ and ‘‘W’’ indicators as POA and allow the condition on its own to cause an increased payment at the CC and MCC level. We treat HACs coded with ‘‘N’’ and ‘‘U’’ indicators as Not Present on Admission (NPOA) and do not allow the condition on its own to cause an increased payment at the CC and MCC level. We refer readers to the following rules for a detailed discussion of POA indicator reporting: The FY 2009 IPPS proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525). In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53324), the 5010 format allows the reporting and, effective January 1, 2011, the processing of up to 25 diagnoses and 25 procedure codes. As such, it is necessary to report a valid POA indicator for each diagnosis code, including the principal diagnosis and all secondary diagnoses up to 25. 4. HACs and POA Reporting in Preparation for Transition to ICD–10– CM and ICD–10–PCS In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in preparation for the transition to the ICD–10–CM and ICD–10–PCS code sets, we indicated that further information regarding the use of the POA indicator with the ICD–10–CM/ICD–10–PCS classifications as they pertain to the HAC policy would be discussed in future rulemaking. At the March 5, 2012 and the September 19, 2012 meetings of the ICD–9–CM Coordination and Maintenance Committee, an announcement was made with regard to the availability of the ICD–9–CM HAC list translation to ICD–10–CM and ICD– 10–PCS code sets. Participants were informed that the list of the ICD–9–CM selected HACs has been translated into codes using the ICD–10–CM and ICD– 10–PCS classification system. It was recommended that the public review this list of ICD–10–CM/ICD–10–PCS code translations of the selected HACs VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 available on the CMS Web site at: https://www.cms.gov/Medicare/Coding/ ICD10/ICD-10-MS-DRG-ConversionProject.html. The translations can be found under the link titled ‘‘ICD–10– CM/PCS MS–DRG v30 Definitions Manual Table of Contents—Full Titles— HTML Version in Appendix I—Hospital Acquired Conditions (HACs).’’ This CMS Web site regarding the ICD–10– MS–DRG Conversion Project is also available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare -Fee-for-Service-Payment/Hospital AcqCond/icd10_hacs.html. We encouraged the public to submit comments on these translations through the HACs Web page using the CMS ICD– 10–CM/PCS HAC Translation Feedback Mailbox that was set up for this purpose under the Related Links section titled ‘‘CMS HAC Feedback.’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated that the final HAC list translation from ICD–9– CM to ICD–10–CM/ICD–10–PCS would be subject to formal rulemaking. We encouraged readers to review the educational materials and draft code sets available for ICD–10–CM/ICD–10– PCS on the CMS Web site at: https:// www.cms.gov/ICD10/. In addition, we stated that the draft ICD–10–CM/ICD– 10–PCS Coding Guidelines could be viewed on the CDC Web site at: https://www.cdc.gov/nchs/icd/ icd10cm.htm. The HACs code translation list from ICM–9–CM to ICD–10–CM/ICD–10–PCS is available to the public on the CMS Web site at: https://www.cms.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We note that Appendix I of the ICD–10 MS– DRGs Version 31.0–R file posted on the Web site contains the DRA HACs translated to ICD–10. We note that section 212 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, delayed the transition from the ICD–9–CM to the ICD–10 code set. 5. Proposals Regarding Current HACs and Previously Considered Candidate HACs In this FY 2015 IPPS/LTCH PPS proposed rule, we are not proposing to add or remove categories of the HACs. However, we continue to encourage public dialogue about refinements to the HAC list by written stakeholder comments about both previously selected and potential candidate HACs. We refer readers to section II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 for detailed discussion supporting our determination regarding each of these conditions. We also refer readers to section II.F.5. of the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27892 through 27898), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013, and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50523 through 50527) for the HAC policy for FY 2014. 6. RTI Program Evaluation On September 30, 2009, a contract was awarded to RTI to evaluate the impact of the Hospital-Acquired Condition-Present on Admission (HAC– POA) provisions on the changes in the incidence of selected conditions, effects on Medicare payments, impacts on coding accuracy, unintended consequences, and infection and event rates. This was an intra-agency project with funding and technical support from CMS, OPHS, AHRQ, and CDC. The evaluation also examined the implementation of the program and evaluated additional conditions for future selection. The contract with RTI ended on November 30, 2012. Summary reports of RTI’s analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC–POA program evaluation were included in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292 through 53302). Summary and detailed data also were made publicly available on the CMS Web site at: https://www.cms.gov/ HospitalAcqCond/01_Overview.asp and the RTI Web site at: https://www.rti.org/ reports/cms/. In addition to the evaluation of HAC and POA MedPAR claims data, RTI also conducted analyses on readmissions due to HACs, the incremental costs of HACs to the health care system, a study of spillover effects and unintended consequences, as well as an updated analysis of the evidence-based guidelines for selected and previously considered HACs. Reports on these analyses have been made publicly available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/. 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines The RTI program evaluation includes a report that provides references for all evidence-based guidelines available for E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. Guidelines were primarily identified using the AHRQ National Guidelines Clearing House (NGCH) and the CDC, along with relevant professional societies. Guidelines published in the United States were used, if available. In the absence of U.S. guidelines for a specific condition, international guidelines were included. Evidence-based guidelines that included specific recommendations for the prevention of the condition were identified for each of the selected conditions. In addition, evidence-based guidelines also were found for the previously considered candidate conditions. RTI prepared a final report to summarize its findings regarding evidence-based guidelines. This report can be found on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/Downloads/EvidenceBased-Guidelines.pdf. Subsequent to this final report, RTI was awarded an FY 2014 Evidence-Based Guidelines Monitoring contract. Under the contract, RTI will provide a summary report of all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. This report is usually delivered to CMS annually in a May/June timeframe. Updates to the guidelines will be made available to the public. G. Proposed Changes to Specific MS– DRG Classifications mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Discussion of Changes to Coding System and Basis for Proposed MS–DRG Updates a. Conversion of MS–DRGs to the International Classification of Diseases, 10th Revision (ICD–10) Providers use the code sets under the ICD–9–CM coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS–DRG system. The ICD–10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD– 10–CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding, as well as the Official ICD–10–CM and ICD–10– PCS Guidelines for Coding and Reporting. The ICD–10 coding system was initially adopted for transactions conducted on or after October 1, 2013, VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 as described in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Administrative Simplification: Modifications to Medical Data Code Set Standards to Adopt ICD–10–CM and ICD–10–PCS Final Rule published in the Federal Register on January 16, 2009 (74 FR 3328 through 3362) (hereinafter referred to as the ‘‘ICD–10–CM and ICD–10–PCS final rule’’). However, the Secretary of Health and Human Services issued a final rule that delays the compliance date for ICD–10 from October 1, 2013, to October 1, 2014. That final rule, entitled ‘‘Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for ICD–10–CM and ICD–10–PCS Medical Data Code Sets,’’ CMS–0040–F, was published in the Federal Register on September 5, 2012 (77 FR 54664) and is available for viewing on the Internet at: https:// www.gpo.gov/fdsys/pkg/FR-2012-09-05/ pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) was enacted. Section 212 of Public Law 113–93, titled ‘‘Delay in Transition from ICD–9 to ICD–10 Code Sets,’’ provides that ‘‘[t]he Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD–10 code sets as the standard for code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d– 2(c)) and section 162.1002 of title 45, Code of Federal Regulations.’’ As of now, the Secretary has not implemented this provision under HIPPA. The anticipated move to ICD–10 necessitated the development of an ICD–10–CM/ICD–10–PCS version of the MS–DRGs. CMS began a project to convert the ICD–9–CM-based MS–DRGs to ICD–10 MS–DRGs. In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on the creation of the ICD–10 version of the MS–DRGs, which will be implemented at the same time as ICD–10 (75 FR 50127 and 50128). While we did not propose an ICD–10 version of the MS– DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that we have been actively involved in converting current MS–DRGs from ICD–9–CM codes to ICD–10 codes and sharing this information through the ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee. We undertook this early conversion project to assist other payers and providers in understanding how to implement their own conversion projects. We posted ICD–10 MS–DRGs based on Version PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 28003 26.0 (FY 2009) of the MS–DRGs. We also posted a paper that describes how CMS went about completing this project and suggestions for other payers and providers to follow. Information on the ICD–10 MS–DRG conversion project can be found on the ICD–10 MS–DRG Conversion Project Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD10/ICD-10-MS-DRG-ConversionProject.html. We have continued to keep the public updated on our maintenance efforts for ICD–10–CM and ICD–10–PCS coding systems, as well as the General Equivalence Mappings that assist in conversion through the ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee. Information on these committee meetings can be found on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. During FY 2011, we developed and posted Version 28.0 of the ICD–10 MS– DRGs based on the FY 2011 MS–DRGs (Version 28.0) that we finalized in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD–10 MS– DRGs Version 28.0 also included the CC Exclusion List and the ICD–10 version of the hospital-acquired conditions (HACs), which was not posted with Version 26.0. We also discussed this update at the September 15–16, 2010 and the March 9–10, 2011 meetings of the ICD–9–CM Coordination and Maintenance Committee. The minutes of these two meetings are posted on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. We reviewed comments on the ICD– 10 MS–DRGs Version 28.0 and made updates as a result of these comments. We called the updated version the ICD– 10 MS–DRGs Version 28–R1. We posted a Definitions Manual of ICD–10 MS– DRGs Version 28–R1 on our ICD–10 MS–DRG Conversion Project Web site. To make the review of Version 28–R1 updates easier for the public, we also made available pilot software on a CD ROM that could be ordered through the National Technical Information Service (NTIS). A link to the NTIS ordering page was provided on the CMS ICD–10 MS– DRGs Web page. We stated that we believed that, by providing the ICD–10 MS–DRGs Version 28–R1 Pilot Software (distributed on CD ROM), the public would be able to more easily review and provide feedback on updates to the ICD– 10 MS–DRGs. We discussed the updated ICD–10 MS–DRGs Version 28–R1 at the September 14, 2011 ICD–9–CM Coordination and Maintenance E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28004 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Committee meeting. We encouraged the public to continue to review and provide comments on the ICD–10 MS– DRGs so that CMS could continue to update the system. In FY 2012, we prepared the ICD–10 MS–DRGs Version 29.0, based on the FY 2012 MS–DRGs (Version 29.0) that we finalized in the FY 2012 IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD–10 MS–DRGs Version 29.0 on our ICD–10 MS–DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 28.0 to Version 29.0 to facilitate a review. The ICD–10 MS–DRGs Version 29.0 was discussed at the ICD–9–CM Coordination and Maintenance Committee meeting on March 5, 2012. Information was provided on the types of updates made. Once again the public was encouraged to review and comment on the most recent update to the ICD– 10 MS–DRGs. CMS prepared the ICD–10 MS–DRGs Version 30.0 based on the FY 2013 MS– DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS final rule. We posted a Definitions Manual of the ICD–10 MS–DRGs Version 30.0 on our ICD–10 MS–DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 29.0 to Version 30.0 to facilitate a review. We produced mainframe and computer software for Version 30.0, which was made available to the public in February 2013. Information on ordering the mainframe and computer software through NTIS was posted on the ICD–10 MS–DRG Conversion Project Web site. The ICD–10 MS–DRGs Version 30.0 computer software facilitated additional review of the ICD– 10 MS–DRGs conversion. We provided information on a study conducted on the impact of converting MS–DRGs to ICD–10. Information on this study is summarized in a paper entitled ‘‘Impact of the Transition to ICD–10 on Medicare Inpatient Hospital Payments.’’ This paper was posted on the CMS ICD–10 MS–DRGs Conversion Project Web site and was distributed and discussed at the September 15, 2010 ICD–9–CM Coordination and Maintenance Committee meeting. The paper described CMS’ approach to the conversion of the MS–DRGs from ICD– 9–CM codes to ICD–10 codes. The study was undertaken using the ICD–9–CM MS–DRGs Version 27.0 (FY 2010) which was converted to the ICD–10 MS–DRGs Version 27.0. The study estimated the impact on aggregate payment to hospitals and the distribution of payments across hospitals. The impact of the conversion from ICD–9–CM to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 ICD–10 on Medicare MS–DRG hospital payments was estimated using FY 2009 Medicare claims data. The study found a hospital payment increase of 0.05 percent using the ICD–10 MS–DRGs Version 27.0. CMS provided an overview of this hospital payment impact study at the March 5, 2012 ICD–9–CM Coordination and Maintenance Committee meeting. This presentation followed presentations on the creation of ICD–10 MS–DRGs Version 29.0. A summary report of this meeting can be found on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. At this March 2012 meeting, CMS announced that it would produce an update on this impact study based on an updated version of the ICD–10 MS– DRGs. This update of the impact study was presented at the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting. The study found that moving from an ICD– 9–CM-based system to an ICD–10 MS– DRG replicated system would lead to DRG reassignments on only 1 percent of the 10 million MedPAR sample records used in the study. Ninety-nine percent of the records did not shift to another MS–DRG when using an ICD–10 MS– DRG system. For the 1 percent of the records that shifted, 45 percent of the shifts were to a higher weighted MS– DRG, while 55 percent of the shifts were to lower weighted MS–DRGs. The net impact across all MS–DRGs was a reduction by 4/10000 or minus 4 pennies per $100. The updated paper is posted on the CMS Web site at: https:// cms.hhs.gov/Medicare/Coding/ICD10/ ICD-10-MS-DRG-ConversionProject.html under the ‘‘Downloads’’ section. Information on the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting can be found on the CMS Web site at: https:// cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD–10 MS–DRG Version 30.0 software provided additional information to the public who were evaluating the conversion of the MS–DRGs to ICD–10 MS–DRGs. CMS prepared the ICD–10 MS–DRGs Version 31.0 based on the FY 2014 MS– DRGs (Version 31.0) that we finalized in the FY 2014 IPPS/LTCH PPS final rule. In November 2013, we posted a Definitions Manual of the ICD–10 MS– DRGs Version 31.0 on the ICD–10 MS– DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We also PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 prepared a document that described changes made from Version 30.0 to Version 31.0 to facilitate a review. We produced mainframe and computer software for Version 31.0, which was made available to the public in December 2013. Information on ordering the mainframe and computer software through NTIS was posted on the CMS Web site at: https://cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the ‘‘Related Links’’ section. This ICD–10 MS–DRGs Version 31.0 computer software facilitated additional review of the ICD–10 MS–DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD–10 MS–DRGs did not accurately reflect grouping logic found in the ICD–9–CM MS–DRGs Version 31.0. We reviewed comments received and developed an update of ICD–10 MS– DRGs Version 31.0, which we called ICD–10 MS–DRGs Version 31.0–R. We have posted a Definitions Manual of the ICD–10 MS–DRGs Version 31.0–R on the ICD–10 MS–DRG Conversion Project Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We also prepared a document that describes changes made from Version 31.0 to Version 31.0–R to facilitate a review. We will continue to share ICD–10–MS–DRG conversion activities with the public through this Web site. b. Basis for FY 2015 MS–DRG Updates CMS encourages input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014. The comments that were submitted in a timely manner for FY 2015 are discussed below in this section. Following are the changes we are proposing to the MS–DRGs. We are inviting public comment on each of the MS–DRG classification proposed changes described below, as well as our proposals to maintain certain existing MS–DRG classifications, which also are discussed below. In some cases, we are proposing changes to the MS–DRG classifications based on our analysis of claims data. In other cases, we are proposing to maintain the existing MS– DRG classification based on our analysis of claims data. For this FY 2015 proposed rule, our MS–DRG analysis is based on claims data from the December E:\FR\FM\15MYP2.SGM 15MYP2 28005 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 2013 update of the FY 2013 MedPAR file, which contains hospital bills received through September 30, 2013, for discharges occurring through September 30, 2013. In our discussion of the proposed MS–DRG reclassification changes that follows, we refer to our analysis of claims data from the ‘‘December 2013 update of the FY 2013 MedPAR file.’’ For the FY 2015 final rule, we intend to calculate the final relative weights on claims data from the March 2014 update of the FY 2013 MedPAR file, which will contain hospital bills received through December 31, 2013, for discharges occurring through December 31, 2013. As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modification to the MS–DRGs for particular circumstances brought to our attention, we considered whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients in the MS– DRG. We evaluated patient care costs using average costs and lengths of stay and relied on the judgment of our clinical advisors to decide whether patients are clinically distinct or similar to other patients in the MS–DRG. In evaluating resource costs, we considered both the absolute and percentage differences in average costs between the cases we selected for review and the remainder of cases in the MS–DRG. We also considered variation in costs within these groups; that is, whether observed average differences were consistent across patients or attributable to cases that were extreme in terms of costs or length of stay, or both. Further, we considered the number of patients who will have a given set of characteristics and generally preferred not to create a new MS–DRG unless it would include a substantial number of cases. 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Intracerebral Therapies: Gliadel® Wafer During the comment period for the FY 2014 IPPS/LTCH PPS proposed rule, we received a public comment that we considered to be outside the scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The commenter requested that a new MS–DRG be created for intracerebral therapies, including implantation of chemotherapeutic agents. Specifically, the commenter referred to the Gliadel® Wafer for the treatment of High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors originating in the brain. The Gliadel® Wafer has been discussed in prior rulemaking, including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule (68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005 IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR 48957 through 48971); and the FY 2008 IPPS/ LTCH PPS final rule (72 FR 47252 through 47253). We refer readers to these prior discussions for further background information regarding the Gliadel® Wafer. Effective October 1, 2002, ICD–9–CM procedure code 00.10 (Implantation of chemotherapeutic agent) was created to identify and describe insertion of the Gliadel® Wafer. This procedure code is assigned to MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in MDC 1. According to the commenter, this current MS–DRG assignment does not compensate providers adequately for the expenses incurred to perform the surgery and implantation of the wafer device. The commenter noted that MS– DRG 023 has a national average payment rate of approximately $28,016. However, the commenter stated, ‘‘the acquisition cost for 1 box of the Gliadel® Wafer alone (typical utilization per procedure is 8 wafers or 1 box) is $29,035.’’ We conducted an analysis using claims data from the December 2013 update of the FY 2013 MedPAR file. Our findings are shown in the table below. Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG 023—All cases ............................................................................................................ MS–DRG 023—Cases with procedure code 00.10 .................................................................... As shown in the table above, there were a total of 5,383 cases in MS–DRG 023 with an average length of stay of 10.98 days and average costs of $36,982. The number of cases reporting procedure code 00.10 in MS–DRG 023 totaled 158, with an average length of stay of 7.0 days and average costs of $34,027. The data clearly demonstrate that the volume of cases reporting procedure code 00.10 within MS–DRG 023 have a shorter average length of stay and are lower in average costs in comparison to all the cases in the MS–DRG. Given the low volume of cases, shorter average length of stay, and lower average costs, the data do not support the creation of a new MS–DRG for cases utilizing the Gliadel® Wafer. In addition, our clinical advisors determined that cases reporting procedure code 00.10 are appropriately assigned within MS–DRG 023. As VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 discussed in the FY 2005 IPPS final rule (69 FR 48959), Gliadel® Wafer cases were assigned to a new DRG that was clinically coherent and reflected the resources used to treat those cases, which appropriately addressed the concerns of commenters who raised questions regarding DRG assignment for those cases at that time. Subsequently, with the adoption of the MS–DRGs, in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47252 through 47253), we assigned all cases utilizing the Gliadel® Wafer technology to MS–DRG 023, the higher severity level, and revised the title of this MS–DRG in recognition of the complexity and costs associated with the implantation. Our clinical advisors continue to support this assignment for these same reasons. Therefore, we are not proposing to create a new MS–DRG for FY 2015 for cases where ICD–9–CM procedure code PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 5,383 158 Average length of stay Average costs 10.98 7.0 $36,982 34,027 00.10 is reported. We are inviting public comments on our proposal to maintain the current MS–DRG structure. b. Endovascular Embolization or Occlusion of Head and Neck We received a request to change the MS–DRG assignment for the following three ICD–9–CM procedure codes representing endovascular embolization or occlusion procedures of the head and neck: • 39.72 (Endovascular (total) embolization or occlusion of head and neck vessels); • 39.75 (Endovascular embolization or occlusion of vessel(s) of head or neck using bare coils); and • 39.76 (Endovascular embolization or occlusion of vessel(s) of head or neck using bioactive coils). These three procedure codes are currently assigned to the following eight E:\FR\FM\15MYP2.SGM 15MYP2 28006 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules MS–DRGs under MDC 1. Cases assigned to MS–DRGs 020, 021, and 022 require a principal diagnosis of hemorrhage. Cases assigned to MS–DRGs 023 and 024 require the insertion of a major implant or an acute complex central nervous system (CNS) principal diagnosis. Cases assigned to MS–DRGs 025, 026, and 027 do not have a principal diagnosis of hemorrhage, an acute complex CNS principal diagnosis, or a major device implant. • MS–DRG 020 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with MCC) • MS–DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with CC) • MS–DRG 022 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage without CC/MCC) • MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant) • MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without MCC) • MS–DRG 025 (Craniotomy & Endovascular Intracranial Procedures with MCC) • MS–DRG 026 (Craniotomy & Endovascular Intracranial Procedures with CC) • MS–DRG 027 (Craniotomy & Endovascular Intracranial Procedures without CC/MCC) The requestor recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved from MS– DRGs 025, 026, and 027 to MS–DRGs 023 and 024, even when there is no reported acute complex CNS principal diagnosis or a major device implant. The requestor stated that unruptured aneurysms can be treated by a minimally invasive technique utilizing endovascular coiling. The requester noted that a microcatheter is inserted into a groin artery and navigated through the vascular system to the location of the aneurysm. The coils are inserted through the microcatheter into the aneurysm in order to occlude (fill) the aneurysm from inside the blood vessel. Once the coils are implanted, the blood flow pattern within the aneurysm is altered. The requestor stated that these cases do not have a principal diagnosis of hemorrhage because the treatment is for an unruptured aneurysm which has not hemorrhaged. Furthermore, the requestor stated that only a few of these cases without hemorrhage have a complex CNS principal diagnosis. Therefore, the requester believed that most of the cases should be assigned to MS–DRGs 025, 026, and 027. The requestor stated that the average costs of coil cases captured by procedure codes 39.72, 39.75, and 39.76 are significantly higher than other cases within MS–DRGs 025, 026, and 027 where most of the coil cases are Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 23—All cases .............................................................................................................. 24—All cases .............................................................................................................. 25—All cases .............................................................................................................. 25—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ 26—All cases .............................................................................................................. 26—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ 27—All cases .............................................................................................................. 27—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ Our clinical advisors reviewed the results of our examination and determined that the endovascular embolization or occlusion of head and neck procedures are appropriately classified within MS–DRGs 025, 026, and 027 because they do not have an acute complex CNS principal diagnosis or a major device implant which would add to their clinical complexity. Cases in MS–DRG 024 have average costs that are $4,049 higher than cases in MS–DRG 027 with procedure code 39.72, 39.75, or 39.76. We acknowledge that the 1,245 cases with procedure code 39.72, 39.75, or 39.76 in MS–DRGs 025 and 026 have average costs that are closer to those in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 MS–DRGs 024 and 025. However, these cases are 1,245 of the total 2,976 cases that would be involved if we moved all MS–DRGs 025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to MS–DRGs 024 and 025, even if they did not have an acute complex CNS principal diagnosis or a major device implant. Based on these findings and the recommendations from our clinical advisors, we have determined that proposing to move endovascular embolization or occlusion of head and neck procedures from MS–DRGs 025, 026, and 027 to MS–DRGs 023 and 024 is not warranted. Therefore, we are proposing to maintain the current MS– PO 00000 assigned. As stated earlier, the requester recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved to MS–DRGs 023 and 024, even when there is not an acute complex CNS principal diagnosis or a major device implant reported. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular embolization or occlusion of head and neck. The table below shows our findings. For MS–DRGs 025, 026, and 027, the cases identified by procedure code 39.72, 39.75, or 39.76 (endovascular embolization or occlusion of head and neck) have higher average costs and shorter lengths of stay in comparison to all the cases within each of those respective MS–DRGs. The average costs of cases in MS–DRG 024 are $4,049 higher than the average costs of the 1,731 endovascular embolization or occlusion of head and neck procedures cases in MS–DRG 027 ($26,250 versus $22,201). The findings also show that the 524 cases with procedure code 39.72, 39.75, or 39.76 with average costs of $41,030 in MS– DRG 025 are closer to the average costs of $36,982 for cases in MS–DRG 023. Lastly, we found that the 721 endovascular embolization or occlusion of head and neck procedure cases in MS–DRG 026 have average costs of $27,998 compared to average costs of $26,250 for cases in MS–DRG 024. Frm 00030 Fmt 4701 Sfmt 4702 5,383 1,745 15,937 524 8,520 721 10,326 1,731 Average length of stay Average costs 10.98 6.30 9.68 7.97 6.16 3.14 3.30 1.66 $36,982 26,250 29,722 41,030 21,194 27,998 16,389 22,201 DRG assignments for endovascular embolization or occlusion of head and neck procedures. We are inviting public comments on our proposal. 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System We received a request to create a new MS–DRG for the Avery Breathing Pacemaker System. This system is also called a diaphragmatic pacemaker and is captured by ICD–9–CM procedure code 34.85 (Implantation of diaphragmatic pacemaker). The requestor stated that the diaphragmatic pacemaker is indicated for adult and E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules pediatric patients with chronic respiratory insufficiency that would otherwise be dependent on ventilator support. The procedure consists of surgically implanted receivers and electrodes mated to an external transmitter by antennas worn over the implanted receivers. The external transmitter and antennas send radiofrequency energy to the implanted receivers under the skin. The receivers then convert the radio waves into stimulating pulses sent down the electrodes to the phrenic nerves, causing the diaphragm to contract. The requestor stated that this normal pattern is superior to mechanical ventilators that force air into the chest. The requestor also stated that the system is expensive; the device cost is approximately $57,000. According to the requestor, given the cost of the device, hospitals are reluctant to use it. The requestor did not make a specific MS–DRG reassignment request. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 163—All cases ............................................................................................................ 163—Cases with procedure code 34.85 .................................................................... 164—All cases ............................................................................................................ 164—Cases with procedure code 34.85 .................................................................... 165—All cases ............................................................................................................ 165—Cases with procedure code 34.85 .................................................................... There were only 48 cases of diaphragmatic pacemakers within MS– DRGs 163, 164, and 165. The average costs of these diaphragmatic pacemaker cases ranged from $22,977 for the single case in MS–DRG 165 to $29,406 for the cases in MS–DRG 163, compared to the average costs for all cases in MS–DRGs 163, 164, and 165, which range from $13,081 to $34,308. The average cost for diaphragmatic pacemaker cases in MS– DRG 163 was lower than that for all cases in MS–DRG 163, $29,406 compared to $34,308 for all cases. The average cost for diaphragmatic pacemaker cases was higher for MS– DRG 164, $23,406 compared to $18,352 for all cases. While the average cost for the single diaphragmatic pacemaker case was significantly higher for MS– DRG 165, $22,977 compared to $13,081, we were unable to determine if additional factors might have impacted the higher cost for this single case. Given the small number of diaphragmatic pacemaker cases that we found, we do not believe that there is justification for creating a new MS– DRG. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS–DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. We note that, as discussed in section II.G.4.c. of the preamble of this proposed rule, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS–DRG is whether there are at least 500 cases in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS–DRG, applying it here suggests that creating a new MS–DRG for only 48 cases would not be appropriate. Although the average costs of these diaphragmatic pacemaker cases are higher than the average costs of all cases in MS–DRGs 163 and 164, we believe the current MS–DRG assignment is appropriate and that the data do not support creating an MS–DRG because there are so few cases. Our clinical advisors reviewed this issue and determined that the diaphragmatic pacemaker cases are appropriately classified within MS– DRGs 163, 164, and 165 because they are clinically similar to other cases of patients with major chest procedures within MS–DRGs 163, 164, and 165. Our clinical advisors did not support creating a new MS–DRG for such a small number of cases. Based on the results of the examination of the claims data, the recommendations from our clinical advisors, and the small number of diaphragmatic pacemaker cases, we are not proposing to create a new MS–DRG for diaphragmatic pacemaker cases at this time. We are proposing to maintain the current MS–DRG assignments for diaphragmatic pacemaker cases. We are inviting public comments on our proposal. 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Exclusion of Left Atrial Appendage We received a request to move the exclusion of the left atrial appendage PO 00000 When used for a respiratory failure patient, procedure code 34.85 is assigned to MS–DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively). We examined claims data from the December 2013 update of the FY 2013 MedPAR file for diaphragmatic pacemaker cases. The following table shows our findings. Number of cases MS–DRG Frm 00031 Fmt 4701 Sfmt 4702 28007 11,766 13 16,087 34 9,207 1 Average length of stay Average costs 13.13 2.23 6.58 1.71 3.91 1.00 $34,308 29,406 18,352 23,406 13,081 22,977 procedure, which is a non-O.R. procedure and captured by ICD–9–CM procedure code 37.36 (Excision, destruction or exclusion of left atrial appendage (LAA)), from MS–DRGs 250 (Percutaneous Cardiovascular without Coronary Artery Stent with MCC) and 251 (Percutaneous Cardiovascular without Coronary Artery Stent without MCC) to MS–DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC). The requestor stated that the exclusion of the left atrial appendage procedure code 37.36 is not clinically coherent with the other procedures in MS–DRGs 250 and 251 and that this current assignment to MS–DRGs 250 and 251 does not compensate providers adequately for the expenses incurred to perform this procedure and placement of the device. The exclusion of the left atrial appendage procedure involves a percutaneous placement of a snare/ suture around the left atrial appendage to close it off. The exclusion of the left atrial appendage procedure takes place in the cardiac catheterization laboratory under general anesthesia and is a catheter based closed-chest procedure instead of an open heart surgical technique to treat the same clinical condition, with the same intended results. The procedure can be performed by either an interventional cardiologist or an electrophysiologist. We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS– DRGs 250 and 251 and MS–DRGs 237 and 238. Our findings are shown in the table below. E:\FR\FM\15MYP2.SGM 15MYP2 28008 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 250—All cases ............................................................................................................ 250—Cases with procedure code 37.36 .................................................................... 251—All cases ............................................................................................................ 251—Cases with procedure code 37.36 .................................................................... 237—All cases ............................................................................................................ 238—All cases ............................................................................................................ The data in the table above show that, while the average costs of the atrial appendage exclusion procedures are higher ($29,637) than those for all cases ($21,319) within MS–DRG 250 and are higher ($18,298) than for all cases ($14,614) within MS–DRG 251, they are lower than those in MS–DRGs 237 ($35,642) and 238 ($24,511). Our clinical advisors reviewed this issue and recommended not moving these standalone percutaneous cases to MS–DRGs 237 and 238 because they do not consider them to be major cardiovascular procedures. Our clinical advisors stated that cases reporting ICD– 9–CM procedure code 37.36 are appropriately assigned within MS–DRG 250 and 251 because they are percutaneous cardiovascular procedures and are clinically similar to other procedures within the MS–DRG. Therefore, we are not proposing to reassign exclusion of atrial appendage procedure cases from MS–DRGs 250 and 251 to MS–DRGs 237 and 238 for FY 2015. We are inviting public comments on our proposal to maintain the current MS–DRG structure for the exclusion of the left atrial appendage. b. Transcatheter Mitral Valve Repair: MitraClip® The MitraClip® System (hereafter referred to as MitraClip®) for transcatheter mitral valve repair has been discussed in extensive detail in previous rulemaking, including the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR 51528 through 51529) and the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27902 through 27903) and final rule (77 FR 53308 through 53310), in response to requests for MS–DRG reclassification, as well as, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552) under the new technology addon payment policy. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50575), the application for a new technology add-on payment for MitraClip® was unable to be considered further due to lack of FDA approval by the July 1, 2013 deadline. Subsequently, on October 24, 2013, MitraClip® received FDA approval. As a result, the manufacturer has submitted new requests for both an MS–DRG reclassification and new technology add-on payment for FY 2015. We refer readers to section II.I. of the preamble of this proposed rule for discussion regarding the application for MitraClip® under the new technology add-on payment policy. Below we discuss the MS–DRG reclassification request. The manufacturer’s request for MS– DRG reclassification involves two components. The first component consists of reassigning cases reporting a transcatheter mitral valve repair using the MitraClip® from MS–DRGs 250 and 251(Percutaneous Cardiovascular mstockstill on DSK4VPTVN1PROD with PROPOSALS2 250—All cases ............................................................................................................ 250—Cases with procedure code 35.97 .................................................................... 251—All cases ............................................................................................................ 251—Cases with procedure code 35.97 .................................................................... As displayed in the table above, the data demonstrate that, for MS–DRG 250, there were a total of 9,174 cases with an average length of stay of 6.90 days and average costs of $21,319. The number of cases reporting the ICD–9–CM procedure code 35.97 in MS–DRG 250 totaled 67 with an average length of stay of 8.48 days and average costs of $39,103. For MS–DRG 251, there were a total of 26,331 cases with an average VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 length of stay of 3.01 days and average costs of $14,614. There were 127 cases found in MS–DRG 251 reporting the procedure code 35.97 with an average length of stay of 3.94 days and average costs of $25,635. We recognize that the cases reporting procedure code 35.97 have a longer length of stay and higher average costs in comparison to all the cases within MS–DRGs 250 and 251. However, as stated in prior rulemaking PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 Average costs 6.90 7.21 3.01 3.01 9.66 3.73 $21,319 29,637 14,614 18,298 35,642 24,511 Procedure without Coronary Artery Stent with MCC and without MCC, respectively) to MS–DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/ MCC). The second component of the manufacturer’s request was for CMS to examine the creation of a new base MS– DRG for transcatheter valve therapies. Effective October 1, 2010, ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant) was created to identify and describe the MitraClip® technology. To address the first component of the manufacturer’s request, we conducted an analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS–DRGs 250 and 251. The table below shows our findings. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 9,174 61 26,331 341 17,813 33,644 Average length of stay 9,174 67 26,331 127 Average length of stay Average costs 6.90 8.48 3.01 3.94 $21,319 39,103 14,614 25,635 (77 FR 53309), it is a fundamental principle of an averaged payment system that half of the procedures in a group will have above average costs. It is expected that there will be higher cost and lower cost subsets, especially when a subset has low numbers. We also evaluated the claims data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 216 E:\FR\FM\15MYP2.SGM 15MYP2 28009 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules through 221. Our findings are shown in the table below. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 216—All 217—All 218—All 219—All 220—All 221—All cases cases cases cases cases cases ............................................................................................................ ............................................................................................................ ............................................................................................................ ............................................................................................................ ............................................................................................................ ............................................................................................................ The data in our findings do not warrant reassignment of cases reporting use of the MitraClip®. If we were to propose reassignment of cases reporting procedure code 35.97 to MS–DRGs 216 through 221, they would be significantly overpaid, as the average costs range from $34,310 to $65,478 for those MS– DRGs. In addition, our clinical advisors do not support reassigning these cases. They noted that the current MS–DRG assignment is appropriate for the reasons stated in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53309). To reiterate, our clinical advisors note that the current MS–DRG assignment is reasonable because the operating room resource utilizations of percutaneous procedures, such as those found in MS– DRGs 250 and 251, tend to group together, and are generally less costly than open procedures, such as those found in MS–DRGs 216 through 221. Percutaneous procedures by organ system represent groups that are reasonably clinically coherent. More significantly, our clinical advisors state that postoperative resource utilization is significantly higher for open procedures with much greater morbidity and consequent recovery needs. Because the equipment, technique, staff, patient populations, and physician specialty all tend to group by type of procedure (percutaneous or open), separately grouping percutaneous procedures and open procedures is more clinically consistent. Therefore, we are not proposing to modify the current MS– DRG assignment for cases reporting procedure code 35.97 from MS–DRGs 250 and 251 to MS–DRGs 216 through 221 for FY 2015. We are inviting public comments on our proposal to not make any modifications to the current MS– DRG logic for these cases. As indicated above, the second component of the manufacturer’s request involved the creation of a new base MS–DRG for transcatheter valve therapies. We also received a similar request from another manufacturer recommending that we create a new MS–DRG for procedures referred to as endovascular cardiac valve replacement procedures. We reviewed each of these requests using the same data analysis, as set forth below. The discussion for endovascular cardiac valve replacement procedures is included in section II.G.4.c. of the preamble of this proposed rule and includes findings from the analysis and our proposals for each of these similar, but distinct requests. c. Endovascular Cardiac Valve Replacement Procedures As noted in the previous section related to the MitraClip® technology, we received two requests to create a new base MS–DRG for what was referred to as ‘‘transcatheter valve therapies’’ by one manufacturer and ‘‘endovascular cardiac valve replacement’’ procedures by another manufacturer. Below we summarize the details of each request and review results of the data analysis that was performed. Transcatheter Valve Therapies The request related to transcatheter valve therapies consisted of creating a 10,131 5,374 882 17,856 21,059 4,586 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG 250 through 251—Cases with procedure code 35.97 ................................................ Upon analysis of cases in MS–DRGs 216 through 221 reporting the cardiac valve replacement procedure codes, we VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 found a total of 7,287 cases with an average length of stay of 8.1 days and PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 Average costs 15.41 9.51 6.88 11.63 7.13 5.32 $65,478 44,695 39,470 54,590 38,137 34,310 new MS–DRG that would include the MitraClip® technology (ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant)), along with the following list of ICD–9–CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique: • 35.05 (Endovascular replacement of aortic valve); • 35.06 (Transapical replacement of aortic valve); • 35.07 (Endovascular replacement of pulmonary valve); • 35.08 (Transapical replacement of pulmonary valve); and • 35.09 (Endovascular replacement of unspecified valve). We performed analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for both the percutaneous mitral valve repair and the transcatheter/endovascular cardiac valve replacement codes in their respective MS–DRGs. The percutaneous mitral valve repair with implant (MitraClip®) procedure code is currently assigned to MS–DRGs 250 and 251, while the transcatheter/endovascular cardiac valve replacement procedure codes are currently assigned to MS– DRGs 216, 217, 218, 219, 220, and 221. As illustrated in the table below, the data demonstrate that, for MS–DRGs 250 and 251, there were a total of 194 cases reporting procedure code 35.97, with an average length of stay of 5.5 days and average costs of $30,286. Number of cases MS–DRG Average length of stay 194 Average length of stay Average costs 5.5 $30,286 average costs of $53,802, as shown in the table below. E:\FR\FM\15MYP2.SGM 15MYP2 28010 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Number of cases MS–DRG MS–DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ MS–DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ The data clearly demonstrate that the volume of cases for the transcatheter/ endovascular cardiac valve replacement procedures are much higher in comparison to the volume of cases for the percutaneous mitral valve repair (MitraClip®) procedure (7,287 compared to 194). In addition, the average costs of the transcatheter/endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair with implant ($53,802 compared to $30,286). Our clinical advisors do not support grouping a percutaneous valve repair procedure with transcatheter/ endovascular valve replacement procedures. They do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClip® technology identified by procedure code 35.97 is utilized for a percutaneous mitral valve repair, while the other technologies, identified by procedure codes 35.05 through 35.09, are utilized for transcatheter/endovascular cardiac valve replacements. Consequently, the data analysis and our clinical advisors do not support the creation of a new MS–DRG. Therefore, for FY 2015, we are not proposing to create a new MS– DRG to group cases reporting the percutaneous mitral valve repair (MitraClip®) procedure with transcatheter/endovascular cardiac valve replacement procedures. We are inviting public comments on our proposal. Endovascular Cardiac Valve Replacement The similar but separate request relating to endovascular cardiac valve replacement procedures consisted of creating a new MS–DRG that would only include the various types of cardiac valve replacements performed by an endovascular or transcatheter technique. In other words, this request specifically did not include the MitraClip® technology (ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant)) and only included the list of ICD–9–CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique (ICD–9–CM procedure codes 35.05 through 35.09) as described earlier in this section. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ MS–DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS–DRG, this subgroup must meet all of the following five criteria: • A reduction in variance of costs of at least 3 percent. • At least 5 percent of the patients in the MS–DRG fall within the CC or the MCC subgroup. • At least 500 cases are in the CC or the MCC subgroup. • There is at least a 20-percent difference in average costs between subgroups. • There is a $2,000 difference in average costs between subgroups. In applying the five criteria, we found that the data support the creation of a new MS–DRG subdivided into two PO 00000 Average costs 7,287 8.1 $53,802 52,601 10.1 47,177 The human heart contains four major valves—the aortic, mitral, pulmonary, and tricuspid valves. These valves function to keep blood flowing through the heart. When conditions such as stenosis or insufficiency/regurgitation occur in one or more of these valves, valvular heart disease may result. Cardiac valve replacement surgery is performed in an effort to correct these diseased or damaged heart valves. The endovascular or transcatheter technique presents a viable option for high-risk patients who are not candidates for the traditional open surgical approach. We reviewed the claims data from the December 2013 update of the FY 2013 MedPAR file for cases in MS–DRGs 216 through 221. Our findings are shown in the chart below. The data analysis shows that cardiac valve replacements performed by an endovascular or transcatheter technique represent a total of 7,287 of the cases in MS–DRGs 216 through 221, with an average length of stay of 8.1 days and higher average costs ($53,802 compared to $47,177) in comparison to all of the cases in MS– DRGs 216 through 221. Number of cases MS–DRG As the data appear to indicate support for the creation of a new base MS–DRG, based on our evaluation of resource consumption, patient characteristics, volume, and costs between the cardiac valve replacements performed by an endovascular or transcatheter technique and the open surgical technique, we then applied our established criteria to determine if these cases would meet the requirements to create subgroups. We use five criteria established in the FY 2008 IPPS final rule (72 FR 47169) to review requests involving the creation of a new CC or an MCC subgroup within a base MS–DRG. As outlined in the FY 2012 IPPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted Average length of stay Frm 00034 Fmt 4701 Sfmt 4702 Average length of stay Average costs 7,287 8.1 $53,802 52,601 10.1 47,177 severity levels. We also consulted with our clinical advisors. Our clinical advisors stated that patients receiving endovascular cardiac valve replacements are significantly different from those patients who undergo an open chest cardiac valve replacement. They noted that patients receiving endovascular cardiac valve replacements are not eligible for open chest cardiac valve procedures because of a variety of health constraints. This highlights the fact that peri-operative complications and post-operative morbidity have significantly different profiles for open chest procedures compared with endovascular interventions. This is also substantiated by the different average lengths of stay E:\FR\FM\15MYP2.SGM 15MYP2 28011 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules demonstrated by the two cohorts. Our clinical advisors further noted that separately grouping these endovascular valve replacement procedures provides greater clinical cohesion for this subset of high-risk patients. We are proposing to create the following MS–DRGs for endovascular cardiac valve replacements: • Proposed new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC); and • Proposed new MS–DRG 267 (Endovascular Cardiac Valve Replacement without MCC). Number of cases Proposed new MS–DRGs for endovascular cardiac valve replacement Proposed New MS–DRG 266 with MCC .................................................................................... Proposed New MS–DRG 267 without MCC ............................................................................... We are inviting public comments on our proposal to create these new MS– DRGs for FY 2015. d. Abdominal Aorta Graft We received a request that we change the MS–DRG assignment for procedure code 39.71 (Endovascular implantation of other graft in abdominal aorta), which is assigned to MS–DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively). The requestor asked that we reassign procedure code 39.71 to MS–DRGs 228, 229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is significantly higher than other cases in MS–DRGs 237 and 238. The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is closer to those in MS–DRGs 228, 229, and 230. The requestor stated that the goal of endovascular repair for abdominal aneurysm is to isolate the diseased, aneurismal portion of the aorta and common iliac arteries from continued mstockstill on DSK4VPTVN1PROD with PROPOSALS2 237—All cases ............................................................................................................ 237—Cases with procedure code 39.71 .................................................................... 238—All cases ............................................................................................................ 238—Cases with procedure code 39.71 .................................................................... 228—All cases ............................................................................................................ 229—All cases ............................................................................................................ 230—All cases ............................................................................................................ As this table shows, endovascular abdominal aorta graft implantation cases have higher average costs and shorter lengths of stay than all cases within MS–DRGs 237 and 238. The average cost for endovascular abdominal aorta graft implantation cases in MS–DRG 237 is $9,256 greater than that for all cases in MS–DRG 237 ($44,898 compared to $35,642). The average cost for endovascular abdominal aorta graft implantation cases in MS–DRG 238 is $3,973 higher than that for all cases in MS–DRG 238 ($28,484 compared to $24,511). Cases in MS–DRG 228 have average costs that are $7,417 higher than the endovascular abdominal aorta graft implantation cases in MS–DRG 237 ($52,315 compared to $44,898). MS– DRG 228 and MS–DRG 237 both contain cases with MCCs. Cases in MS–DRG 229, which contain a CC, have average costs that are $3,586 higher than average costs of the endovascular abdominal aorta graft implantation cases in MS– DRG 238, which do not contain an MCC ($32,070 compared to $28,484). Cases in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 MS–DRG 230, which have neither an MCC nor a CC, have average costs that are $797 higher than the endovascular abdominal aorta graft implantation cases in MS–DRG 238 ($29,281 compared to $28,484). While the average costs were higher for endovascular abdominal aorta graft implantation cases compared to all cases within MS–DRGs 237 and 238, each MS–DRG has some cases that are higher and some cases that are lower than the average costs for the entire MS– DRG. MS–DRGs were developed to capture cases that are clinically consistent with similar overall average resource requirements. This results in some cases within an MS–DRG having costs that are higher than the overall average and other cases having costs that are lower than the overall average. This may be due to specific types of cases included within the MS–DRGs or to the fact that some cases will simply require additional resources on a specific admission. However, taken as a whole, the hospital will be paid an appropriate amount for the group of PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 Average costs 10.6 5.7 $61,891 46,259 exposure to systemic blood pressure. The procedure involves the delivery and deployment of endovascular prostheses, also referred to as a graft, as required to isolate the aneurysm above and below the extent of the disease. The requestor stated that this significantly reduces patient morbidity and death caused by leakage and/or sudden rupture of an untreated aneurysm. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular abdominal aorta graft implantations. The following table shows our findings. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 3,516 3,771 Average length of stay 17,813 2,093 33,644 15,483 1,543 2,003 493 Average length of stay Average costs 9.66 8.30 3.73 2.30 13.48 7.47 4.95 $35,642 44,898 24,511 28,484 52,315 32,070 29,281 cases that are assigned to the MS–DRG. We believe the endovascular abdominal aorta graft implantation cases are appropriately grouped with other procedures within MS–DRGs 237 and 238. Our clinical advisors reviewed this issue and determined that the endovascular abdominal aorta graft implantation cases are appropriately classified within MS–DRGs 237 and 238 because they are clinically similar to the other procedures in MS–DRGs 237 and 238, which include other procedures on the aorta. While the endovascular abdominal aorta graft implantation cases have higher average costs than the average for all cases within MS–DRGs 237 and 238, our clinical advisors do not believe this justifies moving the cases to MS–DRGs 228, 229 and 230, which involve a different set of cardiothoracic surgeries. Based on the results of examination of the claims data and the recommendations of our clinical advisors, we do not believe that E:\FR\FM\15MYP2.SGM 15MYP2 28012 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules proposing to reclassify endovascular abdominal aorta graft implantation cases from MS–DRGs 237 and 238 is warranted. We are proposing to maintain the current MS–DRG assignments for endovascular abdominal aorta graft implantation cases. We are inviting public comments on our proposal. 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Shoulder Replacement Procedures We received a request to change the MS–DRG assignment for shoulder replacement procedures. This request involved the following two procedure codes: • 81.88 (Reverse total shoulder replacement); and • 81.97 (Revision of joint replacement of upper extremity). With respect to procedure code 81.88, the requestor asked that reverse total shoulder replacements be reassigned from MS–DRGs 483 and 484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC and without CC/MCC, respectively) to MS– DRG 483 only. The reassignment of procedure code 81.88 from MS–DRGs 483 and 484 was discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536). The result of reassigning reverse shoulder replacements from MS–DRGs 483 and 484 to MS–DRG 483 only would be that this procedure would be assigned to MS–DRG 483 whether or not the case had a CC or an MCC. The requestor stated that reverse shoulder replacement procedures are more clinically cohesive with higher severity MS–DRGs due to the complexity and resource consumption of these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536) for a discussion of the reverse total shoulder replacement. The requestor also recommended that we reassign what it described as another shoulder procedure involving procedure code 81.97, which is assigned to MS– DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), to MS–DRG 483. We point out that MS– DRG 483 contains upper joint replacements, including shoulder replacements. MS–DRG 483 does not Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG MS–DRG MS–DRG MS–DRG Proposed 483—All cases ............................................................................................................ 483—Cases with procedure code 81.88 .................................................................... 484—All cases ............................................................................................................ 484—Cases with procedure code 81.88 .................................................................... Revised MS–DRG 483 with all severity levels included ............................................. As the above table shows, MS–DRG 484 reverse shoulder replacement cases have similar average costs to those in MS–DRG 483 ($18,719 for reverse shoulder replacements in MS–DRG 484 compared to $18,807 for all cases in MS–DRG 483). However, in reviewing the data, we observed that the claims data no longer support two severity levels for MS–DRGs 483 and 484. We use the five criteria established in FY 2008 (72 FR 47169) to review requests involving the creation of a new CC or MCC subgroup within a base MS– DRG. As outlined in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS–DRG, the subgroup must meet all of the following five criteria: • A reduction in variance of costs of at least 3 percent. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • At least 5 percent of the patients in the MS–DRG fall within the CC or MCC subgroup. • At least 500 cases are in the CC or MCC subgroup. • There is at least a 20-percent difference in average costs between subgroups. • There is a $2,000 difference in average costs between subgroups. We found through our examination of the claims data from the December 2013 update of the FY 2013 MedPAR file that the two severity subgroups of MS–DRG 483 and 484 no longer meet the fourth criterion of at least a 20-percent difference in average costs between subgroups. We found that there is a $2,453 difference in average costs between MS–DRG 483 and MS–DRG 484. The difference in average costs would need to be $3,761 to meet the fourth criterion. Therefore, our claims data support collapsing MS–DRGs 483 and 484 into a single MS–DRG. Our PO 00000 contain any joint revision procedures. Similar to the request for reassignment of procedure code 81.88, this would mean that procedure code 81.97 would be assigned to MS–DRG 483 whether or not the case had a CC or an MCC. If CMS did not support this recommendation for moving procedure code 81.97 to MS–DRG 483, the requestor recommended an alternative reassignment to MS–DRG 515 (Other Musculoskeletal System and Connective Tissue O.R. procedures with MCC) even if the case had no MCC. We point out that, while the requestor refers to procedure code 81.97 as a shoulder procedure, the code description actually includes revisions of joint replacements of a variety of upper extremity joints, including those in the elbow, hand, shoulder, and wrist. As stated earlier, reverse shoulder replacements are assigned to MS–DRGs 483 and 484. Revisions of upper joint replacements are assigned to MS–DRGs 515, 516, and 517. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 483 and 484. The following table shows our findings of cases of reverse shoulder replacement. Frm 00036 Fmt 4701 Sfmt 4702 14,220 7,086 23,183 9,633 37,403 Average length of stay Average costs 3.20 3.19 1.95 2.03 2.4 $18,807 20,699 16,354 18,719 17,287 clinical advisors reviewed this issue and agree that there is no longer enough difference between the two severity levels to justify separate severity subgroups for MS–DRGs 483 and 484, which include a variety of upper joint replacements. Therefore, our clinical advisors support our recommendation to collapse MS–DRGs 483 and 484 into a single MS–DRG. Based on the results of examination of the claims data and the advice of our clinical advisors, we are proposing to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities’’. The following table shows our findings of cases of revisions of upper joint replacement from the December 2013 update of the FY 2013 MedPAR file. E:\FR\FM\15MYP2.SGM 15MYP2 28013 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 515—All cases ............................................................................................................ 515—Cases with procedure code 81.97 .................................................................... 516—All cases ............................................................................................................ 516—Cases with procedure code 81.97 .................................................................... 517—All cases ............................................................................................................ 517—Cases with procedure code 81.97 .................................................................... 483—All cases ............................................................................................................ Cases identified by code 81.97 in MS– DRGs 515, 516, and 517 have lower average costs and shorter lengths of stay than all cases in MS–DRG 515. The average costs of cases in MS–DRG 515 are $3,977 higher than the average costs of the cases with procedure code 81.97 in MS–DRG 516 ($22,191 compared to $18,214). The average costs of cases in MS–DRG 515 are $6,271 higher than cases with procedure code 81.97 in MS– DRG 517 ($22,191 compared to $15,920). The table above shows that the average costs of cases in MS–DRG 483 are $3,278 lower than the average costs of cases with procedure code 81.97 in MS–DRG 515 ($18,807 compared to $22,085). The average costs of cases in MS–DRG 483 are $593 higher than the average costs of cases with procedure code 81.97 in MS–DRG 516 ($18,807 compared to $18,214). The average costs of cases in MS–DRG 483 are $2,887 higher than the average costs of cases with procedure code 81.97 in MS–DRG 517 ($18,807 compared to $15,920). The claims data do not support moving all procedure code 81.97 cases to MS–DRG 515 or MS–DRG 483, whether or not there is a CC or an MCC. We also point out once again that procedure code 81.97 is a nonspecific code that captures revisions to not only the shoulder, but also a variety of upper extremity joints including those in the elbow, hand, shoulder, and wrist. Therefore, we have no way of determining how many cases reporting procedure code 81.97 were actually shoulder procedures as opposed to procedures on the elbow, hand, or wrist. Our clinical advisors reviewed this issue and determined that the revisions of upper joint replacement procedures are appropriately classified within MS– DRGs 515, 516, and 517, which include other joint revision procedures. They do not support moving revisions of upper joint replacement procedures to MS– DRG 515, whether or not there is an MCC. They support the current classification, which bases the severity level on the presence of a CC or an MCC. They also do not support moving revisions of upper joint replacement procedures to MS–DRG 483, whether or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 not there is a CC or an MCC, because these revisions are not joint replacements. Based on the results of our examination and the advice of our clinical advisors, we are not proposing moving revisions of upper joint replacement procedures to MS–DRG 515 or MS–DRG 483, whether or not there is a CC or an MCC. In summation, we are proposing to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities’’. We are proposing to maintain the current MS–DRG assignments for revisions of upper joint replacement procedures in MS–DRGs 515, 516, and 517. We are inviting public comments on our proposals. b. Ankle Replacement Procedures We received a request to change the MS–DRG assignment for two ankle replacement procedures. The request involved the following two procedure codes: • 81.56 (Total ankle replacement); and • 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified). The reassignment of procedure code 81.56 from MS–DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with CC and without MCC, respectively) to a new MS–DRG or, alternatively, to MS– DRG 469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50536 through 50537). We refer readers to this final rule for a discussion of ankle replacement procedures. The requestor asked that we again evaluate reassigning total ankle replacement procedures. The requestor also asked that we reassign what it referred to as another ankle replacement revision procedure captured by procedure code 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified), which is assigned to MS–DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 3,407 88 8,502 799 5,794 1,256 14,220 Average length of stay Average costs 9.22 5.66 5.34 2.84 3.28 2.07 3.20 $22,191 22,085 14,356 18,214 12,172 15,920 18,807 The requestor asked that we reassign procedure code 81.56 from MS–DRGs 469 and 470 to MS–DRG 483 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC) and rename the MS–DRG to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS–DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the case did not have a CC or an MCC. If CMS did not find this acceptable, the requestor made an alternative recommendation of assigning procedure code 81.56 to MS– DRG 469 and renaming the MS–DRG to better capture the additional cases. Cases would be assigned to the highest severity level whether or not the case had an MCC. The requestor also recommended that procedure code 81.59, which is assigned to MS–DRGs 515, 516, and 517 be reassigned to MS–DRG 483 and that the MS–DRG be given a new title to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS–DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the patient did not have a CC or an MCC. If CMS did not support this recommendation, the requestor suggested two additional recommendations. One involves moving procedure code 81.59 to MS–DRG 515 even when the case had no MCC. The other recommendation was to move procedure code 81.59 to MS–DRG 469, whether or not the case had a MCC. We point out that while the requestor refers to procedure code 81.59 as a revision of an ankle replacement, the code actually includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe. The following table shows the number of total ankle replacement cases, average length of stay, and average costs for procedure code 81.56 in MS–DRGs 469 and 470 found in claims data from the December 2013 update of the FY 2013 E:\FR\FM\15MYP2.SGM 15MYP2 28014 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules MedPAR file compared to all cases within MS–DRGs 469, 470, and 483. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 469—All cases .......................................................................................................... 469—Cases with procedure code 81.56 .................................................................. 470—All cases .......................................................................................................... 470—Cases with procedure code 81.56 .................................................................. 483 ............................................................................................................................ In summary, the requestor asked us to reassign procedure code 81.56 in MS– DRGs 469 and 470 to one of the following two options: MS–DRG 483 (highest severity level); or MS–DRG 469 (highest severity level). As the table for total ankle replacement above shows, the average cost of cases with procedure code 81.56 in MS–DRG 469 is $27,419 and $19,332 in MS–DRG 470. This compares with the average costs of all cases in MS– DRGs 469 and 470 of $22,548 and $15,119, respectively. While the average cost of cases reporting procedure code 81.56 in MS–DRG 469 is $4,871 higher than the average cost for all cases in MS–DRG 469, we point out that there were only 32 cases. The relatively small number of cases may have been impacted by other factors such as complications or comorbidities. Several expensive cases could impact the average costs for a very small number of patients. The average cost of cases reporting procedure code 81.56 in MS– DRG 470 is $4,213 higher than the average cost for all cases in MS–DRG 470. While the average costs are higher, within all MS–DRGs, some cases have higher and some cases have lower average costs. MS–DRGs are groups of clinically similar cases that have similar overall costs. Within a group of cases, one would expect that some cases have costs that are higher than the overall average and some cases have costs that are lower than the overall average. MS–DRG 469 ankle replacement cases have average costs that are $8,612 higher than the average costs of all cases in MS–DRG 483 ($27,419 compared to $18,807). Moving these cases (procedure code 81.56) to MS–DRG 483 would result in payment below average costs compared to the current MS–DRG assignment in MS–DRG 469. Furthermore, as noted earlier, moving total ankle replacement cases to MS– DRG 483 would result in a lower extremity procedure being added to what is now an upper extremity MS– DRG. This would significantly disrupt the clinical cohesion of MS–DRG 483. The average costs of all cases in MS– DRG 469 are $3,216 higher than the average costs of those cases with procedure code 81.56 in MS–DRG 470 ($22,548 compared to $19,332) The data do not support moving procedure code 81.56 cases to MS–DRG 483 or 469 because it would not result in payments that more accurately reflect their current average costs. Our clinical advisors reviewed this issue and determined that the ankle replacement cases are mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG 515—All cases .......................................................................................................... MS–DRG 515—Cases with procedure code 81.59 .................................................................. MS–DRG 516—All cases .......................................................................................................... MS–DRG 516—Cases with procedure code 81.59 .................................................................. MS–DRG 517—All cases .......................................................................................................... MS–DRG 517—Cases with procedure code 81.59 .................................................................. MS–DRG 483—All cases .......................................................................................................... MS- DRG 469—All cases .......................................................................................................... The requestor asked that all cases with procedure code 81.59 in MS–DRGs 515, 516, and 517 be assigned to one of the following three choices: • MS–DRG 483 (highest severity level); • MS–DRG 515 (highest severity level) whether or not there is an MCC; or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • MS–DRG 469 (highest severity level). Our review of data from the above revision of joint replacement of lower extremity table shows that cases in MS– DRG 483 have average costs that are $5,560 higher than the average costs of cases with procedure code 81.59 in MS– DRG 515; $5,550 greater than those in MS–DRG 516; and $8,844 greater than PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 Average costs 722 6.19 3.25 2.13 3.20 $22,548 27,419 15,119 19,332 18,807 25,916 32 406,344 1,379 14,220 appropriately classified within MS– DRGs 469 and 470 with the severity level leading to the MS–DRG assignment. They do not support moving these cases to MS–DRG 483 because ankle replacements, which are lower joint procedures, are not clinically similar to upper joint replacement procedures. Based on the results of examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, we are not proposing to move total ankle procedures to MS–DRG 483 or MS–DRG 469 when there is no MCC. We are proposing to maintain the current MS–DRG assignments for ankle replacement cases. We are inviting public comments on our proposal. The following table shows our findings from examination of the claims data from the December 2013 update of the FY 2013 MedPAR file for the number of cases reporting procedure code 81.59 in MS–DRGs 515, 516, and 517 (revision of joint replacement of lower extremity) and their average length of stay and average costs as compared to all cases within MS–DRGs 515, 516, and 517 (where procedure code 81.59 is currently assigned), as well as data for MS–DRGs 469 and 483. Number of cases MS–DRG Average length of stay Average length of stay Average costs 9.22 6.00 5.34 3.00 3.28 1.80 722 3.20 $22,191 16,988 14,356 16,998 12,172 13,704 22,548 18,807 3,407 5 8,502 16 5,794 40 25,916 14,220 those in MS–DRG 517 ($22,548 compared to $16,988; $22,548 compared to $16,998, and $22,548 compared to $13,704, respectively). As mentioned earlier, MS–DRG 483 is currently composed of only upper extremity procedures. Moving lower extremity procedures into this MS–DRG would disrupt the clinical cohesiveness of MS– DRG 483. E:\FR\FM\15MYP2.SGM 15MYP2 28015 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules The average costs of all cases in MS– DRG 469 are $18,807, compared to average costs of $16,988, $16,998, and $13,703 for procedure code 81.59 cases in MS–DRGs 515, 516, and 517, respectively. The data do not support moving all procedure code 81.59 cases to MS–DRG 469 even when there is no MCC. We also point out that moving cases with procedure code 81.59 to MS– DRG 469 would disrupt the clinical cohesiveness of MS–DRG 469, which currently captures major joint replacement or reattachment procedures of the lower extremity. Procedure code 81.59 includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe. This nonspecific code would not be considered a major joint procedure. The code captures revisions of an ankle replacement as well as a more minor revision of the toe. Our clinical advisors reviewed this issue and determined that the revision of joint replacement of lower extremity cases are appropriately classified within MS–DRGs 515, 516, and 517 where revisions of other joint replacements are captured. They support the current severity levels in MS–DRGs 515, 516, and 517, which allow the presence of a CC or an MCC to determine the severity level assignment. They do not support moving these cases to MS–DRG 483, which is applied to upper extremity procedures because these procedures are not clinically consistent with revisions of lower joint procedures. They also do not support moving these cases to MS–DRG 469 when there is no MCC because these procedures are not joint replacement procedures. Based on the findings of our examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, we are not proposing to move the revision of joint replacement of lower extremity cases to MS–DRGs 483 or 469, whether or not there is an MCC. We are proposing to maintain the current MS–DRG assignments for revision of joint replacement of lower extremity cases. In summary, we are proposing to maintain the current MS–DRG assignment for total ankle replacements in MS–DRGs 469 and 470 and revision of joint replacement of lower extremity procedures in MS–DRGs 515, 516, and 517. We are inviting public comments on our proposals. c. Back and Neck Procedures We received a request to reassign cases identified with a complication or comorbidity (CC) in MS–DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/ Neurostimulator) to MS–DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/ Neurostimulator). The requester suggested that we create a new MS–DRG that would be subdivided based solely on the ‘‘with MCC or Disc Device/ Neurostimulator’’ and the ‘‘without MCC’’ (and no device) criteria. For the FY 2008 rulemaking cycle, we performed a comprehensive analysis of Number of cases MS–DRG MS–DRG 490—All cases ............................................................................................................ MS–DRG 491—All cases ............................................................................................................ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 As shown in the table above, there were a total of 16,930 cases in MS–DRG 490 with an average length of stay of 4.53 days and average costs of $13,727. For MS–DRG 491, there were a total of 25,778 cases with an average length of stay of 2.20 days and average costs of $8,151. We then analyzed the data for MS– DRGs 490 and 491 by subdividing cases based on the ‘‘with MCC or Disc Device/ all the spinal DRGs as we proposed (72 FR 24731 through 24735) and finalized (72 FR 47226 through 47232) adoption of the MS–DRGs. With the revised spinal MS–DRGs, we were better able to identify a patient’s level of severity, complexity of service, and utilization of resources. This was primarily attributed to the new structure for the severity level designations of ‘‘with MCC,’’ ‘‘with CC,’’ and ‘‘non-CC’’ (or without CC/MCC). Another contributing factor was that we incorporated specific procedures and technologies into the GROUPER logic for some of those spinal MS–DRGs. Specifically, as noted above, in the title of MS–DRG 490, we accounted for disc devices and neurostimulators because the data demonstrated that the procedures utilizing those technologies were more complex and required greater utilization of resources. According to the requester, since that time, concerns have been expressed in the provider community regarding inadequate payment for MS–DRG 490 when these technologies are utilized. An analysis conducted by the requester alleged that the subset of patients identified in the ‘‘with MCC or disc device/neurostimulator’’ group are different with regard to resource use from the ‘‘without CC/MCC’’ (and no device) patient group. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 490 and 491. The table below shows our findings. Neurostimulator’’ and the ‘‘without MCC’’ (and no device) criteria. We found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493 in the ‘‘with MCC or Disc Device/Neurostimulator’’ group and a total of 39,329 cases with an average length of stay of 2.8 days and average costs of $9,405 in the ‘‘without MCC’’ and no device group. Due to the wide range in the volume of cases, 16,930 25,778 Average length of stay Average costs 4.53 2.20 $13,727 8,151 length of stay, and average costs between these two subgroups, we concluded that further analysis of the data using a separate ‘‘with CC’’ (and no device) subset of patients was warranted. Therefore, we evaluated the data using a three-way severity level split that consisted of the three subgroups shown in the table below. ADDITIONAL ANALYSIS FOR BACK & NECK PROCEDURES EXCEPT SPINAL FUSION: DISC DEVICE/NEUROSTIMULATOR Number of cases Severity level split —With MCC or disc device/neurostimulator ............................................................................... —With CC .................................................................................................................................... —Without CC/MCC ...................................................................................................................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 3,379 13,551 25,778 E:\FR\FM\15MYP2.SGM 15MYP2 Average length of stay Average costs 6.6 3.9 2.2 $21,493 11,791 8,151 28016 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules For the first subgroup, ‘‘with MCC or Disc Device/Neurostimulator,’’ we found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493. In the second subgroup, ‘‘with CC’’ (no device), we found a total of 13,551 cases with an average length of stay of 3.9 days and average costs of $11,791. In the third subgroup, ‘‘without CC/MCC’’ (no device), we found a total of 25,778 cases with an average length of stay of 2.2 days and average costs of $8,151. The results of this additional data analysis demonstrate a better distribution of cases with regard to length of stay and average costs. Our clinical advisors agree that a patient’s severity of illness is captured more appropriately with this subdivision. The data also meet the established criteria for creating subgroups within a base MS–DRG as discussed earlier in this proposed rule. As the subdivision of the claims data based on these subgroups better captures a patient’s severity level and utilization of resources and is supported by our clinical advisors, we are proposing to create three new MS–DRGs and to delete MS–DRGs 490 and 491. These proposed new MS–DRGs would be titled as follows and would be effective as of October 1, 2014: • Proposed new MS–DRG 518 (Back & Neck Procedures Except Spinal Fusion with MCC or Disc Device/ Neurostimulator); • Proposed new MS–DRG 519 (Back & Neck Procedures Except Spinal Fusion with CC); and • Proposed new MS–DRG 520 (Back & Neck Procedures Except Spinal Fusion without CC/MCC). We are inviting public comments on our proposal to create these proposed new MS–DRGs for FY 2015. 6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyrin Metabolism We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule that we considered out of scope for the proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The request was for the creation of a new MS–DRG to better identify cases where patients with disorders of porphyrin metabolism exist, to recognize the resource requirements in caring for these patients, to ensure appropriate payment for these cases, and to preserve patient access to necessary treatments. This issue has been discussed previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and 27905) and final rule (77 FR 53311 through 53313). Porphyria is defined as a group of rare disorders (‘‘porphyrias’’) that interfere with the production of hemoglobin that is needed for red blood cells. While some of these disorders are genetic (inborn) and others can be acquired, they all result in the abnormal accumulation of hemoglobin building blocks, called porphyrins, which can be deposited in the tissues where they particularly interfere with the functioning of the nervous system and the skin. Treatment for patients suffering from disorders of porphyrin metabolism consists of an intravenous injection of Panhematin® (hemin for injection). In 1984, this pharmaceutical agent became the first approved drug for a rare disease to be designated under the Orphan Drug Act. The requestor stated that it is the only FDA-approved prescription treatment for acute intermittent porphyria. ICD–9–CM diagnosis code 277.1 (Disorders of porphyrin metabolism) describes these cases, which are currently assigned to MS–DRG 642 (Inborn and Other Disorders of Metabolism). We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS– DRG 642. Our findings are shown in the table below. Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with PROPOSALS2 MS–DRG 642—All cases ............................................................................................................ MS–DRG 642—Cases with principal diagnosis code 277.1 ....................................................... As shown in the table above, we found a total of 1,486 cases in MS–DRG 642, with an average length of stay of 4.61 days and average costs of $8,151. We then analyzed the data for cases reporting diagnosis code 277.1 as the principal diagnosis in this same MS– DRG. We found a total of 299 cases, with an average length of stay of 5.98 days and average costs of $13,303. While the data show that the average costs for the 299 cases reporting a principal diagnosis code of 277.1 were higher than the average costs for all cases in MS–DRG 642 ($13,303 compared to $8,151), the number of cases is small. Given the small number of porphyria cases, we do not believe there is justification for creating a new MS–DRG. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS–DRG because several expensive cases could impact the overall relative payment weight. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Having larger clinical cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. In addition, as discussed earlier, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS–DRG is whether there are at least 500 cases in the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS–DRG, applying it here suggests that creating a new MS–DRG for cases reporting a principal diagnosis of code 277.1 would not be appropriate. Our clinical advisors reviewed this issue and recommended no MS–DRG change for porphyria cases because they fit clinically within MS–DRG 642. In summary, we are not proposing to create a new MS–DRG for porphyria cases. We are inviting public comments on our proposal to maintain porphyria cases in MS–DRG 642. PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 1,486 299 Average length of stay Average costs 4.61 5.98 $8,151 13,303 7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period) We received a request to evaluate the MS–DRG assignment of seven ICD–9– CM diagnosis codes in MS–DRG 794 (Neonate With Other Significant Problems) under MDC 15. The requestor stated that these codes have no bearing on the infant, and are not representative of a neonate with a significant problem. The requestor recommended that we change the MS–DRG logic so that the following seven ICD–9–CM codes would not lead to assignment of MS–DRG 794. The requestor recommended that the diagnoses be added to the ‘‘only secondary diagnosis’’ list under MS– DRG 795 (Normal newborn) so that the case would be assigned to MS–DRG 795 (Normal newborn). • V17.0 (Family history of psychiatric condition) • V17.2 (Family history of other neurological Diseases) E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules • V17.49 (Family history of other cardiovascular diseases) • V18.0 (Family history of diabetes mellitus) • V18.19 (Family history of other endocrine and metabolic diseases) • V18.8 (Family history of infectious and parasitic diseases) • V50.3 (Ear piercing) In the case of a newborn with one of these diagnosis codes reported as a secondary diagnosis, the case would be assigned to MS–DRG 794. The commenter believed that any of these seven diagnosis codes (noted above), when reported as a secondary diagnosis for a newborn case, should be assigned to MS–DRG 795 instead of MS–DRG 794. Our clinical advisors reviewed this request and concur with the commenter that the seven ICD–9–CM diagnosis codes noted above should not continue to be assigned to MS–DRG 794, as there is no clinically usable information reported in those codes identifying significant problems. Therefore, for FY 2015, we are proposing to reassign these following seven diagnoses to the ‘‘only secondary diagnosis list’’ under MS– DRG 795 so that the case would be assigned to MS–DRG 795. • V17.0 (Family history of psychiatric condition) • V17.2 (Family history of other neurological diseases) • V17.49 (Family history of other cardiovascular diseases) • V18.0 (Family history of diabetes mellitus) • V18.19 (Family history of other endocrine and metabolic diseases) • V18.8 (Family history of infectious and parasitic diseases) • V50.3 (Ear piercing) We are inviting public comments on this proposal. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 8. Proposed Medicare Code Editor (MCE) Changes The Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into an MS– DRG. As discussed in section II.G.1.a. of the preamble of this proposed rule, we developed an ICD–10 version of the current MS–DRGs, which are based on ICD–9–CM codes. We refer to this version of the MS–DRGs as the ICD–10 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 MS–DRGs Version 31.0–R. In November 2013, we also posted a Definitions of Medicare Code Edits Manual of the ICD–10 MCE Version 31.0 on the ICD– 10 MS–DRG Conversion Project Web site at: https://www.cms.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We produced mainframe and computer software for Version 31.0 of the MS–DRG GROUPER with Medicare Code Editor, which was made available to the public in December 2013. Information on ordering the mainframe and computer software through NTIS was posted on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the ‘‘Related Links’’ section. This ICD–10 MS–DRG GROUPER with Medicare Code Editor Version 31.0 computer software facilitated additional review of the ICD–10 MS–DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD–10 MS–DRG GROUPER and MCE did not accurately reflect the logic and edits found in the ICD–9–CM MS–DRG GROUPER and MCE Version 31.0. We also have posted an ICD–10 version of the current MCE, which is based on ICD–9–CM codes, and refer to that version of the MCE as the ICD–10 MCE Version 31.0–R. Both of these documents are posted on our ICD–10 MS–DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We will continue to share ICD–10 MS–DRG and MCE conversion activities with the public through this Web site. For FY 2015, we are proposing to remove extracranial-intracranial (EC–IC) bypass surgery from the ‘‘Noncovered Procedure’’ edit code list for Version 32.0 of the MCE. This procedure is identified by ICD–9–CM procedure code 39.28 (Extracranial-intracranial (EC–IC) vascular bypass). Because of the complexity of appropriately classifying the circumstances under which the EC–IC bypass surgery may, or may not, be considered reasonable and necessary for certain conditions, we are proposing to remove the MCE ‘‘Noncovered Procedure’’ edit for EC–IC bypass surgery from the ‘‘Noncovered Procedure’’ edit code list for Version 32.0 of the MCE. We are inviting public comments on this proposal. 9. Proposed Changes to Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 28017 assignment of the case to a different MS–DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS–DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS–DRG associated with the most resource-intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of MS–DRG reclassification and recalibrations, for FY 2015, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization. A surgical class can be composed of one or more MS–DRGs. For example, in MDC 11, the surgical class ‘‘kidney transplant’’ consists of a single MS–DRG (MS–DRG 652) and the class ‘‘major bladder procedures’’ consists of three MS–DRGs (MS–DRGs 653, 654, and 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS–DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS–DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS–DRGs 001 and 002 and surgical class B includes MS–DRGs 003, 004, and 005. Assume also that the average costs of MS–DRG 001 are higher than that of MS–DRG 003, but the average costs of MS–DRGs 004 and 005 are higher than the average costs of MS– DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS–DRG in the class by frequency (that is, by the number of cases in the MS–DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of ‘‘other O.R. procedures’’ as discussed below. This methodology may occasionally result in assignment of a case involving multiple procedures to the lowerweighted MS–DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical E:\FR\FM\15MYP2.SGM 15MYP2 28018 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the ‘‘other O.R. procedures’’ surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS–DRG or MS–DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The ‘‘other O.R. procedures’’ class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higherordered surgical class has lower average costs than the class ordered below it. Based on the changes that we are proposing to make for FY 2015, as discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the preamble of this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing to revise the surgical hierarchy for MDC 5 (Diseases and Disorders of the Circulatory System) and MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) as follows: In MDC 5, we are proposing to sequence proposed new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and proposed new MS–DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS–DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC). In MDC 8, we are proposing to delete MS–DRGs 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and MS– DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/Neurostimulator) from the surgical hierarchy. We are proposing to sequence proposed new MS–DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/ Neurostimulator), proposed new MS– DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), and proposed new MS–DRG 520 (Back & Neck Procedure Except Spinal Fusion without CC/MCC) above MS–DRG 492 (Lower Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC). We are inviting public comments on our proposals. 10. Proposed Changes to the MS–DRG Diagnosis Codes for FY 2015 a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CC) Severity Levels for FY 2015 A complete updated MCC, CC, and Non-CC Exclusion List is available via the Internet on the CMS Web site at: https://cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/ AcuteInpatientPPS/ as follows: • Table 6I (Complete MCC list); • Table 6J (Complete CC list); and • Table 6K (Complete list of CC Exclusions). b. Coronary Atherosclerosis Due to Calcified Coronary Lesion We received a request that we change the severity level for ICD–9–CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified coronary lesion) from a non-CC to an MCC. This issue was previously discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50541 through 50542). We examined claims data from the December 2013 update of the FY 2013 MedPAR file for ICD–9–CM diagnosis code 414.4. The following chart shows our findings. Diagnosis description CC Level Cnt 1 Cnt 1 Impact Cnt 2 Cnt 2 Impact Cnt 3 Cnt 3 Impact 414.4 ............ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Code Coronary atherosclerosis due to calcified lesion. Non-CC ..... 1,796 1.16 3,056 2.18 2,835 3.01 We ran the above data as described in the FY 2008 IPPS final rule with comment period (72 FR 47158 through 47161). The C1 value reflects a patient with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 value reflects a patient with at least one other secondary diagnosis that is a CC, but none that is an MCC. The C3 value reflects a patient with at least one other secondary diagnosis that is an MCC. The chart above shows that the C1 finding is 1.16. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.18. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.16 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As stated earlier, a value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not support reclassifying this diagnosis code to an MCC. Our clinical advisors reviewed the data and evaluated this condition. They PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 recommended that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. They do not believe that this diagnosis would increase the severity level of patients. They pointed out that a similar code, diagnosis code 414.2 (Chronic total occlusion of coronary artery), is a nonCC. Our clinical advisors believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2. Considering the C1 and C2 ratings and the input from our clinical advisors, we are not proposing to reclassify diagnosis code 414.4 to an MCC; the diagnosis code would continue to be considered a non-CC. Therefore, based on the data and clinical analysis, we are proposing to maintain diagnosis code 414.4 as a non- E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules CC. We are inviting public comments on our proposal. 11. Complications or Comorbidity (CC) Exclusions List a. Background of the CC List and the CC Exclusions List Under the IPPS MS–DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS–DRGs we adopted for FY 2008 (72 FR 47152 through 47171). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 b. Proposed CC Exclusions List for FY 2015 In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As we indicated above, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles: • Chronic and acute manifestations of the same condition should not be considered CCs for one another; • Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another; • Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/ unobstructed, and benign/malignant, should not be considered CCs for one another; • Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and • Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC.1 For FY 2015, we are not proposing any changes to the CC Exclusion List. Therefore, we are not developing or 1 We refer readers to the FY 1989 final rule (53 FR 38485, September 30, 1988) for the revision made for the discharges occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September 4, 1990) for the FY 1991 revision; the FY 1992 final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782, September 1, 1995) for the FY 1996 revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 51542); the FY 2013 final rule (77 FR 53315); and the FY 2014 final rule (78 FR 50541). In the FY 2000 final rule (64 FR 41490, July 30, 1999), we did not modify the CC Exclusions List because we did not make any changes to the ICD–9–CM codes for FY 2000. PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 28019 publishing Tables 6G (Additions to the CC Exclusion List) or Table 6H (Deletions from the CC Exclusion List). We have developed Table 6K (Complete List of CC Exclusions), which is available only via the Internet on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ index.html. Because of the length of Table 6K, we are not publishing it in the Addendum to this proposed rule. Each of these principal diagnosis codes for which there is a CC exclusion is shown with an asterisk and the conditions that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. Beginning with discharges on or after October 1 of each year, the indented diagnoses are not recognized by the GROUPER as valid CCs for the asterisked principal diagnoses. A complete updated MCC, CC, and Non-CC Exclusions List is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/. Because there are no proposed new, revised, or deleted diagnosis or procedure codes for FY 2015, we are not developing Table 6A (New Diagnosis Codes), Table 6B (New Procedure Codes), Table 6C (Invalid Diagnosis Codes), Table 6D (Invalid Procedure Codes), Table 6E (Revised Diagnosis Code Titles), and Table 6F (Revised Procedure Codes) to this proposed rule and they are not published as part of this proposed rule. We are proposing no additions or deletions to the MS–DRG MCC List for FY 2015 and no additions or deletions to the MS–DRG CC List for FY 2015. Therefore, we are not developing Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions to the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions to the CC List), and they are not published as part of this proposed rule. Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current MS– DRG Definitions Manual, Version 31.0, is available on a CD for $225.00. This manual may be obtained by writing 3M/ HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949–0303, or by obtaining an order form at the Web site: https:// www.3MHIS.com. Please specify the revision or revisions requested. Version E:\FR\FM\15MYP2.SGM 15MYP2 28020 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 32.0 of this manual, which will include the final FY 2015 MS–DRG changes, will be available after publication of the FY 2015 final rule on a CD for $225.00. This manual may be obtained by writing 3M/HIS at the address provided above; or by calling (203) 949–0303; or by obtaining an order form at the Web site at: https://www/3MHIS.com. Please specify the revision or revisions requested. 12. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 986; and 987 Through 989 Each year, we review cases assigned to former CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS–DRGs that we adopted for FY 2008, CMS DRG 468 was split three ways and became MS–DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 476 became MS–DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 477 became MS–DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). MS–DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These MS–DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS–DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: • 60.0 (Incision of prostate); • 60.12 (Open biopsy of prostate); • 60.15 (Biopsy of periprostatic tissue); • 60.18 (Other diagnostic procedures on prostate and periprostatic tissue); • 60.21 (Transurethral prostatectomy); • 60.29 (Other transurethral prostatectomy); • 60.61 (Local excision of lesion of prostate); VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • 60.69 (Prostatectomy, not elsewhere classified); • 60.81 (Incision of periprostatic tissue); • 60.82 (Excision of periprostatic tissue); • 60.93 (Repair of prostate); • 60.94 (Control of (postoperative) hemorrhage of prostate); • 60.95 (Transurethral balloon dilation of the prostatic urethra); • 60.96 (Transurethral destruction of prostate tissue by microwave thermotherapy); • 60.97 (Other transurethral destruction of prostate tissue by other thermotherapy); and • 60.99 (Other operations on prostate). All remaining O.R. procedures are assigned to MS–DRGs 981 through 983 and 987 through 989, with MS–DRGs 987 through 989 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.2 Our review of MedPAR claims data showed that there were no cases that merited movement or should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we are not proposing to change the procedures assigned among these MS–DRGs. 2 The original list of the ICD–9–CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), and the FY 1998 final rule (62 FR 45981), we moved several other procedures from DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468. No procedures were moved in FY 1999, as noted in the final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 final rule (67 FR 49999), we did not move any procedures from DRG 477. However, we did move procedure codes from DRG 468 and placed them in more clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 477 because the procedures are nonextensive. In the FY 2005 final rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In addition, we added several existing procedures to DRGs 476 and 477. In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, 2010, 2011, 2012, 2013, and 2014, no procedures were moved, as noted in the FY 2008 final rule with comment period (72 FR 46241), in the FY 2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR 43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012 final rule (76 FR 51549), in the FY 2013 final rule (77 FR 53321), and in the FY 2014 final rule (78 FR 50545). PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 a. Moving Procedure Codes From MS– DRGs 981 Through 983 or MS–DRGs 987 Through 989 Into MDCs We annually conduct a review of procedures producing assignment to MS–DRGs 981 through 983 (Extensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS– DRGs 987 through 989 (Nonextensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS–DRGs into one of the surgical MS–DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS–DRGs for the MDC in which the diagnosis falls. As noted above, there were no cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we are not proposing to remove any procedures from MS–DRGs 981 through 983 or MS– DRGs 987 through 989 into one of the surgical MS–DRGs for the MDC into which the principal diagnosis is assigned. b. Reassignment of Procedures Among MS–DRGs 981 Through 983, 984 Through 986, and 987 Through 989 We also annually review the list of ICD–9–CM procedures that, when in combination with their principal diagnosis code, result in assignment to MS–DRGs 981 through 983, 984 through 986 (Prostatic O.R. procedure unrelated to principal diagnosis with MCC, with CC, or without CC/MCC, respectively), and 987 through 989, to ascertain whether any of those procedures should be reassigned from one of these three MS–DRGs to another of the three MS– DRGs based on average costs and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS–DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules have an adequate number of discharges to analyze the data. There were no cases representing shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical, or that merited movement so that cases should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we are not proposing to move any procedure codes among these MS–DRGs. c. Adding Diagnosis or Procedure Codes to MDCs Based on the review of cases in the MDCs as described above in sections II.G.2. through 7. of the preamble of this proposed rule, we are not proposing to add any diagnosis or procedure codes to MDCs for FY 2015. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 13. Proposed Changes to the ICD–9–CM System a. ICD–10 Coordination and Maintenance Committee In September 1985, the ICD–9–CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD–9–CM system. The final update to ICD–9–CM codes was to be made on October 1, 2013. Thereafter, the name of the Committee was changed to the ICD–10 Coordination and Maintenance Committee, effective with the March 19–20, 2014 meeting. The ICD–10 Coordination and Maintenance Committee will address updates to the ICD–10–CM, ICD–10–PCS, and ICD–9– CM coding systems. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the coding systems to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and nonFederal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system. The official list of ICD–9–CM diagnosis and procedure codes by fiscal year can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ codes.html. The official list of ICD–10– CM and ICD–10–PCS codes can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Coding/ICD10/ index.html. The NCHS has lead responsibility for the ICD–10–CM and ICD–9–CM VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD–10–PCS and ICD–9–CM procedure codes included in the Tabular List and Alphabetic Index for Procedures. The Committee encourages participation in the above process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2015 at a public meeting held on September 18–19, 2013, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 15, 2013. The Committee held its 2014 meeting on March 19–20, 2014. Any new ICD– 10–CM/PCS codes for which there was consensus of public support and for which complete tabular and indexing changes will be made by May 2014 will be included in the October 1, 2014 update to ICD–10–CM/ICD–10–PCS. For FY 2015, there are no proposed new, revised, or deleted ICD–9–CM diagnosis or procedure codes. Copies of the minutes of the procedure codes discussions at the Committee’s September 18–19, 2013 meeting and March 19–20, 2014 meeting can be obtained from the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html?redirect=/ icd9ProviderDiagnosticCodes/03_ meetings.asp. The minutes of the diagnosis codes discussions at the September 18–19, 2013 meeting and March 19–20, 2014 meeting are found at: https://www.cdc.gov/nchs/icd/ icd9cm.html. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates. We encourage commenters to address suggestions on coding issues involving PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 28021 diagnosis codes to: Donna Pickett, CoChairperson, ICD–10 Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by Email to: dfp4@cdc.gov. Questions and comments concerning the procedure codes should be addressed to: Patricia Brooks, CoChairperson, ICD–10 Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244–1850. Comments may be sent by Email to: patricia.brooks2@cms.hhs.gov. In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October. Section 503(a) of Public Law 108–173 included a requirement for updating ICD–9–CM codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the ‘‘Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) . . . until the fiscal year that begins after such date.’’ This requirement improves the recognition of new technologies under the IPPS system by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1. While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28022 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules in order to identify and report the new codes. The ICD–10 (previously the ICD–9– CM) Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all diagnosis and procedure coding changes, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee Meeting minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this new April update would have on providers. In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108–173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee’s public VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April l, 2014 implementation of a code at the September 18–19, 2013 Committee meeting. Therefore, there were no new codes implemented on April 1, 2014. ICD–9–CM addendum and code title information is published on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD9Provider DiagnosticCodes/?redirect=/ icd9ProviderDiagnosticCodes/ 01overview.asp#TopofPage. ICD–10–CM and ICD–10–PCS addendum and code title information is published on the CMS Web site at https://www.cms.gov/ Medicare/Coding/ICD10/. Information on ICD–10–CM diagnosis codes, along with the Official ICD–10– CM Coding Guidelines, can also be found on the CDC Web site at: https:// www.cdc.gov/nchs/icd/icd10cm.html. Information on new, revised, and deleted ICD–10–CM/ICD–10–PCS codes is also provided to the AHA for publication in the Coding Clinic for ICD–10. AHA also distributes information to publishers and software vendors. CMS also sends copies of all ICD–9– CM coding changes to its Medicare contractors for use in updating their systems and providing education to providers. The code titles are adopted as part of the ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules. b. Code Freeze In the January 16, 2009 ICD–10–CM and ICD–10–PCS final rule (74 FR 3340), there was a discussion of the need for a partial or total freeze in the annual updates to both ICD–9–CM and ICD–10–CM and ICD–10–PCS codes. The public comment addressed in that final rule stated that the annual code set updates should cease l year prior to the implementation of ICD–10. The commenters stated that this freeze of code updates would allow for instructional and/or coding software PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 programs to be designed and purchased early, without concern that an upgrade would take place immediately before the compliance date, necessitating additional updates and purchases. HHS responded to comments in the ICD–10 final rule that the ICD–9–CM Coordination and Maintenance Committee has jurisdiction over any action impacting the ICD–9–CM and ICD–10 code sets. Therefore, HHS indicated that the issue of consideration of a moratorium on updates to the ICD– 9–CM, ICD–10–CM, and ICD–10–PCS code sets in anticipation of the adoption of ICD–10–CM and ICD–10–PCS would be addressed through the Committee at a future public meeting. The code freeze was discussed at multiple meetings of the ICD–9–CM Coordination and Maintenance Committee and public comment was actively solicited. The Committee evaluated all comments from participants attending the Committee meetings as well as written comments that were received. The Committee also considered the delay in implementation of ICD–10 until October 1, 2014. There was an announcement at the September 19, 2012 ICD–9–CM Coordination and Maintenance Committee meeting that a partial freeze of both ICD–9–CM and ICD–10 codes will be implemented as follows: • The last regular annual update to both ICD–9–CM and ICD–10 code sets was made on October 1, 2011. • On October 1, 2012 and October 1, 2013, there will be only limited code updates to both ICD–9–CM and ICD–10 code sets to capture new technology and new diseases. • On October 1, 2014, there were to be only limited code updates to ICD–10 code sets to capture new technology and diagnoses as required by section 503(a) of Public Law 108–173. There were to be no updates to ICD–9–CM on October 1, 2014. • On October 1, 2015, one year after the originally scheduled implementation of ICD–10, regular updates to ICD–10 were to begin. The ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee announced that it would continue to meet twice a year during the freeze. At these meetings, the public will be encouraged to comment on whether or not requests for new diagnosis and procedure codes should be created based on the need to capture new technology and new diseases. Any code requests that do not meet the criteria will be evaluated for implementation within ICD–10 one year after the implementation of ICD–10, once the partial freeze is ended. E:\FR\FM\15MYP2.SGM 15MYP2 28023 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Complete information on the partial code freeze and discussions of the issues at the Committee meetings can be found on the ICD–10 Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD9ProviderDiagnosticCodes/ meetings.html. A summary of the September 19, 2012 Committee meeting, along with both written and audio transcripts of this meeting, is posted on the Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9- CM-C-and-M-Meeting-Materials-Items/ 2012-09-19-MeetingMaterials.html. This partial code freeze has dramatically decreased the number of codes created each year as shown by the following information. TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR ICD–9–CM codes Fiscal year Number mstockstill on DSK4VPTVN1PROD with PROPOSALS2 FY 2009 (October 1, 2008): Diagnoses .......................................... Procedures ......................................... FY 2010 (October 1, 2009): Diagnoses .......................................... Procedures ......................................... FY 2011 (October 1, 2010): Diagnoses .......................................... Procedures ......................................... FY 2012 (October 1, 2011): Diagnoses .......................................... Procedures ......................................... FY 2013 (October 1, 2012): Diagnoses .......................................... Procedures ......................................... FY 2014 (October 1, 2013): Diagnoses .......................................... Procedures ......................................... 20:20 May 14, 2014 Jkt 232001 Change Fiscal year 14,025 3,824 348 56 14,315 3,838 290 14 14,432 3,859 117 21 14,567 3,877 135 18 14,567 3,878 0 1 14,567 3,882 As mentioned earlier, the public is provided the opportunity to comment on any requests for new diagnosis or procedure codes discussed at the ICD– 10 Coordination and Maintenance Committee meeting. The public has supported only a limited number of new codes during the partial code freeze, as can be seen by data shown above. We have gone from creating several hundred new codes each year to creating only a limited number of new ICD–9–CM and ICD–10 codes. At the September 18–19, 2013 and March 19–20, 2014 Committee meetings, we discussed any requests we had received for new ICD–10–CM diagnosis and ICD–10–PCS procedure codes that were to be implemented on October 1, 2014. We did not discuss ICD–9–CM codes. The public was given the opportunity to comment on whether or not new ICD–10–CM and ICD–10– PCS codes should be created, based on the partial code freeze criteria. The public was to use the criteria as to whether codes were needed to capture new diagnoses or new technologies. If the codes do not meet those criteria for implementation during the partial code freeze, consideration was to be given as to whether the codes should be created after the partial code freeze ends one year after the implementation of ICD– 10–CM/PCS. We invited public comments on any code requests discussed at the September 18–19, 2013 VerDate Mar<15>2010 ICD–10–CM and ICD–10–PCS codes 0 4 FY 2009: ICD–10–CM ....................................... ICD–10–PCS ..................................... FY 2010: ICD–10–CM ....................................... ICD–10–PCS ..................................... .............................................................. ICD–10–CM ....................................... ICD–10–PCS ..................................... FY 2012: ICD–10–CM ....................................... ICD–10–PCS ..................................... FY 2013: ICD–10–CM ....................................... ICD–10–PCS ..................................... FY 2014: ................................................... ICD–10–CM ....................................... ICD–10–PCS ..................................... and March 19–20, 2014 Committee meetings for implementation as part of the October 1, 2014 update. The deadline for commenting on code proposals discussed at the September 18–19, 2013 Committee meeting was November 15, 2013. The deadline for commenting on code proposals discussed at the March 19–20, 2014 Committee meeting was April 18, 2014. H. Recalibration of the Proposed FY 2015 MS–DRG Relative Weights 1. Data Sources for Developing the Proposed Relative Weights In developing the proposed FY 2015 system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2013 MedPAR data used in this proposed rule include discharges occurring on October 1, 2012, through September 30, 2013, based on bills received by CMS through December 31, 2013, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which at that time were under a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in calculating the proposed relative weights includes data for approximately 10,050,984 Medicare discharges from PO 00000 Frm 00047 Fmt 4701 Number Sfmt 4702 Change 68,069 72,589 +5 ¥14,327 69,099 71,957 +1,030 ¥632 69,368 72,081 +269 +124 69,833 71,918 +465 ¥163 69,832 71,920 ¥1 +2 69,823 71,924 ¥9 +4 IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR ‘‘GHO Paid’’ indicator field on the claim record is equal to ‘‘1’’ or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR ‘‘Indirect Medical Education (IME)’’ payment field, indicating that the claim was an ‘‘IME only’’ claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the December 31, 2013 update of the FY 2013 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called ‘‘claim type.’’ Claim type ‘‘60’’ indicates that the claim was an inpatient claim paid as fee-for-service. Claim types ‘‘61,’’ ‘‘62,’’ ‘‘63,’’ and ‘‘64’’ relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the proposed relative weights for FY 2015 also excludes claims with claim type values not equal to ‘‘60.’’ The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. We note that the FY 2015 proposed relative weights are based on the ICD– E:\FR\FM\15MYP2.SGM 15MYP2 28024 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 9–CM diagnoses and procedures codes from the MedPAR claims data, grouped through the ICD–9–CM version of the FY 2015 GROUPER (Version 32). The second data source used in the costbased relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the December 31, 2013 update of the FY 2012 HCRIS for calculating the proposed FY 2015 costbased relative weights. 2. Methodology for Calculation of the Proposed Relative Weights As we explain in section II.E.2. of the preamble of this proposed rule, we are calculating the proposed FY 2015 relative weights based on 19 CCRs, as we did for FY 2014. The methodology we used to calculate the proposed FY 2015 MS–DRG cost-based relative weights based on claims data in the FY 2013 MedPAR file and data from the FY 2012 Medicare cost reports is as follows: • To the extent possible, all the claims were regrouped using the proposed FY 2015 MS–DRG classifications discussed in sections II.B. and II.G. of the preamble of this proposed rule. • The transplant cases that were used to establish the proposed relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicare-approved transplant centers that have cases in the FY 2012 MedPAR file. (Medicare coverage for heart, heartlung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.) • Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS–DRG and before eliminating statistical outliers. • Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges, intensive care charges, pharmacy VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 charges, special equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood charges, and anesthesia charges were also deleted. • At least 92.2 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted. (We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50551) for the edit threshold related to FY 2014 and prior fiscal years). • Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS– DRG. • Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to ‘‘Y’’ for ‘‘Yes’’ for all claims that otherwise have an ‘‘N’’ (No) or a ‘‘U’’ (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field. Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a ‘‘Y’’ indicator is associated with the diagnosis on the claim), it is not a HAC, and the hospital is paid for the higher severity (and, therefore, the higher weighted MS–DRG). If the particular condition is not present on admission (that is, an ‘‘N’’ indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG GROUPER assigns the claim to a lower severity (and, therefore, the lower weighted MS–DRG) as a penalty for allowing a Medicare inpatient to contract a HAC. While the POA reporting meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 Because cases identified as HACs are likely to be more complex than similar cases that are not identified as HACs, the charges associated with HAC cases are likely to be higher as well. Therefore, if the higher charges of these HAC claims are grouped into lower severity MS–DRGs prior to the relative weight-setting process, the relative weights of these particular MS–DRGs would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS–DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost. To avoid these problems, we reset the POA indicator field to ‘‘Y’’ only for relative weight-setting purposes for all claims that otherwise have an ‘‘N’’ or a ‘‘U’’ in the POA field. This resetting ‘‘forced’’ the more costly HAC claims into the higher severity MS–DRGs as appropriate, and the relative weights calculated for each MS–DRG more closely reflect the true costs of those cases. Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-ofliving adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS–DRG for each of the 19 cost groups so that each MS– DRG had 19 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2012 cost report data. The 19 cost centers that we used in the proposed relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center CCRs. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Cost center group name (19 total) MedPAR charge field Revenue codes contained in MedPAR charge field Cost report line description Routine Days ......... Private Room Charges. 011X and 014X ...... Intensive Days ....... Semi-Private Room Charges. Ward Charges ........ Intensive Care Charges. Coronary Care Charges. Drugs ..................... Pharmacy Charges Supplies and Equipment. Medical/Surgical Supply Charges. Implantable Devices Durable Medical Equipment Charges. Used Durable Medical Charges. ................................ Therapy Services ... Inhalation Therapy Physical Therapy Charges. Occupational Therapy Charges. Speech Pathology Charges. Inhalation Therapy Charges. Operating Room Charges. Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) Form CMS– 2552–10 C_1_C5_30 C_1_C6_30 D3_HOS_C2_30 012X, 013X and 016X–019X 015X 020X ...................... Intensive Care Unit C_1_C5_31 C_1_C6_31 D3_HOS_C2_31 021X ...................... Coronary Care Unit C_1_C5_32 C_1_C6_32 D3_HOS_C2_32 C_1_C5_33 C_1_C6_33 D3_HOS_C2_33 C_1_C5_34 C_1_C6_34 D3_HOS_C2_34 C_1_C5_35 C_1_C6_35 D3_HOS_C2_35 025X, 026X and 063X. Burn Intensive Care Unit. Surgical Intensive Care Unit. Other Special Care Unit. Intravenous Therapy. Drugs Charged To Patient. Medical Supplies Charged to Patients. C_1_C5_64 C_1_C6_64 C_1_C7_64 C_1_C6_73 C_1_C7_73 C_1_C6_71 C_1_C7_71 D3_HOS_C2_64 C_1_C5_96 C_1_C6_96 C_1_C7_96 D3_HOS_C2_96 C_1_C6_97 C_1_C7_97 C_1_C6_72 C_1_C7_72 D3_HOS_C2_97 C_1_C6_66 C_1_C7_66 C_1_C6_67 C_1_C7_67 C_1_C6_68 C_1_C7_68 C_1_C6_65 C_1_C7_65 C_1_C6_50 C_1_C7_50 C_1_C6_51 C_1_C7_51 C_1_C6_52 C_1_C7_52 C_1_C6_53 C_1_C7_53 C_1_C6_69 C_1_C7_69 C_1_C6_59 C_1_C7_59 C_1_C6_60 C_1_C7_60 C_1_C6_61 C_1_C7_61 C_1_C6_70 C_1_C7_70 C_1_C6_54 C_1_C7_54 C_1_C6_55 D3_HOS_C2_66 C_1_C6_56 C_1_C7_56 C_1_C6_57 C_1_C7_57 D3_HOS_C2_56 0270, 0271, 0272, 0273, 0274, 0277, 0279, and 0621, 0622, 0623. 0290, 0291, 0292 DME-Rented .......... and 0294–0299. C_1_C5_73 C_1_C5_71 0293 ....................... DME-Sold ............... C_1_C5_67 0275, 0276, 0278, 0624. Implantable Devices Charged to Patients. Physical Therapy ... C_1_C5_72 042X ...................... 043X ...................... 044X and 047X ...... 041X and 046X ...... Occupational Therapy. Speech Pathology C_1_C5_66 C_1_C5_67 C_1_C5_68 036X ...................... C_1_C5_50 071X ...................... Recovery Room ..... C_1_C5_51 072X ...................... 037X ...................... Delivery Room and Labor Room. Anesthesiology ...... C_1_C5_52 Anesthesia ............. Operating Room Charges. Anesthesia Charges C_1_C5_53 Cardiology .............. Cardiology Charges 048X and 073X ...... Electrocardiology ... C_1_C5_69 Cardiac Catheterization. Laboratory .............. ................................ 0481 ....................... C_1_C5_59 Laboratory Charges 030X, 031X, and 075X. Cardiac Catheterization. Laboratory .............. Labor & Delivery .... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 074X, 086X ............ Radiology ............... Radiology Charges 032X, 040X ............ 028x, 0331, 0332, 0333, 0335, 0339, 0342. 0343 and 344 ........ Computed Tomography (CT) Scan. VerDate Mar<15>2010 CT Scan Charges .. 20:20 May 14, 2014 Jkt 232001 Medicare charges from HCRIS (Worksheet D–3, Column & line number) Form CMS–2552–10 Adults & Pediatrics (General Routine Care). Respiratory Therapy. Operating Room .... Operating Room .... Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS–2552–10 28025 035X ...................... PO 00000 Frm 00049 PBP Clinic Laboratory Services. Electro-Encephalography. Radiology—Diagnostic. Radiology—Therapeutic. C_1_C5_65 C_1_C5_60 C_1_C5_61 C_1_C5_70 C_1_C5_54 C_1_C5_55 Radioisotope .......... C_1_C5_56 Computed Tomography (CT) Scan. C_1_C5_57 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 D3_HOS_C2_73 D3_HOS_C2_71 D3_HOS_C2_72 D3_HOS_C2_67 D3_HOS_C2_68 D3_HOS_C2_65 D3_HOS_C2_50 D3_HOS_C2_51 D3_HOS_C2_52 D3_HOS_C2_53 D3_HOS_C2_69 D3_HOS_C2_59 D3_HOS_C2_60 D3_HOS_C2_61 D3_HOS_C2_70 D3_HOS_C2_54 D3_HOS_C2_55 D3_HOS_C2_57 28026 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Cost center group name (19 total) MedPAR charge field Revenue codes contained in MedPAR charge field Magnetic Resonance Imaging (MRI). Emergency Room .. MRI Charges .......... 061X ...................... Emergency Room Charges. Blood Charges ....... 045x ....................... Cost report line description Magnetic Resonance Imaging (MRI). Emergency ............. Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) Form CMS– 2552–10 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS–2552–10 Medicare charges from HCRIS (Worksheet D–3, Column & line number) Form CMS–2552–10 C_1_C5_58 C_1_C6_58 C_1_C7_58 D3_HOS_C2_58 C_1_C5_91 D3_HOS_C2_91 Other Services ....... 039x ....................... Other Service Charge. 0002–0099, 022X, 023X, 024X, 052X, 053X. 055X–060X, 064X– 070X, 076X– 078X, 090X– 095X and 099X. 0800X .................... 080X and 082X– 088X. Renal Dialysis ........ ESRD Revenue Setting Charges. Outpatient Service Charges. Lithotripsy Charge .. Clinic Visit Charges Professional Fees Charges. Ambulance Charges. 049X ...................... 079X ...................... 051X ...................... 096X, 097X, and 098X. 054X ...................... We refer readers to the FY 2009 IPPS/ LTCH PPS final rule (73 FR 48462) for a discussion on the revenue codes included in the Supplies and Equipment and Implantable Devices CCRs, respectively. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Development of National Average CCRs We developed the national average CCRs as follows: Using the FY 2012 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 C_1_C5_63 C_1_C6_63 C_1_C7_63 D3_HOS_C2_63 Renal Dialysis ........ ................................ C_1_C5_74 ........................... C_1_C6_74 C_1_C7_74 D3_HOS_C2_74 Home Program Dialysis. ASC (Non Distinct Part). ................................ Other Ancillary ....... C_1_C5_94 C_1_C6_94 C_1_C7_94 C_1_C6_75 D3_HOS_C2_94 ........................... C_1_C5_76 Clinic ...................... C_1_C5_90 C_1_C5_92.01 Other Outpatient Services. Ambulance ............. C_1_C5_93 C_1_C5_95 C_1_C5_88 FQHC ..................... Blood Storage/Processing. C_1_C5_62 Rural Health Clinic 038x ....................... Whole Blood & Packed Red Blood Cells. Blood Storing, Processing, & Transfusing. Observation beds ... Blood and Blood Products. C_1_C6_91 C_1_C7_91 C_1_C6_62 C_1_C7_62 C_1_C5_89 C_1_C5_75 than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicarespecific CCR was determined by taking the Medicare charges for each line item from Worksheet D–3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D–3. Once each hospital’s Medicare-specific costs were established, we summed the total PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 C_1_C7_75 C_1_C6_76 C_1_C7_76 C_1_C6_90 C_1_C7_90 C_1_C6_92.01 C_1_C7_92.01 C_1_C6_93 C_1_C7_93 C_1_C6_95 C_1_C7_95 C_1_C6_88 C_1_C7_88 C_1_C6_89 C_1_C7_89 D3_HOS_C2_62 D3_HOS_C2_75 D3_HOS_C2_76 D3_HOS_C2_90 D3_HOS_C2_ 92.01 D3_HOS_C2_93 D3_HOS_C2_95 D3_HOS_C2_88 D3_HOS_C2_89 Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs. After we multiplied the total charges for each MS–DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 ‘‘costs’’ across each MS–DRG to produce a total standardized cost for the MS–DRG. The average standardized cost for each MS– DRG was then computed as the total standardized cost for the MS–DRG divided by the transfer-adjusted case count for the MS–DRG. The average cost for each MS–DRG was then divided by the national average standardized cost per case to determine the relative weight. The proposed FY 2015 cost-based relative weights were then normalized by an adjustment factor of 1.642112 so that the average case weight after E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. The proposed 19 national average CCRs for FY 2015 are as follows: Group Routine Days .................................... Intensive Days .................................. Drugs ................................................ Supplies & Equipment ...................... Implantable Devices ......................... Therapy Services .............................. Laboratory ......................................... Operating Room ............................... Cardiology ......................................... Cardiac Catheterization .................... Radiology .......................................... MRIs ................................................. CT Scans .......................................... Emergency Room ............................. Blood and Blood Products ................ Other Services .................................. Labor & Delivery ............................... Inhalation Therapy ............................ Anesthesia ........................................ Since FY 2009, the relative weights have been based on 100 percent cost weights based on our MS–DRG grouping system. When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. In this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing to use that same case CCR threshold in recalibrating the proposed 0.483 MS–DRG relative weights for FY 2015. 0.405 Using data from the FY 2013 MedPAR 0.191 file, there were 8 MS–DRGs that contain 0.293 fewer than 10 cases. Under the MS– 0.355 DRGs, we have fewer low-volume DRGs 0.345 than under the CMS DRGs because we 0.128 no longer have separate DRGs for 0.212 patients aged 0 to 17 years. With the 0.124 exception of newborns, we previously 0.131 separated some DRGs based on whether 0.164 the patient was age 0 to 17 years or age 0.086 17 years and older. Other than the age 0.043 split, cases grouping to these DRGs are 0.197 identical. The DRGs for patients aged 0 0.360 to 17 years generally have very low 0.398 volumes because children are typically 0.393 ineligible for Medicare. In the past, we 0.182 have found that the low volume of cases 0.115 for the pediatric DRGs could lead to Low-volume MS–DRG MS–DRG title 768 ............... 791 ............... Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C. Neonates, Died or Transferred to Another Acute Care Facility. Extreme Immaturity or Respiratory Distress Syndrome, Neonate. Prematurity with Major Problems .............. 792 ............... Prematurity without Major Problems ......... 793 ............... Full-Term Neonate with Major Problems .. 794 ............... Neonate with Other Significant Problems 795 ............... Normal Newborn ....................................... 789 ............... 790 ............... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Bundled Payments for Care Improvement (BPCI) Initiative The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 28027 significant year-to-year instability in their relative weights. Although we have always encouraged non-Medicare payers to develop weights applicable to their own patient populations, we have received frequent complaints from providers about the use of the Medicare relative weights in the pediatric population. We believe that eliminating this age split in the MS–DRGs will provide more stable payment for pediatric cases by determining their payment using adult cases that are much higher in total volume. Newborns are unique and require separate MS– DRGs that are not mirrored in the adult population. Therefore, it remains necessary to retain separate MS–DRGs for newborns. All of the low-volume MS–DRGs listed below are for newborns. In FY 2015, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS–DRGs, we are proposing to compute relative weights for the low-volume MS–DRGs by adjusting their final FY 2014 relative weights by the percentage change in the average weight of the cases in other MS– DRGs. The crosswalk table is shown below: Crosswalk to MS–DRG Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS’ Center for Medicare and Medicaid Innovation’s Web site at https:// innovation.cms.gov/initiatives/BundledPayments/ and to section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343) for a discussion on the BPCI initiative. In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent fiscal years, we finalized a policy to treat hospitals that participate in the BPCI initiative the same as prior fiscal years PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 for the IPPS payment modeling and ratesetting process without regard to a hospital’s participation within these bundled payment models (that is, as if a hospital were not participating in those models under the BPCI initiative). Therefore, for FY 2015, we are proposing to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer readers to the FY 2013 IPPS/ LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in E:\FR\FM\15MYP2.SGM 15MYP2 28028 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the BPCI initiative in our ratesetting process. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 I. Proposed Add-On Payments for New Services and Technologies 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ‘‘new technologies’’) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, ‘‘based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.’’ We note that beginning with discharges occurring in FY 2008, CMS transitioned from CMS– DRGs to MS–DRGs. The regulations at 42 CFR 412.87 implement these provisions and specify three criteria for a new medical service or technology to receive the additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. Below we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria as well as other information. For a complete discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574). Under the first criterion, as reflected in § 412.87(b)(2), a specific medical service or technology will be considered ‘‘new’’ for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS–DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a technology receives a new FDA approval, it may not necessarily be VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 considered ‘‘new’’ for purposes of new technology add-on payments if it is ‘‘substantially similar’’ to a technology that was approved by FDA and has been on the market for more than 2 to 3 years. In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our policy regarding substantial similarity in detail. Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, the MS–DRG prospective payment rate otherwise applicable to the discharge involving the new medical services or technologies must be assessed for adequacy. Under the cost criterion, to assess the adequacy of payment for a new technology paid under the applicable MS–DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. Table 10 that was released with the FY 2014 IPPS/LTCH PPS final rule contains the final thresholds that we use to evaluate applications for new technology add-on payments for FY 2015. We refer readers to the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY2014-IPPS-FinalRule-Home-Page.html for a complete viewing of Table 10 from the FY 2014 IPPS/LTCH PPS final rule. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed the issue of whether the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims information that providers submit with applications for new technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue. Under the third criterion, § 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents ‘‘an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.’’ For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 final rule for a more detailed discussion of this criterion (66 FR 46902).) The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, if the costs of the discharge (determined by applying cost-to-charge ratios (CCRs) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an addon payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology exceed Medicare’s payment); or (2) 50 percent of the difference between the full DRG payment and the hospital’s estimated cost for the case. Unless the discharge qualifies for an outlier payment, the additional Medicare payment is limited to the full MS–DRG payment plus 50 percent of the estimated costs of the new technology. Section 503(d)(2) of Public Law 108– 173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108–173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality. In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance for their new medical service or technology by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. The Council on Technology and Innovation (CTI) at CMS oversees the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules agency’s cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108–173. The Council is cochaired by the Director of the Center for Clinical Standards and Quality (CCSQ) and the Director of the Center for Medicare (CM), who is also designated as the CTI’s Executive Coordinator. The specific processes for coverage, coding, and payment are implemented by CM, CCSQ, and the local claimspayment contractors (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, these processes by working to assure that all of these activities reflect the agency-wide priority to promote highquality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries. To improve the understanding of CMS’ processes for coverage, coding, and payment and how to access them, the CTI has developed an ‘‘Innovator’s Guide’’ to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS Web site, in a userfriendly format. This guide was published in August 2008 and is available on the CMS Web site at: https://www.cms.gov/CouncilonTech Innov/Downloads/InnovatorsGuide5_ 10_10.pdf. As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency’s coverage decisions for Medicare. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare’s coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov. We note that applicants for add-on payments for new medical services or technologies for FY 2016 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ newtech.html. To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2016, the CMS Web site also will post the tracking forms completed by each applicant. 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Public Law 108–173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to— • Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries; • Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending; • Accept comments, recommendations, and data from the public regarding whether a service or PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 28029 technology represents a substantial clinical improvement; and • Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2015 prior to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published a notice in the Federal Register on November 29, 2013 (78 FR 71555 through 71557), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 12, 2014. In the announcement notice for the meeting, we stated that the opinions and alternatives provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2015 new medical service and technology add-on payment applications before the publication of the FY 2015 proposed rule. Approximately 91 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. We also live-streamed the town hall meeting and posted the town hall on the CMS YouTube Web page at: https://www.youtube.com/ watch?v=WXyR_TILfKo&list=TLiu1B_ AxXsinTW6EEn4BVUdR4iEM61eV4. We considered each applicant’s presentation made at the town hall meeting, as well as written comments submitted on the applications that were received by the due date of January 21, 2014, in our evaluation of the new technology add-on payment applications for FY 2015 in this proposed rule. In response to the published notice and the New Technology Town Hall meeting, we received written comments regarding the applications for FY 2015 new technology add-on payments. We summarize these comments below or, if applicable, indicate that there were no comments received, at the end of each discussion of the individual applications in this proposed rule. A number of attendees at the New Technology Town Hall meeting provided comments that were unrelated to the ‘‘substantial clinical improvement’’ criterion. As explained above and in the Federal Register notice E:\FR\FM\15MYP2.SGM 15MYP2 28030 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules announcing the New Technology Town Hall meeting (78 FR 71555 through 71557), the purpose of the meeting was specifically to discuss the substantial clinical improvement criterion in regard to pending new technology add-on payment applications for FY 2015. Therefore, we are not summarizing those comments in this proposed rule. Commenters are welcome to resubmit these comments in response to proposals presented in this proposed rule. 3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Glucarpidase (Trade Brand Voraxaze®) BTG International, Inc. submitted an application for new technology add-on payments for Glucarpidase (trade brand Voraxaze®) for FY 2013. Glucarpidase is used in the treatment of patients who have been diagnosed with toxic methotrexate (MTX) concentrations as of result of renal impairment. The administration of Glucarpidase causes a rapid and sustained reduction of toxic MTX concentrations. Voraxaze® was approved by the FDA on January 17, 2012. Beginning in 1993, certain patients could obtain expanded access for treatment use to Voraxaze® as an investigational drug. Since 2007, the applicant has been authorized to recover the costs of making Voraxaze® available through its expanded access program. We describe expanded access for treatment use of investigational drugs and authorization to recover certain costs of investigational drugs in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). Voraxaze® was available on the market in the United States as a commercial product to the larger population as of April 30, 2012. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we expressed concerns about whether Voraxaze® could be considered new for FY 2013. After consideration of all of the public comments received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we considered Voraxaze® to be ‘‘new’’ as of April 30, 2012, which is the date of market availability. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for Voraxaze® and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze® for new technology add-on payments for FY 2013. Cases of Voraxaze® are identified with ICD–9– CM procedure code 00.95 (Injection or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 infusion of glucarpidase). The cost of Voraxaze® is $22,500 per vial. The applicant stated that an average of four vials is used per Medicare beneficiary. Therefore, the average cost per case for Voraxaze® is $90,000 ($22,500 × 4). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for Voraxaze® is $45,000 per case. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year (70 FR 47362). With regard to the newness criterion for Voraxaze®, as stated above, we consider the beginning of the newness period to commence when Voraxaze® was first available on the market on April 30, 2012. Because the 3-year anniversary date for Voraxaze® will occur in the latter half of FY 2015 (April 30, 2015), we are proposing to continue new technology add-on payments for this technology for FY 2015. We are inviting public comments on this proposal. b. DIFICIDTM (Fidaxomicin) Tablets Optimer Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2013 for the use of DIFICIDTM tablets. As indicated on the labeling submitted to the FDA, the applicant noted that Fidaxomicin is taken twice a day as a daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The applicant asserted that Fidaxomicin provides potent bactericidal activity against C. Diff., and moderate bactericidal activity against certain other gram-positive organisms, such as enterococcus and staphylococcus. Unlike other antibiotics used to treat CDAD, the applicant noted that the effects of Fidaxomicin preserve PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 bacteroides organisms in the fecal flora. These are markers of normal anaerobic microflora. The applicant asserted that this helps prevent pathogen introduction or persistence, which potentially inhibits the re-emergence of C. Diff., and reduces the likelihood of overgrowths as a result of vancomycinresistant Enterococcus (VRE). Because of this narrow spectrum of activity, the applicant asserted that Fidaxomicin does not alter this native intestinal microflora. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through 27941), we expressed concern that DIFICIDTM may not be eligible for new technology add-on payments because eligibility is limited to new technologies associated with procedures described by ICD–9–CM codes. We further stated that drugs that are only taken orally (such as DIFICIDTM) may not be eligible for consideration for new technology addon payments because there is no procedure associated with these drugs and, therefore, no ICD–9–CM code(s). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after consideration of the public comments received, we revised our policy to allow the use of National Drug Codes (NDCs) to identify oral medications that have no inpatient procedure for the purposes of new technology add-on payments. The revised policy is effective for payments for discharges occurring on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on this issue. With regard to the newness criterion, Fidaxomicin was approved by the FDA on May 27, 2011, for the treatment of CDAD in adult patients, 18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we established that the beginning of the newness period for this technology is its FDA approval date of May 27, 2011. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for DIFICIDTM and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICIDTM for new technology add-on payments for FY 2013. Cases of DIFICIDTM are identified with ICD–9– CM diagnosis code 008.45 (Intestinal infection due to Clostridium difficile) in combination with NDC code 52015– 0080–01. Providers must report the NDC on the 837i Health Care Claim Institutional form (in combination with ICD–9–CM diagnosis code 008.45) in order to receive the new technology add-on payment. According to the applicant, the cost of DIFICIDTM is E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules $2,800 for a 10-day dosage. The average cost per day for DIFICIDTM is $280 ($2,800/10). Cases of DIFICIDTM within the inpatient setting typically incur an average dosage of 6.2 days, which results in an average cost per case for DIFICIDTM of $1,736 ($280 × 6.2). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for DIFICIDTM is $868. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). The manufacturer commented through a letter to CMS, prior to the publication of this proposed rule, requesting that CMS extend the eligibility for a third year of new technology add-on payments for DIFICIDTM in FY 2015. The manufacturer maintained that the technology still meets all three criteria for new technology add-on payments. Regarding the substantial clinical improvement criterion, the applicant stated that DIFICIDTM continues to remain the only FDA-approved treatment to demonstrate substantial clinical improvement over existing therapies. No new treatments for CDAD have been approved by the FDA since DIFICIDTM. The applicant further stated that a third year of new technology addon payments for DIFICIDTM would continue to reduce access barriers in the acute care hospital inpatient setting, which would support the appropriate use of DIFICIDTM, a treatment that offers a substantial clinical improvement over existing therapies. With respect to the cost criterion, the applicant stated that DIFICIDTM continues to meet the cost criterion. Using claims data from the FY 2012 MedPAR file, the applicant provided updated data from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), and demonstrated that the average case-weighted standardized charge per case exceeded the average case-weighted thresholds under both analyses. The applicant stated that the new technology add-on payment is intended to offer additional payments to support patient access and appropriate use of new technologies for a period of time until the MS–DRGs are adjusted to reflect the cost of the new technology. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The applicant believed that the analyses conducted with the most recent MedPAR claims data available demonstrate that the MS–DRG recalibrations are insufficient to accommodate the cost associated with CDAD and new technologies to treat CDAD under the IPPS within the allotted timeframe of 2 years. According to the applicant, these payment amounts remain an obstacle for the appropriate use of new technologies for CDAD that demonstrate substantial clinical improvement over existing treatments, such as DIFICIDTM. The applicant concluded that a third year of new technology add-on payments for DIFICIDTM is needed to allow sufficient data for future MS–DRG recalibration analyses. With regard to newness criterion, the manufacturer commented that it believed that the technology still meets the newness criterion for the following reason: § 412.87(b)(2) states that ‘‘A medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9– CM) code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). After CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘new’ under the criterion of this section.’’ The manufacturer noted that DIFICIDTM was not assigned an ICD–9– CM procedure code and DIFICIDTM is the first product for which no inpatient procedure is associated to receive a new technology add-on payment since the implementation of the new technology add-on payment policy. The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule (77 FR 53352), which indicated that ‘‘Hospitals currently code and report procedures and more invasive services such as surgeries, infusion of drugs, and specialized procedures such as cardiac catheterizations. Hospitals neither code nor report self-administered drugs.’’ Therefore, the manufacturer contended that, as an oral therapy, neither DIFICIDTM nor its administration was assigned an ICD–9–CM procedure code and, therefore, the technology should still be eligible for the new technology add-on payments. The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS final rule, because an ICD–9–CM procedure PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 28031 code for the administration of an oral medication did not exist and hospitals had no other mechanism to report the use of DIFICIDTM, for FY 2013, CMS instructed hospitals to report the DIFICIDTM NDC on hospital inpatient claims to receive the new technology add-on payment for DIFICIDTM. Prior to October 1, 2012, hospitals did not use NDCs on hospital inpatient claims, which prevented CMS from isolating DIFICIDTM cases and their associated costs. The manufacturer further stated that the NDC methodology was a bold change in policy and inpatient billing processes, and it stands to reason that, because of hospitals unfamiliarity with reporting NDCs on inpatient claims, hospitals’ use of the DIFICIDTM NDC would greatly lag behind the traditional use of ICD–9–CM procedure codes. As such, the manufacturer reasoned that any lag in hospital reporting would directly impact CMS’ ability to track and analyze the cost data associated with DIFICIDTM cases. The manufacturer also noted that on August 31, 2012, CMS issued Transmittal 2539, which is a change request for Medicare Administrative Contractors concerning updates for the upcoming fiscal year. The manufacturer stated that because the new technology add-on heading was omitted in the transmittal, this change request did not highlight the NDC billing approach to ensure that hospitals recognized the important change, which may have caused hospitals to overlook the claim reporting instructions for DIFICIDTM. The manufacturer added that Transmittal 2539 and a Medicare Learning Network® Matters (MLN) article were rescinded and replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted that among CMS’ reasons for replacing the transmittal was to insert the omitted new technology add-on section heading. The manufacturer stated that, although the original transmittal further supports that collection of DIFICIDTM-specific data did not begin until at least October 1, 2012, CMS’ reissuance of the claims processing instructions, and the missing header in the initial instructions, effectively delayed implementation of the new technology add-on payments for 3 months past the October 2012 beginning date. The manufacturer also believed that the need to replace the transmittal underlies hospitals’ difficulties instituting claims’ reporting instructions to receive new technology add-on payments for DIFICIDTM at the hospital level. The manufacturer noted that anecdotal feedback from hospitals, which was shared with CMS during a E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28032 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules meeting in June 2013, suggests that some hospitals faced challenges implementing the appropriate billing and coding processes. The manufacturer was concerned that that these challenges were, in part, caused by the missing header, and that these challenges may have impacted whether eligible cases were properly billed and coded to receive the new technology add-on payment for DIFICIDTM. The manufacturer was further concerned that the effects of any lag or delay caused by unfamiliarity with reporting NDCs and the missing header would also impact the data available to CMS to recalibrate the MS–DRGs and, separately, to evaluate the impact of the new technology add-on payment for DIFICIDTM. The manufacturer further explained that, while DIFICIDTM was available to hospitals after its launch in July 2011, hospitals had no experience reporting NDCs until October 2012, and may not have recognized the opportunity to, or understood the mechanism for doing so, until after January 2013. For the purposes of inpatient data collection and ratesetting, the manufacturer believed that this meant that 2 complete years of DIFICIDTM costs would not be fully reflected in the Medicare claims data for the FY 2015 MS–DRG recalibrations. The manufacturer also analyzed the 100 percent sample of the Standard Analytical File (SAF) for calendar year 2012, which contained first quarter claims data for FY 2013, the first 3 months that DIFICIDTM was eligible for the new technology add-on payments. The manufacturer found a total of 43,608 cases with a diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38 cases across 26 hospitals that reported new technology add-on payments for DIFICIDTM on submitted claims. The manufacturer stated that this preliminary data suggests that the number of cases available for MS–DRG recalibrations for FY 2015 is limited. The manufacturer stated that it is currently attempting to secure FY 2013 MedPAR claims data and that it will likely provide further insights on these issues. In addition, the manufacturer noted that prior new technology add-on payment application approvals have involved technologies with much narrower patient populations compared to DIFICIDTM, allowing the costs of those technologies to influence the MS– DRG relative payment weights for the small number of MS–DRGs with which they are associated. The manufacturer explained that, unlike other technologies approved for new technology add-on payments, the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 DIFICIDTM therapeutic value, while limited to patients with CDAD, is used in patients across a wide range of MS– DRGs due to it being reported as a secondary diagnosis in two-thirds of the cases compared to other technologies, which are assigned to a relatively small number of MS–DRGs. For example, cases involving the Spiration IBV® Valve System, which was granted approval for new technology add-on payments in FY 2010, primarily mapped to three MS–DRGs: 163 (Major Chest Procedures with MCC), 164 (Major Chest Procedures with CC), and 165 (Major Chest Procedures without CC/ MCC). In its analysis of the FY 2012 MedPAR data for the cost criterion, the manufacturer found cases using DIFICIDTM mapped to 544 unique MS– DRGs. Under the 100 percent sample of the SAF for calendar year 2012, the 38 cases mentioned above mapped to 20 different MS–DRGs. The manufacturer maintained that because of the diffuse nature of the DIFICIDTM cases mapping to many MS–DRGs, it believed an extension of the newness period is required for the costs to be adequately reflected in the MS–DRG relative payment weights. In the unique case of DIFICIDTM for the treatment of CDAD, the manufacturer stated that 2 years of new technology add-on payments is insufficient to allow the 544 MS–DRGs to be recalibrated to sufficiently reflect the cost of the use of DIFICIDTM, a treatment that offers significant clinical improvement over existing therapies. With regard to the technology’s newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology addon payments begins when data become available. Section 412.87(b)(2) clearly states that, ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration).’’ Section 412.87(b)(2) also states, ‘‘[a]fter CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘new’ under the criterion of this section.’’ Therefore, regardless of whether a technology can be individually identified by a separate ICD–9–CM code or whether it can only be identified using a NDC code, if the costs of the technology are included in PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 the charge data, and the MS–DRGs have been recalibrated using that data, then the technology can no longer be considered ‘‘new’’ for the purposes of this provision. We further stated in that final rule that the period of newness does not necessarily start with the approval date for the medical service or technology, and does not necessarily start with the issuance of a distinct code. Instead, it begins with availability of the product on the U.S. market, which is when data become available. We have consistently applied this standard, and believe that it is most consistent with the purpose of new technology add-on payments. In addition, similar to our discussion in the FY 2006 IPPS final rule (70 FR 47349), we do not believe that case volume is a relevant consideration for making the determination as to whether a product is ‘‘new.’’ Consistent with the statute, a technology no longer qualifies as ‘‘new’’ once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population. Similarly, this same determination is applicable no matter how many MS–DRGs the technology is spread across. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS–DRG relative weights whether its use in the Medicare population has been frequent or infrequent. We recognize that using an NDC was a novel billing practice under the IPPS. Nevertheless, even though hospitals may not have coded all uses of DIFICIDTM with the NDC, hospital bills would still include charges for all items and services furnished to a Medicare patient, including use of DIFICIDTM. Therefore, even though we may be not be able to identify all uses of DIFICIDTM in the Medicare charge data, hospital charges for the MS–DRGs would continue to reflect use of this technology. With respect to the Transmittal 2539 omitting the header referenced above, as noted above, CMS corrected this issue as soon as possible by rescinding and reissuing this transmittal. Additionally, as noted by the manufacturer, this transmittal was meant for MACs and not hospitals. We believe the guidance issued in Transmittal 2539 clearly described to MACs how hospitals were to report the NDC on the inpatient claim in order to identify cases using DIFICIDTM for purposes of new technology add-on payments. Additionally, the MLN article that the manufacturer referred to above (MLN articles are typically a summary of transmittals for the general public) clearly indicated that DIFICIDTM was new for FY 2013 new technology add- E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 on payments and clearly described how to properly code DIFICIDTM on the inpatient bill in order to receive the new technology add-on payment for FY 2013. The MLN article can be downloaded from the CMS Web site at: https://www.cms.gov/Outreach-andEducation/Medicare-Learning-NetworkMLN/MLNMattersArticles/downloads/ MM8041.pdf. After considering the manufacturer’s comments above, we still consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. Because the 3-year anniversary date of the product’s entry on the U.S. market occurred in the second half of the fiscal year (after April 1, 2014), we continued new technology add-on payments for DIFICIDTM for FY 2014. However, for FY 2015, the 3-year anniversary date of the product’s entry on the U.S. market would occur on May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we are proposing to discontinue new technology add-on payments for DIFICIDTM for FY 2015. We are inviting public comments on this proposal. c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft Cook® Medical submitted an application for new technology add-on payments for the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft (Zenith® F. Graft) for FY 2013. The applicant stated that the current treatment for patients who have had an AAA is an endovascular graft. The applicant explained that the Zenith® F. Graft is an implantable device designed to treat patients who have an AAA and who are anatomically unsuitable for treatment with currently approved AAA endovascular grafts because of the length of the infrarenal aortic neck. The applicant noted that, currently, an AAA is treated through an open surgical repair or medical management for those patients not eligible for currently approved AAA endovascular grafts. With respect to newness, the applicant stated that FDA approval for the use of the Zenith® F. Graft was granted on April 4, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we stated that because the Zenith® F. Graft was approved by the FDA on April 4, 2012, we believed that the Zenith® F. Graft met the newness criterion as of that date. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the Zenith® F. Graft and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved the Zenith® F. Graft for new technology add-on payments for FY 2013. Cases involving the Zenith® F. Graft that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 39.78 (Endovascular implantation of branching or fenestrated graft(s) in aorta). In the application, the applicant provided a breakdown of the costs of the Zenith® F. Graft. The total cost of the Zenith® F. Graft utilizing bare metal (renal) alignment stents was $17,264. Of the $17,264 in costs for the Zenith® F. Graft, $921 are for components that are used in a standard Zenith AAA Endovascular Graft procedure. Because the costs for these components are already reflected within the MS–DRGs (and are no longer ‘‘new’’), in the FY 2013 IPPS/LTCH PPS final rule, we stated that we do not believe it is appropriate to include these costs in our calculation of the maximum cost to determine the maximum add-on payment for the Zenith® F. Graft. Therefore, the total maximum cost for the Zenith® F. Graft is $16,343 ($17,264¥$921). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Zenith® F. Graft is $8,171.50. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Zenith® F. Graft, as stated above, we consider the beginning of the newness period to commence when the Zenith® F. Graft was approved by the FDA on April 4, 2012. Because the 3-year anniversary date of the entry of the Zenith® F. Graft on the U.S. market will occur in the second half of the fiscal year (April 4, 2015), we are proposing to continue new technology add-on payments for this technology for FY 2015. We are inviting public comments on this proposal. d. KcentraTM CSL Behring submitted an application for new technology add-on payments for KcentraTM for FY 2014. KcentraTM is a replacement therapy for fresh frozen plasma (FFP) for patients with an PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 28033 acquired coagulation factor deficiency due to warfarin and who are experiencing a severe bleed. KcentraTM contains the Vitamin K dependent coagulation factors II, VII, IX and X, together known as the prothrombin complex, and antithrombotic proteins C and S. Factor IX is the lead factor for the potency of the preparation. The product is a heat-treated, non-activated, virus filtered and lyophilized plasma protein concentrate made from pooled human plasma. KcentraTM is available as a lyophilized powder that needs to be reconstituted with sterile water prior to administration via intravenous infusion. The product is dosed based on Factor IX units. Concurrent Vitamin K treatment is recommended to maintain blood clotting factor levels once the effects of KcentraTM have diminished. KcentraTM was approved by the FDA on April 29, 2013. In the FY 2014 IPPS/ LTCH PPS final rule, we approved new ICD–9–CM procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate) which uniquely identifies KcentraTM. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted that we were concerned that KcentraTM may be substantially similar to FFP and/ or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS final rule, in response to comments submitted by the manufacturer, we stated that we agree that KcentraTM may be used in a patient population that is experiencing an acquired coagulation factor deficiency due to Warfarin and who are experiencing a severe bleed currently but are ineligible for FFP, particularly for use by IgA deficient patients and other patient populations that have no other treatment option to resolve severe bleeding in the context of an acquired Vitamin K deficiency. In addition, FFP is limited because it requires special storage conditions while KcentraTM is stable for up to 36 months at room temperature thus allowing hospitals that otherwise would not have access to FFP (for example, small rural hospitals as discussed by the applicant in its comments) to keep a supply of KcentraTM and treat patients who would possibly have no access to FFP. We noted that FFP is considered perishable and can be scarce by nature (due to production and other market limitations) thus making some hospitals unable to store FFP, which limits access to certain patient populations in certain locations. Therefore, we stated that we believe that KcentraTM provides a therapeutic option for a new patient population and is not substantially similar to FFP. Also, we gave credence to the information presented by the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28034 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules manufacturer that KcentraTM provides a simple and rapid repletion relative to FFP and reduces the risk of a transfusion reaction relative to FFP because it does not contain ABO antibodies and does not require ABO typing. As a result, we concluded that KcentraTM is not substantially similar to FFP, and that it meets the newness criterion. After evaluation of the newness, cost, and substantial clinical improvement criteria for new technology add-on payments for KcentraTM and consideration of the public comments we received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we approved KcentraTM for new technology add-on payments for FY 2014 (78 FR 50575 through 50580). Cases involving KcentraTM that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 00.96. In the application, the applicant estimated that the average Medicare beneficiary would require an average dosage of 2500 International Units (IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases of KcentraTM would incur an average cost per case of $3,175 ($635 × 5). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS– DRG payment for the case. As a result, the maximum add-on payment for a case of KcentraTM is $1,587.50 for FY 2014. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that new technology add-on payments for KcentraTM would not be available with respect to discharges for which the hospital received an add-on payment for a blood clotting factor administered to a Medicare beneficiary with hemophilia who is a hospital inpatient. Under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is ‘‘the amount of the payment with respect to the operating costs of inpatient hospital services (as defined in subsection (a)(4) of this section)’’ for discharges on or after April 1, 1988. Section 1886(a)(4) of the Act excludes from the term ‘‘operating costs of inpatient hospital services’’ the costs with respect to administering blood clotting factors to individuals with hemophilia. The costs of administering a blood clotting factor to a Medicare beneficiary who has hemophilia and is a hospital inpatient are paid separately from the IPPS. (For information on how the blood clotting factor add-on payment is made, we refer readers to Section 20.7.3 of Chapter Three of the Medicare Claims Processing Manual, VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 which can be downloaded from the CMS Web site at: https://cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/clm104c03.pdf.) In addition, we stated that if KcentraTM is approved by the FDA as a blood clotting factor, we believed that it may be eligible for blood clotting factor add-on payments when administered to Medicare beneficiaries with hemophilia. We make an add-on payment for KcentraTM for such discharges in accordance with our policy for payment of a blood clotting factor, and the costs would be excluded from the operating costs of inpatient hospital services as set forth in section 1886(a)(4) of the Act. Section 1886(d)(5)(K)(i) of the Act requires the Secretary to ‘‘establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under this subsection’’ beginning with discharges on or after October 1, 2001. We believe that it is reasonable to interpret this requirement to mean that the payment mechanism established by the Secretary recognizes only costs for those items that would otherwise be paid based on the prospective payment system (that is, ‘‘the payment system established under this subsection’’). As noted above, under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is the amount of payment for the operating costs of inpatient hospital services, as defined in section 1886(a)(4) of the Act, for discharges on or after April 1, 1988. We understand this to mean that a new medical service or technology must be an operating cost of inpatient hospital services paid based on the prospective payment system, and not excluded from such costs, in order to be eligible for the new technology add-on payment. We pointed out that new technology add-on payments are based on the operating costs per case relative to the prospective payment rate as described in § 412.88. Therefore, we believe that new technology add-on payments are appropriate only when the new technology is an operating cost of inpatient hospital services and are not appropriate when the new technology is excluded from such costs. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that we believe that hospitals may only receive new technology add-on payments for discharges where KcentraTM is an operating cost of inpatient hospital services. In other words, a hospital would not be eligible to receive the new technology add-on payment when it is administering KcentraTM in treating a Medicare beneficiary who has hemophilia. In those instances, PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 KcentraTM is specifically excluded from the operating costs of inpatient hospital services in accordance with section 1886(a)(4) of the Act and paid separately from the IPPS. However, when a hospital administers KcentraTM to a Medicare beneficiary who does not have hemophilia, the hospital would be eligible for a new technology add-on payment because KcentraTM would not be excluded from the operating costs of inpatient hospital services. Therefore, discharges where the hospital receives a blood clotting factor add-on payment are not eligible for a new technology add-on payment for the blood clotting factor. We refer readers to Chapter Three, Section 20.7.3 of the Medicare Claims Processing Manual for a complete discussion on when a blood clotting factor add-on payment is made. The manual can be downloaded from the CMS Web site at: https:// www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ Downloads/clm104c03.pdf. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for KcentraTM, as stated above, we consider the beginning of the newness period to commence when KcentraTM was approved by the FDA on April 29, 2013. Because KcentraTM is still within the 3year newness period, we are proposing to continue new technology add-on payments for this technology for FY 2015. We are inviting public comments on this proposal. e. Argus® II Retinal Prosthesis System Second Sight Medical Products, Inc. submitted an application for new technology add-on payments for the Argus® II Retinal Prosthesis System (Argus® II System) for FY 2014. The Argus® II System is an active implantable medical device that is intended to provide electrical stimulation of the retina to induce visual perception in patients who are profoundly blind due to retinitis pigmentosa (RP). These patients have bare or no light perception in both eyes. The system employs electrical signals to bypass dead photo-receptor cells and stimulate the overlying neurons according to a real-time video signal that is wirelessly transmitted from an externally worn video camera. The Argus® II implant is intended to be implanted in a single eye, typically the worse-seeing eye. Currently, bilateral E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules implants are not intended for this technology. According to the applicant, the surgical implant procedure takes approximately 4 hours and is performed under general anesthesia. The Argus® II System consists of three primary components: (1) An implant which is an epiretinal prosthesis that is fully implanted on and in the eye (that is, there are no percutaneous leads); (2) external components worn by the user; and (3) a ‘‘fitting’’ system for the clinician that is periodically used to perform diagnostic tests with the system and to custom-program the external unit for use by the patient. We describe these components more fully below. • Implant: The retinal prosthesis implant is responsible for receiving information from the external components of the system and electrically stimulating the retina to induce visual perception. The retinal implant consists of: (a) A receiving coil for receiving information and power from the external components of the Argus® II System; (b) electronics to drive stimulation of the electrodes; and (c) an electrode array. The receiving coil and electronics are secured to the outside of the eye using a standard scleral band and sutures, while the electrode array is secured to the surface of the retina inside the eye by a retinal tack. A cable, which passes through the eye wall, connects the electronics to the electrode array. A pericardial graft is placed over the extra-ocular portion on the outside of the eye. • External Components: The implant receives power and data commands wirelessly from an external unit of components, which include the Argus II Glasses and Video Processing Unit (VPU). A small lightweight video camera and transmitting coil are mounted on the glasses. The telemetry coils and radio-frequency system are mounted on the temple arm of the glasses for transmitting data from the VPU to the implant. The glasses are connected to the VPU by a cable. This VPU is worn by the patient, typically on a belt or a strap, and is used to process the images from the video camera and convert the images into electrical stimulation commands, which are transmitted wirelessly to the implant. • ‘‘Fitting System’’: To be able to use the Argus® II System, a patient’s VPU needs to be custom-programmed. This process, which the applicant called ‘‘fitting’’, occurs in the hospital/clinic shortly after the implant surgery and then periodically thereafter as needed. The clinician/physician also uses the ‘‘Fitting System’’ to run diagnostic tests (for example, to obtain electrode and impedance waveform measurements or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to check the radio-frequency link between the implant and external unit). This ‘‘Fitting System’’ can also be connected to a ‘‘Psychophysical Test System’’ to evaluate patients’ performance with the Argus® II System on an ongoing basis. These three components work together to stimulate the retina and allow a patient to perceive phosphenes (spots of light), which they then need to learn to interpret. While using the Argus® II System, the video camera on the patient-worn glasses captures a video image. The video camera signal is sent to the VPU, which processes the video camera image and transforms it into electrical stimulation patterns. The electrical stimulation data are then sent to a transmitter coil mounted on the glasses. The transmitter coil sends both data and power via radio-frequency (RF) telemetry to the implanted retinal prosthesis. The implant receives the RF commands and delivers stimulation to the retina via an array of electrodes that is secured to the retina with a retinal tack. In patients with RP, the photoreceptor cells in the retina, which normally transduce incoming light into an electro-chemical signal, have lost most of their function. The stimulation pulses delivered to the retina via the electrode array of the Argus® II Retinal Prosthesis System are intended to mimic the function of these degenerated photoreceptors cells. These pulses induce cellular responses in the remaining, viable retinal nerve cells that travel through the optic nerve to the visual cortex where they are perceived as phosphenes (spots of light). Patients learn to interpret the visual patterns produced by these phosphenes. With respect to the newness criterion, according to the applicant, the FDA designated the Argus® II System a Humanitarian Use Device in May 2009 (HUD designation #09–0216). The applicant submitted a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA in May 2011 to obtain market approval for the Argus® II System. The HDE was referred to the Ophthalmic Devices Panel of the FDA’s Medical Devices Advisory Committee for review and recommendation. At the Panel’s meeting held on September 28, 2012, the Panel voted 19 to 0 that the probable benefits of the Argus® II System outweigh the risks of the system for the proposed indication for use. The applicant received the HDE approval from the FDA on February 14, 2013. Currently there are no other approved treatments for patients with severe to profound RP. The Argus® II System has an IDE number of G050001 and is a PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 28035 Class III device. In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50580 through 50583), we approved new ICD– 9–CM procedure code 14.81 (Implantation of Epiretinal Visual Prosthesis), which uniquely identifies the Argus® II System. The other two codes approved by CMS are for removal, revision, or replacement of the device. More information on these codes can be found on the CMS Web site at: https:// cms.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM-C-and-M-Meeting-Materials-Items/ 2013-03-05-MeetingMaterials.html. After evaluation of the new technology add-on payment application and consideration of public comments received, we concluded that the Argus® II System met all of the new technology add-on payment policy criteria. Therefore, we approved the Argus® II System for new technology add-on payments in FY 2014 (78 FR 50580 through 50583). Cases involving the Argus® II System that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act, which makes no mention of any add-on payments for a new medical service or technology. Therefore, it is not appropriate to include capital costs in the add-on payments for a new medical service or technology. In the application, the applicant provided a breakdown of the costs of the Argus® II System. The total operating cost of the Argus® II System is $144,057.50. Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Argus® II System for FY 2014 is $72,028.75. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Argus® II System, as stated above, we consider the beginning of the newness period to commence when the Argus® II E:\FR\FM\15MYP2.SGM 15MYP2 28036 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 System was approved by the FDA on February 14, 2013. Because the Argus® II System is still within the 3-year newness period, we are proposing to continue new technology add-on payments for this technology for FY 2015. We are inviting public comments on this proposal. f. Zilver® PTX® Drug Eluting Peripheral Stent Cook® Medical submitted an application for new technology add-on payments for the Zilver® PTX® Drug Eluting Peripheral Stent (Zilver® PTX®) for FY 2014. The Zilver® PTX® is intended for use in the treatment of peripheral artery disease (PAD) of the above–the-knee femoropopliteal arteries (superficial femoral arteries). According to the applicant, the stent is percutaneously inserted into the artery(s), usually by accessing the common femoral artery in the groin. The applicant stated that an introducer catheter is inserted over the wire guide and into the target vessel where the lesion will first be treated with an angioplasty balloon to prepare the vessel for stenting. The applicant indicated that the stent is selfexpanding, made of nitinol (nickel titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug approved for use as an anticancer agent and for use with coronary stents to reduce the risk of renarrowing of the coronary arteries after stenting procedures. The applicant received FDA approval on November 15, 2012, for the Zilver® PTX®. The applicant maintains that the Zilver® PTX® is the first drug-eluting stent used for superficial femoral arteries. The technology is currently described by ICD–9–CM procedure code 00.60 (Insertion of drug-eluting stent(s) of the superficial femoral artery). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 50585), after evaluation of the new technology addon payment application and consideration of the public comments received, we approved the Zilver® PTX® for new technology add-on payments in FY 2014. Cases involving the Zilver® PTX® that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH PPS final rule, to determine the amount of Zilver® PTX® stents per case, instead of using the amount of stents used per case based on the ICD– 9–CM codes, the applicant used an average of 1.9 stents per case based on the Zilver® PTX® Global Registry Clinical Study. The applicant stated in its application that the anticipated cost per stent is approximately $1,795. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Therefore, cases of the Zilver® PTX® would incur an average cost per case of $3,410.50 ($1,795 × 1.9). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case of the Zilver® PTX® is $1,705.25 for FY 2014. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Zilver® PTX®, as stated above, we consider the beginning of the newness period to commence when the Zilver® PTX® was approved by the FDA on November 15, 2012. Because the Zilver® PTX® is still within the 3-year newness period, we are proposing to continue new technology add-on payments for this technology for FY 2015. We are inviting public comments on this proposal. 4. FY 2015 Applications for New Technology Add-On Payments We received seven applications for new technology add-on payments for FY 2015, three of which were applications resubmitted from FY 2014. However, one applicant withdrew its application prior to the publication of this proposed rule. In accordance with the regulations under § 412.87(c), applicants for new technology add-on payments must have FDA approval by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. A discussion of the six remaining applications is presented below. a. Dalbavancin (Durata Therapeutics, Inc.) Durata Therapeutics, Inc. submitted an application for new technology addon payments for FY 2015 for the use of Dalbavancin. Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic administered as a onceweekly 30-minute infusion via a peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. According to the applicant, Dalbavancin’s unique pharmacokinetic profile demonstrates rapid bactericidal activity that is potent and sustained against serious gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA). PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 With respect to the newness criterion, the applicant stated that Dalbavancin’s once-weekly dosing, a simpler regimen than the current standard of care (Vancomycin) of daily or multiple-times daily intravenous dosing, allows for the discontinuation of IV access with its attendant risks of line-related thrombosis and infection. The applicant submitted a New Drug Approval Application (NDA) on September 26, 2013, and anticipates FDA approval of Dalbavancin sometime in May of 2014. To date, no ICD–10–PCS code specifically describes the administration of Dalbavancin. The applicant applied for a new ICD–10–PCS code to describe the administration of Dalbavancin, which was presented at the March 19– 20, 2014 ICD–10 Coordination and Maintenance Committee meeting. If approved, the code will be effective on October 1, 2014. We are inviting public comments on whether the technology meets the newness criterion. We note that in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically: (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS–DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of the criteria above, it would be considered substantially similar to an existing technology and would not be considered ‘‘new’’ for purposes of new technology add-on payments. In evaluating the first criterion, the applicant stated that Dalbavancin’s mechanism of action is unique compared to other antibiotics as it involves the interruption of cell wall synthesis resulting in bacterial cell death. Furthermore, the applicant cited Dalbavancin’s long half-life as the factor that differentiates itself from existing antibacterial agents active against MRSA. With respect to the second criterion, we believe that cases of ABSSSI that use Dalbavancin or other antibiotics for treatment would be assigned to the same MS–DRGs. Finally, with respect to the third criterion, we believe that Dalbavancin and other antibiotics used to treat cases of ABSSSI treat the same disease and patient population. Based on evaluation of the substantially similarity criteria, it appears that Dalbavancin is not substantially similar to other antibiotics for the treatment of ABSSSI because it E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules does not use the same or a similar mechanism of action to achieve a therapeutic outcome. We are inviting public comments regarding whether Dalbavancin is substantially similar to existing antibiotics and whether Dalbavancin meets the newness criterion. According to the applicant, Dalbavancin is indicated to treat grampositive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These conditions may be a primary diagnosis, but are often secondary to an underlying condition such as diabetes, heart failure, pressure ulcers, etc. Therefore, the technology is eligible to be used across all MS–DRGs. To demonstrate that it meets the cost criterion, the applicant searched the FY 2012 MedPAR file (across all MS–DRGs) for cases where at least one ABSSSI ICD–9–CM code was present on the claim, including those where MRSA was present on a claim with an ABSSSI diagnosis. Specifically, the applicant searched for cases with one of the following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and paronychia of finger); 681.10 (Cellulitis and abscess of toe, unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis and abscess of unspecified digit); 682.0–682.9 (Other cellulitis and abscess of face, neck, trunk, upper arm and forearm, hand except fingers and thumb, buttock, leg except foot, foot except toes, specified sites, unspecified sites); 686.00 (Pyoderma, unspecified); 686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic granuloma of skin and subcutaneous tissue); 686.8 (Other specified local infections of skin and subcutaneous tissue); 686.9 (Unspecified local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic wound infection not elsewhere classified); 998.51 (Infected postoperative seroma); and 998.59 (Other postoperative infection). The applicant believed that these cases represent potential cases eligible for the administration of Dalbavancin. The applicant found 570,698 cases across 682 MS–DRGs and noted that almost 25 percent of the total number of cases would map to MS–DRGs 603 (Cellulitis without MCC), while the top 10 MS–DRGs accounted for almost half (or 49 percent) of the total number of cases. Of the 682 MS–DRGs, only 90 of these MS–DRGs accounted for 1,000 cases or more. The applicant standardized the charges for all 570,698 cases, which equated to an average caseweighted standardized charge per case of $46,138. We note that the applicant VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 did not inflate the charges nor did it include charges for Dalbavancin in the average case-weighted standardized charge per case. The applicant calculated an average case-weighted threshold of $44,255 across all MS– DRGs. Therefore, the applicant asserted the average case-weighted standardized charge per case (without inflating and including charges for Dalbavancin) exceeds the average case-weighted threshold of $44,255 (as indicated in Table 10 of the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant maintained that Dalbavancin meets the cost criterion. We are inviting public comments regarding whether Dalbavancin meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. With regard to substantial clinical improvement, as previously stated by the applicant, Dalbavancin is a new intravenous (IV) lipoglycopeptide antibiotic administered as a onceweekly 30 minute infusion via a peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. The applicant noted that, in the setting of continuing emergence of resistance among gram-positive pathogens worldwide, there is an increasing medical need for new antibacterial agents with enhanced gram-positive activity. The applicant cited the Infectious Diseases Society of America (IDSA),3 stating the need for a multipronged approach to address the impact of antibiotic resistance. In addition, the applicant stated the FDA has also designated MRSA as a pathogen of special interest which allows an antibiotic effective against this organism to be designated as a ‘‘Qualified Infectious Disease Product,’’ recognizing the medical need for drugs to treat infections caused by this pathogen. The applicant believed that having a medicinal agent with clinical efficacy against gram-positive pathogens, including MRSA and CA–MRSA, a favorable benefit/risk ratio, and a favorable pharmacokinetics profile allowing convenient dosing in inpatients and outpatients with the potential for minimizing patient noncompliance would be a valuable addition to the antibacterial armamentarium for the treatment of ABSSSI. The applicant also noted that, when taking Dalbavancin, there is no need for oral step-down therapy. The applicant suggested that Dalbavancin offers treatment advantages over other available options for therapy 3 ‘‘Bad PO 00000 Bugs, No Drugs,’’ July 2004. Frm 00061 Fmt 4701 Sfmt 4702 28037 for skin infections as a result of the following: • Improved potency against key bacterial pathogens with the concentration of Dalbavancin required to kill key target pathogens lower relative to other antibiotics commonly used to treat such pathogens; • Retained activity against staphylococcus aureus resistant to other antibiotics; • Improved safety profile as Dalbavancin exhibits more favorable tolerability and safety than alternative approved antibacterial drugs in areas such as no evidence of thrombocytopenia as seen with linezolid and tedezolid, superior infusion related tolerability relative to other antiobiotics, an absence or reduction of drug specific toxicities, and once a week dosing of IV Dalbavancin avoids pitfalls of patient noncompliance with an oral medication; • Lack of drug interactions due to metabolic profile which minimizes risk of unexpected adverse events when coadministered with other compounds as seen with linezolid and quinupristin/ dalfopristin; • Decreased requirement for therapeutic interventions, specifically the need for an intravenous catheter as Dalbavancin is administered once a week, thus reducing catheter related infection as well; • Reduced time to patient defined recovery; • Reduced mortality rate as demonstrated in the combined phase of the Discover 1 and Discover 2 clinical trials; • The potential for avoidance of admission to the hospital as Dalbavancin allows the utilization of a weekly treatment regimen, thus potentially increasing the convenience of outpatient therapy for patients. The applicant conducted three phase three randomized, controlled, double blinded clinical trials. The first was the pivotal VER001–9 study with a total of 873 patients with cSSSIs, which compared the safety and efficacy of IV Dalbavancin with possible switch to oral placebo to IV Linezolid with possible switch to oral Linezolid. According to the applicant, the primary efficacy endpoint of clinical response at test of 14 days with a plus or minus of 2 days after completion of therapy demonstrated comparable clinical efficacy to linezolid and met the requirement of statistical demonstration of noninferiority. In the clinically evaluable population, 88.9 percent of patients who received Dalbavancin compared to 91.2 percent of patients who received vancomycin/linezolid E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28038 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules were clinical successes. The applicant also noted that Dalbavancin had an improved safety profile compared to Linezolid as the overall incidence and percentage of adverse events and deaths were lower in the Dalbavancin group, which was statistically significant. The second and third clinical trials were the Discover 1 and Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI and compared IV Dalbavancin with IV placebo every 12 hours to match Vancomycin with possible switch to oral Vancomycin to IV Vancomycin with IV placebo to match IV Dalbavancin with possible switch to oral Linezolid. The applicant reported that in both studies, the primary efficacy outcome measure was clinical response in 48 to 72 hours poststudy drug initiation and a secondary outcome measure was clinical status at the end of treatment visit (day 14) in the Intent to Treat (ITT) and clinically evaluable at End of Treatment populations. Clinical status was also determined at the short-term follow-up and long-term follow-up visits. According to the applicant, the Discover 1 trial demonstrated that 83.3 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 81.8 percent of patients who received Vancomycin/Linezolid. The applicant also noted that Dalbavancin was noninferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): ¥4.6 percent; 7.9 percent). The applicant further noted that the Discover 2 trial showed similar results to the Discover 1 trial. Specifically, the trial demonstrated that 76.8 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 78.3 percent of patients who received Vancomycin/ Linezolid. The applicant again noted that Dalbavancin was noninferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): ¥7.4 percent; 4.6 percent). The applicant found Dalbavancin to be effective against MRSA and other gram-positive bacteria associated with ABSSSI. The applicant stated that 25 percent of patients in the study were treated without an inpatient admission. We are concerned with the details of the trial design and the primary efficacy endpoints used within those trials that were used to provide the clinical data supplied by the applicant. All of the trials were noninferiority studies, which prevent any determination as to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 substantial clinical improvement from the trial data. The primary efficacy endpoint was defined as having no increase in lesion size, and no fever 48 to 72 hours after drug initiation. The secondary endpoint was a >20 percent reduction in infection area at defined points in time. At neither endpoint is the patient oriented endpoint of resolution of infection increased. With these limitations in using efficacy data to establish substantial clinical improvement, the applicant suggested that the outpatient treatment, elimination of central lines and avoidance of hospitalization all may improve safety, avoid treatmentassociated infections and improve patient satisfaction, and that these factors demonstrate substantial clinical improvement. While the factors mentioned may be true, the applicant did not present any evidence to support its assertions. We are inviting public comments on whether Dalbavancin meets the substantial clinical improvement criterion, including public comments in response to our concern that the applicant has only provided efficacy data of noninferiority, and no data for the other suggested benefits. We did not receive any public comments in response to the New Technology Town Hall meeting held on February 12, 2014 regarding this technology. b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.) The Heli-FXTM EndoAnchor System is indicated for use in the treatment of patients whose endovascular grafts during treatment of aortic aneurysms have exhibited migrations or endoleaks, or in the treatment of patients who are at risk of such complications, and in whom augmented radial fixation and/or sealing is required to regain or maintain adequate aneurysm exclusion. The Heli-FXTM EndoAnchor System is comprised of the following three components: (1) The EndoAnchor Implant; (2) the Heli-FXTM Applier; and (3) the Heli-FXTM Guide with Obturator. The Heli-FXTM EndoAnchor System is a mechanical fastening device that is designed to enhance the long-term durability and reduce the risk of repeat interventions in endovascular aneurysm repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By deploying a small helical screw (the Heli-FXTM EndoAnchors) to connect the endograft to the aorta, the Heli-FXTM System seeks to provide a permanent seal and fixation, similar to the stability achieved with an open surgical anastomosis. PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 The original Heli-FXTM EndoAnchor System, designed for treating abdominal aortic aneurysms (AAA), was cleared by the FDA through the ‘‘de novo’’ 510(k) process on November 21, 2011 (reference K102333). The Heli-FXTM Thoracic System, which allows the expanded use of the Heli-FXTM EndoAnchor System technology to the treatment of thoracic aortic aneurysms (TAA), was cleared by the FDA on August 14, 2012 (reference K121168). The applicant submitted two applications for approval for new technology add-on payment in FY 2015: one for the treatment of AAAs and the other for the treatment of TAA repair. We note that, as stated in the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915), two applications are necessary in this instance, because patients that may be eligible for use of the technology under the first indication are not expected to be assigned to the same MS–DRGs as patients receiving treatment using the new technology under the second indication. Specifically, patients who have endovascular grafts implanted for the treatment of AAA map to MS–DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC), while patients who have endovascular grafts implanted for the treatment of TAA map to MS–DRGs 219 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter without CC/MCC). Each indication/application must also meet the cost criterion and the substantial clinical improvement criterion in order to be eligible for new technology add-on payments beginning in FY 2015. We discuss both of these applications below. (1) Heli-FXTM EndoAnchor System for the Treatment of AAA As mentioned above, the original Heli-FXTM EndoAnchor System, designed for treating patients diagnosed with AAA, was cleared by the FDA through the ‘‘de novo’’ 510(k) process on November 21, 2011 (reference K102333). According to the applicant, the device became available to Medicare beneficiaries following the product launch at the Society of Vascular Surgery (SVS) Annual Meeting held on June 7–9, 2012. Therefore, the applicant maintained that the Heli-FXTM EndoAnchor System meets the ‘‘newness’’ criterion because the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules technology was not available on the U.S. market until June 2012. The applicant explained that the delay in the general market availability of the original HeliFXTM EndoAnchor System, following initial FDA clearance, was mainly because of the regulatory uncertainty inherent in the ‘‘de novo’’ 510(k) process. This uncertainty prevented the manufacturer from being able to secure the venture capital funding that was necessary to prepare for commercialization before obtaining market clearance. The ability to secure venture capital through the fundraising process was dependent upon the FDA clearance. According to the applicant, funding to commercially market the technology was not obtained until June 2012. In subsequent discussions with the applicant, the applicant confirmed that the Heli-FXTM EndoAnchor System was available on the U.S. market as of November 2011. Further, the applicant acknowledged that four implantations were performed on Medicare beneficiaries between November 2011 and June 2012. Therefore, the Heli-FXTM EndoAnchor System is considered ‘‘new’’ as of November 2011 when the technology was cleared by the FDA and became available on the U.S. market. Section 412.87(b)(2) of the regulations state that, ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new service or technology.’’ Our past practice has been to begin and end the eligibility for new technology addon payments on a fiscal year basis. We have generally followed a guideline that uses a 6-month window, before and after the beginning of the fiscal year, to determine whether to still consider a technology ‘‘new’’ and extend approved new technology add-on payments for an additional fiscal year. In general, a technology is still considered ‘‘new’’ (and eligible to receive new technology add-on payments) only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year. (We refer readers to 70 FR 47362.) With regard to the newness criterion for the Heli-FXTM EndoAnchor System, as stated above, we consider the beginning of the newness period for the device to begin when the technology first became available on the U.S. market in November 2011. As previously stated, the applicant acknowledged that four implantations were performed on Medicare beneficiaries between November 2011 and June 2012. Therefore, the costs of the Heli-FXTM EndoAnchor System are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 currently reflected in the MS–DRGs, and the 3-year anniversary date under the newness criterion for the product’s entry on the U.S. market will occur during November 2014 (the first half of FY 2015). As such, we do not believe that the Heli-FXTM EndoAnchor System meets the newness criterion. We are inviting public comments on whether the Heli-FXTM EndoAnchor System meets the newness criterion. The applicant requested an ICD–10– PCS code, and presented comments at the March 2014 ICD–10 Coordination & Maintenance Committee meeting. To demonstrate that the technology meets the cost criterion, the applicant researched claims data from the 100 percent sample of the 2012 Inpatient Hospital Standard Analytical File (SAF) for cases reporting either procedure code 39.71 (Endovascular implantation of other graft in abdominal aorta), or procedure code 39.79 (Other endovascular procedures on other vessels) in the first or second procedure position on the claim, in combination with one of the following primary diagnosis codes: 441.4 (Abdominal aneurysm without mention of rupture); 996.1 (Mechanical complication of other vascular device, implant, and graft); or 996.74 (Other complications due to other vascular device, implant, and graft). The applicant believed that this combination of ICD–9–CM codes identifies cases treated for AAA. We note that the 2012 SAF dataset includes all claims submitted from hospitals paid under the IPPS for calendar year 2012. The applicant focused its analysis on MS–DRGs 237 and 238 because these are the MS–DRGs that cases treated with the implantation of endovascular grafts for AAAs would most likely map to. The applicant found a total of 8,142 cases, and noted that 9.35 percent of the total number of cases would map to MS–DRG 237, and 90.65 percent of the total number of cases would map to MS–DRG 238. The applicant standardized the charges for all 8,142 cases. Using the inflation factor of 1.47329 published in the FY 2014 IPPS/ LTCH final rule (78 FR 50982), the applicant inflated the standardized charges by 14.88 percent (the applicant multiplied 1.47329 × 1.47329 × 1.47329 in order to inflate the charges from 2012 to 2015). The applicant then added the charges for the Heli-FXTM EndoAnchor System to the standardized charges by dividing the cost of the Heli-FXTM EndoAnchor System device by each individual hospital specific CCR from the FY 2012 impact file. This equated to an average case-weighted inflated standardized charge per case of $111,613. The applicant noted that the PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 28039 average case-weighted inflated standardized charge per case did not contain additional operating room charges that relate to the Heli-FXTM EndoAnchor System. Therefore, the applicant determined that it was necessary to add an additional $1,440 for operating room charges, which was based on an additional half hour of operating room time from one hospital, to the average case-weighted standardized charge per case. This resulted in an average case-weighted standardized charge per case of $113,053. The applicant calculated an average case-weighted threshold of $86,278 across both MS–DRGs 237 and 238. The applicant noted that the average case-weighted standardized charge per case, computed without including the additional operating room charges that relate to the Heli-FXTM EndoAnchor System, exceeded the average case-weighted threshold of $86,278. Therefore, the applicant maintained that the technology meets the cost criterion. The applicant also submitted claims data from the ANCHOR (Aneurysm Treatment Using the Heli-FX Aortic Securement System Global Registry) study to demonstrate that the technology meets the cost criterion. A total of 51 cases were submitted with 11.76 percent of all the cases mapping to MS–DRG 237, and 88.24 percent of all the cases mapping to MS–DRG 238. The applicant standardized the charges for all 51 cases, and determined an average case-weighted standardized charge per case of $128,196. The applicant calculated an average caseweighted threshold of $87,118 across MS–DRGs 237 and 238. Therefore, because the average case-weighted standardized charge per case exceeds the average case-weighted threshold, the applicant maintained that the technology meets the cost criterion. We are inviting public comments on whether the Heli-FXTM EndoAnchor System meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analyses. We discuss whether the Heli-FXTM EndoAnchor System represents a substantial clinical improvement over other treatments used for the repair of both abdominal and thoracic aortic aneurysms in one discussion below. (2) Heli-FXTM EndoAnchor System for the Treatment of Thoracic Aortic Aneurysms The Heli-FXTM Thoracic System, which allows the expanded use of the Heli-FXTM EndoAnchor System technology to TAA repair, was cleared E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28040 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules by the FDA on August 14, 2012 (reference K121168). The new system consists of a longer delivery device with additional tip configurations to allow the helical EndoAnchor technology to treat TAA. A line extension to the original Heli-FXTM EndoAnchor System, allowing improved treatment of AAA patients with larger aortic neck diameters, was cleared by the FDA on April 12, 2013 (reference K130677). With regard to the newness criterion for the Heli-FXTM Thoracic System, we consider the beginning of the newness period for the device to begin when the technology was approved by the FDA on August 14, 2012. Because the 3-year anniversary date of the product’s entry on the U.S. market would occur in the second half of FY 2015 (August 14, 2015), we believe that the Heli-FXTM Thoracic System meets the newness criterion. We are inviting public comments on whether the Heli-FXTM Thoracic System meets the newness criterion. As stated above, the applicant requested an ICD–10–PCS code, and presented comments at the March 2014 ICD–10 Coordination & Maintenance Committee meeting. To demonstrate that the Heli-FXTM Thoracic System meets the cost criterion, similar to the analysis performed for the Heli-FXTM EndoAnchor System for the treatment of AAA, the applicant researched claims data from the 100 percent sample of the 2012 SAF for cases reporting procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) in the first or second procedure position on the claim, in combination with one of the following primary diagnosis codes: 404.93 (Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end-stage renal disease); 441.01 (Dissection of aorta, thoracic); 441.03 (Dissection of aorta, thoracoabdominal); 441.2 (Thoracic aneurysm without mention of rupture); 441.4 (Abdominal aneurysm without mention of rupture); 441.7 (Thoracoabdominal aneurysm, without mention of rupture); 996.1 (Mechanical complication of other vascular device, implant, and graft); or 996.74 (Other complications due to other vascular device, implant, and graft). The applicant believed that this combination of ICD–9–CM codes identifies cases treated for TAA. We note that the 2012 SAF dataset includes all claims submitted from hospitals paid under the IPPS for CY 2012. The applicant focused its analysis on MS–DRGs 219, 220, and 221 because these are the MS–DRGs to which cases treated with the implantation of endovascular grafts for TAA repair VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 would most likely map. The applicant found a total of 642 cases, and noted that 27.88 percent of the total number of cases would map to MS–DRG 219, 40.50 percent of the total number of cases would map to MS–DRG 220, and 31.62 percent of the total number of cases would map to MS–DRG 221. The applicant standardized the charges for all 642 cases. Using the inflation factor of 1.47329 published in the FY 2014 IPPS/LTCH final rule (78 FR 50982), the applicant inflated the standardized charges by 14.88 percent (the applicant multiplied 1.47329 × 1.47329 × 1.47329 in order to inflate the charges from 2012 to 2015). The applicant then added the charges for the Heli-FXTM EndoAnchor System to the standardized charges by dividing the cost of the Heli-FXTM EndoAnchor System device by each individual hospital specific CCR from the FY 2012 impact file. This equated to an average case-weighted inflated standardized charge per case of $156,625. The applicant noted that the average case-weighted inflated standardized charge per case did not contain additional operating room charges related to the use of this technology. Therefore, the applicant determined that it was necessary to add an additional $2,160 for operating room charges, which was based on an additional 45 minutes of operating room time from one hospital, to the average case-weighted standardized charge per case. This resulted in an average caseweighted standardized charge per case of $158,785. The applicant calculated an average case-weighted threshold of $141,194 across MS–DRGs 219, 220, and 221. The applicant noted that the average case-weighted standardized charge per case, without including charges for additional operating room time, exceeded the average caseweighted threshold of $141,194. Therefore, the applicant maintained that the technology meets the cost criterion. We are inviting public comments on whether the Heli-FXTM Thoracic System meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. (3) Evaluation of the Substantial Clinical Improvement Criterion for the HeliFXTM EndoAnchor System for the Treatment of Abdominal and Thoracic Aortic Aneurysms The applicant stated that the HeliFXTM EndoAnchor System represents a substantial clinical improvement for the following reasons: The technology improves overall rates of aneurysm exclusion and long-term success after EVAR by increasing the integrity and PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 long-term durability of the proximal seal and fixation; the technology reduces the risk and rate of secondary interventions and readmissions due to aneurysmrelated complications (for example, endoleaks, migration, aneurysm enlargement) caused by failure of the proximal seal; the technology improves the general applicability of EVAR to patients with a broader spectrum of aortoiliac anatomy, including those with hostile proximal neck anatomy; and the technology reduces the rigor of life-long imaging follow-up for EVAR patients by reducing the rate of late failure and increasing the post-EVAR rates of aneurysm sac regression due to complete, endoleak-free durable aneurysm exclusion. While current devices and capabilities are greatly improved over the first generation of devices, the applicant noted that EVAR treatments using the first generation of devices has not proven to be as durable, anatomically applicable, or complication-free as open surgery. 4 5 6 7 Several critical and lifethreatening limitations continue to require improvement to these devices and procedures, including the need to reduce serious early and late device and procedure-related complications, such as loss of stability, and integrity and robustness of the clinical proximal aortic landing zone, and to offer an alternative method of EVAR to a broader segment of the patient population. The applicant provided literature, analyses of data from the ‘‘STAPLE–2’’ clinical trial and the ANCHOR Registry, and a meta-analysis of EVAR trials to demonstrate that the Heli-FXTM EndoAnchor System represents a substantial clinical improvement above current treatments available. We summarize the information provided by the applicant that supports the clinically beneficial results of using the Heli-FXTM EndoAnchor System. The ‘‘STAPLE–2’’ clinical trial enrolled 155 patients at 25 U.S. centers between September 2007 and January 4 Abbruzzese, T.A., Kwolek, C.J., Brewster, D.C., et al, ‘‘Outcomes following endovascular abdominal aortic aneurysm repair (EVAR): An anatomic and device-specific analysis,’’ Journal of Vascular Surgery, 2008, Vol. 48, pp. 19–28. 5 Dangas, G., O’Connor, D., Firwana, B., et al, ‘‘Open Versus Endovascular Stent Graft Repair of Abdominal Aortic Aneurysms: A Meta-Analysis of Randomized Trials,’’ JACC, 2012, Vol. 5 (10), pp. 1072–1080. 6 De Bruin, J.L., Baas, A.F., Buth, J., et al, ‘‘LongTerm Outcome of Open or Endovascular Repair of Abdominal Aortic Aneurysm,’’ New England Journal of Medicine, May 2010, Vol. 362(20), pp. 1881–1889. 7 Greenhalgh, R.M., Brown, L.C., Powell, J.T., et al, ‘‘Endovascular versus open repair of abdominal aortic aneurysm,’’ New England Journal of Medicine, May 2010, Vol. 362(20), pp. 1863–1871. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 2009. Clinical (and imaging) data are available for 147, 139 and 125 patients at 1-year, 2-year, and 3-year follow-up, respectively, representing the complete data sets at these time points. Patients enrolled in the clinical trial and observed under the study will continue to be followed per protocol for 5 years following aneurysm repair. According to the applicant, the results of the trial and study demonstrate that the Heli-FXTM EndoAnchor System is associated with an extremely low rate of proximal neckrelated issues in long-term follow-up. The applicant maintained that this determination results in improved outcomes for aortic aneurysm patients, and reduced rate of re-interventions, which are associated with hospital admissions, procedural risks, and reversions to increased follow-up frequency requiring more physician visits and radiographic imaging studies. The data used for this analysis was extracted from the clinical database on February 1, 2013, and are identical to those used to generate the most recent Annual Progress Report (APR) submitted to the FDA, as required under the U.S. IDE regulations. While the ‘‘STAPLE–2’’ clinical trial was conducted exclusively with the Aptus AAA endograft (which remains investigational), the applicant believed that the use of the Heli-FXTM EndoAnchor System-related data is applicable to the use of the anchor with the compatible Cook, Gore, and Medtronic manufactured endografts in treatment anatomies for AAA and TAA cases. Through 3-year follow-up, the applicant noted that there have been no anchor fractures as observed by the core lab. Further, there have been no relative migrations of the Heli-FXTM EndoAnchor System as compared to other endografts reported by the core laboratory. In the analysis of the ‘‘STAPLE–2’’ clinical trial data at 1-year follow-up, the applicant noted that the core lab observed no proximal migrations, and a single case of Type I endoleak. A single secondary intervention was required to address the Type I endoleak in a patient with a circumferentially incomplete proximal neck within the 1-year followup period. The applicant further noted that no additional Type I endoleaks have been observed beyond the 1-year follow-up in any patient enrolled in the trial. In addition, there were no reported instances of aneurysm rupture, vessel perforation, vessel dissection, catheter embolization, enteric fistula, infection, Type III endoleak, conversion, allergic reactions, renal emboli, or patient death VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 associated with the use of the Heli-FXTM EndoAnchor System. Further, there have been no reports of bleeding or hematoma at the EndoAnchor penetration locations in the aortic neck. Beyond the 1-year follow-up, three patients have demonstrated proximal migrations less than 1 cm. None of these cases were associated with Type I endoleaks or aneurysm sac expansions. The applicant then compared migrations and Type I endoleaks data from the ‘‘STAPLE–2’’ clinical trial to analogous data from five compatible AAA endografts that were not anchored (data taken from published SSE data obtained from the FDA’s Web site). One year of data was compared because this timeframe is what is reported in a standard fashion from IDE trials of endografts. The applicant noted that the Heli-FXTM EndoAnchor System data compares favorably against the data obtained in U.S. pivotal trials of devices that did not employ discrete independent fixation means, particularly when viewed in light of the shorter average neck lengths treated in the ‘‘STAPLE–2’’ clinical trial versus those involving the Cook, Gore, and Medtronic manufactured endografts. According to the applicant, the number of proximal migrations were low across devices as reported in the SSE data, and an analysis using the Fisher’s exact method demonstrated no statistically significant differences when compared to the anchored endografts used in the ‘‘STAPLE–2’’ clinical trial (all p = NS). The incidence of Type I endoleaks and the need for secondary interventions to address them was significantly lower for the Heli-FXTM EndoAnchor System endografts analyzed under the ‘‘STAPLE–2’’ clinical trial versus the Medtronic, AneuRx, and Talent manufactured endografts (p = 0.026 versus AneuRx and p = 0.015 versus Talent). The applicant stated that the applicability of post-hoc statistical analyses is limited. However, the applicant believed that because the data being compared under the analyses were collected through similar protocols and with the same endpoint definitions, post-hoc comparisons were deemed appropriate. The applicant further believed that the comparison of this data demonstrates that the Heli-FXTM EndoAnchor System is associated with very low rates of Type I endoleaks and migrations. The applicant also provided data from the ANCHOR Registry, which is a postmarket, prospective, observational, multi-center, international, dual-arm study designed to capture real-world data on the usage patterns and clinical results associated with the use of the PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 28041 Heli-FXTM EndoAnchor System as a method of treatment for patients in need of EVAR. The applicant explained that the ANCHOR Registry represents a growing body of data on the application of the Heli-FXTM EndoAnchor System used as a method of endovascular aortic aneurysm repair. The applicant noted that to its knowledge, the anatomical challenges present in the registry are greater than those in any large scale published series. The applicant further noted that, although long-term results are limited, the acute results demonstrate a high level of device safety, technical feasibility and acute success in a patient population with few viable options. Primary safety for the ANCHOR Registry is being measured as a composite of freedom from device or procedure-related serious adverse events through 1-year follow-up following the Heli-FXTM EndoAnchor System implantation. Primary effectiveness is being measured as a composite of acute technical success and freedom from Type Ia endoleaks and endograft migrations through 1-year follow-up. Inclusion and exclusion criteria are minimal, essentially following the IFU requirements. Patients are being followed in the registry by their physician’s standard of care for 5 years. Enrollment in the ANCHOR Registry began in March 2012. Through August 2013, a total of 258 patients were enrolled at 40 participating centers (29 located in the United States and 11 located in the European Union), and data are available in the registry’s database. Of these, 195 patients (76 percent) were enrolled in the primary arm, having the Heli-FXTM EndoAnchor System implanted at the time of their initial aneurysm treatment, either as a prophylactic measure, or to address an acute leak seen on completion arteriography. The remaining patients (63 or 24 percent) were enrolled in the revision arm, having the Heli-FXTM EndoAnchor Systems implanted at a secondary procedure to arrest migration, or address endoleaks discovered on follow-up in previously implanted endografts. The applicant noted that physicians are choosing to apply the Heli-FXTM EndoAnchor System in a subset of patients that are at a higher risk for proximal neck-related complications during follow-up. The large average sac diameter in the revision arm suggested that these patients’ initial treatments were unsuccessful and, as such, they have experienced continued sac expansion post-EVAR. These patients E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28042 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules also represent a high-risk subset of patients. Acute results are measured in terms of technical success. In the primary arm, 193 of 194 procedures were successful, and in the revision arm, 57 of 63 procedures were successful. All technical failures were persistence of Type Ia endoleaks. There has been a single re-intervention at 69 days postEndoanchor implantation for a persistent Type Ia endoleak in one patient in the revision arm, in which the Heli-FXTM EndoAnchor System combined with a proximal cuff were unable to completely resolve the endoleak. There have been no devicerelated serious adverse events. As mentioned above, because the ‘‘STAPLE–1,’’ 8 and ‘‘STAPLE–2’’ clinical trials were single-arm studies, no data are available from them to assess the impact of the Heli-FXTM EndoAnchor System on endograft performance. To make this assessment, a meta-analysis was conducted. The meta-analysis combined long-term AAA endograft performance from endografts marketed in the United States, and compared these measures to those from long-term follow-up in the ‘‘STAPLE–2’’ trial. According to the applicant, the key findings from the meta-analysis are as follows: • Heli-FXTM EndoAnchors reduced the proportion of treated aneurysms with enlargement greater than 5 mm at 3 years from 12.7 percent to 3.9 percent (p = .002). • Heli-FX EndoAnchor System reduced the proportion of leaks requiring treatment at 3 years from 12 percent to 1.3 percent (p < .001). • Heli-FXTM EndoAnchor System reduced (all-cause) mortality at 3 years from 18.8 percent to 8.4 percent (p = .002). However, this does not appear to have been totally mediated by AAArelated mortality, which was reduced by the Heli-FXTM EndoAnchor System from 2.5 percent to 0.7 percent at 3 years (but was not statistically significant, p = .372). According to the applicant, in general, patients in the ANCHOR Registry were similar to the patients in the AAA endograft studies. The applicant noted that the results of the analysis using the Fisher’s Exact Tests were consistent between the All-Studies’ comparisons and the IDE-Studies’ comparisons: AllCause Mortality, Leaks requiring 8 Deaton, D.H., Mehla, M., Kasirajan, K., et al., ‘‘The Phase I Multi-center Trial (Staple-1) of the Aptus Endovascular Repair System: Results at 6 Months and 1 Year,’’ Journal of Vascular Surgery, 2009, Vol. 49, pp. 851–857 (discussion on pp. 857– 858.) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Treatment, and Enlargement were all significantly lower at 3 years in the endografts implanted with the HeliFXTM EndoAnchor System than in standard endografts. The applicant asserted that the metaanalysis shows that there is objective evidence that the Heli-FXTM EndoAnchor System effectively reduces well-documented problems with endografts. By providing the endograft with better apposition to the native artery, the applicant noted that the HeliFXTM EndoAnchor System reduces the rates of enlargement and endoleaks requiring treatment. The applicant further noted that these results were consistent in the All-Studies’ and IDE Studies’ meta-analyses. The applicant believed that lower rates of leaks requiring intervention would save payers money over the long term. The applicant observed that, while there was no significant improvement in the rate of ruptures with the Heli-FXTM EndoAnchor System, this may be due to the fact that leaks were treated and, thereby, prevented any ruptures. The applicant believed that the higher rate of treated endoleaks in endografts implanted without the Heli-FXTM EndoAnchor System provides for this hypothesis. Also, migration did not appear to be significantly reduced by the Heli-FXTM EndoAnchor System (3.5 percent at 3 years in both groups; p = 1.0). Finally, the applicant concluded that, overall, the lower complication rates seen with the Heli-FXTM EndoAnchor System in the meta-analysis provide evidence of the clinical benefits and likely economic benefits associated with the use of the Heli-FXTM EndoAnchor System. The applicant believed that the technology may be especially helpful in patients with difficult anatomy, and that it may be reasonable to consider using the Heli-FXTM EndoAnchor System prophylactically in the treatment of all such patients. In addition to the formal study data from the ‘‘STAPLE–2’’ trial, the Global ANCHOR Registry, and the metaanalysis based on these, the applicant provided published peer-reviewed literature that represent an early state of scientific data dissemination outside of non-company sponsored clinical studies, which is commensurate with the recent market approvals of the HeliFXTM EndoAnchor System technology. The applicant believed that this data demonstrates strong initial physician enthusiasm and resulting favorable clinical results in their experience to date. The applicant noted that the general body of scientific literature is considered meaningful and growing for PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 this early stage of market introduction. However, the applicant asserted that the literature supports the study and metaanalysis data above that documents that improved clinical outcomes were observed, including outcomes in a broader range of patients that are often ineligible for, or at greatest risk with, EVAR. We are concerned that the three sources of data, the ‘‘STAPLE–2’’ clinical trial, the Anchor registry, and the literature review that the applicant submitted to support their application are not high quality evidence. The ‘‘STAPLE–2’’ study was a single-arm study and only used one endograft, the registry is an observational study, and the literature review does not provide clinical data. Also, the meta-analysis of all the submitted data is only as good as the data used. While the clinical data submitted suggests that some outcomes such as EVAR failure are improved, we are concerned that there is not enough clinical evidence to support the substantial clinical improvement criterion. We are inviting public comments on whether the submitted data demonstrate that the Heli-FXTM EndoAnchor System represents a substantial clinical improvement in the treatment of Medicare beneficiaries, particularly in regard to the concerns we have identified. We received public comments in response to the New Technology Town Hall meeting held on February 12, 2014. We summarize these comments below. Comment: Several commenters supporting new technology add-on payments for the Heli-FXTM EndoAnchor System. In addition, one commenter believed that EndoAnchors would broaden the applicability of endovascular aneurysm repair. The commenter noted that use of EndoAnchors increases the force needed to dislodge the proximal neck of the graft by several times, and in some cases even stronger than a hand-sewn anastomosis. This commenter further noted that this would allow patients with short, or otherwise difficult aortic necks to be treated more safely with endovascular aneurysm repair. The commenter stated that the technology is beneficial for patients who have medical problems or advanced age as contraindications to open surgery because endovascular repair can be made possible with the Heli-FXTM EndoAnchor System. The commenter further stated that patients with endoleaks identified during follow-up are frequently not candidates for extension prostheses and would otherwise require open explantation of the graft and aneurysm E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 repair. The commenter explained that these are far more challenging and risky operations than primary open aneurysm repairs, and are routinely associated with blood loss of several liters as well as prolonged lower extremity, renal, and visceral ischemia. The commenter noted that many of these often elderly patients can be successfully treated in a minimally invasive manner using the Heli-FXTM EndoAnchor System, reestablishing proximal fixation and seal while avoiding the morbidity and mortality associated with graft explantation and open repair. The commenter concluded that if new technology add-on payments are approved for the Heli-FXTM EndoAnchor System, many patients would realize the advantages of this unique and necessary device, improving their care and reducing overall cost. Another commenter stated that the Heli-FXTM EndoAnchor System provides an opportunity to extend a less mortal procedure (EVAR) to patients whose anatomy may predispose them to late failure, including patients with large proximal neck diameters, increased iliac diameters, or abnormal neck anatomy. In primary repair, the applicant stated that endoanchors have been demonstrated to mimic a surgical anastomosis. The commenter believed that this would lead to less reinterventions and less aneurysm related mortality. Given the cost of reintervention or treating a ruptured AAA, the commenter believed that this technology should have a real impact in the overall cost of EVAR in this patient population. Response: We appreciate the commenters’ support. We considered these comments in our evaluation of the Heli-FXTM EndoAnchor System application for new technology add-on payments for FY 2015 and in the development of this proposed rule. As stated above, we are inviting additional public comments on whether the HeliFXTM EndoAnchor System represents a substantial clinical improvement in the treatment of Medicare beneficiaries, particularly in regard to the concerns we have identified. c. WATCHMAN® Left Atrial Appendage Closure Technology Boston Scientific Corporation submitted an application for new technology add-on payments for the WATCHMAN® Left Atrial Appendage Closure Technology (Watchman® System) for FY 2015. When a patient has an arrhythmia known as atrial fibrillation (AF), the left atrium does not expand and contract normally. As a result, the left atrium is not capable of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 completely emptying itself of blood. Blood may pool, particularly in the part of the left atrium called the left atrial appendage. This pooled blood is prone to clotting, causing formation of a thrombus (that is, a blood clot). When a thrombus breaks off, it is called an embolism (or thromboembolism). An embolism can cause a stroke or other peripheral arterial blockage. The WATCHMAN® Left Atrial Appendage (LAA) Closure Device is an implant that acts as a physical barrier, sealing the LAA to prevent thromboemboli from entering into the arterial circulation from the LAA, thereby reducing the risk of stroke and potentially eliminating the need for Warfarin therapy in those patients diagnosed with nonvalvular AF and who are eligible for Warfarin therapy. The applicant anticipates FDA premarket approval of the WATCHMAN® System in the first half of 2014. According to the applicant, the WATCHMAN® System is the first LAA closure device that would be approved by the FDA. Therefore, the applicant believes that the technology meets the newness criterion. The device is currently identified by ICD–9–CM procedure code 37.90 (Insertion of Left Atrial Appendage Device), which was issued on October 1, 2004. We are inviting public comments on if, and how, the WATCHMAN® System meets the newness criterion. With regard to the cost criterion, the applicant used the FY 2012 MedPAR file and searched the claims data for cases reporting with ICD–9–CM procedure code 37.90. The applicant provided two analyses. The first analysis includes all claims that contained ICD–9–CM procedure code 37.90 regardless of whether it was the principle procedure that determined the MS–DRG assignment of the case. This returned 243 cases spread across 21 MS–DRGs. The applicant noted that the MedPAR file contained claims that were returned to the provider reporting charges for actual cases from clinical trials that used the WATCHMAN® System that were well below post-FDA approval pricing. Therefore, the applicant removed the premarket device related charges. The applicant then standardized the charges, applied an inflation factor of 1.096898 based on the 2-year charge inflation factor listed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982) and then added post-FDA approval charges for the WATCHMAN® System. This resulted in an average case-weighted standardized charge per case of $176,943. The applicant calculated an average case-weighted threshold of $107,345 across all MS– PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 28043 DRGs. Therefore, the applicant asserted that the average case-weighted standardized charge per case exceeds the average case-weighted threshold and maintained that the technology meets the cost criterion. The second analysis focused on cases reporting ICD–9–CM procedure code 37.90, and assigned to MS–DRGs 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent with MCC) and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent without MCC). According to the applicant, these are the MS–DRGs to which cases using the WATCHMAN® System in the delivery of treatment as the principal procedure performed during the inpatient stay are assigned. The applicant found a total of 122 cases, and noted that 9.02 percent of the total number of cases would map to MS–DRG 250, and 90.98 percent of the total number of cases would map to MS–DRG 252. Similar to above, the applicant noted that the MedPAR file contained claims that were returned to the provider reporting charges for actual cases from clinical trials that used the WATCHMAN® System that were well below post-FDA approval pricing. Therefore, the applicant removed the premarket device-related charges. The applicant then standardized the charges, applied an inflation factor of 1.096898 based on the 2-year charge inflation factor listed in the FY 2014 IPPS/LTCH final rule (78 FR 50982), and then added post FDA-approval charges for the WATCHMAN® System. This resulted in an average case-weighted standardized charge per case of $113,210. The applicant calculated an average caseweighted threshold of $68,093. The applicant asserted that the average caseweighted standardized charge per case exceeds the average case-weighted threshold. Therefore, the applicant maintained that the technology meets the cost criterion. We are inviting public comments on whether the WATCHMAN® System meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. The applicant asserted in its application that the WATCHMAN® System meets the substantial clinical improvement criterion. The applicant believed that the WATCHMAN® System provides a permanent solution proven to reduce the risk of thromboembolic stroke in patients diagnosed with highrisk, nonvalvular AF, and who are eligible for Warfarin therapy. Therefore, the applicant believed that the WATCHMAN® System fulfills a major unmet clinical need. According to the applicant, clinical trial data E:\FR\FM\15MYP2.SGM 15MYP2 28044 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 demonstrated non-inferiority of the WATCHMAN® System compared to Warfarin therapy. Further, long-term follow-up data suggested superiority compared to Warfarin therapy by demonstrating 40 percent relative reduction of primary efficacy events, and 60 percent relative reduction for CV mortality. The applicant also stated that, procedure complication rate is low, with the majority of events occurring soon before, during, or soon after the procedure. The applicant submitted multiple clinical trial studies to demonstrate that the technology represents a substantial clinical improvement. Specifically, the WATCHMAN® System United States clinical program included five studies with approximately 2000 patients. There were two prospective, randomized-controlled trials (PROTECT AF 9 10 11 12 and PREVAIL 13 14), two continued access registries for patients who completed PROTECT AF and PREVAIL (CAP and CAP2, respectively), and the ASAP feasibility study. According to the applicant, PROTECT AF was a prospective, randomizedcontrolled trial comparing the outcomes of patients who received care for LAA closure using the WATCHMAN® System (463 patients) with those of patients who were anticoagulated with Warfarin therapy (244 patients). The trial was designed to show that the WATCHMAN® System was noninferior to Warfarin therapy. The primary outcome was anticipated to occur at a rate of 6.15 per 100 patient-years in the control group, and the sample size was chosen using a ‘‘two-fold non-inferiority margin.’’ Because patients could be randomized to Warfarin therapy, all patients were eligible to continue 9 Wrigley, B., Lip, G., ‘‘Can the WATCHMAN device truly PROTECT from stroke in atrial fibrillation?’’, Lancet Neurology, 2009. 10 Reddy, V., Holmes, D., Doshi, S., et al. ‘‘Safety of percutaneous left atrial appendage closure: Results from the WATCHMAN left atrial appendage system for embolic protection in patients With AF (PROTECT AF) clinical trial and the Continued Access Registry. Circulation.’’ Vol. 123, 2011. 11 Reddy, V., Doshi, S., Sievert, H., et. al., ‘‘Percutaneous left atrial appendage closure for stroke prophylaxis in patients with atrial fibrillation: 2.3-year follow up of the PROTECT AF (Watchman Left Atrial Appendage System for embolic protection in patients with atrial fibrillation) trial,’’ Circulation., 2013, Vol. 127, pp. 720–729. 12 Alli, O., Doshi, S., Kar, S., et al., ‘‘Quality of Life Assessment in the Randomized PROTECT AF Trial of Patients at Risk for Stroke With NonValvular Atrial Fibrillation,’’ Journal of American College of Cardiology, Vol. 61, No 17, 2013, pp. 1790–1798. 13 Landmesser, U., Holmes, D., ‘‘Left atrial appendage closure: A percutaneous transcatheter approach for stroke prevention in atrial fibrillation,’’ European Heart Journal, Vol. 33, 2012. 14 Homes, D.R. PREVAIL Results CIT, 2013. VerDate Mar<15>2010 21:35 May 14, 2014 Jkt 232001 Warfarin, and did not have an excessive risk of bleeding. By design, all patients in PROTECT AF continued Warfarin therapy for 45 days after the device implantation procedure. Outcome data from PROTECT AF have been reported after mean followups of 1.5 years, 2.3 years, and 3.7 years. The primary efficacy endpoint was the composite of stroke, systemic embolism, cardiovascular death, or unexplained death. This primary endpoint occurred in the control group at a lower rate than was assumed in the sample size calculations: The observed rate was between 3.8 and 4.9 per 100 patientyears compared with the design estimate of 6.15 per 100 patient-years. According to the applicant, patients randomly assigned to receive the WATCHMAN® System device in the PROTECT AF trial had numerically lower rates of the primary endpoint than the patients randomly assigned to Warfarin (also known as Coumadin) at all time points. We note that, although the point estimates favor the device for the primary endpoint, the differences were not statistically significant because the upper 95 percent confidence intervals are all above 1.0. However, the secondary endpoint of cardiovascular death was reduced significantly, as was all-cause mortality with a rate ratio of 0.66 (CL 0.45–0.98). The criteria for noninferiority of the primary endpoint were met over all follow-up intervals. According to the applicant, the probability is >99 percent that device-treated patients have no more than twice the rate of stroke, embolism, or death than Warfarintreated patients. Also, the incidence of proceduralrelated complications in this trial was 8.7 percent. The applicant noted that complications early in the trial were related to procedures performed by new users. As a result, changes were made to the procedure and physician training, and the complication rate subsequently decreased. The applicant stated in its application that the Circulatory System Devices Advisory Panel to the Division of Cardiovascular Devices (DCD) within the Center for Devices and Radiological Health (CDRH) of the FDA reviewed the 1-year PROTECT AF data on April 23, 2009. The panel voted 7:5 in favor of the device, resulting in a positive recommendation for ‘‘approval with conditions.’’ However, noting the complication rate, the FDA required additional data collection on procedural safety to confirm the lower rates observed in the second half of the trial. As a result of this requirement, the PREVAIL trial study was designed in a PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 similar fashion to PROTECT AF, but with modifications to trial entry criteria and a minimum number of new operators. According to the applicant, in the interim, FDA also recognized the effectiveness of the WATCHMAN® System and the need for a new therapeutic option for patients receiving Warfarin therapy, and a continued access program (CAP) was authorized. With 460 patients enrolled, according to the applicant, efficacy rates in the CAP trial study were similar to those seen in the PROTECT AF trial study, and procedural complications were reduced by over 50 percent compared to the PROTECT AF trial study, from 8.7 percent to 4.1 percent. From November 2010 to June 2012, the PREVAIL trial enrolled a total of 407 patients, 269 of whom received treatment for LAA closure with the WATCHMAN® System, and 138 who received Warfarin therapy. The applicant noted that the procedural complication rate was 4.4 percent, confirming the rate seen in the second half of the PROTECT AF trial study and the CAP trial study. After the PREVAIL trial closed, the FDA authorized a second CAP (specifically, CAP2), which has enrolled 336 patients as of the date the applicant submitted its application. The applicant also submitted data concerning patients diagnosed with AF who are not on an oral anticoagulant. These patients are not protected from stroke by an oral anticoagulant. There may be increased periprocedural risk of device implantation because thrombus might form on the device surface more readily in patients with no anticoagulation (patients in the PROTECT AF trial were treated with Warfarin for 45 days after the device implantation procedure). Specifically, the ASAP Registry (5) enrolled 150 patients, at one of four centers, that had a contraindication to even short-term anticoagulation, mostly a history of prior bleeding. There was no control group. Device implantation led to a serious adverse event in 13 patients (8.7 percent), including one case of device thrombus leading to ischemic stroke. Five other patients had a device-related thrombus that did not lead to stroke (four of these patients were treated with low molecular weight heparin), resulting in an overall 4.0 percent incidence (6 out of 150) of deviceassociated thrombus. In the PROTECT AF trail study, 20 of the 473 patients (4.2 percent) had device-associated thrombus, 3 of which led to an ischemic stroke. The rates of device-related thrombus are similar in the two studies E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (4.0 percent versus 4.2 percent), but the number of patient studied is smaller in the ASAP Registry (5) study compared to the PROTECT AF clinical trial study. In the 14-month follow-up data for the ASAP Registry (5) study, the rate of stroke or systemic embolism was 2.3 percent per year, which was said to be ‘‘lower than expected’’ based on prior data for patients diagnosed with AF who were not treated with Warfarin (there was no concurrent control group). The data provided suggested efficacy in this patient population. However, we are concerned that there is not strong evidence that the device prevents stroke. All trials in the U.S. clinical program allowed for continued follow-up of patients out to 5 years postrandomization. According to the applicant, the patients enrolled in the PROTECT AF clinical trial now have an average of 3.8 years of follow-up. The applicant asserted that an analysis of this long-term data demonstrates superior primary efficacy outcomes of the WATCHMAN® System over Warfarin therapy. The applicant concluded that the WATCHMAN® System provides a permanent solution to reduce the risk of ischemic strokes caused by thromboemboli originating in the LAA in patients diagnosed with nonvalvular AF. The applicant further stated that, the data demonstrate that LAA closure using the WATCHMAN® System is a substantial improvement in care as compared to currently available pharmacologic therapy, such as Warfarin therapy. The WATCHMAN® System may be used in two populations: (1) Patients who could take Warfarin (or other oral anticoagulant), but would prefer to avoid the risk of bleeding from anticoagulant therapy; (2) patients who are not eligible for oral anticoagulation therapy because of an unacceptable risk of bleeding. Most of the clinical evidence presented by the applicant is from the former group, and the applicant has requested from the FDA that the label indication be for ‘‘high risk patients with nonvalvular atrial fibrillation who are eligible for warfarin therapy, but, for whom the risks posed by long-term warfarin therapy outweigh the benefits.’’ We are concerned that the evidence presented by the applicant demonstrating the superiority of the WATCHMAN® System compared to Warfarin therapy is insufficient. The clinical study discussed above was designed to demonstrate that the WATCHMAN® is noninferior to Warfarin therapy. Specifically, in the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PREVAIL AF trial study, the primary endpoint was not significantly improved in the conventional hypothesis testing statistical analysis at any time point. The longer term data has improved efficacy and safety data, but still remain sparse. Even for the secondary patient population ineligible for anticoagulation therapy, the evidence remains weak as the only data comes from the ASAP Registry (5) observational study of 150 patients without a concurrent control group. A recent article in the Journal of the American College of Cardiology echoes these concerns: ‘‘Current issues compromising the implementation of procedural approaches for stroke prevention in AF are discussed herein and include: (1) Lack of multiple randomized clinical trials; (2) lack of consensus regarding the appropriate target population to study; and (3) ability to obtain approval of devices for outcome measures of unconfirmed clinical importance, such as, the use of complete closure of the LAA at the time of the index procedure as a surrogate for clinical efficacy.’’ 15 We are inviting public comments on whether this technology meets the substantial clinical improvement criterion, particularly regarding our concerns discussed above. We did not receive any public comments in response to the New Technology Town Hall meeting held on February 12, 2014 in regard to this technology. d. CardioMEMSTM HF (Heart Failure) System CardioMEMS, Inc. submitted an application for new technology add-on payment for FY 2015 for the CardioMEMSTM HF (Heart Failure) System, which is an implantable hemodynamic monitoring system comprised of an implantable sensor/ monitor placed in the distal pulmonary artery. Pulmonary artery hemodynamic monitoring is used in the management of heart failure. The CardioMEMSTM HF System measures multiple pulmonary artery pressure parameters for an ambulatory patient to measure and transmit data via a wireless sensor to a secure Web site. The CardioMEMSTM HF System utilizes radiofrequency (RF) energy to power the sensor and to measure pulmonary artery (PA) pressure and consists of three components: An Implantable Sensor with Delivery Catheter, an External Electronics Unit, 15 Holmes, D.R., et. al., ‘‘Left Atrial Occlusion,’’ Journal of American College of Cardiology, 2014, Vol. 63, pp. 291–8. PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 28045 and a Pulmonary Artery Pressure Database. The system provides the physician with the patient’s PA pressure waveform (including systolic, diastolic, and mean pressures) as well as heart rate. The sensor is permanently implanted in the distal pulmonary artery using transcatheter techniques in the catheterization laboratory where it is calibrated using a Swan-Ganz catheter. PA pressures are transmitted by the patient at home in a supine position on a padded antenna, pushing one button which records an 18-second continuous waveform. The data also can be recorded from the hospital, physician’s office or clinic. The hemodynamic data, including a detailed waveform, are transmitted to a secure Web site that serves as the Pulmonary Artery Pressure Database, so that information regarding PA pressure is available to the physician or nurse at any time via the Internet. Interpretation of trend data allows the clinician to make adjustments to therapy and can be used along with heart failure signs and symptoms to adjust medications. The applicant believed that a large majority of patients receiving the sensor would be admitted as an inpatient to a hospital with a diagnosis of acute or chronic heart failure, which is typically described by ICD–9–CM diagnosis code 428.43 (Acute or chronic combine systolic and diastolic heart failure) and the sensor would be implanted during the inpatient stay. The applicant stated that for safety considerations, a small portion of these patients may be discharged and the sensor would be implanted at a future date in the hospital outpatient setting. In addition, there would likely be a group of patients diagnosed with chronic heart failure who are not currently hospitalized, but who have been hospitalized in the past few months for whom the treating physician believes that regular pulmonary artery pressure readings are necessary to optimize patient management. Depending on the patient’s status, the applicant stated that these patients may have the sensor implanted in the hospital inpatient or outpatient setting. The applicant anticipates FDA approval and commercial launch in the second quarter of 2014. The CardioMEMSTM HF System is currently described by ICD–9–CM procedure code 38.26 (Insertion of implantable pressure sensor without lead for intracardiac or great vessel hemodynamic monitoring). We are inviting public comments regarding how the CardioMEMSTM HF System meets the newness criterion. With respect to cost criterion, the applicant submitted actual claims from E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28046 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the CHAMPION 16 clinical trial. Of the 550 patients enrolled in the trial, the applicant received 310 hospital bills. The applicant excluded the following claims: Incomplete or missing procedure codes, incomplete charge information and bills that were statistical outliers (three standard deviations away from the geometric mean). This resulted in a final cohort of 138 claims. The applicant noted that cases treated with the CardioMEMSTM HF System would typically map to MS– DRG 264 (Other Circulatory System Operating Room Procedures). Using the 138 clinical trial claims, the applicant standardized the charges and added charges for the CardioMEMSTM HF System (because the clinical trial claims did not contain charges for the CardioMEMSTM HF System). This resulted in an average case-weighted standardized charge per case of $79,218. Using the FY 2014 Table 10 thresholds, the threshold for MS–DRG 264 is $60,172. Because the average case-weighted standardized charge per case exceeded the threshold amount, the applicant maintained that the CardioMEMSTM HF System would meet the cost criterion. We are inviting public comments on whether or not the CardioMEMSTM HF System meets the cost criterion. With regard to substantial clinical improvement, the applicant asserted that elevated PA pressures occur prior to signs and symptoms of heart failure and changes in PA pressures provide a sound physiologic basis for its management. The applicant also contended that, until the creation of the CardioMEMS wireless PA implant, knowledge of PA pressure was only feasible in the hospital with the performance of a right heart catheterization. According to the applicant, the CardioMEMSTM HF System provides physicians knowledge of PA pressure while the patient is at home, allowing proactive management to prevent heart failure decompensation and hospitalization. The applicant cited clinical data from the CHAMPION trial. The trial is a prospective, multicenter, randomized, single-blinded clinical trial conducted in the United States, designed to evaluate the safety and efficacy of the CardioMEMSTM HF System in reducing heart failure-related hospitalizations in 16 Abraham WT, Adamson PB, Bourge RC, Aaron MF, Costanzo MR, Stevenson LW, Strickland W, Neelagaru S, Raval N, Krueger S, Weiner S, Shavelle D, Jeffries B, Yadav JS; for the CHAMPION Trial Study Group. Wireless pulmonary artery haemodynamic monitoring in chronic heart failure: a randomised controlled trial, Lancet, February 19, 2011, Vol. 377(9766), pp:658–666. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 a subset of subjects suffering from heart failure. The applicant shared several major findings from the CHAMPION trial as described below. The primary efficacy endpoint of the CHAMPION trial was the rate of HF hospitalizations during the first 6 months of randomized access. There were 84 heart failure hospitalizations in the treatment group compared with 120 heart failure hospitalizations in the control group. This difference between the groups represented a 28-percent reduction in the rate of hospitalization for heart failure in the treatment group (0.32 hospitalizations per patient in the treatment group versus 0.44 hospitalizations per patient in the control group, p = 0.0002). Although not a primary end point, the rate of HF hospitalizations after 18 months was 33 percent lower in the treatment group than in the control group. According to the applicant, secondary endpoints of the CHAMPION trial are changes in pulmonary artery pressures, proportion of subjects hospitalized, days alive outside of the hospital, quality of life (QOL), and heart failure management which demonstrated the following results: • Pulmonary Artery Pressures: At baseline, both treatment and control patients had similar PA mean pressures. The change in pressure over the first 6 months was evaluated by integrating the area under the pressure curve (AUC). At 6 months of follow-up, the treatment group had a significantly greater reduction in AUC of ¥155.7 mmHg days compared to the control group which had an increase in AUC of +33.1 mmHg-days; p = 0.0077. • Proportion of Subjects Hospitalized: During the 6-month follow-up period, the proportion of subjects hospitalized for 1 or more HF hospitalizations was significantly lower in the treatment group (55 out of 270 patients) than in the control group (80 out of 280 patients) (20.4 percent versus 28.6 percent; p = 0.0292). • Days Alive Outside of the Hospital: At 6 months, treatment patients had a nonsignificant and clinically not meaningful increase in days alive outside of the hospital (174.4 versus 172.1; p = 0.0280) and fewer average days in the hospital (2.2 versus 3.8; p = 0.0246) compared to control patients. • Quality of Life: The heart failure specific quality of life was assessed with the MLHFQ total score at 6 months. The average total score in the treatment group was 45.2 ± 26.4 which was significantly better than the average total score in the control group 50.6 ± 24.8 (p = 0.0236). The difference in total quality of life was primarily due to the PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 physical domain. The average physical score for the treatment group (19.8 ± 11.2) was significantly better than the control group (22.4 ± 10.9) (p = 0.0096). There was also a significant difference in the emotional domain with an average score of 9.5 ± 8.1 for the treatment group and 11.0 ± 7.7 for the control group (p = 0.0398). • Heart Failure Management: Physicians responded to treatment of patients’ elevated PA pressures by making medication changes to lower PA pressures and reduce the risk for HF hospitalization. Physicians documented all medication changes for all patients and indicated whether the change was made in response to PA pressures or standard of care information. During the 6-month follow-up period, physicians made approximately one additional HF medication change per patient per month in the treatment group when compared to the control group. Specifically, treatment patients had 1.55 medication changes per month on average compared to control patients having 0.65 medication changes per month (p < 0.0001). The difference in HF management between the treatment and control group was due to HF medication changes made in response to PA pressures. The study met the two primary safety endpoints: (1) Freedom from device/ system related complications (DSRC); and (2) freedom from sensor failure. The protocol pre-specified objective performance criterion (OPC) were that at least 80 percent of patients were to be free from DSRC and at least 90 percent were to be free from pressure sensor failure. Of the 575 patients in the safety population, 567 (98.6 percent) were free from DSRC at 6 months (lower confidence limit 97.3 percent, p < 0.0001). This lower limit of 97.3 percent is greater than the pre-specified OPC of 80 percent. There were no sensor explants or repeat implants and all sensors were operational at 6 months for a freedom from sensor failure of 100 percent (lower confidence limit 99.3 percent, p < 0.0001). This lower limit of 99.3 percent is greater than the prespecified OPC of 90 percent. The applicant also noted that the CardioMEMSTM HF System reduces the occurrence of HF hospitalizations in NYHA Class III heart failure patients. According to the applicant, the device had very few device and system related complications occurring over the course of the clinical trial. All primary and secondary study endpoints were successfully achieved. In addition, the CHAMPION trial suggests the safety and effectiveness of the device was E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules maintained during longer term followup. After reviewing the information provided by the applicant, we have the following concerns. The applicant did not discuss long-term outcomes, specifically death. We believe additional long-term outcome information and how the technology changes long-term outcomes would further assist in our determination of whether the technology represents a substantial clinical improvement. With regard to the clinical trial, information from the randomized access period and the open access period did not include the total number of deaths in each group. While the data support a reduction in total hospitalizations, the rate of hospitalization in each group (0.32 versus 0.44) does not appear to be clinically meaningful. This is supported by total days alive out of the hospital being virtually identical in both groups. Finally, we are concerned about the cause of the significant dropouts in the Kaplan Meier curves which further demonstrates lack of impact on survival. We are inviting public comments on whether or not the CardioMEMSTM HF Monitoring System technology represents a substantial clinical improvement in the Medicare population. We received public comments via email in response to the February 12, 2014 New Technology Town Hall meeting in regard to this technology. We summarize these comments below. Comment: Commenters supported the approval of new technology add-on payments for the CardioMEMSTM HF System. One commenter stated that it had personal experience with the CardioMEMSTM HF System. The commenter explained that having access to a patient’s daily pressures provides trend data. The commenter further explained that if there is a variation or increase in a patient’s pressure, the physician can contact the patient over the phone and conduct an evaluation to look for increased symptoms or to learn if the patient has skipped their diuretics. The device prompts the clinician to ask questions such as what is different today than yesterday and if the patient is feeling okay, especially if the patient has not taken a pressure rate in a few days. Based on the answer to these questions or if the clinician has concerns, the primary investigator or the patient’s primary cardiologist can assess the pressures and symptoms and decide the next course of treatment for the patient. The commenter believed that this structured and consistent monitoring has kept many patients out of the hospital. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The commenter noted that the monitoring of pressures to assess clinical status before the patient recognizes symptoms for chronic CHF patients with significant left ventricular dysfunction can be very useful. The commenter explained that these patients are accustomed to being sick and tend to ignore the first symptoms and do not seek treatment until they are unable to breathe. The commenter noted that often a clinician can increase the patient’s home medications before pressures get too high. The commenter also noted that, for patients who go to a CHF clinic on a regular basis, typically patient information of pressure trends, along with symptoms and laboratory results, can help determine if medications should be given that day. The commenter stated that extra information from the CardioMEMSTM HF System can change the way physicians treat the patient and has, in many instances, at its site. The commenter concluded the CardioMEMSTM HF System provides a substantial clinical benefit versus current methods for managing heart failure. Another commenter stated that the implant procedure was very simple and straightforward for patients, especially compared to having a pacemaker or defibrillator implanted. The commenter further stated that the device is compatible with defibrillators and cardiac resynchronization therapy, which are present in many advanced heart failure patients. The commenter added that the CardioMEMSTM HF System is a wireless device and does not involve addition of another intracardiac lead. Aside from regular pressure readings, the commenter noted that it found unexpected intake issues for some patients who were unknowingly consuming certain high-sodium foods. The commenter noted that they were able to reduce sodium intake further to help reduce pressures. The commenter also noted that it presented a case report of increasing pressures in a patient in whom the primary investigator adjusted diuretic therapy and later the patient’s ACE-Inhibitor and nitrates. The commenter stated that it successfully lowered pressures and avoided a probable heart failure hospitalization. The commenter added that the CardioMEMSTM HF System allows hospitals to easily obtain pressures at home for transmission and the ability to check pressures rather than perform right heart catheterization if a patient was admitted to the hospital. The commenter also stated that patients found transmission of their data easy and were surprised how quickly PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 28047 the data was sent to the clinic. The commenter added that it had patients that liked the portability of the home electronic equipment, which allowed them to take it with them on long weekends or vacations. The commenter added that this information was advantageous as it further allowed clinicians to implement changes in a timely manner. The commenter noted the following trial results in its clinic, which the commenter believed confirm the benefit of hemodynamic monitoring: A 28percent reduction in heart failure hospitalization at 6 months and a 15percent reduction at 15 months. The commenter noted that there were no sensor failures and 98.6 percent of patients remained free from device or system complications. The commenter further noted that it did not experience any complications in patients who were implanted with the device. The commenter did explain that inevitably, due to the nature of heart failure, several patients eventually required advanced therapies with transplantation or ventricular assist device support without any issue from the sensor. The commenter also noted some additional key points such as: A reduction in hospitalization for patients with preserved ejection fraction; in addition to diuretic adjustment, the study found nitrates were also adjusted, which further supports use of the device to optimize vasodilator therapy for pulmonary hypertension and afterload reduction in this patient population. The commenter concluded that, for the reasons stated above, the CardioMEMSTM HF System provides a substantial clinical benefit versus current methods for managing heart failure. One commenter stated that the CardioMEMSTM HF System provides clinicians with daily remotely monitored pulmonary artery pressure and has been proven clinically and dramatically to reduce heart failure hospitalizations. The commenter cited the CHAMPION IDE trial, which was a prospective, multicenter, single-blind, clinical study that enrolled 550 patients randomized to treatment guided by the CardioMEMSTM HF System verses optimal medical therapy. The commenter stated that the trial met all of its primary safety and efficacy endpoints; reducing heart failure hospitalizations by 28 percent 6 months after implant (p = 0.0002). The commenter further stated that the reduction in heart failure hospitalizations increased over time reaching 33 percent (p < 0.0001) at 17 months after implant. In addition, the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28048 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules commenter asserted that the system was shown to be extremely safe, with almost 99 percent of patients free from device or system complications. The commenter also stated that one criterion CMS uses to evaluate substantial clinical improvement is that the device offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods. The commenter believed that there is evidence that use of the CardioMEMSTM HF System to make a diagnosis affects the management of the patient. The commenter added that the CHAMPION trial demonstrated that therapy guided by CardioMEMSTM HF System allows physicians to titrate medications earlier and more effectively reduce heart failure hospitalizations. The commenter noted that this information is not available with any other device or treatment alternative. The commenter further stated that another of CMS’ criteria is that use of the device significantly improves clinical outcomes for a patient population as compared to currently available treatments, such as a decreased number of future hospitalizations. The commenter stated that evidence provided in the CHAMPION trial at 6 months showed a 28-percent reduction in heart failure hospitalizations and even a larger reduction of 33 percent during longterm follow-up at 17 months. Based on the criteria outlined by CMS and the evidence supporting the CardioMEMSTM HF System, the commenter believed that the CardioMEMSTM HF System meets the criteria for substantial clinical improvement. Another commenter, the applicant, reiterated the statements set forth above in the substantial clinical improvement discussion. Response: We appreciate the commenters’ support. We considered these comments in our evaluation of the CardioMEMSTM HF System for new technology add-on payments for FY 2015 and in the development of this proposed rule. As stated above, we are inviting additional public comments on whether or not the CardioMEMSTM HF System represents a substantial clinical improvement in the Medicare population. e. MitraClip® System Abbott Vascular submitted an application for new technology add-on payments for the MitraClip® System for FY 2015. (We note that the applicant submitted an application for new technology add-on payments for FY VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 2014 but failed to receive FDA approval by the July 1 deadline.) The MitraClip® System is a transcatheter mitral valve repair system that includes a MitraClip® device implant, a Steerable Guide Catheter, and a Clip Delivery System. It is designed to perform reconstruction of the insufficient mitral valve for highrisk patients who are not candidates for conventional open mitral valve repair surgery. Mitral regurgitation (MR), also referred to as mitral insufficiency or mitral incompetence, occurs when the mitral valve fails to close completely causing the blood to leak or flow backwards (regurgitate) into the left ventricle. If the amount of blood that leaks backwards into the left ventricle is minimal, then intervention is usually not necessary. However, if the amount of blood that is regurgitated becomes significant, this can cause the left ventricle to work harder to meet the body’s need for oxygenated blood. Severity levels of MR can range from grade 1+ through grade 4+. If left untreated, severe MR can lead to heart failure and death. The American College of Cardiology (ACC) and the American Heart Association (AHA) issued practice guidelines in 2006 that recommended intervention for moderate/severe or severe MR (grade 3+ to 4+). The applicant stated that the MitraClip® System is ‘‘indicated for percutaneous reduction of significant mitral regurgitation . . . in patients who have been determined to be at prohibitive risk for mitral value surgery by a heart team, which includes a cardiac surgeon experienced in mitral valve surgery and a cardiologist experienced in mitral valve disease and in whom existing comorbidities would not preclude the expected benefit from correction of the mitral regurgitation.’’ The MitraClip ® System mitral valve repair procedure is based on the doubleorifice surgical repair technique that has been used as a surgical technique in open chest, arrested-heart surgery for the treatment of MR since the early 1990s. According to the applicant, in utilizing ‘‘the double-orifice technique, a portion of the anterior leaflet is sutured to the corresponding portion of the posterior leaflet using standard techniques and forceps and suture, creating a point of permanent coaptation (‘‘approximation’’) of the two leaflets. When the suture is placed in the middle of the valve, the valve will have a functional double orifice during diastole.’’ With regard to the newness criterion, the MitraClip® System received a premarket approval from the FDA on October 24, 2013. The MitraClip® PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 System is indicated ‘‘for the percutaneous reduction of significant symptomatic mitral regurgitation (MR >= 3+) due to primary abnormality of the mitral apparatus (degenerative MR) in patients who have been determined to be at prohibitive risk for mitral valve surgery by a heart team, which includes a cardiac surgeon experienced in mitral valve surgery and a cardiologist experienced in mitral valve disease, and in whom existing comorbidities would not preclude the expected benefit from reduction of the mitral regurgitation.’’ The MitraClip® System became immediately available on the U.S. market following FDA approval. The MitraClip® System is a Class III device, and has an investigational device exemption (IDE) for the EVEREST study (Endovascular Valve Edge-to-Edge Repair Study)—IDE G030061, and for the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip Percutaneous Therapy for Health Failure Patients with Functional Mitral Regurgitation)—IDE G120024. Effective October 1, 2010, ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant) was created to identify and describe the MitraClip® System technology. Abbott Vascular has also submitted an application for a National Coverage Decision (NCD) for the MitraClip® System device. We refer readers to the CMS Web site at: https://www.cms.gov/ medicare-coverage-database/details/ nca-tracking-sheet.aspx?NCAId=273& NcaName=Transcatheter+Mitral+Valve +(TMV)+Procedures&TimeFrame=90& DocType=All&bc=AAAAIAAACAAAAA %3d%3d& for information related to this ongoing NCD. The tracking sheet for this National Coverage Analysis (NCA) indicates an expected NCA completion date of August 16, 2014, which is after the FY 2015 IPPS/LTCH PPS final rule is scheduled to be published. The processes for evaluation and determination of an NCD, and the processes for evaluation and approval of an application for new technology addon payments are made independent of each other. However, any payment made under the Medicare program for services provided to a beneficiary would be contingent on CMS’ coverage of the item, and any restrictions on the coverage would apply. We are inviting public comments on how the MitraClip® System meets the newness criterion for purposes of new technology add-on payments and the issues that may arise from concurrent NCD requests and new technology add-on payment application review and approval processes. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28049 and 137 cases in MS–DRG 251 (70.61 percent of the total number of cases), which resulted in an average caseweighted standardized charge per case of $232,670. The applicant standardized the charges using the FY 2014 IPPS final rule impact file, and inflated the result using three different inflation factors. We note that, since the applicant used FY 2012 MedPAR data, we believe it is appropriate to use comparable data for standardization. Therefore, we believe use of the FY 2012 final rule impact file is more appropriate rather than the FY 2014 final rule impact file. The first analysis and methodology used an inflation factor of 4.57 percent, which was based on data from the BLS’ nonseasonally adjusted CPI for all urban consumers between January 2011 and January 2013. This resulted in an average case-weighted standardized charge per case of $94,517. The second methodology under the first analysis used an inflation factor of 9.92 percent, which was based on the 2-year charge inflation factor listed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). This resulted in an average caseweighted standardized charge per case of $96,199. The third methodology used under the first analysis used an inflation factor of 4.63 percent, which was based on the Medicare Economic Index (MEI) from the IPPS market basket update between the third quarter of 2012 projected through the third quarter of 2014. This resulted in an average caseweighted standardized charge per case of $91,570. The applicant noted that all three methodologies used under the first analysis to determine each respective average case-weighted standardized charge per case were calculated without any adjustments to reflect the reduced investigational price, or inadequate hospital claim reporting and billing. Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRGs 250 and 251 is $71,467 (all calculations above were performed using unrounded numbers). Because the average case-weighted standardized charge per case for the applicable MS–DRGs calculated under each methodology under the first analysis discussed above exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion. Under the second analysis, which used the same premise as the first analysis, the applicant researched the FY 2012 MedPAR file for claims for cases reporting procedure code 35.97 that mapped to MS–DRGs 250 and 251, except that the applicant excluded charges related to the MitraClip® Continued With regard to the cost criterion, the applicant conducted two analyses. The applicant noted that, while ICD–9–CM procedure code 35.97 maps to MS– DRGs 246 (Percutaneous Cardiovascular Procedure with Drug- Eluting Stent with Major Complication or Comorbidity (MCC) or 4+ Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without MCC), 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI with MCC), and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI without MCC), clinical experience with the MitraClip® System device has demonstrated that it is extremely rare for a patient to receive stents concurrently during procedures using the MitraClip® System device. The applicant further cited the FY 2013 IPPS/LTCH PPS final rule (77 FR 53308) which stated, ‘‘According to the Food and Drug Administration’s (FDA’s) terms of the clinical trial for MitraClipTM, the device is to be implanted in patients without any additional surgeries performed. Therefore, based on these terms, we stated that while the procedure code is assigned to MS–DRGs 246 through 251, the most likely MS–DRG assignments would be MS–DRGs 250 and 251.’’ As a result, the applicant stated that it conducted its analyses solely for MS– DRGs 250 and 251 to demonstrate that the cases involving the MitraClip® System device meet the incremental cost thresholds provided in Table 10 for those MS–DRGs. The applicant researched the FY 2012 MedPAR file for claims for cases reporting ICD–9–CM procedure code 35.97. Under the first analysis and methodology, the applicant noted that this search yielded actual claims for cases in which the MitraClip® System device was used in procedures performed in an IDE study type setting, and hospitals obtained the MitraClip® System device at a reduced investigational price. The applicant further stated that it is likely that hospitals did not report the charges for the investigational device, or submitted claims for charges that were significantly less than the actual device acquisition costs (we refer readers to the explanation below). The applicant found 57 cases in MS–DRG 250 (29.38 percent of the total number of cases), VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 System by removing all charges from the claim that would map to the implantable cost center on the cost report. The applicant then standardized the charges, inflated the result using the three inflation factors above, and added a fixed amount of commercial charges based on post-FDA approval pricing. This resulted in an average case weighted standardized charge per case of $139,536 under the first inflation factor (4.57 percent), $142,364 under the second inflation factor (9.2 percent), and $139,568 under the third inflation factor (4.63 percent). Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRGs 250 and 251 is $71,467 (all calculations above were performed using unrounded numbers). Because the average case-weighted standardized charge per case for the applicable MS–DRGs calculated under all three methodologies discussed above exceeds the average case-weighted threshold amount, the applicant maintained that the MitraClip® System meets the cost criterion. We are inviting public comments on whether or not the MitraClip® System meets the cost criterion. In addition, we are inviting public comments on the methodologies used by the applicant in its two analyses. The applicant asserted that the MitraClip® System meets the substantial clinical improvement criterion. Severe MR is associated with significant morbidity and mortality rates, and is a progressive condition. For symptomatic patients diagnosed with significant MR, surgical repair or replacement is considered the gold standard—offering improvements in symptoms and longer survival rates. However, the applicant explained that studies have indicated that a significant proportion of patients are not eligible for mitral valve repair and/or replacement surgery because of risk factors, including reduced left ventricular function, significant comorbidities, and advanced age. As a result, the applicant stated that there is a significant unmet clinical need for patients diagnosed with severe MR who are too high-risk for surgery, who are receiving palliative medical management. The applicant also stated that the MitraClip® System meets the substantial clinical improvement criterion based on clinical studies 17,18,19,20,21,22,23,24,25 17 Feldman, et al., ‘‘Percutaneous Repair or Surgery for Mitral Regurgitation,’’ New England Journal of Medicine, 2011, Vol. 364, pp. 1395–1406. 18 Foster, et al., ‘‘Percutaneous Mitral Valve Repair in the Initial EVEREST Cohort: Evidence of Reverse Left Ventricular Remodeling,’’ Circulation E:\FR\FM\15MYP2.SGM 15MYP2 28050 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 that have consistently shown that procedures performed using the MitraClip ® System device lead to a significant reduction of MR; improvements in left ventricular (LV) function including LV volumes and dimensions; improved patient outcomes as measured by improvements in New York Heart Association (NYHA) functional class, improvement in healthrelated quality of life measures, and reductions in heart-failure related hospitalizations; and significantly lower mortality rates than predicted surgical mortality rates. The applicant cited clinical data from the EVEREST II High-Risk Study and the EVEREST II (REALISM) Continued Access Study/Registry. The applicant also cited clinical data from a high-risk cohort of patients (the EVEREST II HighRisk Cohort), which is an integrated analysis of the following: (1) Patients within the EVEREST II High-Risk Study who met eligibility criteria for being too high-risk to undergo mitral valve repair surgery; and (2) patients within the EVEREST II (REALISM) Continued Access Study/Registry who were too high-risk for surgery using identical eligibility inclusion criteria. The applicant also cited data from the Prohibitive Risk Degenerative Mitral in Cardivascular Imaging, July 2013, Vol. 6(4), pp. 522–530. 19 Grayburn, et al., ‘‘The Relationship between the Magnitude of Reduction in Mitral Regurgitation Severity and Left Ventricular and Left Atrial Reverse Remodeling after MitraClip Therapy,’’ Circulation in Cardiovascular Imaging, September 2013, epub, September 6, 2013. 20 Lim, et al., ‘‘Improved Functional Status and Quality of Life in Prohibitive Surgical Risk Patients With Degenerative Mitral Regurgitation Following Transcatheter Mitral Valve Repair With the MitraClip® System,’’ Journal of American College of Cardiology, 2013, In Press, Accepted Manuscript, Available online, October 31, 2013. 21 Maisano, F., et al., ‘‘Percutaneous Mitral Valve Interventions in the Real World: Early and One Year Results From the ACCESS–EU, a Prospective, Multicenter, Non-Randomized Post-Approval Study of the MitraClip Therapy in Europ,’’ Journal of American College of Cardiology, 2013, doi: 10.1016/ j.jacc.2013.02.094. 22 Mauri, et al., ‘‘4-Year Results of a Randomized Controlled Trial of Percutaneous Repair Versus Surgery for Mitral Regurgitation,’’ Journal of American College of Cardiology, Volume 62, Issue 4, 2013, pp. 317–328. 23 Munkholm, et al., ‘‘Asystemic Review on the Safety and Efficacy of Percutaneousedge-to-edge Mitral Valve Repair with the MitraClip System for high surgical risk candidates,’’ Heart, June 27, 2013. 24 Reichenspurner, H., et al., ‘‘Clinical Outcomes Through 12 Months in Patients With Degenerative Mitral Regurgitation Treated With the MitraClip Device in the ACCESS–EUrope Phase I Trial,’’ European Journal of Cardiology-and Thoracic Surgy, 2013, Vol. 15, pp. 919–927. 25 Whitlow, et al,. ‘‘Acute and 12-Month Results With Catheter-Based Mitral Valve Leaflet Repair: The EVEREST II (Endovascular Valve Edge-to-Edge Repair) High Risk Study,’’ Journal of American College of Cardiology, 2012, Vol. 59, pp. 130–139. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Regurgitation (DMR) Cohort, which is an analysis of retrospectively evaluated high-risk patients diagnosed with DMR enrolled in the EVEREST II studies that had 1-year follow-up available. In addition to the published clinical experience from the EVEREST studies, the applicant cited data on the use of the MitraClip® System device in a ‘‘realworld’’ setting published recently by a select number of European centers as part of their individual and/or multicenter commercial experience or enrollment in the MitraClip® System device group of the ACCESS–EU postapproval clinical trial in Europe. The European use of the MitraClip® System device is focused on patients who are too high-risk for surgery, and patients who are selected for therapy using a multi-disciplinary ‘‘heart team’’ approach. The applicant stated that published reports on the MitraClip® System device and the procedures in which the device was used have consistently demonstrated a significant reduction in MR incidents that have been durable out to 1, 2, 3, and 4 years. The applicant cited the EVEREST II High-Risk Study (an analysis of 78 patients diagnosed with degenerative or functional MR enrolled in the trial), which stated that ‘‘objective measures of MR grade improved in the MitraClipTM group, including MR grade of <=2+ in 78 percent of surviving patients at 1 year. These patients also experienced clinically significant improvements in left ventricular volume measurements. The clinical significance of these improvements is reflected in the NYHA class improvements. At baseline, 89 percent of patients were NYHA III/IV, improving to Class I/II in 74 percent of surviving patients at 12 months. Quality of life scores also improved significantly. Finally, the number of admissions for heart failure was significantly reduced compared to the year prior to MitraClipTM therapy.’’ The applicant cited clinical outcomes from the Prohibitive Risk DMR cohort. These results are the basis of the FDA premarket approval. Major effectiveness endpoints evaluated at 12 months demonstrated clinically important improvements in MR severity, with MR severity grades of 3+/4+ decreasing from 90.4 percent at baseline to 16.7 percent at 1 year; NYHA Class III/IV decreasing from 86.6 percent at baseline to 13.1 percent at 1 year; and the SF–36 Physical/Mental scale measuring 33.4/ 46.6 at baseline increasing to 39.4/52.2 at 1 year. The applicant stated in its new technology add-on payment application that, ‘‘Heart failure hospitalizations PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 were reduced by 73 percent in the 12 months post MitraClipTM procedure from the 12 month pre-MitraClipTM procedure . . .,’’ and ‘‘the primary safety analysis indicated low procedural (30-day) mortality (6.3 percent) after MitraClipTM in comparison with the STS predicted surgical mortality risk score for these patients (13.2 percent).’’ The applicant discussed published results 26 ‘‘assessing the relationship between the magnitude of reduction in MR and left ventricular (LV) and left atrial (LA) remodeling after the MitraClipTM therapy.’’ In this study of patients diagnosed with significant (grade 3+ or 4+) DMR or functional MR (FMR), the authors found that, ‘‘even reduction of MR severity to moderate (2+) is associated with LV and LA reverse remodeling. In both DMR and FMR, reduction in left ventricular enddiastolic volume (LVEDV) and LA volumes were improved proportionally to the degree of MR reduction at one year.’’ In conclusion, the applicant cited data from the ACCESS–EU study, which noted improvement in disease-specific quality of life measures, including the Minnesota Living with Heart Failure Questionnaire and Six-Minute Walk Test. The applicant also provided data supporting the overall safety and effectiveness of the MitraClip® System device in European ‘‘real-world’’ outcome studies. As noted in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552), we are concerned that the applicant revised its initial FDA request for the use of the MitraClip® System device in all patients diagnosed with significant MR, after learning that the FDA expressed concern that the initial study, EVEREST II, demonstrated that, while the MitraClip® System device had clinically meaningful improvements in LV volume and QOL, the surgical option had better outcomes than the MitraClip® System device in surgical candidates. The FDA then required a second trial focused on high surgical risk patients. We note that the data evaluated by the FDA and presented by the applicant in its application for new technology add-on payments included information from the following: D EVEREST I feasibility trial; enrollment 2003–2006; 55 patients. D EVEREST II RCT; enrollment 2005– 2008; 279 patients. 26 Grayburn, et al., ‘‘The Relationship between the Magnitude of Reduction in Mitral Regurgitation Severity and Left Ventricular and Left Atrial Reverse Remodeling after MitraClip Therapy,’’ Circulation in Cardiovascular Imaging, September 2013, epub, September 6, 2013. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules D EVEREST II High-Risk Study; enrollment 2007–2008; 78 patients. (A comparator group of 36 patients was identified from patients who were screened for the study, but did not meet the mitral valve anatomic criteria for placement of the device.) D EVEREST (REALISM) Continued Access Study and compassionate use; enrollment 2009–2013; 49 patients. The applicant provided comparisons of various outcomes prior to the procedure using the MitraClip® System device and outcomes 12 months later. MR severity, LV end diastolic volume, NYHA Class, SF36 Physical/Mental scale, and heart failure hospitalization rates all had clinically meaningful improvements. For the EVEREST II HRS, the applicant provided analysis demonstrating a significant survival benefit (76 percent versus 55 percent/p <0.047) over the comparator group. In our review of the clinical trials’ data, we have the following key points of concern: • Post-hoc analyses of pooled data sets retain all of the individual shortcomings of the individual data sets; • Pooling does not enhance the utility and scientific value of uncontrolled single-arm registries with no comparators; and • Inappropriate pooling introduces additional confounders. It is also unclear if the appropriate target population for the MitraClip® System device has been identified because the clinical trials conducted by the applicant included patients diagnosed with both DMR and FMR. This makes it difficult to determine which group of patients may benefit more, or less, from the new technology. For example, in a subgroup analysis of the EVEREST II RCT, the authors concluded that, older patients and those patients diagnosed with FMR or abnormal left ventricular function had results more comparable to surgical repair. Data results from 2 years of the EVEREST II RCT also demonstrated that surgery reduced incidents of MR more than the procedures performed using the percutaneous MitraClip® System device. However, both the surgical patients and the patients who were treated using the MitraClip® System device showed comparable results for improved left ventricular function, NYHA functional class, and quality of life. We are inviting public comments on whether this technology meets the substantial clinical improvement criterion, particularly in comparison to other surgical therapies, such as mitral valve repair or replacement, and the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 appropriate target population for this technology. We did not receive any public comments in response to the New Technology Town Hall meeting held on February 12, 2014 in regard to this technology. f. Responsive Neurostimulator (RNS®) System NeuroPace, Inc. submitted an application for new technology add-on payments for FY 2015 for the use of the RNS® System. (We note that the applicant submitted an application for new technology add-on payments for FY 2014, but failed to receive FDA approval prior to the July 1 deadline.) Seizures occur when brain function is disrupted by abnormal electrical activity. Epilepsy is a brain disorder characterized by recurrent, unprovoked seizures. According to the applicant, the RNS® System is the first implantable medical device (developed by NeuroPace, Inc.) for treating persons diagnosed with epilepsy whose partial onset seizures have not been adequately controlled with antiepileptic medications. The applicant further stated that, the RNS® System is the first closed-loop, responsive system to treat partial onset seizures. Responsive electrical stimulation is delivered directly to the seizure focus in the brain when abnormal brain activity is detected. A cranially implanted programmable neurostimulator senses and records brain activity through one or two electrode-containing leads that are placed at the patient’s seizure focus/ foci. The neurostimulator detects electrographic patterns previously identified by the physician as abnormal, and then provides brief pulses of electrical stimulation through the leads to interrupt those patterns. Stimulation is delivered only when abnormal electrocorticographic activity is detected. The typical patient is treated with a total of 5 minutes of stimulation a day. The RNS® System incorporates remote monitoring, which allows patients to share information with their physicians remotely. With respect to the newness criterion, the applicant stated that some patients diagnosed with partial onset seizures that cannot be controlled with antiepileptic medications may be candidates for the vagus nerve stimulator (VNS) or for surgical removal of the seizure focus. According to the applicant, these treatments are not appropriate for, or helpful to, all patients. Therefore, the applicant believed that there is an unmet clinical need for additional therapies for partial onset seizures. The applicant further PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 28051 stated that the RNS® System addresses this unmet clinical need by providing a novel treatment option for treating persons diagnosed with medically intractable partial onset seizures. The applicant received FDA premarket approval in November 2013. The following ICD–9–CM procedure codes are used to identify this technology: 01.20 (Cranial implantation or replacement of neurostimulator pulse generator); 01.29 (Removal of cranial neurostimulator pulse generator); and 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)). We are inviting public comments on whether the technology meets the newness criterion. With regard to the cost criterion, the applicant stated that substantially all cases eligible for the RNS® System would map to MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System Principal Diagnosis without MCC). The applicant further stated that, while it is possible for some cases to occur in MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemotherapy Implant), it would be extremely rare because the applicant believed that these major complications and/or comorbidities would probably preclude a patient from receiving treatment using the RNS® System because the technology is an elective procedure. The applicant submitted two analyses to demonstrate that the technology meets the cost criterion. For the first analysis, the applicant used clinical trial claims data collected in the RNS® System Pivotal Clinical Investigation to calculate the anticipated average caseweighted standardized charge per case. The applicant maintained that this analysis best represents the anticipated charges for the technology because it is based on actual cases treated using this technology. The applicant analyzed 163 claims from 28 hospitals participating in the clinical trial. Five claims from one hospital were excluded because no hospital-specific information regarding standardization was available. The resulting 158 claims included dates of service ranging from May 2006 through May 2009. The average case-weighted standardized charge per case for these 158 claims was $54,691. The applicant then standardized the charges for each claim. The applicant noted that it was not necessary to remove any charges from these claims because the technology was provided at no charge in the trial. After standardizing the charges for each E:\FR\FM\15MYP2.SGM 15MYP2 28052 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules claim, the applicant inflated the charges reported on each claim using the BLS’ CPI–IP data covering the same period. Specifically, because the publicly available FY 2012 MedPAR data do not identify the month of the discharge on inpatient claims, but do identify the calendar quarter, the applicant used a mid-month convention to determine the relevant monthly CPI–IP for each calendar quarter. The applicant then calculated the percentage change from the relevant quarter to the quarter of the most recently available CPI–IP, which was the August 2013 CPI–IP. Specifically, the applicant used the following assumptions: FY 2012 calendar quarter Midpoint of quarter CPI IP Q4 2011 ........................................................................ Q1 2012 ........................................................................ Q2 2012 ........................................................................ Q3 2012 ........................................................................ Most recent as of application ....................................... Nov–11 ......................................................................... Feb–11 .......................................................................... May–11 ......................................................................... Aug–11 ......................................................................... Aug–13 ......................................................................... Percent change to August 2013 242.672 245.721 247.646 248.856 261.915 7.93 6.59 5.76 5.25 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Source as cited by applicant: Bureau of Labor Statistics’ Web site, accessed October 13, 2013; Base Period: December 1996 = 100. After inflating the charges, the applicant estimated charges for the RNS® System by multiplying the device cost to the hospital by an anticipated hospital markup of 100 percent, or conversely by dividing the device cost by a CCR of 0.50. The applicant based its estimated CCR on four analyses. First, the applicant reviewed the 2007 and 2008 reports prepared by RTI for CMS on charge compression, which found that the national aggregate CCR for devices and implants was 0.43 and 0.467, as presented in the respective reports. Second, the applicant queried hospitals participating in the RNS® System Pivotal trial, and these queries yielded a mean and median CCR for implantable devices of 0.37 and 0.36, respectively. Third, the applicant reviewed data from the (All Payor) Premier database for cases performed during 2000 through 2010 that reported ICD–9 CM procedure codes 02.93 and/ or 86.95 on a claim, and calculated a mean and median CCR for implanted leads and neurostimulators of 0.50 and 0.44, respectively. The applicant then reviewed other discussions of past new technology add-on payment applications published in the Federal Register, and noted that other applicants used lower CCRs (higher markups) for implanted devices than the CCR of 0.50 used in the applicant’s analyses. Using this approach, the applicant added the anticipated hospital charge for the implantable RNS® System to the average case-weighted standardized charge per case, and determined a final average case-weighted standardized charge per case of $128,723. The anticipated hospital charge for the implantable RNS® System is $73,900. Using the FY 2014 IPPS Table 10 thresholds, the threshold for MS–DRG 024 is $91,197. Because the final average case-weighted standardized charge per case of $128,723 for MS–DRG VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 024 exceeds the average case-weighted threshold amount, the applicant maintained that the RNS® System meets the cost criterion. In the second analysis, which the applicant characterizes as supplementary, the applicant researched the FY 2012 MedPAR file for cases reporting the following combinations of ICD–9–CM procedures codes: 02.93 and 86.95, or procedures codes 02.93 and 01.20 that mapped to MS–DRG 024. The applicant found 383 claims for cases reporting the combination of ICD–9–CM procedures codes 02.93 and 01.20, and pointed out that these cases were coded with procedure code 01.20 in error because no new RNS® System implantations occurred after May 2009. The applicant analyzed these 383 claims, and found that more than 90 percent of these cases had a primary or secondary diagnosis of Parkinson’s disease, essential tremor, or dystonia. These diagnoses are FDAapproved indications for deep brain stimulation (DBS). In addition, the applicant noted that the total covered charges for these cases were less than the estimated charges for a full DBS system, and hypothesized that these cases did not represent implantation of a full DBS system, but did represent the implantation of leads only. The applicant contacted two hospitals that reported claims for cases where total covered charges were less than the charges for a full DBS system, and the hospitals confirmed that their claims represented lead implantations only. Therefore, for the second analysis, the applicant included all of the cases assigned to MS–DRG 024 reporting a combination of ICD–9–CM procedures codes 02.93 and 86.95, and all of the cases assigned to MS–DRG 024 reporting a combination of ICD–9–CM procedures codes 02.93 and 01.20 where the covered charges were greater than, or equal to, the estimated charges of a PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 full DBS system. The applicant maintained that 374 claims from 106 providers met this criterion, and data represented claims from the fourth calendar quarter of 2011 through the third calendar quarter of 2012. Based on this assumption, the applicant calculated an average case-weighted standardized charge per case of $65,555. The applicant then removed DBS charges from the average case-weighted standardized charge per case. The applicant estimated charges for a full DBS system, and maintained that the average cost for a full DBS system is $25,979. Similar to its first analysis, the applicant assumed a CCR of 0.50, or 100 percent markup, which resulted in estimated charges for a full DBS system of $51,958. After removing the DBS system charges, the applicant inflated the charges to the current period using the same methodology in the first analysis, added charges for the RNS® System, and determined a final average case-weighted standardized charge per case of $130,233. As noted above, the anticipated hospital charge for the implantable RNS® System is $73,900. Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRG 024 is $91,197. Because the final average standardized charge per case of $130,233 for MS–DRG 024 exceeds the threshold amount, the applicant maintained that the RNS® System meets the cost criterion. Under either analysis, the applicant maintained that the final average caseweighted standardized charge per case would exceed the average case-weighted threshold. We are inviting public comments on whether the RNS® System meets the cost criterion, particularly based on the assumptions and methodology used in the applicant’s analyses. With regard to substantial clinical improvement, as previously stated, some patients diagnosed with partial E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules onset seizures may not be able to control their seizures with antiepileptic medications, VNS, or with surgical removal of the seizure focus. The applicant stated that the RNS® System provides treatment for those patients diagnosed with partial onset seizures who fail treatment with antiepileptic medications, or VNS therapy, and who are ineligible for resective surgery because of the extent and/or location of the seizure focus, or patients who do not elect surgery. According to the applicant, the RNS® System clinical trials provide Class I evidence that treatment using the RNS® System substantially reduces disabling seizures in patients diagnosed with severe epilepsy, who have tried and failed treatment with antiepileptic medications, and in many cases, VNS or epilepsy surgery. The applicant maintained that the results from their clinical trials demonstrate significant and sustained improvements in health outcomes over the controlled period and over the long term. The applicant conducted a feasibility trial, which was designed to demonstrate adequate safety of its treatment, and provide evidence of effectiveness to support commencement of a randomized double-blinded pivotal trail. In addition, the applicant has an ongoing long-term treatment clinical investigation trial (LTT trial) to assess the long-term safety and effectiveness of the treatment on patients who have completed either the Feasibility trial, or the RNS® System Pivotal trial for an additional seven years. The LTT trial started in April 2006, and the final patient is expected to complete the trial in 2018. The applicant noted that patients enrolled in the LTT trial continued to experience a reduction in seizures over several years of follow-up, further demonstrating the positive effect of responsive stimulation from the RNS® System is durable. The applicant stated that their pivotal trial met its primary effectiveness endpoint by proving that there was a statistically significant greater reduction in seizures in the treatment group&fnl; compared to the control group (p = 0.012). Significant improvements at 1 and 2 years post-implant included: • A significant reduction in disabling seizures of 44 percent and 53 percent at 1 and 2 years, respectively; • Fifty-five percent of patients who reached 2 years post-implant experienced a 50 percent or greater reduction in seizures; and • Significant improvements in overall quality of life, as well as individual quality of life measures including memory, language, attention, concentration and medication effects. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The applicant asserted that there was no negative effect of treatment using the RNS® System on neuropsychological function (including verbal functioning, visual spatial processing, and memory) or mood. The applicant concluded that the RNS® System Pivotal trial provides Class I evidence that responsive cortical stimulation is effective in significantly reducing seizure frequency in adults with one or two seizure foci who have failed two or more antiepileptic medication trials. The applicant stated that experience across all of the RNS® System trials demonstrates the reduction in seizure frequency of disabling partial onset seizures improves over time. In addition, the applicant noted that sustained improvements were also seen in quality of life. Finally, the applicant noted that safety and tolerability measures compare favorably to alternative treatments, such as antiepileptic medications, VNS, and epilepsy surgery. With regard to the substantial clinical improvement criterion, we are concerned that the average age of the patients enrolled in the applicant’s trials was 35 years. Although the applicant maintained that 31 percent of the patients enrolled in the pivotal trial were Medicare beneficiaries, we are unsure of the extent to which this technology would be used by Medicare beneficiaries because of the relatively young age of the majority of the patients enrolled in the pivotal trial. We also are concerned that further clarification on how the RNS® System compares to other neurostimulation treatments was not provided by the applicant. Because the applicant included claims with DBS charges in one of its cost analyses, we believe that the similarities and differences between DBS and the RNS® System may also be relevant under the substantial clinical improvement criterion. In addition, we are concerned that the time period in the clinical trial may not be sufficient to confirm durability. In the RNS® System Pivotal Clinical Investigation, the primary effectiveness endpoint considered seizure frequency over the last 3 months of the blinded period of the trial. We note that the applicant is currently conducting a 5-year study. We are inviting public comments on whether the RNS® System meets the substantial clinical improvement criterion, particularly in regard to the degree in which the technology would be used by Medicare beneficiaries, the comparison to other neurostimulation treatments, and its durability. We received public comments in response to the New Technology Town Hall meeting held on February 12, 2014, PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 28053 regarding this technology and the application for new technology add-on payments. We summarize these comments below. Comment: One commenter, a physician, stated that even with the release of multiple new antiepileptic medications in the past 20 years, over one-third of people diagnosed with epilepsy cannot obtain adequate seizure control. The commenter noted that seizures lead to loss of employment and driving licenses and are socially disabling. The commenter further noted that uncontrolled seizures can cause physical injury and even significantly increased risk of death. The commenter stated that only a fraction of these patients are candidates for potentially curative resective brain surgery and antiepileptic medications can have disabling or severe adverse effects, such as lethargy, ataxia, organ or blood cell damage, Stevens-Johnson syndrome, and psychiatric changes including suicidal ideation. For this reason, the commenter believed that new treatments are still needed. The commenter asserted that the RNS® System represents a much needed new therapy for patients who are desperate to get seizures under control and lead a productive life. The commenter stated that of its patients that participated in the clinical trials, these patients have demonstrated significant and sustained benefits from treatment with the RNS® System. The commenter noted that two patients had a significant reduction in the amount of seizures per month, and are now able to obtain driver licenses and both show improved quality of life. The commenter also noted that the RNS® System is a unique therapy for the following reasons: (1) While medications are chemicals that circulate to every organ, the RNS® System delivers therapy directly to the epileptic focus; (2) RNS® therapy is delivered automatically, avoiding compliance problems that occur with medications; and (3) the RNS® System constantly records data on seizure occurrences that is available to the clinician at any time which can track a patient’s progress without depending on the patient’s memory or willingness to report seizures. The commenter asserted that no other therapy offers this capability. The commenter urged CMS to approve the new technology add-on payment application for the RNS® System, which the commenter believed would help ensure access to this novel therapy for Medicare beneficiaries for whom there are otherwise no good treatment options available. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28054 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Another commenter, also a physician, stated that some of the benefits of the RNS® System therapy include a significant reduction in the seizure frequency and severity, and for some patients, extended periods of seizure freedom. The commenter explained that this reduction in the seizure frequency improves over time, is sustained over several years of follow-up, and can result in improved cognition and a better quality of life. The commenter further stated that some patients have been able to live independently for the first time in their life, take care of children, resume driving, go back to school and/or obtain employment. The commenter concluded the following comparisons between the RNS® System and the vagus nerve stimulator (VNS): • In clinical trials, the RNS® System subjects experienced a greater reduction in seizures than VNS subjects. The median percent reduction in seizures was: 1 year: RNS—44 percent and VNS—31 percent; 2 years: RNS—53 percent and VNS—41 percent. • VNS therapy results in stimulationrelated side effects, including coughing, difficulties with speech and throat pain. RNS® therapy does not result in chronic side effects. • About one-third of patients in RNS® System pivotal trial had previously failed therapy with a VNS. These subjects achieved the same positive improvements in health outcomes from the RNS® System as patients that had not previously tried a VNS. • In the commenter’s experience, not only is the frequency of the seizure activity improved but also the severity of the seizures can improve with the RNS® System. The commenter further noted the ‘‘positive long-term results of RNS therapy.’’ The commenter stated that therapy is being evaluated in the ongoing LTT trial, in which patients are enrolled for an additional 7 years after completing the initial 2-year clinical trial with some patients having the implant for over 9 years. The commenter asserted that the long-term data clearly show that the therapy is durable. Specifically, the commenter noted that seizure reductions are maintained at 50 percent or greater through 7 years (that is, the median percent reduction in seizures is about 60 percent at 7 years). The commenter added that the vast majority of its patients have elected to continue treatment with the device given their response to the RNS® therapy. The commenter encouraged CMS to approve new technology add-on payments for the RNS® System. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Response: We appreciate the commenters’ support. We considered these comments in our evaluation of the RNS® System new technology add-on payment application for FY 2015 and in the development of this proposed rule. As stated above, we are inviting additional public comments on whether the RNS® System meets the substantial clinical improvement criterion, particularly in regard to the degree in which the technology would be used by Medicare beneficiaries, the comparison to other neurostimulation treatments, and its durability. III. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts ‘‘for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.’’ We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the proposed FY 2015 hospital wage index based on the statistical areas appears under section III.B. of the preamble of this proposed rule. Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wagerelated costs of short-term, acute care hospitals. This provision also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The proposed adjustment for FY 2015 is discussed in section II.B. of the Addendum to this proposed rule. As discussed in section III.H. of the preamble of this proposed rule, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 would have been made absent these provisions. The proposed budget neutrality adjustment for FY 2015 is discussed in section II.A.4.b. of the Addendum to this proposed rule. Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are proposing to apply to the FY 2015 wage index appears under section III.F. of the preamble of this proposed rule. B. Proposed Core-Based Statistical Areas for the Hospital Wage Index 1. Background The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by the Office of Management and Budget (OMB). The current statistical areas used in FY 2014 are based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). For a discussion of OMB’s delineations of CBSAs and our implementation of the CBSA definitions, we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We also discussed in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51582) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013, OMB planned to announce new labor market area delineations based on new standards adopted in 2010 (75 FR 37246) and the 2010 Census of Population and Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at https://www.whitehouse.gov/sites/ default/files/omb/bulletins/2013/b-1301.pdf. According to OMB, ‘‘[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010, in the Federal Register (75 FR 37246–37252) and Census Bureau data.’’ In this FY 2015 IPPS/LTCH PPS proposed rule, when referencing the new OMB geographic boundaries of statistical areas, we are using the term ‘‘delineations’’ rather than the term ’’ definitions’’ that we have used in the past, consistent with OMB’s use of the terms (75 FR 37249). In order to implement these changes for the IPPS, it is necessary to identify the new labor market area delineation for each county and hospital in the country. While the revisions OMB published on February 28, 2013 are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, under the new OMB delineations, there would be new CBSAs, urban counties that would become rural, rural counties that would become urban, and existing CBSAs would be split apart. In addition, the effect of the new OMB delineations on various hospital reclassifications, the out-migration adjustment (established by section 505 of Pub. L. 108–173), and treatment of hospitals located in certain rural counties (that is, ‘‘Lugar’’ hospitals) provided for under section 1886(d)(8)(B) of the Act must be considered. These are just a few of the many issues that need to be reviewed regarding the effects of the new OMB labor market area delineations prior to proposing and establishing policies. However, because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications needed to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not implement changes to the wage index for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index based on the new OMB delineations in this FY 2015 proposed rule. As discussed below, in this proposed rule, we are proposing to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. 2. Proposed Implementation of New Labor Market Area Delineations As discussed previously, CMS delayed implementing the new OMB VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 labor market area delineations to allow for sufficient time to assess the new changes. We believe it is important for the IPPS to use the latest labor market area delineations available as soon as is reasonably possible in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. While CMS and other stakeholders have explored potential alternatives to the current CBSA-based labor market system (we refer readers to the CMS Web site at: www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Reform.html), no consensus has been achieved regarding how best to implement a replacement system. As discussed in the FY 2005 IPPS final rule (69 FR 49027), ‘‘While we recognize that MSAs are not designed specifically to define labor market areas, we believe they do represent a useful proxy for this purpose.’’ We further believe that using the most current delineations will increase the integrity of the IPPS wage index system by creating a more accurate representation of geographic variations in wage levels. We have reviewed our findings and impacts relating to the new OMB delineations, and find no compelling reason to further delay implementation. Therefore, we are proposing to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. We are proposing to use these new delineations to calculate area wage indexes in a manner that is generally consistent with the CBSAbased methodologies finalized in the FY 2005 IPPS final rule, and refined in subsequent rulemaking. We also are proposing a wage index transition period applicable to all hospitals that experience negative impacts due to the proposed implementation of the new OMB delineations. This transition is discussed in more detail below. a. Micropolitan Statistical Areas As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), CMS considered whether to use Micropolitan Statistical Areas to define the labor market areas for the purpose of the IPPS wage index. OMB defines a ‘‘Micropolitan Statistical Area’’ as a CBSA ‘‘associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000’’ (75 FR 37252). We refer to these areas as Micropolitan Areas. After extensive impact analysis, CMS determined the best course of action would be to treat all hospitals located in Micropolitan Areas as ‘‘rural’’ and include them in PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 28055 the calculation of each State’s rural wage index. Because Micropolitan areas tend to encompass smaller population centers and contain fewer hospitals than MSAs, we determined that if Micropolitan Areas were to be treated as separate labor market areas, the IPPS wage index would have included drastically more single-provider labor market areas. This larger number of labor market areas with fewer hospitals could create instability in year-to-year wage index values for a large number of hospitals; could reduce the averaging effect of the wage index, thus lessening some of the efficiency incentive inherent in a system based on the average hourly wages for a large number of hospitals; and could arguably create an inequitable system when so many hospitals have wage indexes based solely on their own wage data while other hospitals’ wage indexes are based on an average hourly wage across many hospitals. For these reasons, we adopted a policy to include Micropolitan Areas in the State’s rural wage area, and have continued this policy through the present. Based upon the new 2010 Decennial Census data, a number of urban counties have switched status and have joined or became Micropolitan Areas, and some counties that once were part of a Micropolitan Area, under current OMB delineations, have become urban. Overall, there are fewer Micropolitan Areas (541) under the new OMB delineations based on the 2010 Census than existed under the latest data from the 2000 Census (581). We believe that the best course of action would be to continue the policy established in the FY 2005 IPPS final rule and include hospitals located in Micropolitan Areas in each State’s rural wage index. These areas continue to be defined as having relatively small urban cores (populations of 10,000–49,999). We do not believe it would be appropriate to calculate a separate wage index for areas that typically may include only a few hospitals for the reasons set forth in the FY 2005 IPPS/LTCH PPS final rule, as discussed above. Therefore, in conjunction with our proposal to implement the new OMB labor market area delineations beginning in FY 2015, we are proposing to continue to treat Micropolitan Areas as ‘‘rural’’ and to include the Micropolitan Areas in the calculation of each State’s rural wage index. b. Urban Counties That Would Become Rural Under the New OMB Delineations As previously discussed, we are proposing to implement the new OMB labor market area delineations (based E:\FR\FM\15MYP2.SGM 15MYP2 28056 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules upon the 2010 Decennial Census data) beginning in FY 2015. Our analysis shows that a total of 37 counties (and county equivalents) and 12 hospitals that were once considered part of an urban CBSA would be considered to be located in a rural area, beginning in FY 2015, under these new OMB delineations. The following chart lists the 37 urban counties that would be rural if we finalize our proposal to implement the new OMB delineations. COUNTIES THAT WOULD LOSE URBAN STATUS County Greene County ...................................... Anson County ........................................ Franklin County ...................................... Stewart County ...................................... Howard County ...................................... Delta County .......................................... Pittsylvania County ................................ Danville City ........................................... Preble County ........................................ Gibson County ....................................... Webster County ..................................... Franklin County ...................................... Ionia County ........................................... Newaygo County ................................... Greene County ...................................... Stone County ......................................... Morgan County ...................................... San Jacinto County ............................... Franklin County ...................................... Tipton County ........................................ Nelson County ....................................... Geary County ......................................... Washington County ............................... Pleasants County ................................... George County ...................................... Power County ........................................ Cumberland County ............................... King and Queen County ........................ Louisa County ........................................ Washington County ............................... Summit County ...................................... Erie County ............................................ Franklin County ...................................... Ottawa County ....................................... Greene County ...................................... Calhoun County ..................................... Surry County .......................................... IN NC IN TN MO TX VA VA OH IN KY AR MI MI NC MS WV TX KS IN KY KS OH WV MS ID VA VA VA MO UT OH MA OH AL TX VA We are proposing that the wage data for all hospitals located in the counties listed above would now be considered rural when calculating their respective State’s rural wage index. We recognize that rural areas typically have lower area wage index values than urban areas, and hospitals located in these counties may experience a negative impact in their IPPS payment due to the proposed adoption of the new OMB delineations. We refer readers to section mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Previous CBSA number State 14020 16740 17140 17300 17860 19124 19260 19260 19380 21780 21780 22900 24340 24340 24780 25060 25180 26420 28140 29020 31140 31740 37620 37620 37700 38540 40060 40060 40060 41180 41620 41780 44140 45780 46220 47020 47260 CBSA Bloomington, IN. Charlotte-Gastonia-Rock Hill, NC-SC. Cincinnati-Middletown, OH-KY-IN. Clarksville, TN-KY. Columbia, MO. Dallas-Fort Worth-Arlington, TX. Danville, VA. Danville, VA. Dayton, OH. Evansville, IN-KY. Evansville, IN-KY. Fort Smith, AR-OK. Grand Rapids-Wyoming, MI. Grand Rapids-Wyoming, MI. Greenville, NC. Gulfport-Biloxi, MS. Hagerstown-Martinsburg, MD-WV. Houston-Sugar Land-Baytown, TX. Kansas City, MO-KS. Kokomo, IN. Louisville/Jefferson County, KY-IN. Manhattan, KS. Parkersburg-Marietta-Vienna, WV-OH. Parkersburg-Marietta-Vienna, WV-OH. Pascagoula, MS. Pocatello, ID. Richmond, VA. Richmond, VA. Richmond, VA. St. Louis, MO-IL. Salt Lake City, UT. Sandusky, OH. Springfield, MA. Toledo, OH. Tuscaloosa, AL. Victoria, TX. Virginia Beach-Norfolk-Newport News, VA-NC. III.B.2.e. of the preamble of this proposed rule for a discussion of the proposed wage index transition period, in particular, the discussion regarding the 3-year transition for hospitals located in these specific counties. c. Rural Counties That Would Become Urban Under the New OMB Delineations As previously discussed, we are proposing to implement the new OMB labor market area delineations (based upon the 2010 Decennial Census data) beginning in FY 2015. Analysis of these OMB labor market area delineations shows that a total of 105 counties (and county equivalents) and 81 hospitals that were located in rural areas would be located in urban areas under the new OMB delineations. The following chart lists the 105 rural counties that would be urban if we finalize our proposal to implement the new OMB delineations. COUNTIES THAT WOULD GAIN URBAN STATUS County State Utuado Municipio ................................... Linn County ............................................ Oldham County ...................................... Morgan County ....................................... Lincoln County ....................................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 New CBSA number PR OR TX GA GA PO 00000 10380 10540 11100 12060 12260 Frm 00080 CBSA. Aguadilla-Isabela, PR. Albany, OR. Amarillo, TX. Atlanta-Sandy Springs-Roswell, GA. Augusta-Richmond County, GA-SC. Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules COUNTIES THAT WOULD GAIN URBAN STATUS—Continued mstockstill on DSK4VPTVN1PROD with PROPOSALS2 County State Newton County ....................................... Fayette County ....................................... Raleigh County ....................................... Golden Valley County ............................ Oliver County ......................................... Sioux County .......................................... Floyd County .......................................... De Witt County ....................................... Columbia County .................................... Montour County ...................................... Allen County ........................................... Butler County ......................................... St. Mary’s County ................................... Jackson County ...................................... Williamson County ................................. Franklin County ...................................... Iredell County ......................................... Lincoln County ....................................... Rowan County ........................................ Chester County ...................................... Lancaster County ................................... Buckingham County ............................... Union County ......................................... Hocking County ...................................... Perry County .......................................... Walton County ........................................ Hood County .......................................... Somervell County ................................... Baldwin County ...................................... Monroe County ....................................... Hudspeth County ................................... Adams County ........................................ Hall County ............................................. Hamilton County ..................................... Howard County ...................................... Merrick County ....................................... Montcalm County ................................... Josephine County .................................. Tangipahoa Parish ................................. Beaufort County ..................................... Jasper County ........................................ Citrus County ......................................... Butte County .......................................... Yazoo County ......................................... Crockett County ..................................... Kalawao County ..................................... Maui County ........................................... Campbell County .................................... Morgan County ....................................... Roane County ........................................ Acadia Parish ......................................... Iberia Parish ........................................... Vermilion Parish ..................................... Cotton County ........................................ Scott County ........................................... Lynn County ........................................... Green County ......................................... Benton County ....................................... Midland County ...................................... Martin County ......................................... Le Sueur County .................................... Mille Lacs County ................................... Sibley County ......................................... Maury County ......................................... Craven County ....................................... Jones County ......................................... Pamlico County ...................................... St. James Parish .................................... Box Elder County ................................... Gulf County ............................................ Custer County ........................................ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 New CBSA number TX WV WV MT ND ND VI IL PA PA KY KY MD IL IL PA NC NC NC SC SC VA IN OH OH FL TX TX AL PA TX PA NE NE NE NE MI OR LA SC SC FL ID MS TN HI HI TN TN TN LA LA LA OK IN TX WI MS MI TX MN MN MN TN NC NC NC LA UT FL SD PO 00000 13140 13220 13220 13740 13900 13900 13980 14010 14100 14100 14540 14540 15680 16060 16060 16540 16740 16740 16740 16740 16740 16820 17140 18140 18140 18880 23104 23104 19300 20700 21340 23900 24260 24260 24260 24260 24340 24420 25220 25940 25940 26140 26820 27140 27180 27980 27980 28940 28940 28940 29180 29180 29180 30020 31140 31180 31540 32820 33220 33260 33460 33460 33460 34980 35100 35100 35100 35380 36260 37460 39660 Frm 00081 CBSA. Beaumont-Port Arthur, TX. Beckley, WV. Beckley, WV. Billings, MT. Bismarck, ND. Bismarck, ND. Blacksburg-Christiansburg-Radford, VA. Bloomington, IL. Bloomsburg-Berwick, PA. Bloomsburg-Berwick, PA. Bowling Green, KY. Bowling Green, KY. California-Lexington Park, MD. Carbondale-Marion, IL. Carbondale-Marion, IL. Chambersburg-Waynesboro, PA. Charlotte-Concord-Gastonia, NC-SC. Charlotte-Concord-Gastonia, NC-SC. Charlotte-Concord-Gastonia, NC-SC. Charlotte-Concord-Gastonia, NC-SC. Charlotte-Concord-Gastonia, NC-SC. Charlottesville, VA. Cincinnati, OH-KY-IN. Columbus, OH. Columbus, OH. Crestview-Fort Walton Beach-Destin, FL. Dallas-Fort Worth-Arlington, TX. Dallas-Fort Worth-Arlington, TX. Daphne-Fairhope-Foley, AL. East Stroudsburg, PA. El Paso, TX. Gettysburg, PA. Grand Island, NE. Grand Island, NE. Grand Island, NE. Grand Island, NE. Grand Rapids-Wyoming, MI. Grants Pass, OR. Hammond, LA. Hilton Head Island-Bluffton-Beaufort, SC. Hilton Head Island-Bluffton-Beaufort, SC. Homosassa Springs, FL. Idaho Falls, ID. Jackson, MS. Jackson, TN. Kahului-Wailuku-Lahaina, HI. Kahului-Wailuku-Lahaina, HI. Knoxville, TN. Knoxville, TN. Knoxville, TN. Lafayette, LA. Lafayette, LA. Lafayette, LA. Lawton, OK. Louisville/Jefferson County, KY-IN. Lubbock, TX. Madison, WI. Memphis, TN-MS-AR. Midland, MI. Midland, TX. Minneapolis-St. Paul-Bloomington, MN-WI. Minneapolis-St. Paul-Bloomington, MN-WI. Minneapolis-St. Paul-Bloomington, MN-WI. Nashville-Davidson-Murfreesboro-Franklin, TN. New Bern, NC. New Bern, NC. New Bern, NC. New Orleans-Metairie, LA. Ogden-Clearfield, UT. Panama City, FL. Rapid City, SD. Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28057 28058 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules COUNTIES THAT WOULD GAIN URBAN STATUS—Continued County State Fillmore County ...................................... Yates County .......................................... Sussex County ....................................... Worcester County .................................. Highlands County ................................... Webster Parish ....................................... Cochise County ...................................... Plymouth County .................................... Union County ......................................... Pend Oreille County ............................... Stevens County ...................................... Augusta County ...................................... Staunton City .......................................... Waynesboro City .................................... Little River County .................................. Sumter County ....................................... Pickens County ...................................... Gates County ......................................... Falls County ........................................... Columbia County .................................... Walla Walla County ................................ Peach County ......................................... Pulaski County ....................................... Culpeper County .................................... Rappahannock County ........................... Jefferson County .................................... Kingman County ..................................... Davidson County .................................... Windham County .................................... New CBSA number MN NY DE MA FL LA AZ IA SC WA WA VA VA VA AR FL AL NC TX WA WA GA GA VA VA NY KS NC CT We are proposing that when calculating the area wage index, the wage data for hospitals located in these counties would be included in their new respective urban CBSAs. Typically, hospitals located in an urban area would receive a higher wage index value than hospitals located in their State’s rural area. However, with regard to the wage index applicable to individual hospitals, we are proposing to implement a transitional wage index adjustment for any hospital that would receive a lower wage index under the new OMB delineations than it would have received under the current CBSA 40340 40380 41540 41540 42700 43340 43420 43580 43900 44060 44060 44420 44420 44420 45500 45540 46220 47260 47380 47460 47460 47580 47580 47894 47894 48060 48620 49180 49340 CBSA. Rochester, MN. Rochester, NY. Salisbury, MD-DE. Salisbury, MD-DE. Sebring, FL. Shreveport-Bossier City, LA. Sierra Vista-Douglas, AZ. Sioux City, IA-NE-SD. Spartanburg, SC. Spokane-Spokane Valley, WA. Spokane-Spokane Valley, WA. Staunton-Waynesboro, VA. Staunton-Waynesboro, VA. Staunton-Waynesboro, VA. Texarkana, TX-AR. The Villages, FL. Tuscaloosa, AL. Virginia Beach-Norfolk-Newport News, VA-NC. Waco, TX. Walla Walla, WA. Walla Walla, WA. Warner Robins, GA. Warner Robins, GA. Washington-Arlington-Alexandria, DC-VA-MD-WV. Washington-Arlington-Alexandria, DC-VA-MD-WV. Watertown-Fort Drum, NY. Wichita, KS. Winston-Salem, NC. Worcester, MA-CT. definitions. We refer readers to section III.B.2.e. of the preamble of this proposed rule for further discussion of this proposed transition. d. Urban Counties That Would Move to a Different Urban CBSA Under the New OMB Delineations In addition to rural counties becoming urban and urban counties becoming rural, several urban counties would shift from one urban CBSA to another urban CBSA under our proposal to adopt the new OMB delineations. In certain cases, adopting the new OMB delineations would involve a change only in CBSA name or number, while the CBSA continues to encompass the same constituent counties. For example, CBSA 29140 (Lafayette, IN) would experience both a change to its number and its name, and become CBSA 29200 (Lafayette-West Lafayette, IN), while all of its three constituent counties would remain the same. We have identified 19 counties that would remain in a CBSA that experienced a change in name or number under the new delineations, but would retain the same constituent counties, as shown in the following table. COUNTIES THAT WOULD REMAIN IN CBSA THAT CHANGED NUMBER mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Prior CBSA No. 14484 14484 14484 47644 47644 47644 47644 47644 26180 29140 29140 29140 42044 42060 44600 44600 New CBSA No. ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ VerDate Mar<15>2010 20:20 May 14, 2014 14454 14454 14454 47664 47664 47664 47664 47664 46520 29200 29200 29200 11244 42200 48260 48260 County State Norfolk County ................................................................................................................................. Plymouth County ............................................................................................................................. Suffolk County ................................................................................................................................. Lapeer County ................................................................................................................................. Livingston County ............................................................................................................................ Macomb County .............................................................................................................................. Oakland County ............................................................................................................................... St. Clair County ............................................................................................................................... Honolulu County .............................................................................................................................. Benton County ................................................................................................................................. Carroll County .................................................................................................................................. Tippecanoe County ......................................................................................................................... Orange County ................................................................................................................................ Santa Barbara County ..................................................................................................................... Jefferson County ............................................................................................................................. Brooke County ................................................................................................................................. Jkt 232001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 MA. MA. MA. MI. MI. MI. MI. MI. HI. IN. IN. IN. CA. CA. OH. WV. Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28059 COUNTIES THAT WOULD REMAIN IN CBSA THAT CHANGED NUMBER—Continued Prior CBSA No. New CBSA No. 44600 ................ 13644 ................ 13644 ................ 48260 43524 43524 County State Hancock County .............................................................................................................................. Frederick County ............................................................................................................................. Montgomery County ........................................................................................................................ We are not discussing further in this section these proposed changes because they are inconsequential changes with respect to the IPPS wage index. However, in other cases, if we adopt the new OMB delineations, counties would shift between existing and new CBSAs, changing the constituent makeup of the CBSAs. In one type of change, an entire CBSA would be subsumed by another CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single county (Flagler, FL) CBSA. Flagler County would become a part of CBSA 19660 (Deltona- Daytona Beach-Ormond Beach, FL) under the new OMB delineations. In another type of change, some CBSAs have counties that would split off to become part of or to form entirely new labor market areas. For example, CBSA 37964 (Philadelphia Metropolitan Division) currently is comprised of five Pennsylvania counties (Bucks, Chester, Delaware, Montgomery, and Philadelphia). If we adopt the new OMB delineations, Montgomery, Bucks, and Chester counties would split off and form the new CBSA 33874 (Montgomery County-Bucks County-Chester County, PA Metropolitan Division), while WV. MD. MD. Delaware and Philadelphia counties would remain in CBSA 37964. Finally, in some cases, a CBSA would lose counties to another existing CBSA if we adopt the new OMB delineations. For example, Lincoln County and Putnam County, WV would move from CBSA 16620 (Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV–KY– OH). CBSA 16620 still would exist in the new labor market delineations with fewer constituent counties. The following chart lists the urban counties that would move from one urban CBSA to another urban CBSA if we adopted the new OMB delineations. COUNTIES THAT WOULD CHANGE TO ANOTHER CBSA mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Prior CBSA 11300 11340 14060 37764 16620 16620 16974 16974 21940 21940 21940 26100 31140 34100 35644 35644 20764 20764 20764 35644 20764 35644 35644 35644 35644 35644 35644 35644 35644 37380 37700 37964 37964 37964 39100 39100 41884 41980 41980 41980 41980 48900 49500 49500 New CBSA ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................ VerDate Mar<15>2010 20:20 May 14, 2014 26900 24860 14010 15764 26580 26580 20994 20994 41980 41980 41980 24340 21060 28940 35614 35614 35614 35614 35614 35614 35084 35614 35614 35614 20524 35614 35614 35614 35614 19660 25060 33874 33874 33874 20524 35614 42034 11640 11640 11640 11640 34820 38660 38660 County State Madison County ............................................................................................................................... Anderson County ............................................................................................................................. McLean County ............................................................................................................................... Essex County .................................................................................................................................. Lincoln County ................................................................................................................................. Putnam County ................................................................................................................................ DeKalb County ................................................................................................................................ Kane County .................................................................................................................................... Ceiba Municipio ............................................................................................................................... Fajardo Municipio ............................................................................................................................ Luquillo Municipio ............................................................................................................................ Ottawa County ................................................................................................................................. Meade County ................................................................................................................................. Grainger County .............................................................................................................................. Bergen County ................................................................................................................................. Hudson County ................................................................................................................................ Middlesex County ............................................................................................................................ Monmouth County ........................................................................................................................... Ocean County .................................................................................................................................. Passaic County ................................................................................................................................ Somerset County ............................................................................................................................. Bronx County ................................................................................................................................... Kings County ................................................................................................................................... New York County ............................................................................................................................ Putnam County ................................................................................................................................ Queens County ................................................................................................................................ Richmond County ............................................................................................................................ Rockland County ............................................................................................................................. Westchester County ........................................................................................................................ Flagler County ................................................................................................................................. Jackson County ............................................................................................................................... Bucks County .................................................................................................................................. Chester County ................................................................................................................................ Montgomery County ........................................................................................................................ Dutchess County ............................................................................................................................. Orange County ................................................................................................................................ Marin County ................................................................................................................................... Arecibo Municipio ............................................................................................................................ Camuy Municipio ............................................................................................................................. Hatillo Municipio .............................................................................................................................. Quebradillas Municipio .................................................................................................................... Brunswick County ............................................................................................................................ ´ Guanica Municipio ........................................................................................................................... Guayanilla Municipio ....................................................................................................................... Jkt 232001 PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 IN. SC. IL. MA. WV. WV. IL. IL. PR. PR. PR. MI. KY. TN. NJ. NJ. NJ. NJ. NJ. NJ. NJ. NY. NY. NY. NY. NY. NY. NY. NY. FL. MS. PA. PA. PA. NY. NY. CA. PR. PR. PR. PR. NC. PR. PR. 28060 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules COUNTIES THAT WOULD CHANGE TO ANOTHER CBSA—Continued Prior CBSA New CBSA 49500 ................ 49500 ................ 38660 38660 County ˜ Penuelas Municipio ......................................................................................................................... Yauco Municipio .............................................................................................................................. If hospitals located in these counties move from one CBSA to another under the new OMB delineations, there may be impacts, both negative and positive, upon their specific wage index values. We refer readers to section III.B.2.e. of the preamble of this proposed rule for a discussion of our proposals to moderate the impact of our proposed adoption of the new OMB delineations. e. Proposed Transition Period mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (1) Background Overall, we believe implementing the new OMB labor market area delineations would result in wage index values being more representative of the actual costs of labor in a given area. However, we recognize that some hospitals would experience decreases in wage index values as a result of our proposed implementation of the new labor market area delineations. We also realize that some hospitals would have higher wage index values due to our proposed implementation of the new labor market area delineations. In the past, we have provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. As discussed in the FY 2005 IPPS final rule (69 FR 49032 through 49034), we evaluated several options to ease the transition to the new CBSA system, which we implemented starting in FY 2005 and which is the system currently in use. As discussed in that rule, we determined that the transition to the current wage index system would have the largest negative impacts upon hospitals that were originally considered urban, but would be considered rural under the new definitions. To alleviate the decreased payments associated with having a rural wage index, in calculating the area wage index, in the FY 2005 IPPS final rule, we allowed urban hospitals that became rural under new definitions to maintain their assignment to the labor market area where they were located for FY 2004. This adjustment was granted for a period of 3 fiscal years. In the FY 2005 IPPS final rule, for all hospitals that experienced negative payment impacts due to new definitions (for example, they were moved to an urban CBSA with a lower wage index VerDate Mar<15>2010 20:20 May 14, 2014 State Jkt 232001 value than their previous rural or urban labor market area), we implemented a 1year blended adjustment. We calculated wage indexes for all hospitals using both old and new labor market definitions. Hospitals received 50 percent of their wage index based on the new OMB delineations, and 50 percent of their wage index based on their current labor market area. This adjustment only applied to hospitals that would have experienced a drop in wage index values due to a change in labor market definitions. Hospitals that benefitted from the labor market area transition received their new wage index at the time the new labor market definitions became effective. We continue to have the same concerns expressed in the FY 2005 IPPS final rulemaking. Therefore, we are proposing a similar transition methodology to mitigate any negative financial impacts experienced by hospitals due to our proposal to implement the new OMB labor market area delineations for FY 2015. (2) Proposed Transition for Hospitals in Urban Areas That Would Become Rural For hospitals that are currently located in an urban county that would become rural under the new OMB delineations, and would have no form of wage index reclassification or redesignation in place for FY 2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the Act, redesignations under section 1886(d)(8)(B) of the Act, or rural reclassifications under section 1886(d)(8)(E) of the Act), we are proposing a policy to assign them the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). As stated in the FY 2005 IPPS proposed rule (69 FR 28252), we have in the past provided transitions when adopting changes that have significant payment implications, particularly large negative impacts. We believe it is appropriate to apply a 3year transition period for hospitals located in urban counties that would become rural under the new OMB delineations, given the potentially significant payment impacts for these PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 PR. PR. hospitals. This is consistent with the transition policy adopted in FY 2005 (69 FR 49032 through 49034). We continue to believe, as we stated in the FY 2005 IPPS final rule (69 FR 49033), that the longer transition period is appropriate because, as a group, we expect these hospitals would experience a steeper and more abrupt reduction in their wage index due to the labor market revisions compared to other hospitals. Assigning these hospitals the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index) would be the most similar to the actual payment wage index that these hospitals received in FY 2014, thereby minimizing the negative impact of adopting the new OMB delineations for these hospitals. Accordingly, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we are proposing to assign these hospitals the area wage index value of the urban CBSA to which they geographically were located in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). For example, if urban CBSA 12345 consisted of three counties in FY 2014, and, under the new OMB delineations, one of those counties, County X, would no longer be part of CBSA 12345 and would become rural for FY 2015, we are proposing that hospitals in County X would be assigned the FY 2015 wage index of CBSA 12345, computed using the remaining two counties, with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index. We believe that assigning the wage index of the hospitals’ current area is the simplest and most effective method for mitigating negative payment impacts due to the proposed adoption of the new OMB delineations. We have identified relatively few hospitals that are located in urban counties that would become rural, and fewer yet that do not have a reclassification or redesignation in effect for FY 2015. Because we believe that these urban to rural transitions would E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules be the most likely to cause significant negative payment impacts, we believe that these hospitals should be granted a longer transition period than hospitals that may be switching between urban labor market areas, which as discussed later, we are proposing may receive 1year blended wage index. We note that there are situations where a hospital cannot be assigned the wage index value of the CBSA to which it geographically belonged in FY 2014 because that CBSA would be split and no longer exist and some or all of the constituent counties would be added to another urban labor market area under the new OMB delineations. If the hospital cannot be assigned the wage index value of the CBSA to which it is geographically located in FY 2014 because that CBSA would be split apart and no longer exist, and some or all of its constituent counties would be added to another urban labor market area under the new OMB delineations, we are proposing that hospitals located in such counties that would become rural under the new OMB delineations would be assigned the wage index of the FY 2015 urban labor market area that contains the urban county in their FY 2014 CBSA to which they are closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) for a period of 3 fiscal years. We believe this approach of assigning the wage index of the FY 2015 urban labor market area that contains the urban county in their FY 2014 CBSA to which they are closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) would most closely approximate the hospitals’ FY 2014 actual payment wage index, thereby minimizing the negative effects of the proposed change in the OMB delineations. For example, George County, MS and Jackson County, MS, together, in FY 2014, comprise the urban CBSA 37700 (Pascagoula, MS). Under the new OMB delineations, George County would be considered rural and Jackson County, MS would become part of the urban labor market area of Gulfport-Biloxi-Pascagoula, MS (CBSA 25060). In this instance, we are proposing that hospitals in George County, MS would be assigned the FY 2015 wage index for CBSA 25060 (Gulfport-Biloxi-Pascagoula, MS), with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied. Furthermore, we are proposing that any hospital that is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations, but also has a VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reclassification or redesignation in effect for FY 2015 (from a pre-existing reclassification or redesignation granted prior to FY 2015), would not be eligible for the 3-year transition wage index. This is because if the hospital is reclassified or redesignated in some manner, it would instead receive a wage index that reflects its own choice to obtain its reclassified or redesignated status. Accordingly, if a hospital is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations and such hospital sought and was granted reclassification or redesignation for FY 2015 or such hospital seeks and is granted any reclassification or redesignation for FY 2016 or FY 2017, we are proposing that the hospital would permanently lose its 3-year transitional assigned wage index status, and would not be eligible to reinstate it. For example, if a hospital that is currently urban but would become rural under the new OMB delineations received a 3-year transition wage index in FY 2015 based on the wage index of the urban CBSA to which it was geographically located in FY 2014 and then by its own choice, reclassifies to obtain a different area wage index in FY 2016, the hospital would not be eligible to reinstate the transition wage index, even if it opts to cancel its reclassification for FY 2017. We are proposing the transition adjustment to assist hospitals if they experience a negative payment impact specifically due to the proposed adoption of the new OMB delineations in FY 2015. If a hospital chooses in a future fiscal year to forego this transition adjustment by obtaining some form of reclassification or redesignation, we do not believe reinstatement of this transition adjustment would be appropriate. The purpose of the adjustment is to assist hospitals that may be negatively impacted by the new OMB delineations in transitioning to a wage index based on these delineations. By obtaining a reclassification or redesignation, we believe that the hospital has made the determination that the transition adjustment is not necessary because it has other viable options for mitigating the impact of the transition to the new OMB delineations. With respect to the wage index computation, we are proposing to follow our existing policy regarding the inclusion of a hospital’s wage index data in the CBSA in which it is geographically located (we refer readers to Step 6 of the method for computing the unadjusted wage index in the FY 2012 IPPS/LTCH PPS final rule (76 FR PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 28061 51592)). Accordingly, beginning with FY 2015, we are proposing that the wage data of all hospitals receiving this type of 3-year transition adjustment would be included in the statewide rural area in which they are geographically located under the new OMB labor market area delineations of FY 2015. After the 3-year transition period, beginning in FY 2018, we are proposing that these formerly urban hospitals discussed above would receive their statewide rural wage index, absent any reclassification or redesignation. In addition, we are proposing that the hospitals receiving this 3-year transition because they are in counties that were urban under the current CBSA definitions, but would be rural under the new OMB delineations, would not be considered urban hospitals. Rather, they would maintain their status as rural hospitals for other payment considerations. This is because our proposal to apply a 3-year transitional wage index for these newly rural hospitals only applies for the purpose of calculating the wage index under our proposal to adopt the new CBSA delineations. We are not proposing transitions for other IPPS payment policies that may be impacted by the proposed adoption of the new CBSA delineations. However, we will continue to apply the existing regulations at § 412.102 with respect to determining DSH payments in the first year after a hospital loses urban status (we refer readers to section II.B.2.e.(7) of the preamble of this proposed rule). (3) Proposed Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) of the Act Where the Urban Area Would Become Rural Under the New OMB Delineations As discussed in section II.H.3. of the preamble of this proposed rule, there are some hospitals that currently are geographically located in rural areas but are deemed to be urban under section 1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals currently redesignated under section 1886(d)(8)(B) of the Act would no longer be eligible for deemed urban status under the new OMB delineations, as discussed in detail in section III.H.3. of the preamble of this proposed rule. Similar to the policy implemented in the FY 2005 IPPS final rule (69 FR 49059), and consistent with the policy we are proposing for other hospitals in counties that were urban and would become rural under the new OMB delineations, we are proposing to apply the 3-year transition to these hospitals currently redesignated to urban areas under section 1886(d)(8)(B) of the Act E:\FR\FM\15MYP2.SGM 15MYP2 28062 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 that would no longer be deemed urban under the new OMB delineations and would revert to being rural. That is, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we are proposing to assign these hospitals the FY 2015 area wage index value of hospitals reclassified to the urban CBSA (that is, the attaching wage index) to which they were redesignated in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). If the hospital cannot be assigned the reclassified wage index value of the CBSA to which it was redesignated in FY 2014 because that CBSA would split apart and no longer exist, and some or all of its constituent counties would be added to another urban labor market area under the new OMB delineations, we are proposing that such hospitals would be assigned the wage index of the hospitals reclassified to the FY 2015 urban labor market area that contains the urban county in their FY 2014 redesignated CBSA to which they are closest for a period of 3 fiscal years. We are proposing to assign these hospitals the area wage index of hospitals reclassified to a CBSA because hospitals deemed urban under section 1886(d)(8)(B) of the Act are treated as reclassified under current policy, under which such hospitals receive an area wage index that includes wage data of all hospitals reclassified to the area. (4) Proposed Transition for Hospitals That Would Experience a Decrease in Wage Index Under the New OMB Delineations While we believe that instituting the latest OMB labor market area delineations would create a more accurate wage index system, we also recognize that implementing the new OMB delineations may cause some short-term instability in hospital payments. Therefore, in addition to the 3-year transition adjustment for hospitals being transitioned from urban to rural status as discussed above, we are proposing a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively due to the proposed implementation of the new OMB delineations. Similar to the policy adopted in the FY 2005 IPPS final rule (69 FR 49033), we are proposing that a post-reclassified wage index with the rural and imputed floor applied would VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We are proposing to compare these two wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we are proposing that a blended wage index would be computed, consisting of 50 percent of each of the two wage indexes added together. We are proposing that this blended wage index would be the hospital’s wage index for FY 2015. We believe a 1-year, 50/50 blend would mitigate the short-term instability and negative payment impacts due to the proposed implementation of the new OMB delineations, providing hospitals with a transition period during which they may adjust to their new geographic CBSA or may assess any reclassification options that would be available to them starting in FY 2016. We are proposing a longer 3-year transition adjustment for hospitals losing urban status because there are significantly fewer affected urban-to-rural hospitals, and we believe the negative impacts to a hospital shifting from urban to rural status would typically be greater than other types of transitions. We believe that a transition period longer than 1 year to address other impacts of the proposed adoption of new OMB delineations would reduce the accuracy of the overall labor market area wage index system because far more hospitals would be affected. In addition, for FY 2015, for hospitals that would receive the proposed 3-year transition, it is possible that receiving the FY 2015 wage index (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) of the CBSA where the hospital is geographically located for FY 2014 might still be less than the FY 2015 wage index that the hospital would have received in the absence of the adoption of the new OMB delineations (particularly in States where the rural floor is historically very high). Therefore, such a hospital may additionally benefit from application of the 50/50 blended wage indexes. Accordingly, we are proposing to include the assignment of the 3-year transitional wage index in our calculation of the FY 2015 portion of the 50/50 blended wage index for that hospital. After FY 2015, such a hospital may revert to the second year of the 3- PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 year transition. For example, if Hospital X (formerly part of CBSA 12345, now rural) is assigned CBSA 12345’s FY 2015 wage index value of 1.0000 as part of the 3-year transition, but that FY 2015 wage index value would have been 1.1000 under the previous OMB delineations, that hospital would receive a 50/50 blended wage index of 1.0500 for FY 2015. In FY 2016 and FY 2017, Hospital X would still be eligible to receive the remaining 2 years of the 3-year transition wage index of CBSA 12345 (that is, in FY 2016, Hospital X would receive the FY 2016 wage index of CBSA 12345 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied)), and in FY 2017, Hospital X would receive the FY 2017 wage index of CBSA 12345 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). (5) Impact of Proposed Adoption of New OMB Labor Market Area Delineations To illustrate how the proposed adoption of the new OMB labor market area delineations would impact hospitals’ proposed FY 2015 wage indexes, we compared the proposed FY 2015 occupational mix adjusted postreclassified wage indexes with rural floor budget neutrality applied under the FY 2014 CBSAs and under the proposed FY 2015 CBSAs using the new OMB delineations. (This analysis does not include the effects of the outmigration adjustment, the frontier floor, the proposed 3-year hold harmless transition wage indexes, or the proposed 1-year transition blended wage indexes). As a result of applying the proposed new OMB delineations to the wage data, the proposed wage index values for 2,362 urban hospitals (83.8 percent) and 396 (64.0 percent) rural hospitals would increase. The wage index values of 2,337 (82.9 percent) urban hospitals would increase by less than 5 percent, and the wage index values of 13 (0.5 percent) urban hospitals would increase by at least 5 percent but less than 10 percent. The wage index values of 12 (0.4 percent) urban hospitals would increase by greater than or equal to 10 percent. The wage index values of 369 (59.6 percent) rural hospitals would increase by less than 5 percent, 18 rural hospitals (2.9 percent) would increase by at least 5 percent but less than 10 percent, and 9 rural hospitals (1.5 percent) would increase by greater than or equal to 10 percent. However, the wage index values for 451 urban hospitals (16.0 percent) and 223 (36.0 percent) rural hospitals would decrease. The wage index values of 396 (14.0 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules percent) urban hospitals would decrease by less than 5 percent, 40 urban hospitals (1.4 percent) would decrease by at least 5 percent but less than 10 percent, and 15 urban hospitals (0.5 percent) would decrease by greater than or equal to 10 percent. The wage index values of 198 (32.0 percent) rural hospitals would decrease by less than 5 percent, 24 rural hospitals (3.9 percent) would decrease by 5 percent and less than 10 percent, and 1 rural hospital (0.2 percent) would decrease by greater than or equal to 10 percent. The wage index values of 6 (0.2 percent) urban hospitals and zero rural hospitals would remain unchanged by the adoption of the new OMB CBSA delineations. The largest positive impacts would be for 8 hospitals in 5 States (Texas, Minnesota, Louisiana, Alabama, and Michigan) that would be moving from a rural to an urban area (ranging from a 16.57 percent to a 22.91 percent increase in wage index), and for 10 hospitals that would be moving from one urban CBSA (FY 2014 CBSA 20764, Edison-New Brunswick, NJ) to new urban CBSA 35614 (New York-Jersey City-White Plains, NY-NJ), representing a 15.12 percent increase in wage index. The largest negative impacts would be for 5 hospitals in 4 States (New York, Alabama, Idaho, and North Carolina) that would be moving from an urban to a rural area (ranging from a 13.08 percent to a 27.25 percent decrease in wage index), and for 8 hospitals that would be moving from one urban CBSA (FY 2014 CBSA 35644, New York-White Plains-Wayne, NY-NJ) to new urban CBSA 20524 (Dutchess County-Putnam County, NY), representing a 11.42 percent decrease in wage index. These results illustrate that hospitals that would move from rural CBSAs to urban CBSAs generally would benefit significantly, while hospitals that would move from urban to rural CBSAs generally would have larger negative impacts. For all hospitals combined, the wage index values of 2,758 (80.2 percent) overall would be increasing, and 674 (19.6 percent) overall would be 28063 decreasing, indicating that most hospitals would be positively affected by the adoption of the new OMB delineations. Furthermore, the magnitude of the changes would be relatively small overall, with only 132 hospitals (3.8 percent) experiencing either an increase or decrease of at least 5 percent. The following table shows the impact of the proposed adoption of the new OMB delineations on hospitals’ proposed FY 2015 wage indexes, comparing the proposed FY 2015 occupational mix adjusted postreclassified wage indexes with rural floor budget neutrality applied under the FY 2014 CBSAs and the proposed FY 2015 CBSAs using the new OMB delineations. (This analysis does not include the effects of the out-migration adjustment, the frontier floor, the proposed 3-year hold harmless transition wage indexes, or the proposed 1-year transition blended wage indexes). Number of postreclassified rural hospitals based on FY 2014 CBSA Number of postreclassified urban hospitals based on FY 2014 CBSA Total number of hospitals Decrease greater than or equal to 10.0 .......................................................................... Decrease greater than or equal to 5.0 but less than 10.0 .............................................. Decrease greater than or equal to 2.0 but less than 5.0 ................................................ Decrease greater than 0.0 but less than 2.0 .................................................................. No change ....................................................................................................................... Increase greater than 0.0 but less than 2.0 .................................................................... Increase greater than or equal to 2.0 but less than 5.0 ................................................. Increase greater than or equal to 5.0 but less than 10.0 ............................................... Increase greater than or equal to 10.0 ............................................................................ 1 24 36 162 0 365 4 18 9 15 40 94 302 6 2,304 33 13 12 16 64 130 464 6 2,669 37 31 21 Total .......................................................................................................................... 619 2,819 3,438 Percent change in FY 2015 wage index mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (6) Proposed Budget Neutrality For FY 2015, we are proposing to apply both the 3-year transition and 50/50 blended wage index adjustments in a budget neutral manner. We are proposing to make an adjustment to the standardized amount to ensure that the total payments, including the effect of the transition provisions, would equal what payments would have been if we would not be providing for any transitional wage indexes under the new OMB delineations. For a complete discussion on this proposed budget neutrality adjustment for FY 2015, we refer the reader to section II.A.4.b. of the Addendum to this proposed rule. We note that, consistent with past practice (69 FR 49034), we are not adopting the new OMB delineations themselves in a budget neutral manner. We do not believe that the revision to the labor market areas in and of itself VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 constitutes an ‘‘adjustment or update’’ to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act. (7) Proposals With Respect To Determining Disproportionate Share Hospital (DSH) Payments As noted in the FY 2005 IPPS final rule (69 FR 49033), the provisions of § 412.102 of the regulations would continue to apply with respect to determining DSH payments. Specifically, in the first year after a hospital loses urban status, the hospital would receive an additional payment that equals two-thirds of the difference between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural. In the PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 second year after a hospital loses urban status, the hospital would receive an additional payment that equals onethird of the difference between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural. We also are proposing to make changes to the regulations to delete § 412.64(b)(1)(ii)(D). In this regulation section, we currently define a ‘‘hospital reclassified as rural’’ as a hospital located in a county that, in FY 2004, was urban but was redesignated as rural after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003. Because this term is not used in § 412.64, but is used in § 412.102, we E:\FR\FM\15MYP2.SGM 15MYP2 28064 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules are proposing to delete § 412.64(b)(1)(ii)(D) and revise the language at § 412.102 to address the circumstances set forth in § 412.64(b)(1)(ii)(D). The regulation at § 412.102, which addresses special treatment of hospitals located in areas that are changing from urban to rural as a result of a geographic redesignation, is the only location that currently references a ‘‘hospital reclassified as rural’’, as defined at § 412.64(b)(1)(ii)(D). To avoid confusion with urban hospitals that choose to reclassify as rural under § 412.103, we are proposing to revise the regulation text at § 412.102 so that it no longer refers to the defined term ‘‘hospital reclassified as rural,’’ and instead specifically states the circumstances in which § 412.102 applies. In addition, we are proposing to modify the regulation text so that it would apply to all transitions from urban to rural status that occur as a result of any future adoption of new or revised OMB standards for delineating statistical areas adopted by CMS. Specifically, we are proposing to revise the regulations at § 412.102 to state that ‘‘An urban hospital that was part of an MSA, but was redesignated as rural as a result of the most recent OMB standards for delineating statistical areas adopted by CMS, may receive an adjustment to its rural Federal payment amount for operating costs for 2 successive fiscal years as provided in paragraphs (a) and (b) of this section. . . .’’ with comment period (72 FR 47315 through 47318)); and • Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590)) and other deferred compensation costs. 2. Excluded Categories of Costs Consistent with the wage index methodology for FY 2014, the proposed wage index for FY 2015 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as skilled nursing facility (SNF) services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The proposed FY 2015 wage index also excludes the salaries, hours, and wagerelated costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wagerelated costs of CAHs are excluded from the wage index, for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398). 1. Included Categories of Costs 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals Under the IPPS Data collected for the IPPS wage index are also currently used to calculate wage indexes applicable to other providers, such as SNFs, home health agencies (HHAs), and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indexes for non-IPPS providers, other than for LTCHs. Such comments should be made in response to separate proposed rules for those providers. The proposed FY 2015 wage index includes the following categories of data associated with costs paid under the IPPS (as well as outpatient costs): • Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty); • Home office costs and hours; • Certain contract labor costs and hours (which includes direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule D. Verification of Worksheet S–3 Wage Data The wage data for the proposed FY 2015 wage index were obtained from Worksheet S–3, Parts II and III of the Medicare cost report for cost reporting periods beginning on or after October 1, 2010, and before October 1, 2011. For wage index purposes, we refer to cost reports during this period as the ‘‘FY 2011 cost report,’’ the ‘‘FY 2011 wage data,’’ or the ‘‘FY 2011 data.’’ Instructions for completing the wage index sections of Worksheet S–3 are included in the Provider Reimbursement Manual (PRM), Part 2 C. Worksheet S–3 Wage Data for the Proposed FY 2015 Wage Index mstockstill on DSK4VPTVN1PROD with PROPOSALS2 The proposed FY 2015 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2011 (the FY 2014 wage indexes were based on data from cost reporting periods beginning during FY 2010). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 (Pub. No. 15–2), Chapter 40, Sections 4005.2 through 4005.4 for Form CMS– 2552–10. The data file used to construct the proposed FY 2015 wage index includes FY 2011 data submitted to us as of February 27, 2014. As in past years, we performed an extensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our MACs to revise or verify data elements that result in specific edit failures. For the proposed FY 2015 wage index, we identified and excluded 50 providers with data that were too aberrant to include in the proposed wage index, although if data elements for some of these providers are corrected, we intend to include some of these providers in the final FY 2015 wage index. We instructed MACs to complete their data verification of questionable data elements and to transmit any changes to the wage data no later than April 9, 2014. We intend that all unresolved data elements will be resolved by the date the FY 2015 final rule is issued. The revised data will be reflected in the FY 2015 IPPS final rule. In constructing the proposed FY 2015 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2011, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area’s current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398). For this proposed rule, we removed 6 hospitals that converted to CAH status on or after February 14, 2013, the cut-off date for CAH exclusion from the FY 2014 wage index, and through and including February 13, 2014, the cut-off date for CAH exclusion from the FY 2015 wage index. After removing hospitals with aberrant data and hospitals that converted to CAH status, the proposed FY 2015 wage index is calculated based on 3,400 hospitals. For the proposed FY 2015 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located in the same manner that we allotted such hospitals’ data in the FY 2014 wage index (78 FR 50587). Table 2 containing the proposed E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules FY 2015 wage index associated with this proposed rule (available via the Internet on the CMS Web site) includes separate wage data for the campuses of 6 multicampus hospitals. Questions have been raised recently regarding the reporting of contract housekeeping and dietary services on Worksheet S–3, Part II, lines 33 and 35 of the Medicare cost report. CMS finalized its proposal to begin collecting contract labor costs and hours for housekeeping, and dietary (along with management services and the overhead services of administrative and general) in the FY 2003 IPPS final rule (67 FR 50022 through 50023). At that time, we stated, ‘‘We continue to consider whether to expand our contract labor definition to include more types of contract services in the wage index. In particular, we have examined whether to include the costs for acquired dietary and housekeeping services, as many hospitals now provide these services through contracts. Costs for these services tend to be below the average wages for all hospital employees. Therefore, excluding the costs and hours for these services if they are provided under contract, while including them if the services are provided directly by the hospital, creates an incentive for hospitals to contract for these services in order to increase their average hourly wage for wage index purposes’’ (67 FR 50022). In the FY 2003 IPPS proposed rule, we explained that we selected the three overhead services of administrative and general, housekeeping, and dietary because they are provided at all hospitals, either directly or through contracts, and together they comprise about 60 percent of a hospital’s overhead hours (67 FR 31433). In the FY 2003 IPPS final rule, we stated that we ‘‘will monitor the hospital industry for information regarding the hospitals’ ability to provide the data. Further, we will work with hospitals and intermediaries [MACs] to develop acceptable methods for tracking the costs and hours. Finally, before including these additional costs in the wage index, we will provide a detailed analysis of the impact of including these additional costs in the wage index values in the Federal Register and provide for public comment. Our final decision on whether to include contract indirect patient care labor costs in our calculation of the wage index will depend on the outcome of our analyses and public comments’’ (67 FR 50023). Subsequent to the issuance of the FY 2003 IPPS final rule, we revised Worksheet S–3, Part II of the Medicare cost report (CMS Form 2552–96) to add VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 four lines for the reporting of contract labor salaries, wages, and hours. The lines added for contract housekeeping and dietary services were lines 26.01 and 27.01, respectively. (Line 9.03 for contract management and line 22.01 for contract administrative and general (A&G) services were also added at that time). These lines were effective with cost reporting periods beginning on or after October 1, 2003 (that is, FY 2004). Because the cost report data used for the wage index are on a 4-year lag, data from these new contract labor lines would first be available for the FY 2008 wage index. In the FY 2008 rulemaking process, we provided an analysis of the effect on the inclusion in the wage index of the wages and hours related to the new contract labor lines. At that time, 56 hospitals (1.6 percent) failed edits for contract housekeeping line 26.01; and 99 hospitals (2.8 percent) failed edits for contract dietary line 27.01 (72 FR 24680 and 24782). We also noted that ‘‘many of these edit failures are for wage data that are not to be included in the wage index and will be excluded through the wage index calculation. . . . In addition, some of the aberrant data will be resolved by the final rule through the correction process’’ (72 FR 24680 and 24782). The small percentage of hospitals that failed edits for these contract labor lines indicates that the vast majority of hospitals completing these contract labor lines were able to obtain and report reasonable salaries, wages, and hours associated with contract housekeeping and dietary services. In the FY 2008 IPPS final rule, we stated that we believe that ‘‘the impact of this policy is generally very minor, and we do not believe the additional complexity of a transition wage index is warranted for an impact this small. Further, we continue to believe it is prudent policy to include in the wage index the costs for these contract indirect patient care services’’ (72 FR 47316). Therefore, we adopted the policy to include the new contract labor lines in the wage index, beginning with the FY 2008 wage index. The questions that have recently come to our attention involve hospitals that consistently do not provide documentable salaries, wages, and hours for their contracted housekeeping and/or dietary services. (On the Medicare cost report (CMS Form 2552– 10), contract housekeeping is on Worksheet S–3, Part II, line 33 and contract dietary is on line 35). When this situation occurs, CMS has instructed the Medicare contractors to use reasonable estimates, such as regional average hourly rates, as a PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 28065 substitute for actual wages and hours, and to report the estimates on the hospital’s Worksheet S–3, Part II, line 33 or line 35, respectively. Our policy has been to use reasonable estimates for these housekeeping and dietary lines, rather than report zeroes for wages and hours, because, as discussed above and as stated in the FY 2003 IPPS final rule, ‘‘[c]osts for these services tend to be below the average wages for all hospital employees. Therefore, excluding the costs and hours for these services if they are provided under contract, while including them if the services are provided directly by the hospital, creates an incentive for hospitals to contract for these services in order to increase their average hourly wage for wage index purposes’’ (57 FR 50022). We understand that the reason many hospitals provide for failing to report such contract wages and hours is that their contracts do not clearly specify this information, often because they use a single vendor to provide several different contract labor services. We believe that allowing hospitals to routinely use contracts that do not clearly break out the salaries, wages, and hours associated with these services as a reason for not being able to report proper salaries, wages, and hours for these cost report lines undermines the purpose of instituting these lines in the first place. Furthermore, because every hospital must provide housekeeping and dietary services, and because the wage index is a relative measure of the value of the labor provided to a hospital in a particular labor market area, to report zeroes for salaries, wages, and hours for housekeeping and dietary services is not only unrealistic (in that every hospital provides for these services), but also misrepresents the labor costs in that area and undermines our policy. Consequently, CMS has instructed the Medicare contractors not to zero out these line items when a hospital cannot document the housekeeping or dietary salaries, wages, and hours, but instead to use a reasonable estimation of these wages and hours. In this proposed rule, we are reiterating our requirement that all hospitals must document salaries, wages, and hours for the purpose of reporting this information on Worksheet S–3, Part II, lines 32, 33, 34, and/or 35 (for either directly employed housekeeping and dietary employees on lines 32 and 34, and contract labor on lines 33 and 35). It is not acceptable for a hospital to request that the Medicare contractor zero out these line items if the hospital’s contract does not E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28066 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules specifically break out the actual wages and hours. As indicated above, and stated in the FY 2008 IPPS proposed rule (72 FR 24680 and 24782), a small percentage of hospitals failed edits associated with the contract housekeeping and dietary lines, showing that the vast majority of hospitals reporting data on these lines were able to obtain and report reasonable salaries, wages, and hours associated with contract housekeeping and dietary services. We encourage hospitals to ensure that their contracts clearly specify the salaries, wages, and hours related to all of their contract labor. Because these line items have been included in the cost report since FY 2004, we believe that hospitals have had adequate notice and time to structure their contracts so that the wages and hours of contract employees can be determined and included in the cost reports. We expect hospitals to provide accurate data on their cost reports. We understand that there may be rare situations where a hospital would not have documentable salaries, wages, and hours for contract housekeeping and dietary services. In these situations, we believe that it is appropriate and necessary to use reasonable estimates for these numbers in order to determinate the best, most realistic, wage index that we can. As discussed previously, housekeeping and dietary services are unique in that the costs for housekeeping and dietary services tend to be below the average wages for all hospital employees. Thus, an incentive is created for hospitals to avoid reporting these contract labor salaries, wages, and hours on the cost report in order to increase their average hourly wage for wage index purposes. To deter hospitals from not reporting this information and to ensure that the wage index more accurately reflects the labor costs in an area, we believe that it is both necessary and appropriate for the Medicare contractors to estimate such salaries, wages, and hours in the rare instance where a hospital cannot provide such information. Therefore, in the absence of documentable wages and hours for contract housekeeping and dietary services, Medicare contractors would continue to use reasonable estimates for these services. Examples of reasonable estimates are regional average hourly rates, including an average of the wages and hours for dietary and housekeeping services of other hospitals in the same CBSA as the hospital in question. Hospitals also may conduct time studies to determine hours worked. If, for whatever reason, regional VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 averages or time studies cannot be used, Medicare contractors may use data from the Bureau of Labor Statistics to obtain average wages and hours for housekeeping and dietary services. Commenters may also suggest alternatives for imputing reasonable estimates for possible consideration by CMS. In all cases, Medicare contractors must determine that the data used are reasonable. E. Method for Computing the Proposed FY 2015 Unadjusted Wage Index The method used to compute the proposed FY 2015 wage index without an occupational mix adjustment follows the same methodology that we used to compute the FY 2012, FY 2013, and FY 2014 final wage indexes without an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366 through 53367, and 78 FR 50587 through 50588, respectively). As discussed in the FY 2012 final rule, in ‘‘Step 5,’’ for each hospital, we adjust the total salaries plus wagerelated costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2010, through April 15, 2012, for private industry hospital workers from the BLS’ Compensation and Working Conditions. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we are not proposing any changes to the usage for FY 2015. The factors used to adjust the hospital’s data were based on the midpoint of the cost reporting period, as indicated in the following table. MIDPOINT OF COST REPORTING PERIOD After Before Adjustment factor 10/14/2010 11/14/2010 12/14/2010 01/14/2011 02/14/2011 03/14/2011 04/14/2011 05/14/2011 06/14/2011 07/14/2011 08/14/2011 09/14/2011 10/14/2011 11/14/2011 12/14/2011 01/14/2012 02/14/2012 11/15/2010 12/15/2010 01/15/2011 02/15/2011 03/15/2011 04/15/2011 05/15/2011 06/15/2011 07/15/2011 08/15/2011 09/15/2011 10/15/2011 11/15/2011 12/15/2011 01/15/2012 02/15/2012 03/15/2012 1.02230 1.02078 1.01929 1.01782 1.01637 1.01494 1.01355 1.01219 1.01084 1.00948 1.00811 1.00674 1.00538 1.00403 1.00269 1.00134 1.00000 PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 MIDPOINT OF COST REPORTING PERIOD—Continued After Before Adjustment factor 03/14/2012 04/15/2012 0.99866 For example, the midpoint of a cost reporting period beginning January 1, 2011, and ending December 31, 2011, is June 30, 2011. An adjustment factor of 1.01084 would be applied to the wages of a hospital with such a cost reporting period. Using the data as described above and in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50587 through 50588), the proposed FY 2015 national average hourly wage (unadjusted for occupational mix) is $39.1525. The proposed FY 2015 Puerto Rico overall average hourly wage (unadjusted for occupational mix) is $17.0010. F. Proposed Occupational Mix Adjustment to the Proposed FY 2015 Wage Index As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals’ employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor. 1. Development of Data for the Proposed FY 2015 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey As provided for under section 1886(d)(3)(E) of the Act, we collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. As discussed in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50588), the occupational mix adjustment to the FY 2014 wage index was based on data collected on the 2010 Medicare Wage Index Occupational Mix Survey (Form CMS–10079 (2010)). For the FY 2015 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 wage index, we are proposing to again use occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2015. We are including data for 3,165 hospitals that also have wage data included in the proposed FY 2015 wage index. 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index As stated earlier, section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We used occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2013, FY 2014, and the proposed FY 2015 wage index associated with this proposed rule. Therefore, a new measurement of occupational mix will be required for FY 2016. On December 7, 2012, we published in the Federal Register a notice soliciting comments on the proposed 2013 Medicare Wage Index Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 survey, which will be applied to the FY 2016 wage index, includes the same data elements and definitions as the 2010 survey and provides for the collection of hospital-specific wages and hours data for nursing employees for calendar year 2013 (that is, payroll periods ending between January 1, 2013 and December 31, 2013). The comment period for the notice ended on February 5, 2013. After considering the public comments that we received on the December 2012 notice, we made a few minor editorial changes and published the 2013 survey in the Federal Register on February 28, 2013 (78 FR 13679). This survey was approved by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/WAGEINDEX-OCCUPATIONAL-MIXSURVEY2013.pdf. The 2013 Occupational Mix Survey Hospital Reporting Form CMS–10079 for the Wage Index Beginning FY 2016 (in excel format) is available on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY2016-Wage-IndexOccupationalMix.html. Hospitals are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 required to submit their completed 2013 surveys to their MACs by July 1, 2014. The preliminary, unaudited 2013 survey data will be released afterward, along with the FY 2012 Worksheet S–3 wage data, for the FY 2016 wage index review and correction process. 3. Calculation of the Proposed Occupational Mix Adjustment for FY 2015 For FY 2015, we are proposing to calculate the occupational mix adjustment factor using the same methodology that we used for the FY 2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77 FR 53367 through 53368, and 78 FR 50588 through 50589, respectively). As a result of applying this methodology, the proposed FY 2015 occupational mix adjusted national average hourly wage (based on the proposed new OMB delineations) is $39.1177. The proposed FY 2015 occupational mix adjusted Puerto Rico-specific average hourly wage (based on the proposed new OMB delineations) is $17.0526. Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the proposed FY 2015 wage index. For the FY 2015 proposed wage index, because we are using the Worksheet S–3, Parts II and III wage data of 3,400 hospitals, and we are using the occupational mix surveys of 3,165 hospitals for which we also have Worksheet S–3 wage data, that represents a ‘‘response’’ rate of 93.1 percent (3,165/3,400). In the proposed FY 2015 wage index established in this proposed rule, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 23943 and 75 FR 50167, respectively), we stated that, in order to gain a better understanding of why some hospitals are not submitting the occupational mix data, we will require hospitals that do not submit occupational mix data to provide an explanation for not PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 28067 complying. This requirement was effective beginning with the 2010 occupational mix survey. We instructed fiscal intermediaries/MACs to continue gathering this information as part of the FY 2014 and FY 2015 wage index desk review process. We stated that we would review these data for future analysis and consideration of potential penalties for noncompliant hospitals. G. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2015 Occupational Mix Adjusted Wage Index 1. Analysis of the Proposed Occupational Mix Adjustment and the Proposed Occupational Mix Adjusted Wage Index As discussed in section III.F. of the preamble of this proposed rule, for FY 2015, we are proposing to apply the proposed occupational mix adjustment to 100 percent of the proposed FY 2015 wage index. We calculated the proposed occupational mix adjustment using data from the 2010 occupational mix survey data, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586). Using the occupational mix survey data and applying the occupational mix adjustment to 100 percent of the proposed FY 2015 wage index results in a proposed national average hourly wage (based on the new OMB delineations) of $39.1177 and a proposed Puerto-Rico specific average hourly wage of $17.0526. After excluding data of hospitals that either submitted aberrant data that failed critical edits, or that do not have FY 2011 Worksheet S–3, Parts II and III, cost report data for use in calculating the proposed FY 2015 wage index, we calculated the proposed FY 2015 wage index using the occupational mix survey data from 3,165 hospitals. For the FY 2015 proposed wage index, because we are using the Worksheet S– 3, Parts II and III wage data of 3,400 hospitals, and we are using the occupational mix survey data of 3,165 hospitals for which we also have Worksheet S–3 wage data, those data represent a ‘‘response’’ rate of 93.1 percent (3,165/3,400). The proposed FY 2015 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows: E:\FR\FM\15MYP2.SGM 15MYP2 28068 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Proposed average hourly wage Occupational mix nursing subcategory mstockstill on DSK4VPTVN1PROD with PROPOSALS2 National National National National National RN ......................................................................................................................................................................... LPN and Surgical Technician ................................................................................................................................ Nurse Aide, Orderly, and Attendant ...................................................................................................................... Medical Assistant .................................................................................................................................................. Nurse Category ..................................................................................................................................................... The proposed national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $31.744397958. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0. Based on the 2010 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the nurse category is 43.43 percent, and the national percentage of hospital employees in the all other occupations category is 56.57 percent. At the CBSA level, using the new OMB delineations proposed for FY 2015, the percentage of hospital employees in the nurse category ranged from a low of 21.88 percent in one CBSA to a high of 73.27 percent in another CBSA. We compared the proposed FY 2015 occupational mix adjusted wage indexes for each CBSA to the proposed unadjusted wage indexes for each CBSA. We used the proposed FY 2015 new OMB delineations for this analysis. As a result of applying the proposed occupational mix adjustment to the wage data, the proposed wage index values for 215 (52.8 percent) urban areas and 29 (61.7 percent) rural areas would increase. One hundred and sixteen (28.5 percent) urban areas would increase by 1 percent but less than 5 percent, and 4 (1.0 percent) urban areas would increase by 5 percent or more. Fourteen (29.8 percent) rural areas would increase by 1 percent but less than 5 percent, and no rural areas would increase by 5 percent or more. However, the wage index values for 190 (46.7 percent) urban areas and 18 (38.3 percent) rural areas would decrease. Eighty (19.7 percent) urban areas would decrease by 1 percent but less than 5 percent, and 1 (0.2 percent) urban area would decrease by 5 percent or more. Seven (14.9 percent) rural areas would decrease by 1 percent and less than 5 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 percent, and no rural areas would decrease by 5 percent or more. The largest positive impacts would be 6.56 percent for an urban area and 3.35 percent for a rural area. The largest negative impacts would be 5.32 percent for an urban area and 1.71 percent for a rural area. Two urban areas’ wage indexes, but no rural area wage indexes, would remain unchanged by application of the occupational mix adjustment. These results indicate that a larger percentage of rural areas (61.7 percent) would benefit from the occupational mix adjustment than would urban areas (52.8 percent). However, approximately one-third (38.3 percent) of rural CBSAs would still experience a decrease in their wage indexes as a result of the occupational mix adjustment. 2. Proposed Application of the Rural, Imputed, and Frontier Floors a. Proposed Rural Floor Section 4410(a) of Public Law 105–33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the ‘‘rural floor.’’ Section 3141 of Public Law 111–148 also requires that a national budget neutrality adjustment be applied in implementing the rural floor. In the proposed FY 2015 wage index associated with this proposed rule and available on the CMS Web site, based on the proposed implementation of the new OMB delineations discussed in section III.B. of the preamble of this proposed rule, we estimated that 441 hospitals would receive an increase in their FY 2015 proposed wage index due to the application of the rural floor. b. Proposed Imputed Floor for FY 2015 In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the ‘‘imputed floor’’ policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have argued that they are disadvantaged by the absence of rural hospitals to set a wage index floor for those States. Since its initial implementation, we have extended the imputed floor policy four times, the last PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 37.388291241 21.767178303 15.31155016 17.246724132 31.744397958 of which was adopted in the FY 2014 IPPS/LTCH PPS final rule and is set to expire on September 30, 2014. (We refer readers to further discussion of the imputed floor in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50589 through 50590) and to our regulations at 42 CFR 412.64(h)(4).) There were previously two all-urban States, New Jersey and Rhode Island, that have a range of wage indexes assigned to hospitals in the State, including through reclassification or redesignation (we refer readers to discussions of geographic reclassifications and redesignations in section III.H. of the preamble of this proposed rule). However, as we explain below, the method as of FY 2012 for computing the imputed floor (the original methodology) benefitted only New Jersey, and not Rhode Island. In computing the imputed floor for an all-urban State under the original methodology, we calculated the ratio of the lowest-to-highest CBSA wage index for each all-urban State as well as the average of the ratios of lowest-to-highest CBSA wage indexes of those all-urban States. We then compared the State’s own ratio to the average ratio for allurban States and whichever is higher is multiplied by the highest CBSA wage index value in the State—the product of which established the imputed floor for the State. Under the current OMB labor market area delineations that we used for the FY 2014 wage index, Rhode Island has only one CBSA (ProvidenceNew Bedford-Fall River, RI–MA) and New Jersey has 10 CBSAs. Therefore, under the original methodology, Rhode Island’s own ratio equaled 1.0, and its imputed floor was equal to its original CBSA wage index value. However, because the average ratio of New Jersey and Rhode Island was higher than New Jersey’s own ratio, this methodology provided a benefit for New Jersey, but not for Rhode Island. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we retained the imputed floor calculated under the original methodology as discussed above, and established an alternative methodology for computing the imputed floor wage index to address the concern that the original imputed floor methodology guaranteed a benefit E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules for one all-urban State with multiple wage indexes (New Jersey) but could not benefit the other all-urban State (Rhode Island). The alternative methodology for calculating the imputed floor was established using data from the application of the rural floor policy for FY 2013. Under the alternative methodology, we first determined the average percentage difference between the post-reclassified, pre-floor area wage index and the post-reclassified, rural floor wage index (without rural floor budget neutrality applied) for all CBSAs receiving the rural floor. (Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which is available on the CMS Web site) included the CBSAs receiving a State’s rural floor wage index.) The lowest post-reclassified wage index assigned to a hospital in an all-urban State having a range of such values then is increased by this factor, the result of which establishes the State’s alternative imputed floor. We amended § 412.64(h)(4) of the regulations to add new paragraphs to incorporate the finalized alternative methodology, and to make reference and date changes. In summary, for the FY 2013 wage index, we did not make any changes to the original imputed floor methodology at § 412.64(h)(4) and, therefore, made no changes to the New Jersey imputed floor computation for FY 2013. Instead, for FY 2013, we adopted a second, alternative methodology for use in cases where an all-urban State has a range of wage indexes assigned to its hospitals, but the State cannot benefit from the methodology in existing § 412.64(h)(4). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 50590), we extended the imputed floor policy (both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2014, while we continued to explore potential wage index reforms. For FY 2015, we are proposing to continue the extension of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015, as we continue to explore potential wage index reforms. As discussed in section III.B. of the preamble of this proposed rule, we are proposing to adopt the new OMB labor market area delineations beginning in FY 2015. Under OMB’s new labor market area delineations based on Census 2010 data, Delaware would become an all-urban State, along with New Jersey and Rhode Island. Under the new OMB delineations, Delaware would have three CBSAs, New Jersey would have seven CBSAs, and Rhode Island VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 would continue to have only one CBSA (Providence-Warwick, RI–MA). We refer readers to a detailed discussion of our proposal to adopt the new OMB labor market area delineations in section III.B. of the preamble of this proposed rule. We are proposing to revise the regulations at § 412.64(h)(4) and (h)(4)(vi) to reflect the proposed 1-year extension of the imputed floor. We are inviting public comments on our proposal regarding the 1-year extension of the imputed floor. The wage index and impact tables associated with this FY 2015 IPPS/ LTCH PPS proposed rule that are available on the CMS Web site reflect the proposed continued application of the imputed floor policy at § 412.64(h)(4) and a national budget neutrality adjustment for the imputed floor for FY 2015. There are 12 providers in New Jersey, and 1 provider in Delaware that would receive an increase in their FY 2015 wage index due to the proposed continued application of the imputed floor policy under the original methodology. The wage index and impact tables for this FY 2015 proposed rule also reflect the proposed application of the second alternative methodology for computing the imputed floor, which would benefit four hospitals in Rhode Island. c. Proposed State Frontier Floor Section 10324 of Public Law 111–148 requires that hospitals in frontier States cannot be assigned a wage index of less than 1.0000 (we refer readers to regulations at 42 CFR 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50160 through 50161)). Based on the proposed implementation of the new OMB delineations discussed in section III.B. of the preamble of this proposed rule, 46 hospitals would receive the frontier floor value of 1.0000 for their proposed FY 2015 wage index in this proposed rule. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming. Although Nevada is also defined as a frontier State, its proposed FY 2015 rural floor value of 1.1373 is greater than 1.0000, and therefore, no Nevada hospitals would receive a frontier floor value for their proposed FY 2015 wage index. The areas affected by the proposed rural, imputed, and frontier floor policies for the proposed FY 2015 wage index are identified in Table 4D associated with this proposed rule, which is available on the CMS Web site. PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 28069 3. Proposed FY 2015 Wage Index Tables The proposed wage index values for FY 2015 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act), included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site, include the proposed occupational mix adjustment, geographic reclassification or redesignation as discussed in section III.H. of the preamble of this proposed rule, and the application of the rural, imputed, and frontier State floors as discussed in section III.G.2. of the preamble of this proposed rule. We note that because we are proposing to adopt the new OMB labor market area delineations for FY 2015, these tables have additional tabulations to account for wage index calculations computed under the previous and the new OMB delineations. Tables 3A and 3B, available on the CMS Web site, list the proposed 3-year average hourly wage for each labor market area before the redesignation or reclassification of hospitals based on FYs 2009, 2010, and 2011 cost reporting periods. Table 3A lists these data for urban areas, and Table 3B lists these data for rural areas. In addition, Table 2, which is available on the CMS Web site, includes the proposed adjusted average hourly wage for each hospital from the FY 2009 and FY 2010 cost reporting periods, as well as the FY 2011 period used to calculate the proposed FY 2015 wage index. The proposed 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described in Step 5 in section III.G. of the preamble of this proposed rule) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its proposed average hourly wage for the 3year period is calculated based on the data available during that period. The proposed average hourly wages in Tables 2, 3A, and 3B, which are available on the CMS Web site, include the proposed occupational mix adjustment. The proposed wage index values in Tables 4A, 4B, 4C, and 4D also include the proposed national rural floor budget neutrality adjustment (which includes the proposed imputed floor). The proposed wage index values in Table 2 also include the proposed out-migration adjustment for eligible hospitals. As stated above, because we are proposing to adopt the new OMB labor market area delineations for FY 2015, these tables have additional tabulations to account for wage index calculations computed under the current labor market definitions and the E:\FR\FM\15MYP2.SGM 15MYP2 28070 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules new OMB labor market area delineations. In addition, for certain applicable hospitals, the proposed wage index values included in Table 2 are computed to reflect the proposed transitional wage index or the 50/50 blended wage index discussed in detail in section III.B.2.e. of the preamble of this proposed rule. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 2. FY 2015 MGCRB Reclassifications 1. General Policies and Effects of Reclassification and Redesignation Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (generally by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations that we are proposing for FY 2015, and the policies for the effects of hospitals’ reclassifications and redesignations on the wage index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under 42 CFR 412.103. Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of 42 CFR 412.103. While our general policies on geographic reclassification, redesignations under section 1886(d)(8)(B) of the Act, and urban hospitals reclassifying to rural under 42 CFR 412.103 will remain unchanged for FY 2015, we note that, due to our proposed adoption of the new OMB labor market area delineations for FY 2015, there are numerous unique classification VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 considerations for FY 2015 that are discussed in more detail in section III.H. of the preamble of this proposed rule. For a discussion of the new CBSA changes based on the new OMB labor market area delineations and our proposed implementation of those changes, we refer readers to sections III.B. and VI.C. of the preamble of this proposed rule. a. FY 2015 Reclassification Requirements and Approvals Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280. In February 2014, the MGCRB completed its review of FY 2015 reclassification requests. Based on such reviews, there were 379 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2015. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2015, hospitals reclassified beginning during FY 2013 or FY 2014 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications for the remainder of their 3-year period. There were 172 hospitals approved for wage index reclassifications in FY 2013, and 287 hospitals approved for wage index reclassifications in FY 2014. Of all the hospitals approved for reclassification for FY 2013, FY 2014, and FY 2015, as of February 2014, 838 hospitals are in a reclassification status for FY 2015. Under the regulations at 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of a proposed rule. For information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations, and clarifications regarding reinstating reclassifications and ‘‘fallback’’ reclassifications, were included in the FY 2008 IPPS final rule (72 FR 47333). Changes to the wage index that result from withdrawals of requests for reclassification, terminations, wage PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 index corrections, appeals, and the Administrator’s review process for FY 2015 will be incorporated into the wage index values published in the FY 2015 IPPS/LTCH PPS final rule. These changes affect not only the wage index value for specific geographic areas, but also the wage index value redesignated/ reclassified hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated/reclassified hospitals. Further, the wage index value for the area from which the hospitals are redesignated/reclassified may be affected. b. Effects of Implementation of New OMB Labor Market Area Delineations on Reclassified Hospitals Because hospitals that have been reclassified beginning in FY 2013, 2014, or 2015 were reclassified based on the current labor market delineations, if we adopt the new OMB labor market area delineations beginning in FY 2015, the areas to which they have been reclassified, or the areas where they are located, may change. Under the new OMB delineations, many existing CBSAs would be reconfigured. Hospitals with current reclassifications are encouraged to verify area wage indexes on Tables 4A–2 and 4B–2 associated with this proposed rule (which are available via the Internet on the CMS Web site), and confirm that the areas to which they have been reclassified for FY 2015 would continue to provide a higher wage index than their geographic area wage index. Hospitals may withdraw their FY 2015 reclassifications by contacting the MGCRB within 45 days from the publication of this proposed rule. In some cases, adopting the new OMB delineations would result in counties splitting apart from CBSAs to form new CBSAs, or counties shifting from one CBSA designation to another CBSA. Reclassifications granted under section 1886(d)(10) of the Act are effective for 3 fiscal years so that a hospital or county group of hospitals would be assigned a wage index based upon the wage data of hospitals in a nearby labor market area for a 3-year period. If CBSAs are split apart, or if counties shift from one CBSA to another under the new OMB delineations, it raises the question of how to continue a hospital’s reclassification for the remainder of its 3-year reclassification period, if that area to which the hospital reclassified no longer exists, in whole or in part. We dealt with this question in FY 2005 as well when CMS adopted the current OMB labor market area definitions. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Consistent with the policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054 through 49056), if a CBSA would be reconfigured due to the new OMB delineations and it would not be possible for the reclassification to continue seamlessly to the reconfigured CBSA, we believe it is appropriate for us to determine the best alternative location to reassign current reclassifications for the remaining 3 years. Therefore, to maintain the integrity of a hospital’s 3-year reclassification period, we are proposing a policy to assure that current geographic reclassifications (applications approved in FY 2013, FY 2014, or FY 2015) that would be affected by CBSAs that are split apart or counties that shift to another CBSA under the new OMB delineations, would ultimately be assigned to a CBSA under the new OMB delineations that contains at least one county from the reclassified CBSA under the current FY 2014 OMB definitions, and would be generally consistent with rules that govern geographic reclassification. That is, consistent with policy finalized in FY 2005 (69 FR 49054 and 49055), we are proposing a general policy that affected reclassified hospitals would be assigned to a CBSA that (1) would contain the most proximate county that is located outside of the hospital’s proposed FY 2015 geographic labor market area, and (2) is part of the original FY 2014 CBSA to which the hospital is reclassified. We believe that by assigning reclassifications to the CBSA that contains the nearest eligible county (as described above) satisfies the statutory requirement at section 1886(d)(10)(v) of the Act by maintaining reclassification status for a period of 3 fiscal years, while generally respecting the longstanding principle of geographic proximity in the labor market reclassification process. The hospitals that we are proposing to reassign to a different CBSA based on our proposed policy above are listed in a special Table 9A–2 for this proposed rule, which is available via the Internet on the CMS Web site. In addition, we are proposing to allow a hospital, or county group of hospitals, to request reassignment to another CBSA that would contain a county that is part of the current FY 2014 CBSA to which they are reclassified, if the hospital or county group of hospitals can demonstrate compliance with applicable reclassification proximity rules, as described later in this section. We recognize that this proposed reclassification reassignment described for hospitals that are reclassified to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 CBSAs that would split apart or to counties that would shift to another CBSA under the new OMB delineations may result in the reassignment of the hospital for the remainder of its 3-year reclassification period to a CBSA having a lower wage index than the wage index that would have been assigned for the reclassified hospital in the absence of the proposed adoption of the new OMB delineations. Therefore, as discussed in section III.B.2.e.(4) of the preamble of this proposed rule, we are proposing that all hospitals that would experience a decrease in their FY 2015 wage index value due to the proposed implementation of the new OMB delineations would receive a 50/50 blended wage index adjustment in FY 2015. For FY 2015, using FY 2015 wage data, we are proposing to calculate a wage index value based on the current FY 2014 OMB definitions, and a wage index value based upon the proposed new OMB delineations (including reclassification assignments discussed in this section). If the wage index under the proposed new OMB delineations would be lower than the wage index calculated with the current (FY 2014) OMB definitions, the hospital would be assigned a blended wage index (50 percent of the current; 50 percent of the proposed). We believe that this proposed transitional adjustment would mitigate negative payment impacts for FY 2015, and would afford hospitals additional time to fully assess any additional reclassification options available to them under the new OMB delineations. We are including the following descriptions of specific situations where we have determined that reassignment of reclassification areas would be appropriate. (1) Reclassifications to CBSAs That Would Be Subsumed by Other CBSAs We identified 66 counties that are currently located in CBSAs that would be subsumed by another CBSA under the new OMB labor market area delineations. As a result, hospitals reclassifying to those CBSAs would now find that their reclassifications are to a CBSA that no longer exists. For these hospitals, we are proposing to reassign reclassifications to the newly configured CBSA to which all of the original constituent counties in the FY 2014 CBSA are transferred. For example, CBSA 11300 (Anderson, IN) would no longer exist under the proposed FY 2015 delineations. The only constituent county in CBSA 11300, Madison County, IN, would be moving to CBSA 26900 (Indianapolis-Carmel-Anderson, IN). Because the original Anderson, IN PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 28071 labor market area no longer exists, we are proposing to reassign reclassifications from the original Anderson, IN labor market area to a newly configured CBSA where the original constituent county or counties are transferred, which is IndianapolisCarmel-Anderson, IN. For hospitals reclassified to a CBSA that would be subsumed by another CBSA, the following table reflects the hospitals’ current reclassified CBSA, and the CBSA to which CMS is proposing to assign them for FY 2015. PROPOSED HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS RECLASSIFIED TO A CBSA THAT WOULD BE SUBSUMED BY ANOTHER CBSA CMS certification No. (CCN) Current reclassified CBSA Proposed CBSA 050022 050054 050102 050243 050292 050329 050390 050423 050534 050573 050684 050686 050701 050765 050770 140067 150089 220001 220002 220008 220011 220019 220020 220049 220058 220062 220063 220070 220073 220074 220082 220084 220090 220095 220098 220101 220105 220163 220171 220175 220176 230002 230020 230024 230053 230089 230104 230142 230146 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 14060 11300 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 47644 47644 47644 47644 47644 47644 47644 47644 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 14010 26900 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 47664 47664 47664 47664 47664 47664 47664 47664 E:\FR\FM\15MYP2.SGM 15MYP2 28072 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS RECLASSIFIED TO A CBSA THAT WOULD BE SUBSUMED BY ANOTHER CBSA—Continued Current reclassified CBSA Proposed CBSA 230165 230176 230244 230270 230273 230297 300017 300023 300029 390151 410001 410004 410005 410007 410010 410011 410012 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 CMS certification No. (CCN) 47644 47644 47644 47644 47644 47644 37764 37764 37764 13644 14484 14484 14484 14484 14484 14484 14484 47664 47664 47664 47664 47664 47664 15764 15764 15764 43524 14454 14454 14454 14454 14454 14454 14454 (2) Reclassification to CBSAs Where the CBSA Number or Name Has Changed or to CBSAs Containing Counties That Would Be Moving to Another CBSA We identified six CBSAs with current reclassifications that would maintain the same constituent counties, but the CBSA number or name would change if we adopted the new OMB delineations. For example, CBSA 29140 (Lafayette, IN) currently contains three counties (Benton, Carroll, and Tippecanoe Counties). The CBSA name and number for these counties would change to CBSA 29200 (Lafayette-West Lafayette, IN) under the new OMB delineations. Because the constituent counties in these CBSAs would not change under the new delineations, we would consider these CBSAs to be unchanged, and we are not proposing any reassignment for hospitals reclassified to those labor market areas. Table 9A– 2 for this proposed rule (which is available via the Internet on the CMS Web site) reflects the proposed revised CBSA number effective in FY 2015. We identified eight CBSAs with current reclassifications that have one or more counties that would split off and move to a new CBSA or to a different existing CBSA under the new OMB delineations. These CBSAs are shown in the following table. Current FY 2014 CBSA 16620 16974 20764 31140 ... ... ... ... Current FY 2014 CBSA name Charleston, WV. Chicago-Joliet-Naperville, IL. Edison-New Brunswick, NJ. Louisville/Jefferson County, KY-IN. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Current FY 2014 CBSA 35644 ... 37964 ... 39100 ... 48900 ... Current FY 2014 CBSA name New York-White Plains-Wayne, NY-NJ. Philadelphia, PA. Poughkeepsie-Newburgh-Middletown, NY. Wilmington, NC. We have determined that 69 hospitals have current reclassifications to one of these CBSAs. Similar to the methodology finalized in the FY 2005 IPPS final rule (69 FR 49054 through 49055), we are proposing to follow the general policy discussed in section III.H.2.b. of the preamble of this proposed rule. Specifically, we are proposing that affected reclassified hospitals would be assigned to a CBSA (under the new OMB delineations) that would contain the most proximate county that is (1) located outside of the hospital’s proposed FY 2015 geographic labor market area; and (2) is included in the current CBSA to which they are reclassified. For each of the 69 hospitals, we conducted a mapping analysis and determined driving distances from their geographic location to the borders of each county (that is in the reclassified CBSA under the FY 2014 delineations) and is also included in a CBSA under the new OMB delineations, excluding any counties that would be located in the hospital’s proposed FY 2015 geographic labor market area. Following the general reassignment principle that we are proposing, we are proposing to reassign those reclassified hospitals to the CBSA which contains the geographically closest county. For example, there are hospitals that currently are reclassified to CBSA 39100 (PoughkeepsieNewburgh-Middletown, NY) under the FY 2014 delineations, which is comprised of Dutchess County and Orange County, NY. Under the new OMB delineations, Dutchess County would become part of new CBSA 20524 (Dutchess County-Putnam County, NY), while Orange County would join CBSA 35614 (New York-Jersey City-White Plains, NY-NJ Metropolitan Division). Therefore, we mapped the distances from one reclassified hospital to the border of Dutchess County and Orange County, NY (the two counties that were part of CBSA 39100 under the FY 2014 delineations). Our analysis showed that the hospital is 2.2 miles from Dutchess County, and 25.9 miles from Orange County. Therefore, we are proposing to reassign this hospital’s reclassification from the FY 2014 CBSA 39100 to the new CBSA 20524. PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 We also identified affected county group reclassifications. For these reclassifications, we would follow our proposed policy discussed above, except that, for county group reclassifications, we are proposing to reassign hospitals in a county group reclassification to the CBSA under the new OMB delineations to which the majority of hospitals in the group reclassification are geographically closest. Because hospitals in a county group applied as a group, we believe the reassignment should also be applied to the whole group. For example, the hospitals of Fairfield County, CT are reclassified as a group to CBSA 35644 under the FY 2014 delineations. Under the new OMB delineations, CBSA 35644 would no longer exist and would be split into the following two new CBSAs: 20524 (Dutchess County-Putnam County, NY) and 35614 (New YorkJersey City-White Plains, NY-NJ). Of the six hospitals in the group reclassification, all but one would be closer to an eligible county (Westchester, NY) in CBSA 35614 than to an eligible county (Putnam, NY) in CBSA 20524. Because these hospitals in Fairfield, CT applied as a group, we believe the reassignment should also be applied to the whole group. Therefore, we are proposing to assign the hospitals in this group reclassification to CBSA 35614, the reconfigured CBSA to which the majority of the hospitals in the group reclassification are geographically closest. To summarize, of the 69 hospitals reclassified to one of the 8 CBSAs in the preceding table that have counties that would split off and move to a new CBSA or a different existing CBSA under the new OMB delineations, there are 27 hospitals that would maintain the same reclassified CBSA number under our proposals. Another 28 hospitals would be reassigned to a reconfigured CBSA that would contain a similar number of counties from their current reclassified CBSA. For example, the new CBSA 35614 (New York-Jersey City-White Plains, NY-NJ Metropolitan Division) would contain 10 out of 11 counties from current (FY 2014) CBSA 35644 (New York-White Plains-Wayne, NY-NJ Metropolitan Division). For the remaining 14 reclassified hospitals, we are proposing to assign them to a CBSA (under the new OMB delineations) that would have a different CBSA number from the labor market area to which they are currently reclassified (under the current FY 2014 delineations). This is because if the original CBSA to which the hospitals are reclassified is losing counties to another urban CBSA, it may be that the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules original reclassification determination would not be reflective of the new delineations. In addition, because proximity to a CBSA is a requirement of reclassifications approved under section 1886(d)(10) of the Act, we believe it is appropriate to propose to reassign reclassification status to an urban CBSA that contains the county (from the hospital’s current CBSA reclassification) that is closest to the hospital. We believe this would more accurately reflect the geographic labor market area of the reclassified hospital. For example, under the FY 2014 delineations, CBSA 37964 (Philadelphia, PA Metropolitan Division) is comprised of five counties (Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties, PA). Under the new OMB delineations, CBSA 37964 would retain the same CBSA name and number, but three counties (Bucks, Chester, and Montgomery) would split off to form the new CBSA 33874 (Montgomery County-Bucks CountyChester County, PA Metropolitan Division). While CBSA 37964 exists under the FY 2014 and proposed new labor market area delineations, the fact that three counties would be moved to another CBSA means that current reclassifications to CBSA 37964 (Philadelphia) may be more proximate to new CBSA 33874. Therefore, if reclassified hospitals, or the majority of hospitals in a county group, are geographically closer to a county in CBSA 33874 than to a county in CBSA 37964, we are proposing to reassign the reclassification to that area, new CBSA 33874 (Montgomery County-Bucks County-Chester County, PA Metropolitan Division). Consistent with refinements implemented in the FY 2005 IPPS final rule (69 FR 49055), we are proposing to allow hospitals that reclassified under section 1886(d)(10) of the Act to one of the eight CBSAs that split (that is, current FY 2014 CBSAs 16620, 16974, 20764, 31140, 35644, 37964, 39100, 48900) to be reclassified to any CBSA containing a county from their original reclassification labor market area, provided that the hospital demonstrates that it meets the applicable proximity requirements under 42 CFR 412.230(b) and (c) (for individual hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42 CFR 412.234(a)(2) and (a)(3) (for an urban group) to that CBSA. Hospitals that wish to be reassigned to an alternate CBSA (other than the CBSA to which their reclassification would be reassigned in this proposed rule) for which they meet the applicable proximity criteria may request reassignment within 45 days from the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 publication of this proposed rule. Hospitals must send a request to WageIndex@cms.hhs.gov and provide documentation certifying that they meet the requisite proximity criteria for reassignment to an alternate CBSA, as described above. We believe this option of allowing hospitals to submit a request to CMS would provide hospitals with greater flexibility with respect to their reclassification reassignment, while ensuring that the proximity requirements are met. We believe that where the proximity requirements are met, the reclassified wage index would be consistent with the labor market area to which the hospitals were originally approved for reclassification. Under this proposed policy, a hospital may request to be assigned a reclassification to any CBSA that contains any county from the CBSA to which it is currently reclassified. However, to be reassigned to an area that is not the most proximate to the hospital (or the majority of hospitals in a county group), we believe it is necessary that the hospital demonstrates that it complies with the applicable proximity criteria. If a hospital cannot demonstrate proximity to an alternate CBSA, the hospital would not be considered for reclassification to that labor market area, and reassignment would remain with the closest eligible (new) CBSA. As discussed previously in this section, under the new OMB delineations, we identified CBSA 35644 (New York-White Plains-Wayne, NY-NJ Metropolitan Division) as one of the examples of the eight CBSAs that would have at least one county that would split off and join another new CBSA (Putnam County joined Dutchess County, NY to form new CBSA 20524), while also having multiple counties assigned to a reconfigured CBSA 35614 (New YorkJersey City-White Plains, NY-NJ Metropolitan Division). CBSA 35614 would also add Orange County, NY under the new OMB delineations. The hospitals that are currently located in CBSA 39100 (Poughkeepsie-NewburghMiddletown, NY) are currently part of a group reclassification of Orange County, NY to CBSA 35644 (New York-White Plains-Wayne, NY-NJ Metropolitan Division). As discussed above, we are proposing to reassign current reclassifications to the CBSA that contains the most proximate county that is located outside of the reclassified hospital’s proposed geographic labor market area, and is currently part of the original CBSA to which the hospital is reclassified. In the case of the Orange County, NY group reclassification, the closest (and only) county from the PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 28073 original reclassified area (CBSA 35644), that would not be located in Orange County’s proposed home labor market area (CBSA 35614) is Putnam County, NY. Therefore, we are proposing to reassign the Orange County group reclassification to CBSA 20524 (Putnam County-Dutchess County, NY). If the hospitals from the Orange County, NY group reclassification do not wish to maintain this assignment, we encourage them to formally terminate the current group reclassification within 45 days from the publication of this proposed rule, as discussed earlier in this section. The following table shows proposed hospital reclassification assignments for hospitals reclassified to CBSAs from which counties would be split off and moved to a different CBSA under the new OMB delineations. The following table shows the current reclassified CBSA and the CBSA to which CMS is proposing reassignment. PROPOSED HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS THAT ARE RECLASSIFIED TO CBSAS FROM WHICH COUNTIES WOULD BE SPLIT OFF AND MOVED TO A DIFFERENT CBSA CMS Certification number (CCN) Current reclassified CBSA Proposed reassigned CBSA 070006 070010 070018 070028 070033 070034 140B10 140012 140033 140084 140100 140110 140130 140155 140161 140186 140202 140291 150002 150004 150008 150034 150090 150125 150126 150165 150166 180012 180048 310002 310009 310014 310015 310017 310031 310038 35644 35644 35644 35644 35644 35644 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 31140 31140 35644 35644 37964 35644 35644 20764 35644 35614 35614 35614 35614 35614 35614 16974 20994 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 31140 31140 35614 35614 37964 35614 35614 35614 20524 E:\FR\FM\15MYP2.SGM 15MYP2 28074 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS THAT ARE RECLASSIFIED TO CBSAS FROM WHICH COUNTIES WOULD BE SPLIT OFF AND MOVED TO A DIFFERENT CBSA—Continued Current reclassified CBSA Proposed reassigned CBSA 310039 310050 310054 310070 310076 310083 310096 310108 310119 330027 330106 330126 330135 330167 330181 330182 330198 330205 330224 330225 330259 330264 330331 330332 330372 340042 340068 390044 390096 390316 420085 510062 510070 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 CMS Certification number (CCN) 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 39100 35644 35644 35644 35644 35644 35644 48900 48900 37964 37964 37964 48900 16620 16620 20524 35614 35614 20524 35614 35614 35614 20524 35614 35614 35614 20524 20524 35614 35614 35614 35614 20524 20524 35614 35614 20524 35614 35614 35614 48900 34820 33874 33874 33874 48900 16620 16620 Table 9A–2 for this proposed rule (which is available via the Internet on the CMS Web site) reflects all proposed reassignments of hospital reclassifications. We are proposing that hospitals that disagree with our determination of the most proximate county must provide an alternative method for determining proximity to CMS within 45 days from the publication of this proposed rule. The hospital’s request for reassignment should contain the hospital’s name, address, CCN, and point of contact information. All requests must be sent to WageIndex@ cms.hhs.gov. Changes to a hospital’s CBSA assignment on the basis of a hospital’s disagreement with our determination of closest county, or on the basis of being granted a reassignment due to meeting applicable proximity criteria to an eligible CBSA will be announced in the FY 2015 IPPS final rule. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (3) Reclassifications to CBSAs That Would Contain Hospital’s Geographic County We identified 14 reclassified hospitals that would be geographically located in their reclassified labor market area under the new OMB delineations. For example, hospital 34–0015 is located in Rowan County, NC. Rowan County is currently a Micropolitan Statistical Area in NC, and treated as rural. The hospital is reclassified to CBSA 16740 (CharlotteConcord-Rock Hill, NC–SC). Under the new OMB delineations, CBSA 16740 (Charlotte-Concord-Gastonia, NC–SC) would include Rowan County. Therefore, the current reclassification would become redundant. CBSA 16740 did not lose any counties to another labor market area; therefore, assignment to another alternate CBSA would not be an option under our proposed methodology. Because, by definition, a hospital would not be ‘‘reclassified’’ to its own geographic labor market area, and maintaining that ‘‘reclassified’’ status to its own geographic labor market area would serve no beneficial purpose for a hospital, we expect that all such affected hospitals would wish to terminate their reclassification status. Therefore, we are assuming for purposes of this proposed rule that the affected hospitals would be terminating their reclassification status for the remaining years of their 3-year reclassification period, and for FY 2015, we are proposing to assign them the wage index of the CBSA in which they are geographically located. Affected hospitals should inform CMS if they wish to retain their current reclassification by sending notice to WageIndex@cms.hhs.gov within 45 days from the publication of this proposed rule. If an affected hospital does not inform us that they wish to retain their current reclassification, we will assume that the hospital has elected to terminate the reclassification. For purposes of this proposed rule, we are presenting tables under the presumption that all 14 hospitals will opt to cancel their reclassification status. We are proposing to assign these hospitals the wage index value of their home area from Table 4A–2 for this proposed rule (which is available via the Internet on the CMS Web site), and not include them as reclassified hospitals in Table 9A–2 for this proposed rule (which is available via the Internet on the CMS Web site). PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 HOSPITALS RECLASSIFIED TO PROPOSED HOME LABOR MARKET AREA CMS certification No. (CCN) Current geographic CBSA Proposed geographic CBSA 340015 340129 340144 420036 450596 420027 150088 150113 190003 440073 460017 460039 190144 490019 34 34 34 42 45 11340 11300 11300 19 44 46 46 19 49 16740 16740 16740 16740 23104 24860 26900 26900 29180 34980 36260 36260 43340 47894 We have included a footnote for Table 9A–2 for this proposed rule indicating that these hospitals have been removed from this table, pending notification by the hospitals. c. Applications for Reclassifications for FY 2016 Applications for FY 2016 reclassifications are due to the MGCRB by September 2, 2014 (the first working day of September 2014). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). As discussed in section III.B. of the preamble of this proposed rule, we are proposing to adopt the new OMB labor market area delineations announced on February 28, 2013. Therefore, hospitals would apply for reclassifications based on the new OMB delineations we are proposing to use for FY 2015. Applications and other information about MGCRB reclassifications may be obtained via the Internet on the CMS Web site at: https://www.cms.gov/Regulations-andGuidance/Review-Boards/MGCRB/ index.html, or by calling the MGCRB at (410) 786–1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244– 2670.3. We also are proposing changes to the regulations at § 412.232(b)(2) and § 412.234(a)(3)(iv) to include reference to the most recent OMB standards for delineating statistical areas (using the most recent Census Bureau data and estimates) that were adopted by CMS. For rural groups, the group of hospitals must demonstrate that the county in which the hospitals are located meets the standards for redesignation to an MSA as an ‘‘outlying county.’’ For urban groups, hospitals located in counties that are in the same combined statistical area or CBSA as the urban area to which E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules they seek redesignation qualify as meeting the proximity requirements for reclassification to the urban area to which they seek redesignation. We are not proposing any changes to the reclassification policy, but would include language to reflect use of the most recent OMB standards for delineating statistical areas (using the most recent Census Bureau data and estimates) that were adopted by CMS in consideration of group reclassification applications submitted for review in FY 2015 (that is submitted by September 30, 2014, reviewed by the MGCRB in FY 2015, to be effective in FY 2016) and future years. 3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act Section 1886(d)(8)(B)(i) of the Act requires the Secretary to ‘‘treat a hospital located in a rural county adjacent to one or more urban areas as being located in the urban metropolitan statistical area to which the greatest number of workers in the county commute’’ if certain adjacency and commuting criteria are met. The criteria utilize standards for designating Metropolitan Statistical Areas published in the Federal Register by the Director of the Office of Management and Budget (OMB) based on the most recently available decennial population data. Effective beginning FY 2005, we used OMB’s CBSA standards based on the 2000 Census and the 2000 Census data to identify counties in which hospitals qualify under section 1886(d)(8)(B) of the Act to receive the wage index of the urban area. Hospitals located in these counties have been known as ‘‘Lugar’’ hospitals and the counties themselves are often referred to as ‘‘Lugar’’ counties. As discussed in section III.B. of the preamble to this proposed rule, we are proposing to implement OMB’s revised labor market area delineations based on the Census 2010 data for purposes of determining applicable wage indexes for acute care hospitals beginning in FY 2015. As we have done in the past, we also are proposing to use the new OMB 28075 delineations to identify rural counties that would qualify as ‘‘Lugar’’ under section 1886(d)(8)(B) of the Act and therefore would be redesignated to urban areas for FY 2015. We are proposing to revise the regulations at § 412.64(b)(3)(i) to reflect the most recent OMB standards for delineating statistical areas adopted by CMS. By applying the new OMB delineations, the number of qualifying counties, shown in the following chart, would increase from 98 to 127. After evaluating and analyzing the 2010 Census commuting data, we are proposing that, effective for discharges on or after October 1, 2014, in accordance with section 1886(d)(8)(B) of the Act, hospitals located in the rural counties listed in the first column of the following table would be designated as part of the urban area listed in the second column based on the criteria discussed above. We note that rural counties that no longer meet the qualifying criteria to be Lugar are discussed below in section III.H.3.c. of the preamble of this proposed rule. RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT (BASED ON NEW OMB DELINEATIONS AND CENSUS 2010 DATA) Rural county Lugar designated CBSA NEW mstockstill on DSK4VPTVN1PROD with PROPOSALS2 County name State CBSA CBSA name Chambers County ............................... Cherokee County ................................ Cleburne County ................................. Macon County ..................................... Talladega County ................................ Denali Borough ................................... Hot Spring County .............................. Litchfield County ................................. Bradford County .................................. Levy County ........................................ Washington County ............................. Chattooga County ............................... Jackson County .................................. Lumpkin County .................................. Polk County ......................................... Talbot County ...................................... Oneida County .................................... Christian County ................................. Iroquois County ................................... Logan County ...................................... Mason County ..................................... Ogle County ........................................ Union County ...................................... Clinton County .................................... Greene County .................................... Henry County ...................................... Marshall County .................................. Parke County ...................................... Spencer County .................................. Starke County ..................................... Tipton County ...................................... Warren County .................................... Boone County ..................................... Buchanan County ............................... Cedar County ...................................... Delaware County ................................ Iowa County ........................................ AL ..... AL ..... AL ..... AL ..... AL ..... AK ..... AR ..... CT ..... FL ...... FL ...... FL ...... GA ..... GA ..... GA ..... GA ..... GA ..... ID ...... IL ....... IL ....... IL ....... IL ....... IL ....... IL ....... IN ...... IN ...... IN ...... IN ...... IN ...... IN ...... IN ...... IN ...... IN ...... IA ...... IA ...... IA ...... IA ...... IA ...... 12220 40660 11500 12220 11500 21820 26300 35300 27260 23540 37460 40660 12060 12060 40660 17980 36260 44100 28100 44100 37900 40420 16060 29200 14020 26900 43780 45460 21780 16980 26900 29200 11180 47940 26980 20220 26980 Auburn-Opelika, AL ......................................................................................... Rome, GA ........................................................................................................ Anniston-Oxford-Jacksonville, AL .................................................................... Auburn-Opelika, AL ......................................................................................... Anniston-Oxford-Jacksonville, AL .................................................................... Fairbanks, AK .................................................................................................. Hot Springs, AR ............................................................................................... New Haven-Milford, CT ................................................................................... Jacksonville, FL ............................................................................................... Gainesville, FL ................................................................................................. Panama City, FL .............................................................................................. Rome, GA ........................................................................................................ Atlanta-Sandy Springs-Roswell, GA ................................................................ Atlanta-Sandy Springs-Roswell, GA ................................................................ Rome, GA ........................................................................................................ Columbus, GA-AL ............................................................................................ Ogden-Clearfield, UT ....................................................................................... Springfield, IL ................................................................................................... Kankakee, IL .................................................................................................... Springfield, IL ................................................................................................... Peoria, IL ......................................................................................................... Rockford, IL ..................................................................................................... Carbondale-Marion, IL ..................................................................................... Lafayette-West Lafayette, IN ........................................................................... Bloomington, IN ............................................................................................... Indianapolis-Carmel-Anderson, IN .................................................................. South Bend-Mishawaka, IN-MI ........................................................................ Terre Haute, IN ................................................................................................ Evansville, IN-KY ............................................................................................. Chicago-Naperville-Elgin, IL-IN-WI .................................................................. Indianapolis-Carmel-Anderson, IN .................................................................. Lafayette-West Lafayette, IN ........................................................................... Ames, IA .......................................................................................................... Waterloo-Cedar Falls, IA ................................................................................. Iowa City, IA .................................................................................................... Dubuque, IA ..................................................................................................... Iowa City, IA .................................................................................................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 New. New. New. New. New. New. New. New. New. New. New. 28076 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT (BASED ON NEW OMB DELINEATIONS AND CENSUS 2010 DATA)—Continued Rural county Lugar designated CBSA NEW mstockstill on DSK4VPTVN1PROD with PROPOSALS2 County name State CBSA CBSA name Jasper County ..................................... Franklin County ................................... Nelson County .................................... Assumption Parish .............................. Jefferson Davis Parish ........................ St. Landry Parish ................................ Oxford County ..................................... Caroline County .................................. Franklin County ................................... Allegan County .................................... Ionia County ........................................ Lenawee County ................................. Newaygo County ................................. Shiawassee County ............................ Tuscola County ................................... Goodhue County ................................. Meeker County .................................... Rice County ........................................ Pearl River County .............................. Stone County ...................................... Dade County ....................................... Otoe County ........................................ Douglas County .................................. Lyon County ........................................ Los Alamos County ............................. Cayuga County ................................... Cortland County .................................. Genesee County ................................. Greene County .................................... Lewis County ...................................... Montgomery County ............................ Schuyler County .................................. Seneca County ................................... Camden County .................................. Caswell County ................................... Granville County ................................. Greene County .................................... Harnett County .................................... Polk County ......................................... Wilson County ..................................... Traill County ........................................ Ashtabula County ................................ Champaign County ............................. Columbiana County ............................ Harrison County .................................. Preble County ..................................... Clinton County .................................... Fulton County ...................................... Greene County .................................... Lawrence County ................................ Schuylkill County ................................. Susquehanna County ......................... Adjuntas Municipio .............................. Coamo Municipio ................................ ´ Las Marıas Municipio .......................... Maricao Municipio ............................... Salinas Municipio ................................ Clarendon County ............................... Colleton County .................................. Lee County .......................................... Marion County ..................................... Newberry County ................................ Meigs County ...................................... Blanco County ..................................... Bosque County ................................... Calhoun County .................................. Fannin County ..................................... Grimes County .................................... Harrison County .................................. IA ...... KS ..... KY ..... LA ..... LA ..... LA ..... ME .... MD .... MA .... MI ...... MI ...... MI ...... MI ...... MI ...... MI ...... MN .... MN .... MN .... MS .... MS .... MO .... NE ..... NV ..... NV ..... NM .... NY ..... NY ..... NY ..... NY ..... NY ..... NY ..... NY ..... NY ..... NC ..... NC ..... NC ..... NC ..... NC ..... NC ..... NC ..... ND ..... OH .... OH .... OH .... OH .... OH .... PA ..... PA ..... PA ..... PA ..... PA ..... PA ..... PR ..... PR ..... PR ..... PR ..... PR ..... SC ..... SC ..... SC ..... SC ..... SC ..... TN ..... TX ..... TX ..... TX ..... TX ..... TX ..... TX ..... 19780 28140 31140 12940 29340 29180 30340 12580 44140 24340 24340 11460 24340 29620 40980 33460 33460 33460 25060 25060 44180 30700 16180 16180 42140 45060 27060 40380 10580 48060 10580 27060 40380 47260 15500 20500 24780 39580 43900 40580 24220 17460 44220 49660 48260 19380 48700 25180 38300 38300 39740 13780 38660 41980 32420 32420 25020 44940 16700 44940 22500 17900 17420 12420 47380 47020 19100 17780 30980 Des Moines-West Des Moines, IA .................................................................. Kansas City, MO-KS ....................................................................................... Louisville/Jefferson County, KY-IN .................................................................. Baton Rouge, LA ............................................................................................. Lake Charles, LA ............................................................................................. Lafayette, LA ................................................................................................... Lewiston-Auburn, ME ...................................................................................... Baltimore-Columbia-Towson, MD .................................................................... Springfield, MA ................................................................................................ Grand Rapids-Wyoming, MI ............................................................................ Grand Rapids-Wyoming, MI ............................................................................ Ann Arbor, MI .................................................................................................. Grand Rapids-Wyoming, MI ............................................................................ Lansing-East Lansing, MI ................................................................................ Saginaw, MI ..................................................................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Gulfport-Biloxi-Pascagoula, MS ....................................................................... Gulfport-Biloxi-Pascagoula, MS ....................................................................... Springfield, MO ................................................................................................ Lincoln, NE ...................................................................................................... Carson City, NV ............................................................................................... Carson City, NV ............................................................................................... Santa Fe, NM .................................................................................................. Syracuse, NY ................................................................................................... Ithaca, NY ........................................................................................................ Rochester, NY ................................................................................................. Albany-Schenectady-Troy, NY ........................................................................ Watertown-Fort Drum, NY ............................................................................... Albany-Schenectady-Troy, NY ........................................................................ Ithaca, NY ........................................................................................................ Rochester, NY ................................................................................................. Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Burlington, NC ................................................................................................. Durham-Chapel Hill, NC .................................................................................. Greenville, NC ................................................................................................. Raleigh, NC ..................................................................................................... Spartanburg, SC .............................................................................................. Rocky Mount, NC ............................................................................................ Grand Forks, ND-MN ...................................................................................... Cleveland-Elyria, OH ....................................................................................... Springfield, OH ................................................................................................ Youngstown-Warren-Boardman, OH-PA ......................................................... Weirton-Steubenville, WV-OH ......................................................................... Dayton, OH ...................................................................................................... Williamsport, PA .............................................................................................. Hagerstown-Martinsburg, MD-WV ................................................................... Pittsburgh, PA .................................................................................................. Pittsburgh, PA .................................................................................................. Reading, PA .................................................................................................... Binghamton, NY .............................................................................................. Ponce, PR ....................................................................................................... San Juan-Carolina-Caguas, PR ...................................................................... ¨ Mayaguez, PR ................................................................................................. ¨ Mayaguez, PR ................................................................................................. Guayama, PR .................................................................................................. Sumter, SC ...................................................................................................... Charleston-North Charleston, SC .................................................................... Sumter, SC ...................................................................................................... Florence, SC .................................................................................................... Columbia, SC .................................................................................................. Cleveland, TN .................................................................................................. Austin-Round Rock, TX ................................................................................... Waco, TX ......................................................................................................... Victoria, TX ...................................................................................................... Dallas-Fort Worth-Arlington, TX ...................................................................... College Station-Bryan, TX ............................................................................... Longview, TX ................................................................................................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00100 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28077 RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT (BASED ON NEW OMB DELINEATIONS AND CENSUS 2010 DATA)—Continued Rural county Lugar designated CBSA NEW County name State CBSA CBSA name Henderson County .............................. Hill County ........................................... Milam County ...................................... Van Zandt County ............................... Willacy County .................................... King and Queen County ..................... Louisa County ..................................... Madison County .................................. Orange County .................................... Page County ....................................... Shenandoah County ........................... Southampton County .......................... Surry County ....................................... Island County ...................................... Mason County ..................................... Jackson County .................................. Morgan County ................................... Roane County ..................................... Green Lake County ............................. Jefferson County ................................. Walworth County ................................. TX ..... TX ..... TX ..... TX ..... TX ..... VA ..... VA ..... VA ..... VA ..... VA ..... VA ..... VA ..... VA ..... WA .... WA .... WV .... WV .... WV .... WI ..... WI ..... WI ..... 46340 19100 12420 19100 15180 40060 40060 16820 47900 25500 49020 47260 47260 42660 36500 16620 25180 16620 22540 33340 33340 Tyler, TX .......................................................................................................... Dallas-Fort Worth-Arlington, TX ...................................................................... Austin-Round Rock, TX ................................................................................... Dallas-Fort Worth-Arlington, TX ...................................................................... Brownsville-Harlingen, TX ............................................................................... Richmond, VA .................................................................................................. Richmond, VA .................................................................................................. Charlottesville, VA ........................................................................................... Washington-Arlington-Alexandria, DC-VA-MD-WV ......................................... Harrisonburg, VA ............................................................................................. Winchester, VA-WV ......................................................................................... Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Seattle-Tacoma-Bellevue, WA ........................................................................ Olympia-Tumwater, WA .................................................................................. Charleston, WV ............................................................................................... Hagerstown-Martinsburg, MD-WV ................................................................... Charleston, WV ............................................................................................... Fond du Lac, WI .............................................................................................. Milwaukee-Waukesha-West Allis, WI .............................................................. Milwaukee-Waukesha-West Allis, WI .............................................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Proposed New Lugar Areas for FY 2015 Of the 127 qualifying counties identified as Lugar counties based on the new OMB delineations, 58 counties would be newly designated as Lugar for FY 2015 if we finalize our proposed adoption of the new OMB delineations. Hospitals in these counties, with at least 25 percent of their workers commuting to a higher wage area, effective October 1, 2014, will be deemed to be located in the CBSA to which the highest number of their workers commute (which is identified in the column titled ‘‘Lugar Designated CBSA’’ in the table above). Hospitals in these counties would receive the reclassified urban wage index of the corresponding Lugar Designated CBSA, unless they choose to waive their Lugar status, as discussed later in this section. Some areas that are currently urban counties would be geographically rural if we adopted the new OMB delineations and would meet the requirements for redesignation as Lugar areas. As described in section III.B.2.e.(2) of the preamble of this proposed rule, we are proposing a 3year hold harmless transitional wage index adjustment for hospitals located in urban counties that become rural under the new OMB delineations. Because Lugar status is a form of redesignation, hospitals that currently are located in urban counties that would become rural under the new OMB delineations and are also considered Lugar areas under the new OMB VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 New. New. New. New. New. New. New. New. delineations would not be eligible for the 3-year transition wage index adjustment unless they choose to waive Lugar status for FY 2015 (as discussed later in this section) and seek no other form of wage index reclassification. readers to the FY 2008 IPPS final rule with comment period (72 FR 47337 through 47338) for a discussion of this policy.) b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. Using Table 4C associated with this proposed rule (which is available via the Internet on the CMS Web site), affected hospitals may compare the reclassified wage index for the labor market area into which they would be reclassified by the MGCRB to the reclassified wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act. Hospitals may withdraw from an MGCRB reclassification within 45 days of the publication of this FY 2015 proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51598 through 51599) for the procedural rules and requirements for a hospital that is redesignated under section 1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB, as well as our policy of measuring the urban area, exclusive of the Lugar County, for purposes of meeting proximity requirements.) We treat New England deemed counties in a manner consistent with how we treat Lugar counties. (We refer If we adopt the new OMB delineations, 29 rural counties would no longer meet the qualifying criteria to be redesignated as Lugar effective October 1, 2014, either because they would be geographically located in an urban area, or they would fail to meet the 25percent cumulative out-migration threshold with application of the new 2010 Census commuting data. Counties that were deemed urban under section 1886(d)(8)(B) of the Act in FY 2014, but would be geographically located in an urban area under the new OMB delineations for FY 2015 are: Windham County, CT Flagler County, FL Walton County, FL Morgan County, GA Peach County, GA De Witt County, IL Allen County, KY St. James Parrish, LA Montcalm County, MI Fillmore County, MN Lincoln County, NC Cotton County, OK Linn County, OR Adams County, PA Monroe County, PA Falls County, TX Buckingham County, VA Floyd County, VA Green County, WI PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as Lugar E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28078 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Counties that would fail to meet the 25-percent threshold in FY 2015 are: Banks County, GA Hendry County, FL Bingham County, ID Oceana County, MI Columbia County, NY Sullivan County, NY Wyoming County, NY Oconee County, SC Middlesex County, VA Wahkiakum County, WA In section III.B.2.e.(2) of the preamble of this proposed rule, to help ease dramatic negative impacts in payment for hospitals designated as urban under the current FY 2014 OMB delineations, but would be classified as rural under the new OMB delineations, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we are proposing to assign these hospitals the FY 2015 area wage index value of the urban CBSA to which they geographically belonged in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). (For purposes of the wage index computation, the wage data of these hospitals would remain assigned to the statewide rural area in which they are located.) Similarly, we are proposing that the same 3-year transition apply to hospitals located in those counties that would lose their deemed urban designation under section 1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB delineations. Because these hospitals would, in fact, lose their designated urban status, we are proposing to extend the 3-year hold harmless transitional wage index adjustment to these hospitals located in counties formerly designated as urban under section 1886(d)(8)(B) of the Act. That is, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we are proposing to assign these hospitals the FY 2015 area wage index value of the urban CBSA to which they were designated as urban in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). We are proposing to use the wage data from these hospitals as part of computing the rural wage index. In addition, during this 3-year transition period, these hospitals would be eligible to apply for reclassification by the MGCRB. As discussed in section III.B.2.e.(3) of the preamble of this proposed rule, we are proposing that if a hospital is currently located in an urban county that would VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 become rural for FY 2015 under the new OMB delineations, and such hospital seeks and is granted any reclassification or redesignation during FYs 2015, 2016, or 2017, the hospital would permanently lose its 3-year transitional assigned wage index, and would not be able to reinstate it. Similarly, we are proposing that this policy also apply to hospitals located in those counties that would lose their deemed urban designation under section 1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB delineations. In FY 2018, we are proposing that these hospitals would receive their statewide rural wage index. 4. Waiving Lugar Redesignation for the Out-Migration Adjustment In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the DSH payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. (We refer readers to a discussion of DSH payment adjustment under section IV.F. of the preamble of this proposed rule.) In addition, we adopted a minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within 45 days from the publication of the proposed rule) to waive its urban status for the full 3-year period for which its out-migration adjustment is effective. By doing so, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the out-migration adjustment. Therefore, under the procedural change, a Lugar hospital that requests to waive its urban status in order to receive the rural wage index in addition to the out-migration adjustment would be deemed to have accepted the out-migration adjustment and agrees to be treated as rural for the duration of its 3-year eligibility period, unless, prior to its second or third year of eligibility, the hospital explicitly notifies CMS in writing, within the required period (generally 45 days from the publication of the proposed rule), that it instead elects to return to its deemed urban status and no longer wishes to accept the out-migration PO 00000 Frm 00102 Fmt 4701 Sfmt 4702 adjustment. If the hospital does notify CMS that it is electing to return to its deemed urban status, it would again be treated as urban for all IPPS payment purposes. We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51599 through 51600) for a detailed discussion of the policy and process for waiving Lugar status for the out-migration adjustment. 5. Update of Application of Urban to Rural Reclassification Criteria Section 401(a) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106– 113), which amended section 1886(d)(8) of the Act by adding a new paragraph (E), directed the Secretary to treat any subsection (d) hospital located in an urban area as being located in the rural area of the State in which the hospital is located, providing that the hospital applied for reclassification in a manner determined by the Secretary and met certain criteria. As discussed in the FY 2001 interim final rule (65 FR 47029 through 47031), we codified in regulation at § 412.103 the application process and the qualifying criteria for any hospital seeking rural reclassification. In order to be approved for a rural reclassification, a hospital must meet one of three criteria. The first criterion, located at § 412.103(a)(1), qualifies a hospital located in a rural census tract of an MSA area, as determined under the most recent version of the Goldsmith Modification, the RuralUrban Commuting Area (RUCA) codes. On February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. These delineations are based on 2010 decennial Census data. Several modifications of RUCA codes were necessary to take into account updated commuting data and revised OMB delineations. We refer readers to the U.S. Department of Agriculture’s Economic Research Service Web site for a detailed listing of updated RUCA codes found at: https:// www.ers.usda.gov/data-products/ruralurban-commuting-area-codes.aspx. The updated RUCA code definitions were introduced in late 2013. As discussed at § 412.103(f), the duration of an approved rural reclassification remains in effect without need for reapproval unless there is a change in the circumstances under which the E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 classification was approved. If a hospital located in an urban area was approved for a rural reclassification under § 412.103(a)(1), that reclassification would no longer be valid if the hospital is no longer located within a rural census tract of an MSA defined as an RUCA. Therefore, we encourage all hospitals with active rural reclassifications under section 1886(d)(8)(E) of the Act to review their original reclassification application and determine whether the reclassification status would still apply. As discussed in section VI.C.2. of the preamble of this proposed rule, we are proposing a 2year grace period allowing affected CAHs additional time to seek a new rural reclassification without the threat of losing its CAH status. As discussed in section VI.C.2. of the preamble of this proposed rule, we are not proposing a grace period for other types of hospitals to seek a new rural reclassification. We note that rural reclassification status under § 412.103 is effective as of the filing date of the application. Therefore, if the change in RUCA codes invalidates any hospital’s rural reclassification status, we believe hospitals will have adequate time to apply for a new reclassification using an alternative qualification criterion specified at either § 412.103(a)(2) or § 412.103(a)(3). A rural referral center (RRC) or a sole community hospital (SCH) that continues to meet the appropriate qualification criteria would, in itself, qualify for a rural reclassification. If a complete application is received before October 1, 2014, and is approved by the CMS Regional Office, the hospital would experience no interruption in its rural status. I. Proposed FY 2015 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the ‘‘out-migration’’ adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index. When this provision was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 which was derived from a special tabulation of the 2000 Census journeyto-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the ‘‘long-form’’ survey, which the Census Bureau used at the time, and it contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was ‘‘short form’’ only; therefore, this information was not collected as part of the 2010 Census. The Census Bureau is working with CMS to provide an alternative dataset based on the latest available data that is expected to meet our needs for developing a new out-migration adjustment. We believe we will have the necessary time to obtain, review and analyze the data in order to propose new out-migration adjustments based on new commuting patterns developed from the 2010 Census data beginning with FY 2016. Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. The data used for the FY 2014 out-migration adjustment are the most recent data that have been analyzed, and we believe that these data are appropriate to establish the qualifying counties. Therefore, we are proposing that the FY 2015 out-migration adjustments continue to be based on the 2000 Census data. We also are proposing that the FY 2015 outmigration adjustments continue to be based on the policies, procedures, and computation that were used for the FY 2014 out-migration adjustment. (We refer readers to a full discussion of the adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602)). Table 4J, which is available via the Internet on the CMS Web site, lists the proposed out-migration adjustments for the proposed FY 2015 wage index. Section 1886(d)(13)(F) of the Act states that ‘‘[a] wage index increase under this paragraph shall be effective for a period of 3 fiscal years, except that the Secretary shall establish procedures under which a subsection (d) hospital may elect to waive the application of such wage index increase.’’ Therefore, for FY 2015, because we are proposing to continue to use the out-migration adjustment data used for FY 2014, consistent with the statute, we also are proposing to allow hospitals that qualified in FY 2013 or FY 2014 to receive the out-migration adjustment PO 00000 Frm 00103 Fmt 4701 Sfmt 4702 28079 based on the commuting data and the CBSA delineations used for FY 2014 to continue to receive the same outmigration adjustment for the remainder of their 3-year qualification period. Similarly, if a hospital qualifies for and opts to receive the out-migration adjustment for the first time in FY 2015, we also are proposing to allow that hospital to receive the out-migration adjustment based on the data used for FY 2014 for FYs 2015, 2016, and 2017. Accordingly, even if we propose to adopt new out-migration adjustment data for FY 2016, as we believe we will be able to do, hospitals that are already receiving an out-migration adjustment beginning with a fiscal year prior to FY 2016 would still receive their outmigration adjustment based on the data used for FY 2014 for the years that remain of their 3-year qualification period in FY 2016 and after. We intend to address application of the FY 2016 out-migration adjustment in greater detail in the FY 2016 proposed rule. However, in this FY 2015 proposed rule, we are soliciting comments on how to implement the new out-migration adjustment data for FY 2016, given the statutory requirement at section 1886(d)(13)(F) of the Act that an out-migration adjustment be effective for 3 fiscal years. As discussed in section III.B. of the preamble of this proposed rule, we are proposing to use OMB’s new labor market area delineations based on the 2010 Census data to identify counties qualifying as Lugar counties for FY 2015. In section III.H.3 of the preamble of this proposed rule, we discuss hospitals located in rural counties that are deemed to be urban under section 1886(d)(8)(B) of the Act. These rural counties are known as ‘‘Lugar’’ counties. Under the new OMB delineations, there would be counties newly qualifying as Lugar as well as counties that were previously Lugar counties that would no longer meet the criteria to be redesignated as Lugar. As discussed in section III.H.4. of the preamble of this proposed rule, if a Lugar hospital qualifies for and accepts the outmigration adjustment, it must waive its deemed urban status and can do so for the 3-year period for which the outmigration adjustment is effective. Therefore, hospitals located in counties newly designated as Lugar due to the new OMB delineations would have the choice to either maintain their Lugar status or waive it in order to receive the out-migration adjustment in FY 2015 based on the out-migration adjustment data used for FY 2014. On the other hand, there are hospitals in counties deemed to be Lugar under E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28080 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the previous CBSA delineations that waived their Lugar status for the outmigration adjustment, but are not Lugar under the new OMB delineations. These hospitals would continue to receive the out-migration adjustment for the 3-year eligibility period through FY 2015 or FY 2016. However, these hospitals that are located in urban counties under the new OMB delineations, and wish to continue to maintain their rural status effective October 1, 2014, must do so by reclassifying from urban to rural under § 412.103. Section 1886(d)(13)(G) of the Act states that a hospital cannot simultaneously receive the outmigration adjustment and be subject to a reclassification under section 1886(d)(8) or 1886(d)(10) of the Act. Therefore, if such hospital is not located in a geographically rural area under the new OMB delineations, and reclassifies under § 412.103 of the regulations in order to be treated as rural for IPPS purposes, the hospital would be ineligible to receive an out-migration adjustment, even if the 3-year eligibility period has not expired. As discussed in section III.B.5. of the preamble of this proposed rule, we are proposing a 1-year blended wage index for any provider that experiences a decrease in wage index value due to the proposed implementation of the new OMB labor market area delineations. This proposal would create a wage index that is 50 percent of the wage index derived using the current FY 2014 OMB delineations, and 50 percent of the wage index based on the proposed new OMB delineations. As discussed in section III.B.2.e.(4) of the preamble of this proposed rule, we are proposing to apply this blended wage index value to any affected hospital in a budget neutral manner. However, we are proposing that hospitals receiving the out-migration adjustment would have it added to the result of the 50/50 blended wage index, after budget neutrality is applied. We are proposing the blended wage index transition adjustment specifically to address any negative impact that may be caused by the proposed adoption of the new OMB delineations in FY 2015. To specifically identify and address any such negative payment impact, we are proposing to apply the out-migration adjustment independent of the blended wage index and other wage index adjustments (for example, the rural floor) and related budget neutrality adjustments. This is consistent with our current policy to apply the outmigration adjustment after all other wage index adjustments and related budget neutrality adjustments have been applied. Therefore, we believe the out- VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 migration adjustment would be properly applied as a supplemental addition to a hospital’s final wage index value, similar to our treatment of hospitals receiving the frontier State floor value of 1.00, as described under 42 CFR 412.64(m), that also qualify for an outmigration adjustment and would receive that adjustment. J. Process for Requests for Wage Index Data Corrections The preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the proposed FY 2015 wage index were made available on September 13, 2013, through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Wage-Index-FilesItems/FY-2015-Wage-Index-HomePage.html. In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional public use file on our Web site that reflects the actual data that are used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and the scheduling of the Hospital Open Door forums at the CMS Web site at: https://www.cms.gov/ Outreach-and-Education/Outreach/ OpenDoorForums/. In a memorandum dated September 16, 2013, we instructed all MACs to inform the IPPS hospitals they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed below). We also instructed the MACs to advise hospitals that these data were also made available directly through their representative hospital organizations. If a hospital wished to request a change to its data as shown in the September 13, 2013 wage and occupational mix data files, the hospital was to submit corrections along with complete, detailed supporting documentation to its MAC by November 21, 2013. Hospitals were notified of this deadline and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the Internet, through the September 16, 2013 memorandum referenced above. PO 00000 Frm 00104 Fmt 4701 Sfmt 4702 In the September 16, 2013 memorandum, we also specified that a hospital requesting revisions to its occupational mix survey data was to copy its record(s) from the CY 2010 occupational mix preliminary files posted to the CMS Web site in September, highlight the revised cells on its spreadsheet, and submit its spreadsheet(s) and complete documentation to its MAC no later than November 21, 2013. The MACs notified the hospitals by early-February 2014 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals’ late-November revision requests. The MACs also submitted the revised data to CMS by late January 2014. CMS published the proposed wage index public use files that included hospitals’ revised wage index data on February 20, 2014. Hospitals had until March 3, 2014, to submit requests to the MACs for reconsideration of adjustments made by the MACs as a result of the desk review, and to correct errors due to CMS’ or the MAC’s mishandling of the wage index data. Hospitals also were required to submit sufficient documentation to support their requests. After reviewing requested changes submitted by hospitals, MACs were required to transmit to CMS any additional revisions resulting from the hospitals’ reconsideration requests by April 9, 2014. The deadline for a hospital to request CMS intervention in cases where the hospital disagreed with the MAC’s policy interpretations was April 16, 2014. We note that, beginning with the FY 2015 wage index, per the FY 2015 wage index timeline posted on the CMS Web site at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/Downloads/FY2015WI-Timeline.pdf, the April appeals must be sent via mail and email. We refer readers to the wage index timeline for complete details. Upon release of this proposed rule, hospitals should examine Table 2, which is listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY-2015-Wage-IndexHome-Page.html. Table 2 contains each hospital’s proposed adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2011 data used to construct the proposed FY 2015 wage index. We note that the proposed hospital average hourly wages shown in E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Table 2 only reflect changes made to a hospital’s data that were transmitted to CMS by February 26, 2014. The final wage index data public use files are posted on May 2, 2014 on the Internet at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY-2015-Wage-IndexHome-Page.html. The May 2014 public use files are made available solely for the limited purpose of identifying any potential errors made by CMS or the MAC in the entry of the final wage index data that resulted from the correction process described above (revisions submitted to CMS by the MACs by April 9, 2014). After the release of the May 2014 wage index data files, changes to the wage and occupational mix data will only be made in those very limited situations involving an error by the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the MAC nor CMS will approve the following types of requests: • Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by the MACs on or before April 9, 2014. • Requests for correction of errors that were not, but could have been, identified during the hospital’s review of the February 20, 2014 wage index public use files. • Requests to revisit factual determinations or policy interpretations made by the MAC or CMS during the wage index data correction process. If, after reviewing the May 2014 final public use files, a hospital believes that its wage or occupational mix data are incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital should notify both its MAC and CMS regarding why the hospital believes an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital is required to send its request to CMS and to the MAC no later than June 2, 2014. Similar to the April appeals, beginning with the FY 2015 wage index, in accordance with the FY 2015 wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/FY2015WI-Timeline.pdf, the June appeals must be sent via mail and email to CMS and the MACs. We refer readers to the wage index timeline for complete details. (We refer readers to section II.K. of the preamble to this proposed rule where VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 we are proposing revisions to the wage index timetable.) Verified corrections to the wage index data received timely by CMS and the MACs (that is, by June 2, 2014) will be incorporated into the final wage index in the FY 2015 IPPS/LTCH PPS final rule, which will be effective October 1, 2014. We created the processes described above to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2015 payment rates. Accordingly, hospitals that do not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the MAC’s decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the PRRB, the failure of CMS to make a requested data revision. We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections. Again, we believe the wage index data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC’s attention. Moreover, because hospitals have access to the final wage index data by early May 2014, they have the opportunity to detect any data entry or tabulation errors made by the MAC or CMS before the development and publication of the final FY 2015 wage index by August 2014, and the implementation of the FY 2015 wage index on October 1, 2014. If hospitals avail themselves of the opportunities afforded to provide and make corrections to the wage and occupational mix data, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after June 2, 2014, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with 42 CFR 412.64(k)(1) of our existing regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) The MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, ‘‘before the beginning of the fiscal year’’ means PO 00000 Frm 00105 Fmt 4701 Sfmt 4702 28081 by the June deadline for making corrections to the wage data for the following fiscal year’s wage index (for example, June 2, 2014 for the FY 2015 wage index). This provision is not available to a hospital seeking to revise another hospital’s data that may be affecting the requesting hospital’s wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made. In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) The MAC or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the MAC and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the June 2, 2014 deadline for the FY 2015 wage index); and (3) CMS agreed before October 1 that the MAC or CMS made an error in tabulating the hospital’s wage index data and the wage index should be corrected. In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the June 2, 2014 deadline for the FY 2015 wage index), and CMS acknowledges that the error in the hospital’s wage index data was caused by CMS’ or the MAC’s mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital’s data. In addition, the provision cannot be used to correct prior years’ wage index data; and it can only be used for the current Federal fiscal year. In situations where our policies would allow midyear E:\FR\FM\15MYP2.SGM 15MYP2 28082 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index. We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital’s payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital’s wage index data revision request. K. Notice of Change to Wage Index Development Timetable As explained in section III.J. the preamble of this proposed rule, the preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the proposed FY 2015 wage index were made available on September 13, 2013, through the Internet on the CMS Web site. The posting of these preliminary files initiate what is virtually a year-long cycle for developing the wage index associated with the following IPPS fiscal year. This lengthy, almost year-long cycle is unique to the development of the IPPS wage index, and occurs independently from the development of the IPPS proposed and final rules, which typically are published in the spring and summer each year. In addition, the wage index, which is based on hospitals’ wage data reported on Worksheets S–3, Parts II and III of the Form CMS–2552–10 of the Medicare cost report and occupational mix data, is the only portion of the IPPS that historically has been subject to its own annual review process, first by the MACs, and then by CMS, followed by distinct opportunities for hospitals to appeal decisions made by the MACs or CMS. This process is separate and independent from the standard cost report settlement and appeals processes established under the regulations at 42 CFR 405.1800 through 405.1889. Although this unique wage index development timetable has been in place since the early days of the IPPS, the current timetable is rooted in changes adopted in the FY 1998 IPPS final rule with comment period (62 FR 45990 through 45993). However, with numerous legislative and regulatory changes made to the IPPS since FY 1998, the demands on hospitals, MACs, and CMS have increased substantially. As a result, it has become increasingly challenging for wage index stakeholders to manage the wage index timetable with competing priorities. For the FY 2015 wage index, CMS made slight changes to the wage index development timetable, by posting the preliminary public use file (PUF) in September 2013 rather than in October 2013, which, in turn, moved back the deadline for hospitals to request revisions to the data displayed in that preliminary PUF to November 2013, instead of December 2013. In addition, the date for the MACs to complete desk reviews on that data was similarly moved to a slightly earlier deadline in early CY 2014. The FY 2015 Wage Index Development Timetable, which is posted on the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/FY2015WI-Timeline.pdf, shows that hospitals have a little more than 2 months to request revisions to their data displayed in the September 13, 2013 preliminary PUF, until the commencement of the desk review process by the MACs on November 21, 2013. The MACs also have a little more than 2 months to complete the desk reviews and submit revised cost report data to CMS by January 29, 2014. Less than a month later, on February 20, 2014, the revised FY 2015 wage index and occupational mix PUFs were posted on the CMS Web site. Ensuring the accuracy of the February PUF is extremely important and beneficial to hospitals because, as the timetable shows, it is the basis for hospitals to appeal data that are incorrect, with March 3, 2014 being the last date that hospitals can request revisions to errors in the February 20, 2014 PUF. Therefore, we have concluded that steps should be taken to improve the accuracy of the February PUF, most importantly by proposing changes to the wage index timetables for future IPPS fiscal years that are much more significant and fundamental than the slight revisions to the timetable implemented for FY 2015. We believe that the changes we are proposing below would not only improve the accuracy of the February PUF, but also would reduce the number of hospital appeals based on the February PUF. For example, as specified below, instead of the current timetable which only provides CMS with less than a month to review the MACs’ desk reviews and prepare the February PUF, we are proposing approximately 3 months between the date that the MACs’ desk reviews would end and the date that CMS would post the subsequent PUF. To allow hospitals and MACs adequate time to prepare for the changes to the wage index development timetable, we are proposing to make the following significant changes beginning with the FY 2017 wage index cycle. We are listing the proposed changes for FY 2017 below in a table side by side with the existing timetable, so that commenters may read the proposed changes in the context of the existing timetable. Under the proposed changes for FY 2017, although we are not providing exact dates for the FY 2017 wage index timetable, we note that, with every change listed below, we intend to provide hospitals and MACs with the same or somewhat more time than under the current timetable to complete reviews and request revisions. The proposed revisions would not reduce the amount of time that either hospitals or MACs have to review wage data. Therefore, these proposed changes would not result in additional work on the part of the hospitals or MACs; in fact, in shifting the various dates, we expect that more time would be provided to hospitals, MACs, and CMS to ensure an even more accurate wage index. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Deadlines FY 2015 Timetable Posting of Preliminary PUF on CMS Web site ........................................................ Deadline for Hospitals to Request Revisions to Preliminary PUF .......................... Deadline for MACs to Complete Desk Reviews ...................................................... Posting of February PUF on CMS Web site ........................................................... Deadline Following Posting of February PUF for Hospitals to Request Revisions Completion of Appeals by MACs and Transmission of Final Wage Data to CMS Deadline for Hospitals to Appeal in April ................................................................. Posting of Final Rule PUF ....................................................................................... Deadline for Hospitals to Appeal in June ................................................................ Expected Issuance of IPPS final rule ...................................................................... September 13, 2013 ................ November 21, 2013 ................. January 29, 2014 ..................... February 20, 2014 .................... March 3, 2014 .......................... April 9, 2014 ............................. April 16, 2014 ........................... May 2, 2014 ............................. June 2, 2014 ............................ August 1, 2014 ......................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00106 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Proposed FY 2017 timetable Mid May 2015. Early August 2015. Mid-October 2015. Late January 2016. Mid-February 2016. Mid- to Late March 2016. Early April 2016. Late April 2016. Late May 2016. August 1, 2016. Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules With regard to the FY 2016 wage index cycle, we believe it can serve as a transition to the more significant changes we are proposing for the FY 2017 wage index cycle. We believe that there are steps we can take to improve the accuracy of the February 2016 PUF by building in more time to the FY 2016 wage index review process as well. Specifically, we are notifying hospitals of changes to the deadlines only in the beginning of the FY 2016 wage index timetable, as a transition to the more significant proposed changes for the entire FY 2017 wage index timetable. That is, for FY 2016, we are only changing the following four dates: the posting of the preliminary wage index PUF; the posting of the CY 2013 occupational mix survey data preliminary PUF; the deadline for hospitals to request revisions to the wage data and occupational mix data preliminary PUFs; and the deadline for MACs to complete the desk reviews. We are not changing the remainder of the FY 2016 timetable at this time. We expect that making these changes for the FY 2016 timetable would improve the accuracy of the February 2016 PUF, and also mitigate the number of hospital appeals based on the February 2016 PUF. In addition, we believe these changes would help hospitals, MACs, and CMS adjust to the more significant timeline changes proposed for FY 2017. We are listing only the changes for FY 2016 in the following table side by side with the existing FY 2015 timetable, so that commenters may read the FY 2016 changes in the context of the existing timetable. We are not listing dates that would remain unchanged for FY 2016. Deadlines FY 2015 Timetable Posting of Preliminary Wage Data PUF on CMS Web site .................................... Posting of Preliminary CY 2013 Occupational Mix Data PUF on CMS Web site .. Deadline for Hospitals to Request Revisions to Preliminary PUF .......................... Deadline for MACs to Complete Desk Reviews ...................................................... September 13, 2013 ................ September 13, 2013 ................ November 21, 2013 ................. January 29, 2014 ..................... Typically, the preliminary PUF initiating the start of an IPPS wage index fiscal year contains one spreadsheet with the Worksheet S–3 wage data for the applicable fiscal year on one tab, and another tab with the preliminary occupational mix data for that fiscal year. For the FY 2016 wage index, new occupational mix survey data will be available for use, based on the CY 2013 occupational mix survey. Hospitals are required to submit their CY 2013 occupational mix surveys to their MACs no later than July 1, 2014. Therefore, we will not have the preliminary CY 2013 occupational mix survey data in time to post it simultaneously in late May 2014 with the preliminary FY 2016 wage data. Accordingly, as the table above indicates, we would post the preliminary FY 2016 wage data by itself first in late May 2014, to be followed by a separate posting of the preliminary CY 2013 occupational mix survey data when the data are available, in early to mid-July 2014. We are inviting public comments on our proposals set forth above to make revisions to the wage index timetables for FY 2017. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 L. Labor-Related Share for the FY 2015 Wage Index Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wagerelated costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 labor-related: ‘‘The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. . . .’’ We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index. Section 403 of Public Law 108–173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this ‘‘would result in lower payments to a hospital than would otherwise be made.’’ However, this provision of Public Law 108–173 did not change the legal requirement that the Secretary estimate ‘‘from time to time’’ the proportion of hospitals’ costs that are ‘‘attributable to wages and wage-related costs.’’ Thus, hospitals receive payment based on either a 62percent labor-related share, or the laborrelated share estimated from time to time by the Secretary, depending on which labor-related share resulted in a higher payment. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 50607), we rebased and revised the hospital market basket. We established a FY 2010-based IPPS hospital market basket to replace the FY 2006-based IPPS hospital market basket, effective October 1, 2013. In that final rule, we presented our analysis and conclusions regarding the frequency and methodology for updating the laborrelated share for FY 2014. Using the FY 2010-based IPPS market basket, we PO 00000 Frm 00107 Fmt 4701 Sfmt 4702 28083 Adjusted FY 2016 timetable Late May 2014. Early to Mid-July 2014. Early October 2014. Mid-December 2014. finalized a labor-related share for FY 2014 of 69.6 percent. In addition, we implemented this revised and rebased labor-related share in a budget neutral manner, but consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0 being paid using a laborrelated share lower than the laborrelated share of hospitals with a wage index greater than 1.0. The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. In this FY 2015 proposed rule, we are not proposing to make any further changes to the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other labor-related services. Therefore, for FY 2015, we are proposing to continue to use a laborrelated share of 69.6 percent for discharges occurring on or after October 1, 2014. Tables 1A and 1B, which are published in section VI. of the Addendum to this proposed rule and available via the Internet, reflect this proposed labor-related share. For FY 2015, for all IPPS hospitals whose wage indexes are less than or equal to 1.0000, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals whose wage indexes are greater than 1.0000, for FY 2015, we are proposing to apply the wage index to a proposed labor- E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28084 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules related share of 69.6 percent of the national standardized amount. We note that, for Puerto Rico hospitals, the national labor-related share is 62 percent because the national wage index for all Puerto Rico hospitals is less than 1.0. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through 50603), we also rebased and revised the laborrelated share for the Puerto Rico-specific standardized amounts using FY 2010 as a base year. We finalized a labor-related share for the Puerto Rico-specific standardized amounts for FY 2014 of 63.2 percent. In this FY 2015 proposed rule, we are not proposing to make any further changes to the Puerto Rico specific average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other labor-related services. Therefore, for FY 2015, we are proposing to continue to use a labor-related share for the Puerto Rico-specific standardized amounts of 63.2 percent for discharges occurring on or after October 1, 2014. Puerto Rico hospitals are paid based on 75 percent of the national standardized amounts and 25 percent of the Puerto Ricospecific standardized amounts. For FY 2015, we are proposing to adopt that the labor-related share of a hospital’s Puerto Rico-specific rate would be either the Puerto Rico-specific labor-related share of 63.2 percent or 62 percent, depending on which results in higher payments to the hospital. If the hospital has a Puerto Rico-specific wage index of greater than 1.0 for FY 2015, we are proposing to set the hospital’s rates using a labor-related share of 63.2 percent for the 25 percent portion of the hospital’s payment determined by the Puerto Rico standardized amounts because this amount would result in higher payments. Conversely, a hospital with a Puerto Rico-specific wage index of less than or equal to 1.0 for FY 2015 would be paid using the Puerto Rico-specific labor-related share of 62 percent of the Puerto Rico-specific rates because the lower labor-related share would result in higher payments. The proposed Puerto Rico labor-related share of 63.2 percent for FY 2015 is reflected in Table 1C, which is published in section VI. of the Addendum to this proposed rule and available via the Internet. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 IV. Other Decisions and Proposed Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs A. Proposed Changes to MS–DRGs Subject to the Postacute Care Transfer Policy (§ 412.4) 1. Background Existing regulations at § 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines acute care transfers, and § 412.4(c) defines postacute care transfers. Our policy, set forth in § 412(f), provides that when a patient is transferred and his or her length of stay is less than the geometric mean length of stay for the MS–DRG to which the case is assigned, the transferring hospital is generally paid based on a graduated per diem rate for each day of stay, not to exceed the full MS–DRG payment that would have been made if the patient had been discharged without being transferred. The per diem rate paid to a transferring hospital is calculated by dividing the full DRG payment by the geometric mean length of stay for the MS–DRG. Based on an analysis that showed that the first day of hospitalization is the most expensive (60 FR 45804), our policy generally provides for payment that is twice the per diem amount for the first day, with each subsequent day paid at the per diem amount up to the full MS–DRG payment (§ 412.4(f)(1)). Transfer cases are also eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 412.80(b), is equal to the fixed-loss outlier threshold for nontransfer cases (adjusted for geographic variations in costs), divided by the geometric mean length of stay for the MS–DRG, and multiplied by the length of stay for the case, plus one day. We established the criteria set forth in § 412.4(d) for determining which DRGs qualify for postacute care transfer payments in the FY 2006 IPPS final rule (70 FR 47419 through 47420). The determination of whether a DRG is subject to the postacute care transfer policy was initially based on the Medicare Version 23.0 GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is revised, we use the current version of the Medicare GROUPER and the most recent complete year of MedPAR data to determine if the DRG is subject to the postacute care transfer policy. Specifically, if the MS– PO 00000 Frm 00108 Fmt 4701 Sfmt 4702 DRG’s total number of discharges to postacute care equals or exceeds the 55th percentile for all MS–DRGs and the proportion of short-stay discharges to postacute care to total discharges in the MS–DRG exceeds the 55th percentile for all MS–DRGs, CMS will apply the postacute care transfer policy to that MS–DRG and to any other MS–DRG that shares the same base MS–DRG. In the preamble to the FY 2006 IPPS final rule (70 FR 47419), we stated that ‘‘we will not revise the list of DRGs subject to the postacute care transfer policy annually unless we are making a change to a specific DRG.’’ To account for MS–DRGs subject to the postacute care transfer policy that exhibit exceptionally higher shares of costs very early in the hospital stay, § 412.4(f) also includes a special payment methodology. For these MS– DRGs, hospitals receive 50 percent of the full MS–DRG payment, plus the single per diem payment, for the first day of the stay, as well as a per diem payment for subsequent days (up to the full MS–DRG payment (§ 412.4(f)(6)). For an MS–DRG to qualify for the special payment methodology, the geometric mean length of stay must be greater than 4 days, and the average charges of 1-day discharge cases in the MS–DRG must be at least 50 percent of the average charges for all cases within the MS–DRG. MS–DRGs that are part of an MS–DRG group will qualify under the DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies (§ 412.4(f)(6)). 2. Proposed Changes to the Postacute Care Transfer MS–DRGs Based on our annual review of MS– DRGs, we have identified a number of MS–DRGs that should be included on the list of MS–DRGs subject to the postacute care transfer policy. As we discuss in section II.G. of this proposed rule, in response to public comments and based on our analysis of FY 2013 MedPAR claims data, we are proposing to make several changes to MS–DRGs to better capture certain severity of illness levels, to be effective for FY 2015. Specifically, we are proposing to modify the assignment of endovascular cardiac valve replacements currently assigned to MS–DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures E:\FR\FM\15MYP2.SGM 15MYP2 28085 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/ MCC) to MS–DRGs 266 and 267 (Endovascular Cardiac Valve Replacement with and without MCC, respectively) to better reflect the differences in patients receiving endovascular cardiac valve replacements from patients who undergo an open chest cardiac valve replacement. We also are proposing to further refine back and neck procedures currently assigned to MS–DRGs 490 and 491 (Back & Neck Procedure Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator and without CC/MCC or Disc Device/ Neurostimulator, respectively) into additional severity levels, now identified as MS–DRGs 518, 519, and 520 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/ Neurostimulator, with CC, and without MCC/CC, respectively). Finally, we are proposing to remove the severity levels for reverse shoulder replacements, merging MS–DRGs 483 and 484 (Major Joint & Limb Reattachment Procedure of Upper Extremity with CC/MCC and without CC/MCC, respectively) into MS–DRG 483 (Major Joint/Limb Reattachment Procedure of Upper Extremities). A discussion of these proposed changes can be found in section II.G.4.c., II.G.5.c. and II.G.5.a., respectively, of the preamble of this proposed rule. In light of these proposed changes to the MS–DRGs, according to the regulations under § 412.4(c), we evaluated these proposed FY 2015 MS– DRGs against the general postacute care transfer policy criteria using the FY 2013 MedPAR data. If an MS–DRG qualified for the postacute care transfer policy, we also evaluated that MS–DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6). We continue believe it is appropriate to reassess MS–DRGs when proposing reassignment of diagnostic codes that would result in material changes to an MS–DRG. As a result of our review, we found that MS–DRGs 216 through 221 would require no revisions in postacute care transfer or special payment policy status. However, we are proposing to update the list of MS–DRGs that are subject to the postacute care transfer policy to include the proposed new MS–DRGs 266, 267, 518, 519, and 520. (These MS–DRGs are reflected in Table 5, which is listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site, and also are listed in the charts at the end of this section.) In addition, based on our evaluation of the proposed FY 2015 MS–DRGs using the FY 2013 Med PAR data, we have determined that proposed revised MS–DRG 483 would no longer meet the postacute care transfer criteria. Therefore, we are proposing that it be removed from the list of MS–DRGs subject to the postacute care transfer policy, effective FY 2015. We refer readers to the asterisk (*) bolded text in the following table for which criterion was not met in our analysis for each MS–DRG removed from the postacute care transfer policy list. LIST OF MS–DRGS THAT WOULD CHANGE POSTACUTE CARE TRANSFER POLICY STATUS IN FY 2015 MS– DRG MS–DRG Title 266 ....... Endovascular Cardiac Valve ............. Replacement with MCC .................... Endovascular Cardiac Valve Replacement w/o MCC. Major Joint/Limb Reattachment Procedure of Upper Extremities. Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator. Back & Neck Procedure Except Spinal Fusion with CC. Back & Neck Procedure Except Spinal Fusion without CC/MCC). 267 ....... 483 ....... 518 ....... 519 ....... 520 ....... Total cases Postacute care transfers (55th percentile: 1,471) Percent of short-stay postacute care transfers to all cases (55th percentile: 7.9060%) (percent) Short-stay postacute care transfers Postacute transfer policy status 4,086 2,851 1,030 25.21 YES. 4,476 2,800 835 18.66 YES. 41,372 17,289 2,271 * 5.49 NO. 3,844 2,136 412 10.72 YES. 15,238 7,405 1,126 * 7.39 YES.** 31,792 7,859 0 * 0.00 YES.** mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * Indicates a current postacute care transfer policy criterion that the MS–DRG did not meet. ** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS–DRGs that share the same base MS–DRG will all qualify under the postacute care transfer policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. Finally, we have determined that MS– DRGs 266, 267, 518, 519, and 520 also would meet the criteria for the special payment methodology. Therefore, we are proposing that they would be subject to the MS–DRG special payment methodology, effective FY 2015. LIST OF MS–DRGS THAT WOULD CHANGE DRG SPECIAL PAYMENT POLICY STATUS IN FY 2015 Geometric mean length of stay MS–DRG MS–DRG Title 266 ........... Endovascular Cardiac Valve Replacement with MCC. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00109 8.3643 Fmt 4701 Sfmt 4702 Average charges of 1-day discharges 50% of average charges for all cases within MS–DRG $42,081 E:\FR\FM\15MYP2.SGM $126,326 15MYP2 Special pay policy status YES.* 28086 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules LIST OF MS–DRGS THAT WOULD CHANGE DRG SPECIAL PAYMENT POLICY STATUS IN FY 2015—Continued Geometric mean length of stay MS–DRG MS–DRG Title 267 ........... Endovascular Cardiac Valve Replacement without MCC. Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator. Back & Neck Procedure Except Spinal Fusion with CC. Back & Neck Procedure Except Spinal Fusion without CC/MCC. 518 ........... 519 ........... 520 ........... 50% of average charges for all cases within MS–DRG Average charges of 1-day discharges Special pay policy status 5.0271 128,013 95,141 YES. 4.2882 68,515 43,514 YES. 3.0507 0 0 YES.* 1.7315 0 0 YES.* * As described in the policy at 42 CFR 412.4(d)(6)(iv), MS–DRGs that share the same base MS–DRG will all qualify under the DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 B. Proposed Changes in the Inpatient Hospital Update for FY 2015 (§ 412.64(d)) 1. Proposed FY 2015 Inpatient Hospital Update In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient operating costs by a factor called the ‘‘applicable percentage increase.’’ In FY 2014, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we set the applicable percentage increase under the IPPS by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.3 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2014 adjustment of 0.3 percentage point may result in the applicable percentage increase being less than zero. For FY 2015, there are three statutory changes to the applicable percentage increase compared to FY 2014. First, under section 1886(b)(3)(B)(viii) of the Act, beginning with FY 2015, the reduction in the applicable percentage increase for hospitals that fail to submit quality information under rules established by the Secretary is one- VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 quarter of the applicable percentage increase (prior to the application of statutory adjustments under sections 1886(b)(3)(B)(ix), 1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act) or onequarter of the applicable market basket update. For FY 2014, the reduction to the applicable percentage increase for hospitals that failed to submit quality information under rules established by the Secretary was 2.0 percentage points. Second, beginning with FY 2015, section 1886(b)(3)(B)(ix) requires that any hospital that is not a meaningful electronic health record (EHR) user (as defined in section1886(n)(3) of the Act and not subject to an exception under section1886(b)(3)(B)(ix) of the Act)) will have ‘‘three-quarters’’ of the applicable percentage increase (prior to the application of statutory adjustments under sections 1886(b)(3)(B)(viii), 1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act), or three-quarters of the applicable market basket update, reduced by 331⁄3 percent. The reduction to three-quarters of the applicable percentage increase for those hospitals that are not meaningful EHR users increases to 662⁄3 percent for FY 2016, and, for FY 2017 and subsequent fiscal years, to 100 percent. Third, for FY 2015, section 1886(b)(3)(B)(xii) of the Act applies an additional reduction of 0.2 percentage point compared to 0.3 percentage point for FY 2014. To summarize, for FY 2015, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the PO 00000 Frm 00110 Fmt 4701 Sfmt 4702 market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a 331⁄3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.2 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. As noted previously, sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2015 adjustment of 0.2 percentage point may result in the applicable percentage increase being less than zero. We note that, in compliance with section 404 of the MMA, in the FY 2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS operating and capital market baskets with the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. We are proposing to continue to use the FY 2010-based IPPS operating and capital market baskets for FY 2015. We also are proposing to continue to use a labor-related share that is reflective of the FY 2010 base year. For FY 2015, we are proposing to continue using the labor-related share of 69.6 percent, which is based on the FY 2010-based IPPS market basket. Based on the most recent data available for this FY 2015 proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we are E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules proposing to base the proposed FY 2015 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Insight, Inc.’s (IGI’s) first quarter 2014 forecast of the FY 2010-based IPPS market basket rateof-increase with historical data through fourth quarter 2013, which is estimated to be 2.7 percent. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. For FY 2015, we are not proposing to make any change in our methodology for calculating and applying the MFP adjustment. For FY 2015, we are proposing a MFP adjustment of ¥0.4 percentage point. Similar to the market basket adjustment, for this proposed rule, we used the most recent data available to compute the MFP adjustment. For FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the standardized amount. Below we discuss these four options. • For a hospital that submits quality data and is a meaningful EHR user, we are proposing an applicable percentage increase to the FY 2015 operating standardized amount of 2.1 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.7 percent less an adjustment of 0.4 percentage point for economy-wide productivity (that is, the MFP adjustment) and less 0.2 percentage point). • For a hospitals that submits quality data and is not a meaningful EHR user, we are proposing an applicable percentage increase to the operating standardized amount of 1.425 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.7 percent, less an adjustment of 0.675 percentage point (the market basket rateof-increase of 2.7 percent × 0.75)/3) for failure to be a meaningful EHR user, less an adjustment of 0.4 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). • For a hospital that does not submit quality data and is a meaningful EHR user, we are proposing an applicable percentage increase to the operating standardized amount of 1.425 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.7 percent, less an adjustment of 0.675 percentage point (the market basket rateHospital submitted quality data and is a meaningful EHR user FY 2015 Market Basket Rate-of-Increase ...................................... Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ........................... Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act .................. MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act ................................................................................ Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act .......................................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Hospital submitted quality data and is NOT a meaningful EHR user Frm 00111 Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.7 2.7 2.7 0.0 0.0 ¥0.675 ¥0.675 0.0 ¥0.675 0.0 ¥0.675 ¥0.4 ¥0.4 ¥0.4 ¥0.4 ¥0.2 ¥0.2 ¥0.2 ¥0.2 2.1 1.425 1.425 0.75 one-fourth of the applicable percentage increase (prior to the application of other statutory adjustments) if the hospital fails to submit quality information (under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act) and a 331⁄3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments) for a hospital that is not a PO 00000 of-increase of 2.7 percent/4) for failure to submit quality data, less an adjustment of 0.4 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). • For a hospital that does not submit quality data and is not a meaningful EHR user, we are proposing an applicable percentage increase to the operating standardized amount of 0.75 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.7 percent, less an adjustment of 0.675 percentage point (the market basket rateof-increase of 2.7 percent/4) for failure to submit quality data, less an adjustment of 0.675 percentage point (the market basket rate-of-increase of 2.7 percent × 0.75)/3) for failure to be a meaningful EHR user, less an adjustment of 0.4 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). If more recent data become subsequently available (for example, a more recent estimate of the market basket and the MFP adjustment), we are proposing to use such data, if appropriate, to determine the FY 2015 market basket update and MFP adjustment in the final rule. Below we provide a table summarizing the four proposed applicable percentage increases. 2.7 Proposed Applicable Percentage Increase Applied to Standardized Amount ........................... We are proposing to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law for the FY 2015 update. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we are proposing to add a new paragraph (vi) to § 412.64(d)(1) to reflect the applicable percentage increase to the FY 2015 operating standardized amount as the percentage increase in the market basket index, subject to a reduction of 28087 Fmt 4701 Sfmt 4702 meaningful EHR user in accordance with section 1886(b)(3)(B)(ix) of the Act, less an MFP adjustment and less an additional reduction of 0.2 percentage point. In addition, we are proposing to make technical changes to §§ 412.64(d)(1), (d)(1)(i) through (d)(1)(v), (d)(2)(i), (d)(2)(ii), and (d)(3) introductory text to reflect the order in which CMS applies the statutory adjustments to the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28088 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules applicable percentage increase under section 1886(b)(3)(B) of the Act. As mentioned above, consistent with section 1886(b)(3)(B) of the Act, CMS sets the applicable percentage increase under the IPPS by applying the following adjustments in the following sequence. Specifically, we set the applicable percentage increase under the IPPS equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas subject to a reduction for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and, beginning in FY 2015, a reduction for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act; and then subject to an adjustment based on changes in economy-wide productivity (the MFP adjustment), and an additional reduction as required by section 1886(b)(3)(B)(xii) of the Act. The existing regulation text at § 412.64(d)(2) and (d)(3) describes the reductions for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act as reductions to ‘‘the applicable percentage change specified in paragraph (d)(1) of this section.’’ Section 412.64(d)(1) describes the applicable percentage change for the applicable fiscal year as the percentage increase in the market basket index less the MFP adjustment and less the additional reduction required by section 1886(b)(3)(B)(xii) of the Act. This text suggests that CMS applies the reduction for hospitals that fail to submit quality information and, beginning in FY 2015, the reduction for hospitals not considered to be meaningful EHR users, after it applies the MFP adjustment and the additional reduction under section 1886(b)(3)(B)(xii) of the Act. Therefore, we are proposing to revise the regulations in § 412.64(d) to reflect the order in which CMS applies the adjustments to the applicable percentage increase under section 1886(b)(3)(B) of the Act. We note that we also are proposing clarifying amendments to the regulatory text for prior fiscal years under §§ 412.64(d)(1)(i) through (d)(1)(v) to reflect the determination of the applicable percentage change for those prior years as well as other technical changes for readability. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs is also subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, for FY 2015, we are proposing the following updates to the hospital-specific rates applicable to SCHs and MDHs: An update of 2.1 percent for a hospital that submits quality data and is a meaningful EHR user; an update of 1.425 percent for a hospital that fails to submit quality data and is a meaningful EHR user; an update of 1.425 percent for a hospital that submits quality data and is not a meaningful EHR user; an update of 0.75 percent for a hospital that fails to submit quality data and is not a meaningful EHR user. (As noted below, under current law, the MDH program is effective for discharges occurring on or before March 31, 2015.) For FY 2015, the existing regulations in §§ 412.73(c)(16), 412.75(d), 412.77(e), 412.78(e), and 412.79(d) contain provisions that set the update factor for SCHs and MDHs equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, we are not proposing to make any further changes to these five regulatory provisions to reflect the FY 2015 update factor for the hospital-specific rates of SCHs and MDHs. As mentioned above, for this proposed rule, we used IGI’s first quarter 2014 forecast of the FY 2010based IPPS market basket update with historical data through fourth quarter 2013. Similarly, we used IGI’s first quarter 2014 forecast of the MFP adjustment. For the final rule, we are proposing to use the most recent data available. We note that, as discussed in section IV.G. of the preamble of this proposed rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113– 67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014, Public Law 113–93, enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges PO 00000 Frm 00112 Fmt 4701 Sfmt 4702 occurring before April l, 2015). Prior to the enactment of Public Law 113–67, the MDH program was to be in effect through the end of FY 2013 only. The MDH program expires for discharges beginning on April 1, 2015 under current law. Accordingly, the proposed update of the hospital-specific rates for FY 2015 for MDHs will apply in determining payments for FY 2015 discharges occurring before April 1, 2015. 2. FY 2015 Puerto Rico Hospital Update Puerto Rico hospitals are paid a blended rate for their inpatient operating costs based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 1886(d)(9)(C)(i) of the Act is the basis for determining the applicable percentage increase applied to the Puerto Rico-specific standardized amount. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act, which states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for fiscal year 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are proposing an applicable percentage increase to the Puerto Rico-specific operating standardized amount of 2.1 percent for FY 2015. We note that the provisions of section 1886(b)(3)(B)(viii) of the Act, which specify the adjustments to the applicable percentage increase for ‘‘subsection (d)’’ hospitals that do not submit quality data under the rules established by the Secretary, and the provisions of section 1886(b)(3)(B)(ix) of the Act, which specify the adjustments to the applicable percentage increase for ‘‘subsection (d)’’ hospitals that are not meaningful EHR users, are not applicable to hospitals located in Puerto Rico. For FY 2015, the existing regulations in § 412.211(c) set the update factor for E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Puerto Rico-specific standardized amount equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, we are not proposing to make any further changes to this regulatory provision to reflect the FY 2015 update factor for the Puerto Rico-specific standardized amount. As mentioned previously, for this proposed rule, we used IGI’s first quarter 2014 forecast of the FY 2010based IPPS market basket update with historical data through fourth quarter 2013. For the final rule, we are proposing to use the most recent data available. Similarly, we used IGI’s first quarter 2014 forecast of the MFP adjustment. For the final rule, we are proposing to use the most recent data available. C. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as a rural referral center (RRC). RRCs receive some special treatment under both the DSH payment adjustment and the criteria for geographic reclassification. Section 402 of Public Law 108–173 raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs are also not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital’s average hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area where the hospital is located. Section 4202(b) of Public Law 105–33 states, in part, ‘‘[a]ny hospital classified as an RRC by the Secretary . . . for fiscal year 1991 shall be classified as such an RRC for fiscal year 1998 and each subsequent year.’’ In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), CMS reinstated RRC status for all hospitals that lost the status due to triennial review or MGCRB reclassification. However, CMS did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of ‘‘urban’’ and ‘‘rural’’ specified in Subpart D of 42 CFR Part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum CMI and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to § 412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register (53 FR 38513).) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if— • The hospital’s CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and • The hospital’s number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.) 1. Case-Mix Index (CMI) Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year’s annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The proposed national median CMI value for FY 2015 includes data from all urban hospitals nationwide, and the proposed regional values for FY 2015 are the median CMI values of urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in § 413.75). These proposed values are based on discharges occurring during FY 2013 (October 1, 2012 through September 30, 2013), and include bills posted to CMS’ records through December 2013. We are proposing that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2014, they must have a CMI value for FY 2013 that is at least— • 1.5730; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. The proposed CMI values by region are set forth in the following table: Proposed case-mix index value mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Region 1. 2. 3. 4. 5. 6. 7. 8. 9. New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................ Middle Atlantic (PA, NJ, NY) ........................................................................................................................................................... South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ............................................................................................................... East North Central (IL, IN, MI, OH, WI) .......................................................................................................................................... East South Central (AL, KY, MS, TN) ............................................................................................................................................. West North Central (IA, KS, MN, MO, NE, ND, SD) ...................................................................................................................... West South Central (AR, LA, OK, TX) ............................................................................................................................................ Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ............................................................................................................................... Pacific (AK, CA, HI, OR, WA) ......................................................................................................................................................... We intend to update the preceding numbers in the FY 2015 final rule to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reflect the updated FY 2013 MedPAR file, which would contain data from PO 00000 Frm 00113 Fmt 4701 28089 Sfmt 4702 1.3602 1.4334 1.4815 1.4915 1.4099 1.5498 1.6041 1.6583 1.5680 additional bills received through March 2014. E:\FR\FM\15MYP2.SGM 15MYP2 28090 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules A hospital seeking to qualify as an RRC should obtain its hospital-specific CMI value (not transfer-adjusted) from its fiscal intermediary or MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS–DRG-based payment. 2. Discharges Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges in each year’s annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. We are proposing to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2012 (that is October 1, 2011 through September 30, 2012), which are the latest cost report data available at the time this proposed rule was developed. We are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2014, must have, as the number of discharges for its cost reporting period that began during FY 2012, at least— • 5,000 (3,000 for an osteopathic hospital); or • The median number of discharges for urban hospitals in the census region in which the hospital is located, as indicated in the following table. Number of discharges Region 1. 2. 3. 4. 5. 6. 7. 8. 9. New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................ Middle Atlantic (PA, NJ, NY) ........................................................................................................................................................... South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ............................................................................................................... East North Central (IL, IN, MI, OH, WI) .......................................................................................................................................... East South Central (AL, KY, MS, TN) ............................................................................................................................................. West North Central (IA, KS, MN, MO, NE, ND, SD) ...................................................................................................................... West South Central (AR, LA, OK, TX) ............................................................................................................................................ Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ............................................................................................................................... Pacific (AK, CA, HI, OR, WA) ......................................................................................................................................................... We intend to update these numbers in the FY 2015 final rule based on the latest available cost report data. We reiterate that, if an osteopathic hospital is to qualify for RRC status for cost reporting periods beginning on or after October 1, 2014, the hospital would be required to have at least 3,000 discharges for its cost reporting period that began during FY 2012. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 D. Proposed Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital that is paid under IPPS beginning in FY 2005. Sections 3125 and 10314 of the Affordable Care Act provided for a temporary change in the low-volume hospital payment policy for FYs 2011 and 2012. Section 605 of the American Taxpayer Relief Act of 2012 (ATRA) extended, for FY 2013, the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act. Prior to the enactment of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) on December 26, 2013 and section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93) on April l, 2014, beginning with FY 2014, the low-volume hospital qualifying criteria and payment adjustment returned to the statutory requirements under section 1886(d)(12) of the Act that were in effect prior to the amendments made by the Affordable VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Care Act and the ATRA. (For additional information on the expiration of the temporary changes in the low-volume hospital payment policy for FYs 2011 through 2013 provided for by the Affordable Care Act and the ATRA, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610 through 50613).) Section 1105 of the Pathway for SGR Reform Act extended, for the first 6 months of FY 2014 (that is, through March 31, 2014), the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act and extended through FY 2013 by the ATRA. We addressed the extension of the temporary changes to the lowvolume hospital payment policy through March 31, 2014 under the Pathway for SGR Reform Act in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022 through 15025). In that March 18, 2014 interim final rule with comment period, we also amended the regulations at 42 CFR 412.101 to reflect the extension of the temporary changes to the qualifying criteria and the payment adjustment for low-volume hospitals through March 31, 2014. 2. Provisions of the Protecting Access to Medicare Act of 2014 Section 105 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93) extends, for an additional year (that is, through March 31, 2015), the PO 00000 Frm 00114 Fmt 4701 Sfmt 4702 7,679 10,661 10,591 8,130 7,065 7,925 4,524 8,830 8,261 temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act and extended through FY 2013 by the ATRA and the first half of FY 2014 by the Pathway for SGR Reform Act. We intend to address the extension of the temporary changes to the lowvolume hospital payment policy for the second half of FY 2014 (that is, from April 1, 2014 through September 30, 2014) under Public Law 113–93 in a forthcoming Federal Register notice. However, in this proposed rule, we are proposing to make conforming changes to the existing regulations text at § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through the first half of FY 2015 (that is, through March 31, 2015) in accordance with section 105 of Public Law 113–93. Specifically, we are proposing to revise paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of § 412.101. Under these proposed changes to § 412.101, beginning with FY 2015 discharges occurring on or after April 1, 2015, consistent with section 1886(d)(12) of the Act, as amended, the low-volume hospital qualifying criteria and payment adjustment methodology would revert to that which was in effect prior to the amendments made by the Affordable Care Act and subsequent legislation (that is, the low-volume hospital payment adjustment policy in effect for FYs 2005 through 2010). E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015 As discussed above, under section 1886(d)(12) of the Act, as amended, the temporary changes in the low-volume hospital payment policy originally provided by the Affordable Care Act and extended through subsequent legislation, are effective for FY 2015 discharges occurring before April 1, 2015. To implement the extension of the temporary change in the low-volume hospital payment policy through the first half of FY 2015 (that is, for discharges occurring through March 31, 2015) provided for by Public Law 113– 93, in accordance with proposed § 412.101(b)(2)(ii) and consistent with our historical approach, we are proposing to update the discharge data source used to identify qualifying lowvolume hospitals and calculate the payment adjustment (percentage increase) for FY 2015 discharges occurring before April 1, 2015. Under existing § 412.101(b)(2)(ii), for the applicable fiscal years, a hospital’s Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the lowvolume payment adjustment in the current year. The applicable lowvolume percentage increase, as originally provided for by the Affordable Care Act, is determined using a continuous linear sliding scale equation that results in a low-volume hospital payment adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to a zero percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges. For FY 2015 discharges occurring before April 1, 2015, consistent with our historical policy, we are proposing that qualifying low-volume hospitals and their payment adjustment would be determined using the most recently available Medicare discharge data from the FY 2013 MedPAR file, as these data are the most recent data available. Table 14 listed in the Addendum of this proposed rule (which is available only through the Internet on the CMS Web site at https://www.cms.hhs.gov/ AcuteInpatientPPS/01_overview.asp) lists the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the December 2013 update of the FY 2013 MedPAR file and their proposed low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible). Eligibility for the low-volume hospital payment adjustment for the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 first 6 months of FY 2015 would also be dependent upon meeting (in the case of a hospital that did not qualify for the low-volume hospital payment adjustment in FY 2014) or continuing to meet (in the case of a hospital that did qualify for the low-volume hospital payment adjustment in FY 2014) the mileage criterion specified at proposed § 412.101(b)(2)(ii). A hospital also must be located more than 15 road miles from any other IPPS hospital in order to qualify for a low-volume hospital payment adjustment for FY 2015 discharges occurring before April 1, 2015. We note that the list of hospitals with fewer than 1,600 Medicare discharges in Table 14 does not reflect whether or not the hospital meets the mileage criterion. If more recent Medicare discharge data become available, we intend to use updated data to determine the list of ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the March 2014 update of the FY 2013 MedPAR file and their potential low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible) in Table 14 of the final rule. Furthermore, in accordance with section 1886(d)(12) of the Act, as amended, beginning with FY 2015 discharges occurring on or after April 1, 2015, the low-volume hospital definition and payment adjustment methodology will revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and subsequent legislation (including the Protecting Access to Medicare Act). Therefore, consistent with section 1886(d)(12) of the Act, as amended, under the proposed conforming changes to § 412.101(b)(2), effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Under our existing policy, effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, qualifying hospitals would receive the low-volume hospital payment adjustment of an additional 25 percent for discharges occurring during the fiscal year (or portion of the fiscal year). Consistent with our existing policy for FYs 2005 through 2010, for FY 2015 discharges occurring on or after April 1, 2015 (and PO 00000 Frm 00115 Fmt 4701 Sfmt 4702 28091 subsequent years), the discharge determination for the low-volume hospital payment adjustment would be made based on the hospital’s number of total discharges, that is, Medicare and non-Medicare discharges, as specified at proposed § 412.101(b)(2)(i). The hospital’s most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume hospital payment adjustment in the current fiscal year. We use cost report data to determine if a hospital meets the discharge criterion because these data are the best available data source that includes information on both Medicare and non-Medicare discharges. In addition to a discharge criterion, eligibility for the low-volume hospital payment adjustment also depends on the hospital meeting a mileage criterion. As specified at proposed § 412.101(b)(2)(i), to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2015 discharges occurring on or after April 1, 2015 (and subsequent years), a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. Consistent with our previously established procedure, for FY 2015, we are proposing the following process for requesting and obtaining the lowvolume hospital payment adjustment. That is, in order to receive a low-volume hospital payment adjustment under § 412.101, a hospital must notify and provide documentation to its MAC that it meets the discharge and distance requirements under proposed § 412.101(b)(2)(ii) for FY 2015 discharges occurring before April 1, 2015, and under proposed § 412.101(b)(2)(i) for FY 2015 discharges occurring on or after April 1, 2015, if also applicable. The MAC will determine, based on the most recent data available, if the hospital qualifies as a low-volume hospital, so that the hospital would know in advance whether or not it will receive a payment adjustment. The MAC and CMS may review available data, in addition to the data the hospital submits with its request for low-volume hospital status, in order to determine whether or not the hospital meets the qualifying criteria. Consistent with our previously established procedure, for FY 2015, we are proposing that a hospital must make a written request for low-volume hospital status that is received by its MAC no later than September 1, 2014, in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28092 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules occurring on or after October 1, 2014, and through March 31, 2015, under proposed § 412.101(b)(2)(ii) or through September 30, 2015, for hospitals that also qualify under proposed § 412.101(b)(2)(i)). A hospital that qualified for the low-volume payment adjustment in FY 2014 may continue to receive a low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015, without reapplying if it continues to meet the Medicare discharge criterion established for FY 2015 (shown in Table 14, which is available via the Internet on the CMS Web site) and the distance criterion. However, the hospital must send written verification that is received by its MAC no later than September 1, 2014, that it continues to be more than 15 miles from any other ‘‘subsection (d)’’ hospital. If a hospital’s written request for lowvolume hospital status for FY 2015 is received after September 1, 2014, and if the MAC determines that the hospital meets the criteria to qualify as a lowvolume hospital under proposed § 412.101(b)(2)(ii), the MAC would apply the applicable low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges, effective prospectively within 30 days of the date of its low-volume hospital status determination through discharges occurring on or before March 31, 2015. If the hospital also qualifies under proposed § 412.101(b)(2)(i), the MAC would apply the 25-percent low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges occurring on or after April 1, 2015. If a hospital’s written request for low-volume hospital status for FY 2015 is received on a later date such that the prospective effective date would be on or after April 1, 2015, and the hospital qualifies under proposed § 412.101(b)(2)(i), the MAC would apply the 25-percent low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges occurring from the prospective effective date through September 30, 2015. (For additional details on our established process for the low-volume hospital payment adjustment, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).) E. Indirect Medical Education (IME) Payment Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2015 Under the IPPS, an additional payment amount is made to hospitals with residents in an approved graduate VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The payment amount is determined by use of a statutorily specified adjustment factor. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at § 412.105. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of the IME adjustment and IME adjustment factor. Section 1886(d)(5)(B) of the Act states that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. Accordingly, for discharges occurring during FY 2015, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2015 IME adjustment will result in an increase in IPPS payment of 5.5 percent for every approximately 10 percent increase in the hospital’s resident to bed ratio. 2. Proposed IME Medicare Part C AddOn Payments to Sole Community Hospitals (SCHs) That Are Paid According to Their Hospital-Specific Rates and Proposed Change in Methodology in Determining Payment to SCHs Section 1886(d)(11) of the Act provides for an additional payment amount to a subsection (d) teaching hospital that has an approved medical residency training program for each applicable discharge of any individual who is enrolled under Medicare Managed Care under Part C. The amount of such payment is specified in section 1886(d)(11)(C) of the Act and ‘‘shall be equal to the applicable percentage (as defined in subsection (h)(3)(D)(ii)) of the estimated average per discharge amount that would otherwise have been paid under paragraph (5)(B) if the individuals had not been enrolled as described in subparagraph (B).’’ Under section 1886(d)(5)(D) of the Act, sole community hospitals (SCHs) are paid based on their hospital-specific rate from specified base years or the IPPS Federal rate, whichever yields the greatest aggregate payment for the hospital’s cost reporting period. Payments based on the Federal rate are based on the IPPS standardized amount and include all applicable IPPS add-on payments, such as outliers, DSH, and IME, while payments based on the hospital-specific rate include no add-on payments. Under CMS’ current payment system, both the IME add-on payment for Medicare Part A patient discharges under section 1886(d)(5)(B) of the Act and the IME add-on payment for PO 00000 Frm 00116 Fmt 4701 Sfmt 4702 Medicare Part C patient discharges under section 1886(d)(11) of the Act are included as part of the Federal rate payment, whereas neither of these addon payments are included as part of the hospital-specific rate payment. We note that SCHs that are paid based on their hospital-specific rate do not receive an IME add-on payment for Medicare Part A patient discharges because, generally, the hospital-specific rate already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients, but they also do not receive the IME add-on payment for Medicare Part C patient discharges under section 1886(d)(11) of the Act. Therefore, in the case of Medicare Part C patients, there is no component of the hospital-specific rate that already accounts for the additional costs that SCHs incur for their Medicare Part C patients, and there is currently no payment mechanism for SCHs paid based on their hospitalspecific rate to receive the IME add-on payment for Medicare Part C patients. For the reasons specified below, effective for discharges occurring in cost reporting periods beginning on or after October 1, 2014, we are proposing: (1) To provide all SCHs that are subsection (d) teaching hospitals IME add-on payments for applicable discharges of Medicare Part C patients in accordance with section 1886(d)(11) of the Act, regardless of whether the SCH is paid based on the Federal rate or its hospitalspecific rate; and (2) that, for purposes of the comparison of payments based on the Federal rate and payments based on the hospital-specific rate under section 1886(d)(5)(D) of the Act, IME payments under section 1886(d)(11) of the Act for Medicare Part C patients will no longer be included as part of the Federal rate payment. After the higher of the Federal rate payment amount or the hospitalspecific rate payment amount is determined, any IME add-on payments under section 1886(d)(11) of the Act would be added to that payment for purposes of determining the hospital’s total payment amount. As noted above, under section 1886(d)(5)(D) of the Act, SCHs are paid based on their hospital-specific rate or the IPPS Federal rate, whichever yields the higher payment for the hospital’s cost reporting period. For each cost reporting period, the MAC determines which of the payment options will yield the higher aggregate payment. Interim payments are automatically made on a claim-by-claim basis at the higher rate using the best data available at the time the MAC makes the payment determination for each discharge. However, it may not be possible for the MAC to determine in advance precisely E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules which of the rates will yield the higher aggregate payment by year’s end. In many cases, it is not possible to forecast outlier payments or the final amount of the DSH payment adjustment or the IME adjustment until cost report settlement. As noted above, these adjustment amounts are applicable only to payments based on the Federal rate and not to payments based on the hospitalspecific rate. The MAC makes a final adjustment at cost report settlement after it determines precisely which of the two payment rates would yield the higher aggregate payment to the hospital for its cost reporting period. This payment methodology makes SCHs unique because SCH payments can change on a yearly basis from payments based on the hospital-specific rate to payments based on the Federal rate, or vice versa. As we stated earlier, section 1886(d)(11) of the Act provides for an additional payment for each applicable discharge of any subsection (d) teaching hospital for treating Medicare Part C patients. Section 1886(d)(11)(C) of the Act specifies that the amount of the payment ‘‘shall be equal to the applicable percentage (as defined in subsection (h)(3)(D)(ii)) of the estimated average per discharge amount that would otherwise have been paid under paragraph (5)(B) if the individuals had not been enrolled as described in subparagraph (B)’’ (emphasis added). Because an SCH that is paid based on its hospital-specific rate does not receive any IME add-on payment for Medicare Part A patients as provided under section 1886(d)(5)(B) of the Act because, generally, the hospital-specific rate already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients, CMS has interpreted section 1886(d)(11)(C) of the Act to mean that an SCH that is paid based on its hospital-specific rate also is not entitled to receive an additional payment for discharges of Medicare Part C patients under section 1886(d)(11) of the Act. After further consideration of the language at section 1886(d)(11) of the Act, we believe that the statute would allow an SCH that is paid based on its hospital-specific rate to receive IME add-on payments for its Medicare Part C patient discharges. Section 1886(d)(11)(A) of the Act provides for an additional payment amount for each applicable discharge of a Medicare Part C patient of a subsection (d) hospital that has an approved medical residency training program. Section 1886(d)(11)(C) of the Act sets forth the amount of this additional payment, by reference to the amount that would otherwise have been VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 paid under section 1886(d)(5)(B) of the Act. Although an SCH that is paid based on its hospital-specific rate does not receive any amount under section 1886(d)(5)(B) of the Act for discharges of Medicare Part A patients, we believe that section 1886(d)(11)(C) of the Act can be interpreted as simply establishing the methodology for calculating the amount of the add-on payment, without limiting the applicability of the add-on payment to those SCHs that are paid based on the Federal rate. As noted earlier, in making the comparison of SCH payments under the Federal rate and the hospital-specific rate under section 1886(d)(5)(D) of the Act, the aggregate Federal rate payments are based on the IPPS standardized amount and include IME add-on payments for both Medicare Part A and Medicare Part C patient discharges. Payments based on the hospital-specific rate do not include the Medicare Part A IME add-on payment under section 1886(d)(5)(B) of the Act, under the rationale that, generally, the hospitalspecific rate already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients. Payments based on the hospital-specific rate also do not include the IME add-on payment for Medicare Part C patient discharges under section 1886(d)(11) of the Act. As a result, under the current methodology, if an SCH that is a teaching hospital is paid based on its hospital-specific rate, it receives no IPPS payment that accounts for the additional costs that a teaching hospital incurs for its Medicare Part C patients. In conjunction with our proposal to provide IME add-on payments under section 1886(d)(11) of the Act to SCHs, regardless of whether the SCH is paid based on the Federal rate or its hospitalspecific rate, we also believe that, for purposes of the comparison of payments under the Federal rate and the hospitalspecific rate for SCHs under section 1886(d)(5)(D) of the Act, it is no longer appropriate for IME add-on payments under section 1886(d)(11) of the Act to be included as part of the Federal rate payment. Therefore, we are proposing to no longer include these payments in the comparison in order to more accurately reflect comparable payments for Medicare Part A patient discharges. In addition, because the IME add-on payment for Medicare Part C patient discharges for a given SCH would be the same, regardless of whether it is paid based on the Federal rate or its hospitalspecific rate, there would be no need to include the IME add-on payment for Medicare Part C patient discharges in the comparison. This is because the Part PO 00000 Frm 00117 Fmt 4701 Sfmt 4702 28093 C IME adjustment is always multiplied by the Federal rate that is used under section 1886(d)(5)(B) of the Act, regardless of whether the hospitalspecific rate is higher, in accordance with section 1886(d)(11) of the Act, which states that the IME Part C add-on amount ‘‘shall be equal to the applicable percentage . . . of the estimated average per discharge amount that would otherwise have been paid under paragraph (5)(B).’’ In summary, effective with discharges occurring in cost reporting periods beginning on or after October 1, 2014, we are proposing: (1) To provide all SCHs that are subsection (d) teaching hospitals IME add-on payments for Medicare Part C patient discharges in accordance with section 1886(d)(11) of the Act; and (2) that, for purposes of the comparison of payments based on the Federal rate and the hospital-specific rate for SCHs under section 1886(d)(5)(D) of the Act, IME add-on payments under section 1886(d)(11) of the Act for Medicare Part C patient discharges will no longer be included in the aggregate payment under the Federal rate. That is, for purposes of determining payment to an SCH under section 1886(d)(5)(D) of the Act, we are proposing to compare aggregate payments based on the Federal rate, including the IME add-on payment for Medicare Part A patients (where applicable), but not the IME add-on payment for Medicare Part C patients, to aggregate payments based on the hospital-specific rate, which as explained earlier, do not include any IME add-on payments for either Medicare Part A or Part C patients. After the higher of the Federal rate payment amount or the hospital-specific rate payment amount under section 1886(d)(5)(D) of the Act is determined, the Part C IME adjustment factor would be multiplied by the Federal rate payment amount to determine the addon payment amount under section 1886(d)(11) of the Act, and then any IME add-on payments under section 1886(d)(11) of the Act would be added to the payment amount under section 1886(d)(5)(D) of the Act for purposes of determining the hospital’s total payment amount. We are inviting public comments on both of these proposals and any alternatives that we should consider. 3. Other Proposed Policy Changes Affecting IME In section IV.K. of the preamble of this proposed rule, we present other proposed policy changes relating to GME payments, which may also apply to IME payments. We refer readers to E:\FR\FM\15MYP2.SGM 15MYP2 28094 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b). that section of the preamble of this proposed rule where we present the proposed policies. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 F. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the ‘‘Pickle method.’’ The second method for qualifying for the DSH payment adjustment, which is the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital’s geographic designation, the number of beds in the hospital, and the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: The ‘‘Medicare fraction’’ and the ‘‘Medicaid fraction.’’ The Medicare fraction (also known as the ‘‘SSI fraction’’ or ‘‘SSI ratio’’) is computed by dividing the number of the hospital’s inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital’s total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital’s number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days in the same period. Because the DSH payment adjustment is part of the IPPS, the DSH statutory references (under section 1886(d)(5)(F) of the Act) to ‘‘days’’ apply only to hospital acute care inpatient days. Regulations located at § 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 2. Impact on Medicare DSH Payment Adjustment of Proposed Implementation of New OMB Labor Market Delineations As discussed in section III.B. of the preamble of this proposed rule, we are proposing to implement the new OMB labor market area delineations (which are based on 2010 Decennial Census data) for the FY 2015 wage index. This proposal also would have an impact on the calculation of Medicare DSH payments to certain hospitals. Hospitals that are designated as rural with less than 500 beds and that are not rural referral centers (RRCs) are subject to a maximum DSH payment adjustment of 12 percent. Accordingly, hospitals with less than 500 beds that are currently in urban counties that would become rural if we adopt the new OMB delineations, and that do not become RRCs, would be subject to a maximum DSH payment adjustment of 12 percent. (We note that urban hospitals are only subject to a maximum DSH payment adjustment of 12 percent if they have less than 100 beds.) Under existing regulations at 42 CFR 412.102, a hospital located in an area that is reclassified from urban to rural, as defined in the regulations, may receive an adjustment to its rural Federal payment amount for operating costs for two successive fiscal years. Specifically, the regulations state that, in the first year after a hospital loses urban status, the hospital will receive an additional payment that equals twothirds of the difference between the urban standardized amount and disproportionate share payments as applicable to the hospital before its redesignation from urban to rural and the rural standardized amount and disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital will receive an additional payment that equals one-third of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its redesignation from urban to rural and the rural standardized amount and disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. PO 00000 Frm 00118 Fmt 4701 Sfmt 4702 We note that we no longer make a distinction between the urban standardized amount and the rural standardized amount. Rather, hospitals receive the same standardized amount regardless of their geographic designation. Accordingly, we are proposing to revise the regulation at § 412.102 to remove references to the urban and rural standardized amounts. The provisions of § 412.102 would continue to apply with respect to the calculation of the DSH payments to hospitals that are currently located in urban counties that would become rural if we adopt the new OMB delineations. Specifically, the regulations would state that in the first year after a hospital loses urban status, the hospital will receive an additional payment that equals two-thirds of the difference between disproportionate share payments as applicable to the hospital before its redesignation from urban to rural and the disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital will receive an additional payment that equals one-third of the difference between the disproportionate share payments applicable to the hospital before its redesignation from urban to rural and the disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. For the purposes of ratesetting, calculating budget neutrality, and modeling payment impacts for this proposed rule, any hospital that was previously urban but would be changed to rural status in FY 2015 as a result of the proposed adoption of the new OMB labor market area delineations would have its DSH payments modeled such that the payment equals the amount of the rural disproportionate share payments plus two-thirds of the difference between the urban disproportionate share payments and the rural disproportionate share payments. 3. Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (§ 412.106) a. General Discussion Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111–152), added a new section 1886(r) to the Act that modifies the methodology for computing the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Medicare DSH payment adjustment beginning in FY 2014. For purposes of this proposed rule, we refer to these provisions collectively as section 3133 of the Affordable Care Act. Medicare DSH adjustment payments are calculated under a statutory formula that considers the hospital’s Medicare utilization attributable to beneficiaries who also receive Supplemental Security Income (SSI) benefits and the hospital’s Medicaid utilization. Beginning with discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments. This provision applies equally to hospitals that qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act. The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year are based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year. As provided by section 3133 of the Affordable Care Act, section 1886(r) of the Act requires that, for FY 2014 and each subsequent fiscal year, a ‘‘subsection (d) hospital’’ that would otherwise receive a ‘‘disproportionate share hospital payment . . . made under subsection (d)(5)(F)’’ receives two separately calculated payments. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such a subsection (d) hospital (including a Pickle hospital) 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for disproportionate share hospital payments, which represents ‘‘the empirically justified amount for such payment, as determined by the Medicare Payment Advisory Commission in its March 2007 Report to the Congress.’’ We refer to this payment as the ‘‘empirically justified Medicare DSH payment.’’ In addition to this payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 year, the Secretary shall pay to ‘‘such subsection (d) hospital an additional amount equal to the product of’’ three factors. The first factor is the difference between ‘‘the aggregate amount of payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply’’ and ‘‘the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1)’’ for each fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act. The second factor is, for FYs 2014 through 2017, 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, determined by comparing the percent of such individuals who are uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment), minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FYs 2015 through 2017. For FYs 2014 through 2017, the baseline for the estimate of the change in uninsurance is fixed by the most recent estimate of the Congressional Budget Office before the final vote on the Health Care and Education Reconciliation Act of 2010, which is contained in a March 20, 2010 letter from the Director of the Congressional Budget Office to the Speaker of the House. (A link to this letter is included in section IV.F.3.d.(2) of the preamble of this proposed rule). For FY 2018 and subsequent years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals ‘‘who are uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary’’ of CMS, and the percent of individuals ‘‘who are uninsured in the most recent period for which data is available (as so estimated and certified), minus 0.2 percentage points for FYs 2018 and 2019.’’ Therefore, for FY 2018 and subsequent years, the statute provides some greater flexibility in the choice of the data sources to be used for the estimate of the change in the percent of uninsured individuals. PO 00000 Frm 00119 Fmt 4701 Sfmt 4702 28095 The third factor is a percent that, for each subsection (d) hospital, ‘‘represents the quotient of . . . the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data . . .),’’ including the use of alternative data ‘‘where the Secretary determines that alternative data is available which is a better proxy for the costs of subsection (d) hospitals for . . . treating the uninsured,’’ and ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection.’’ Therefore, this third factor represents a hospital’s uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in that fiscal year, expressed as a percent. For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment determined by these factors as the ‘‘uncompensated care payment.’’ Section 1886(r) of the Act applies to FY 2014 and each subsequent fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647) and the FY 2014 IPPS interim final rule with comment period (78 FR 61191 through 61197), we set forth our policies for implementing the required changes to the DSH payment methodology made by section 3133 of the Affordable Care Act for FY 2014. In those rules, we noted that, because section 1886(r) of the Act modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR Part 412, Subpart M, which were established through the exercise of the Secretary’s discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act. Finally, section 1886(r)(3) of the Act provides that there shall be ‘‘no administrative or judicial review under section 1869, section 1878, or otherwise’’ of ‘‘any estimate of the Secretary for purposes of determining the factors described in paragraph (2),’’ or of ‘‘any period selected by the Secretary’’ for the purpose of determining those factors. Therefore, there is no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or the periods selected in order to develop such estimates. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28096 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules b. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments As indicated earlier, the payment methodology under section 3133 of the Affordable Care Act applies to ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share payment . . . made under subsection (d)(5)(F).’’ Therefore, eligibility for empirically justified Medicare DSH payments is unchanged under section 3133 of the Affordable Care Act. Consistent with the law, hospitals must receive empirically justified Medicare DSH payments in a fiscal year to receive an additional Medicare uncompensated care payment for that year. Specifically, section 1886(r)(2) of the Act states that ‘‘[i]n addition to the payment made to a subsection (d) hospital under paragraph (1) . . . the Secretary shall pay to such subsection (d) hospital an additional amount . . .’’ (emphasis supplied). Because paragraph (1) refers to empirically justified Medicare DSH payments, the additional payment under section 1886(r)(2) of the Act therefore, is limited to hospitals that receive empirically justified Medicare DSH payments in accordance with section 1886(r)(1) of the Act for the applicable fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2014 IPPS interim final rule with comment period (78 FR 61193), we provided that hospitals that are not eligible to receive empirically justified Medicare DSH payments in a fiscal year will not receive uncompensated care payments for that year. We also specified that we would make a determination concerning eligibility for interim uncompensated care payments based on each hospital’s estimated DSH status for the applicable fiscal year (using the most recent data that are available). We indicated that our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH status on the cost report for that payment year. In the FY 2014 IPPS/LTCH PPS final rule, we also considered whether several specific classes of hospitals are included within the scope of section 1886(r) of the Act. As we specified in that final rule (78 FR 50623), subsection (d) Puerto Rico hospitals that are eligible for DSH payments also are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. In addition, in the FY 2014 IPPS/ LTCH PPS final rule, we considered VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 whether Maryland hospitals that were paid under section 1814(b)(3) of the Act, would be eligible to receive uncompensated care payments. We explained that, under section 1814(b) of the Act, hospitals in the State of Maryland were subject to a waiver from the Medicare payment methodologies under which they would otherwise be paid. Because Maryland waiver hospitals were not paid under the IPPS (section 1886(d) of the Act), in the FY 2014 IPPS/LTCH PPS final rule, we determined that Maryland hospitals that operated under a waiver under section 1814(b)(3) of the Act were not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1886(r) of the Act (78 FR 50623). As stated in section IV.H. of the preamble of this proposed rule, effective January 1, 2014, the State of Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act and entered into an agreement with CMS that Maryland hospitals would be paid under the Maryland AllPayor Model. However, under the Maryland All-Payor Model, Maryland hospitals still are not paid under the IPPS. Therefore, they remain ineligible to receive empirically justified Medicare DSH payments or the uncompensated care payments under section 1886(r) of the Act. SCHs are paid based on their hospitalspecific rate from certain specified base years or the IPPS Federal rate, whichever yields the greater aggregate payment for the hospital’s cost reporting period. If an SCH is paid under its hospital-specific rate, it is not eligible for Medicare DSH payments. In order to implement the provisions of section 1886(r) of the Act, in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50624), we specified that we will continue to determine interim payments for SCHs based on what we estimate and project their DSH status to be prior to the beginning of the Federal fiscal year (based on the best available data at that time), subject to settlement through the cost report. We also specified that SCHs that receive interim empirically justified Medicare DSH payments in a fiscal year would receive interim uncompensated care payments for that fiscal year on a per discharge basis, subject as well to settlement through the cost report. Final eligibility determinations will be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments will be adjusted accordingly. PO 00000 Frm 00120 Fmt 4701 Sfmt 4702 Therefore, we follow the same processes of interim and final payments for SCHs that we follow for eligible IPPS DSH hospitals generally. MDHs are paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospitalspecific rate from certain specified base years (76 FR 51684). The IPPS Federal rate used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology. Uncompensated care payments to MDHs were not explicitly addressed in the FY 2014 IPPS/LTCH PPS final rule because, at the time of the publication of the final rule, the MDH program was set to expire at the end of FY 2013. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, the MDH program was extended from October 1, 2013, to March 31, 2014, under the Pathway for SGR Reform Act (Pub. L. 113–67) and was further extended an additional year from April 1, 2014, to March 31, 2015, by the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93). Because MDHs are paid under the IPPS Federal rate and, therefore, are eligible to receive Medicare DSH payments if their disproportionate patient percentage is at least 15 percent, we apply the same process to determine eligibility for Medicare DSH and the uncompensated care payment as we do for all other IPPS hospitals. That is, we make a determination concerning eligibility for interim uncompensated care payments based on each hospital’s estimated DSH status for the applicable fiscal year (using the most recent data that are available) and our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH status on the cost report for that payment year. In addition, as we do for all IPPS hospitals, we would calculate a numerator for Factor 3 for all MDHs, regardless of whether they are projected to be eligible for DSH during the fiscal year, but the denominator for Factor 3 would be based on the uncompensated care data from the hospitals that we have projected to be eligible for DSH during the fiscal year. Furthermore, in the FY 2014 IPPS interim final rule with comment period (79 FR 15027), which addressed MDH payments for the first 6 months of FY 2014, we established a policy of including a pro rata share of the uncompensated care payment amount for that period as part of the Federal rate payment in the comparison of payments under the hospital-specific rate and the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Federal rate. Consistent with that policy, for MDH payments for the first 6 months of FY 2015, a pro rata share of the uncompensated care payment amount for that period will be included as part of the Federal rate payment in the comparison of payments under the hospital-specific rate and the Federal rate. That is, in making this comparison at cost report settlement, we will include the pro rata share of the uncompensated care payment amount that reflects the period of time the hospital was paid under the MDH program for its discharges occurring on or after October 1, 2014, and before April 1, 2015. Consistent with the policy for hospitals with Medicare cost reporting periods that span more than 1 Federal fiscal year, this pro rata share will be determined based on the proportion of the applicable Federal fiscal year that is included in that cost reporting period (78 FR 61192 through 61194). As noted previously, section 106 of Public Law 113–93 provides for an extension of the MDH program through March 31, 2015, only. Therefore, beginning April 1, 2015, all hospitals that previously qualified for MDH status will no longer have MDH status under current law. IPPS hospitals that have elected to participate in the Bundled Payments for Care Improvement initiative receive a payment that links multiple services furnished to a patient during an episode of care. We have stated in previous rulemaking that those hospitals continue to be paid under the IPPS (77 FR 53342). Hospitals that elect to participate in the initiative can still receive DSH payments while participating in the initiative, if they otherwise meet the requirements for receiving such payments. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50625), we specified that we will apply the new DSH payment methodology to the hospitals participating in this initiative, so that eligible hospitals will receive empirically justified Medicare DSH payments and uncompensated care payments. Section 410A of the Medicare Modernization Act established the Rural Community Hospital Demonstration Program. After the initial 5-year period, the demonstration was extended for an additional 5-year period by sections 3123 and 10313 of the Affordable Care Act. There are 23 hospitals currently participating in the demonstration. Under the payment methodology provided in section 410A, participating hospitals receive payment for Medicare inpatient services on the basis of a cost methodology. Specifically, for discharges occurring in the hospitals’ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 first cost reporting period of the initial 5-year demonstration or the first cost reporting period of the 5-year extension, the hospitals participating in the demonstration receive payments for the reasonable cost of providing such services. For discharges occurring in subsequent cost reporting periods during the applicable 5-year period, hospitals receive the lesser of the current year’s reasonable cost-based amount, or the previous year’s amount updated by the percentage increase in the IPPS market basket (the target amount). The instructions (Change Request 5020 (April 14, 2006) and Change Request 7505 (July 22, 2011) for the demonstration require that the MAC not pay Medicare DSH payments in addition to the amount received under the reasonable cost-based payment methodology. Because hospitals participating in the demonstration do not receive DSH payments, we determined in the FY 2014 IPPS/LTCH PPS final rule that these hospitals also are excluded from receiving empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology (78 FR 50625). c. Empirically Justified Medicare DSH Payments As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the DSH payment that would otherwise be made under subsection (d)(5)(F) to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did not believe that it is necessary to develop any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision simply by revising the claims payment methodologies to adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the final rule that can be found on the CMS Web site at: https:// www.cms.gov/Regulations-and- PO 00000 Frm 00121 Fmt 4701 Sfmt 4702 28097 Guidance/Guidance/Transmittals/2014Transmittals-Items/R5P240.html. d. Uncompensated Care Payments As we have discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the new uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to the rate of uninsurance in 2013, and each eligible hospital’s estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. Below we review the data sources and methodologies for computing each of these factors, our final policies for FY 2014, and our proposed policies for FY 2015. (1) Proposed Calculation of Factor 1 for FY 2015 Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that it is a factor ‘‘equal to the difference between (i) the aggregate amount of payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply for such fiscal year (as estimated by the Secretary); and (ii) the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1) for such a fiscal year (as so estimated).’’ Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payment that would have been made under section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for such fiscal year. Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be ‘‘estimated by the Secretary.’’ Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in a fiscal year, as prescribed under section 1886(r)(1) of the Act. Again, section E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28098 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount. Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for the fiscal year. In order to determine Factor 1 in the uncompensated care payment formula, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule with comment period (78 FR 61194), we adopted a policy under which we develop final estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments to hospitals under section 1886(r)(1) of the Act prior to each fiscal year to which the new provision applies. These estimates are not revised or updated after we know the final Medicare DSH payments for the fiscal year. Specifically, in order to determine the two elements of Factor 1 (Medicare DSH payments prior to the application of section 1886(r)(1) of the Act, and empirically justified Medicare DSH payments after application of section 1886(r)(1) of the Act), we use the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by CMS’ Office of the Actuary. The Office of the Actuary projects Medicare DSH payments on a biannual basis, typically in February of each year (based on data from December of the previous year) as part of the President’s Budget, and in July (based on data from June) as part of the Midsession Review. The estimates are based on the most recently filed Medicare hospital cost report with Medicare DSH payment information, supplemental cost report data provided by Indian Health Service (IHS) hospitals to CMS, and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File. Therefore, for the Office of the Actuary’s February 2014 estimate, the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 data are based on the December 2013 update of the Medicare Hospital Cost Report Information System (HCRIS), supplemental cost report data provided by IHS hospitals to CMS as of December 2013 and the FY 2014 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2014 IPPS/LTCH PPS final rule. For the July 2014 estimate, we anticipate that the data will be based on the March 2014 update of the HCRIS data, supplemental cost report data provided by IHS hospitals to CMS as of March 2014, and the FY 2015 proposed rule’s IPPS Impact file, published in conjunction with this proposed rule (and which is available via the Internet on the CMS Web site). For purposes of this proposed rule, we are using the February 2014 Medicare DSH estimates to calculate Factor 1 and to model the proposed impact of this provision. For the final rule, we intend to use the July 2014 Medicare DSH estimates to determine Factor 1 and to model the impact of this provision. In addition, because SCHs paid under their hospitalspecific payment rate are excluded from the application of section 1886(r) of the Act, we also exclude SCHs that are projected to be paid under their hospital-specific rate from our Medicare DSH estimates. Similarly, because Maryland hospitals participating in the Maryland All-Payer Model and hospitals participating in the Rural Community Hospital Demonstration do not receive DSH payments, we also exclude these hospitals from our Medicare DSH estimates. Using the data sources discussed above, the Office of the Actuary uses the most recently submitted Medicare cost report data to identify current Medicare DSH payments, supplemental cost report data provided by IHS hospitals to CMS, and the most recent DSH payment adjustments provided in the IPPS Impact File, and applies inflation updates and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The February 2014 Office of the Actuary estimate for Medicare DSH payments for FY 2015, without regard to the application of section 1886(r)(1) of the Act, is $14.205 billion. This estimate excludes Maryland hospitals participating in the Maryland All-Payer Model, SCHs paid under their hospital-specific payment rate, and hospitals participating in the Rural Community Hospital Demonstration as discussed above. Therefore, based on this estimate, the estimate for empirically justified Medicare DSH payments for FY 2015, PO 00000 Frm 00122 Fmt 4701 Sfmt 4702 with the application of section 1886(r)(1) of the Act, is $3.551 billion (25 percent of the total amount estimated). Under § 412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the Office of the Actuary. Therefore, for the purpose of modeling Factor 1, we are proposing that Factor 1 for FY 2015 would be $10.654 billion ($14.205 billion minus $3.551 billion). We are inviting public comment on our proposed calculation of Factor 1 for FY 2015. (2) Proposed Calculation of Factor 2 for FY 2015 Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Specifically, section 1886(r)(2)(B)(i) of the Act provides: ‘‘For each of fiscal years 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals (I) who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment); and (II) who are uninsured in the most recent period for which data is available (as so calculated), minus 0.1 percentage points for fiscal year 2014 and minus 0.2 percentage points for each of fiscal years 2015, 2016, and 2017.’’ Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the percent of individuals under 65 without insurance in 2013 must be the percent of such individuals ‘‘who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment).’’ The Health Care and Education Reconciliation Act (Pub. L. 111–152) was enacted on March 30, 2010. It was passed in the House of Representatives on March 21, 2010, and by the Senate on March 25, 2010. Because the House of Representatives was the first House to vote on the Health Care and Education E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Reconciliation Act of 2010 on March 21, 2010, we have determined that the most recent estimate available from the Director of the Congressional Budget Office ‘‘before a vote in either House on the Health Care and Education Reconciliation Act of 2010 . . .’’ (emphasis added) appeared in a March 20, 2010 letter from the director of the CBO to the Speaker of the House. Therefore, we believe that only the estimates in this March 20, 2010 letter meet the statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we refer readers to the Web site at: https:// www.cbo.gov/sites/default/files/cbo files/ftpdocs/113xx/doc11379/amend reconprop.pdf.) In its March 20, 2010 letter to the Speaker of the House of Representatives, the CBO provided two estimates of the ‘‘post-policy uninsured population.’’ The first estimate is of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ (82 percent) and the second estimate is of the ‘‘Insured Share of the Nonelderly Population Excluding Unauthorized Immigrants’’ (83 percent). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate that includes all residents, including unauthorized immigrants. We stated that we believe this estimate is most consistent with the statute which requires us to measure ‘‘the percent of individuals under the age of 65 who are uninsured,’’ and provides no exclusions except for individuals over the age of 65. In addition, we stated that we believe that this estimate more fully reflects the levels of uninsurance in the United States that influence uncompensated care for hospitals than the estimate that reflects only legal residents. The March 20, 2010 CBO letter reports these figures as the estimated percentage of individuals with insurance. However, because section 1886(r)(2)(B)(i) of the Act requires that we compare the percent of individuals who are uninsured in the applicable year with the percent of individuals who were uninsured in 2013, in the FY 2014 IPPS/LTCH PPS final rule, we used the CBO insurance rate figure and subtracted that amount from 100 percent (that is the total population without regard to insurance status) to estimate the 2013 baseline percent of individuals without insurance. Therefore, for FYs 2014 through 2017, our estimate of the uninsurance percentage for 2013 is 18 percent. Section 1886(r)(2)(B)(i) of the Act requires that we compare the baseline uninsurance rate to the percent of such VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 individuals ‘‘who are uninsured in the most recent period for which data is available (as so calculated).’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634), we used the same data source, CBO estimates, to calculate this percent of individuals without insurance. In response to public comments, we also agreed that we should normalize the CBO estimates, which are based on the calendar year, for the Federal fiscal years for which each calculation of Factor 2 is made (78 FR 50633). Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we employed the most recently available estimate, specifically CBO’s May 2013 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at: https://www.cbo.gov/sites/default/ files/cbofiles/attachments/44190_Effects AffordableCareActHealthInsurance Coverage_2.pdf) as amended by CBO’s July 2013 estimates of changes in estimates of the effects of insurance coverage provisions in the Affordable Care Act issued in conjunction with a memo regarding ‘‘Analysis of the Administration’s Announced Delay of Certain Requirements Under the Affordable Care Act,’’ which are available at: https://www.cbo.gov/sites/ default/files/cbofiles/attachments/ 44465-ACA.pdf. The CBO’s May 2013 estimate of the rate of insurance for CY 2013 was 80 percent, and for CY 2014 was 84 percent. Therefore, the calculation of Factor 2 for FY 2014, employing a weighted average of the CBO projections for CY 2013 and CY 2014, was as follows: • CY 2013 rate of insurance coverage (May 2013 CBO estimate): 80 percent. • CY 2014 rate of insurance coverage (May 2013 CBO estimate, updated with July 2013 CBO estimate): 84 percent. • FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent * .75) = 83 percent. • Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent. • Percent of individuals without insurance for FY 2014 (weighted average): 17 percent. 1¥|[(0.17¥0.18)/0.18]| = 1¥0.056 = 0.944 (94.4 percent). 0.944 (94.4 percent)¥0.001 (0.1 percentage points) = 0.943 (94.3 percent). 0.943 = Factor 2 Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we adopted 0.943 as the final determination of Factor 2 for FY 2014. In conjunction with this determination, we also determined in the FY 2014 IPPS/LTCH PPS final rule and later revised in the FY 2014 IPPS PO 00000 Frm 00123 Fmt 4701 Sfmt 4702 28099 interim final rule with comment period (78 FR 61195) that the amount available for uncompensated care payments for FY 2014 would be approximately $9.046 billion (0.943 times our Factor 1 estimate of $9.593 billion). For this FY 2015 proposed rule, we have used CBO’s February 2014 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at https:// www.cbo.gov/publication/43900?utm_ source=feedblitz&utm_medium=Feed BlitzEmail&utm_content=812526&utm_ campaign=0). The CBO’s February 2014 estimate of individuals under the age of 65 with insurance in CY 2014 is 84 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2014 is 16 percent (that is, 100 percent minus 84 percent.) Similarly, the CBO’s February 2014 estimate of individuals under the age of 65 with insurance in CY 2015 is 86 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2015 available during the development of this proposed rule is 14 percent (that is, 100 percent minus 86 percent.) The calculation of the proposed Factor 2 for FY 2015, employing a weighted average of the CBO projections for CY 2014 and CY 2015, is as follows: • CY 2014 rate of insurance coverage (February 2014 CBO estimate): 84 percent. • CY 2015 rate of insurance coverage (February 2014 CBO estimate): 86 percent. • FY 2015 rate of insurance coverage: (84 percent * .25) + (86 percent * .75) = 85.5 percent. • Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent • Percent of individuals without insurance for FY 2015 (weighted average): 14.5 percent 1¥|[(0.145—0.18)/0.18]| = 1¥0.19444 = 0.80556 (80.556 percent) 0.80556 (80.556 percent)¥0.002 (0.2 percentage points for FY 2015 under section 1886(r)(2)(B)(i) of the Act) = 0.8036 (80.36 percent) 0.8036 = Factor 2 Therefore, we are proposing that Factor 2 for FY 2015 would be 0.8036. Our proposal for Factor 2 is subject to change if more recent CBO estimates of the insurance rate become available at the time of the preparation of the final rule. We are inviting public comments on our proposed calculation of Factor 2 for FY 2015. E:\FR\FM\15MYP2.SGM 15MYP2 28100 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (3) Proposed Calculation of Factor 3 for FY 2015 Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is ‘‘equal to the percent, for each subsection (d) hospital, that represents the quotient of (i) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data is available which is a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (ii) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period (as so estimated, based on such data).’’ Therefore, Factor 3 is a hospitalspecific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary to determine: (1) The definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period ‘‘based on appropriate data.’’ In addition, we note that the statute permits the Secretary to use alternative data ‘‘in the case where the Secretary determines that alternative data is available,’’ which is a better proxy for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the costs of subsection (d) hospitals for treating uninsured individuals. In the course of considering how to determine Factor 3 during the rulemaking process for FY 2014, we considered defining the amount uncompensated care for a hospital as the uncompensated care costs of each hospital and considered potential data sources for those costs. For purposes of selecting an appropriate data source for this possible definition of uncompensated care costs, we reviewed the literature and available data sources and determined that Worksheet S–10 of the Medicare cost report could potentially provide the most complete data for Medicare hospitals. (We refer readers to the report ‘‘Improvements to Medicare Disproportionate Share (DSH) Payments’’ for a full discussion and evaluation of the available data sources. The report is available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/dsh.html.) However, we noted that Worksheet S–10 is a relatively new data source that has been used for specific payment purposes only in relatively restricted ways (for example, to provide a source of charity care charges in the computation of EHR incentive payments (75 FR 44456)). We also noted that some stakeholders have expressed concern that hospitals have not had enough time to learn how to submit accurate and consistent data through this reporting mechanism. Other stakeholders have maintained that some instructions for Worksheet S–10 still require clarification in order to ensure standardized and consistent reporting by hospitals. At the same time, we noted that Worksheet S–10 is the only national data source that includes data for all Medicare hospitals and is designed to elicit data on uncompensated care costs. We discussed the possible use of data reported on Worksheet S–10 to determine uncompensated care costs in more detail in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27586). Because of concerns regarding variations in the data reported on Worksheet S–10 of the Medicare cost report and the completeness of these data, we did not propose to use data from the Worksheet S–10 to determine the amount of uncompensated care. However, we stated our belief that Worksheet S–10 of the Medicare cost report would otherwise be an appropriate data source to determine uncompensated care costs. In particular, we noted that Worksheet S–10 was developed specifically to collect information on uncompensated care costs in response to interest by MedPAC PO 00000 Frm 00124 Fmt 4701 Sfmt 4702 and other stakeholders regarding the topic (for example, MedPAC’s March 2007 Report to Congress) and that it is not unreasonable to expect information on the cost report to be used for payment purposes. Furthermore, hospitals attest to the accuracy and completeness of the information reported in the cost report at the time of submission. We indicated that we expect reporting on Worksheet S–10 to improve over time, particularly in the area of charity care which is already being used and audited for payment determinations related to the EHR Incentive Program, and that we will continue to monitor these data. Accordingly, we stated that we may proceed with a proposal to use data on the Worksheet S–10 to determine uncompensated care costs in the future, once hospitals are submitting accurate and consistent data through this reporting mechanism. As a result of our concerns regarding the data reported on Worksheet S–10 of the Medicare cost report, we believed it was appropriate to consider the use of alternative data, at least in FY 2014, the first year that this provision is in effect, and possibly for additional years until hospitals have adequate experience reporting all of the data elements on Worksheet S–10. We noted that this approach is consistent with input we received from some stakeholders in response to the CMS National Provider Call in January 2013, who stated their belief that existing FY 2010 and FY 2011 data from the Worksheet S–10 should not be used for implementation of section 1886(r) of the Act and who requested the opportunity to resubmit the data once more specific instructions were issued by CMS. Accordingly, we examined alternative data sources that could be used to allow time for hospitals to gain experience with and to improve the accuracy of their reporting on Worksheet S–10 of the Medicare cost report. We stated in the FY 2014 IPPS/ LTCH PPS final rule that we believe that data on utilization for insured lowincome patients can be a reasonable proxy for the treatment costs of uninsured patients. Moreover, due to the concerns regarding the accuracy and consistency of the data reported on the Worksheet S–10, we also determined that these alternative data, which are currently reported on the Medicare cost report, would be a better proxy for the amount of uncompensated care provided by hospitals. Accordingly, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we adopted the policy of employing the utilization of insured low-income patients defined as E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively, to determine Factor 3. We also indicated that we remained convinced that the Worksheet S–10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3 once hospitals are submitting more accurate and consistent data through this reporting mechanism. In the interim, we indicated that we would take steps such as revising and clarifying cost report instructions, as appropriate. We stated that it is our intention to propose introducing the use of the Worksheet S–10 data for purposes of determining Factor 3 within a reasonable amount of time. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have continued to evaluate and assess the comments we have received from stakeholders about Worksheet S–10 as well as evaluate what changes might need to be made to the instructions to make the data hospitals submit more accurate and consistent across hospitals. Although we have not yet developed revisions to the Worksheet S–10 instructions at this time, we remain committed to making improvements to Worksheet S–10. For that reason, we believe it would be premature to propose the use of Worksheet S–10 data for purposes of determining Factor 3 for FY 2015. Therefore, we are proposing to continue to employ the utilization of insured low-income patients defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients, as defined in § 412.106(b)(4) and § 412.106(b)(2)(i), respectively, to determine Factor 3 for FY 2015. Accordingly, we are proposing to revise the regulations at 42 CFR 412.106(g)(1)(iii)(C) to state that, for FY 2015, CMS will base its estimates of the amount of hospital uncompensated care on the most recent available data on utilization for Medicaid and Medicare SSI patients, as determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of that section of the regulations. We are inviting public comments on this proposal, and we will continue to work with the hospital community and others to develop the appropriate clarifications and revisions to Worksheet S–10 of the Medicare cost report for reporting uncompensated care data. In particular, we are inviting public comments on what would be a reasonable timeline for adopting Worksheet S–10 of the Medicare cost VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 report as the data source for determining Factor 3. As we did for the FY 2014 IPPS/LTCH PPS proposed rule, we are publishing on the CMS Web site a table listing Factor 3 for all hospitals that we estimate would receive empirically justified Medicare DSH payments in a fiscal year (that is, hospitals that we project would receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) and subsection (d) Puerto Rico hospitals that have the potential of receiving a DSH payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. Hospitals have 60 days from the date of public display of the IPPS/ LTCH PPS proposed rule to review these tables and notify CMS in writing of a change in a hospital’s subsection (d) hospital status, such as if a hospital has closed or converted to a CAH. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we considered public comments which recommended that we use the wage index to adjust insured low-income days in determining Factor 3 in order to account for the differences in ‘‘purchasing power’’ in different regions of the country. With respect to these public comments, we agreed that there may be regional variation in uncompensated care costs due to regional variations in the costs of care generally. However, we stated that we did not believe that there was sufficient basis for believing that the wage index reflects the variations in uncompensated care costs well enough to adopt it as the basis for adjusting Factor 3. The wage index reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. In computing the wage index, we derive an average hourly wage for each labor market area (total wage costs divided by total hours for all hospitals in the geographic area) and a national average hourly wage (total wage costs divided by total hours for all hospitals surveyed in the nation). A labor market area’s wage index value is the ratio of the area’s average hourly wage to the national average hourly wage. We note that, for FY 2014, 69.6 percent of the standardized amount is considered to be the labor-related share and, therefore, adjusted by the wage index. However, in addition to the labor-related share of the standardized amount being adjusted by the wage index, the entire standardized amount is also adjusted for the relative weight of the MS–DRG for each individual patient. In other words, the wage index PO 00000 Frm 00125 Fmt 4701 Sfmt 4702 28101 only adjusts for a portion of the variation in costs, and does not address variations in resource use and patient severity. Therefore, we stated that we did not believe that there was sufficient basis for believing that adjusting lowincome patient days by the wage index would better reflect variations in uncompensated care costs. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have continued to consider whether to propose employing the wage index to adjust insured low-income days in determining Factor 3. After this consideration, we continue to believe that a wage index adjustment to insured low-income days is not an appropriate measure to account for variations in the costs of uncompensated care among hospitals. The intensity of such care, and therefore the costs, may vary by hospital, but we still lack convincing evidence that the wage index data are an accurate measure of that intensity. Therefore, we are not proposing to adopt such an adjustment to lowincome days for purposes of calculating Factor 3 in FY 2015. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we also considered public comments that requested that we include insured low-income days from exempt units (specifically, inpatient rehabilitation units paid under the IRF PPS and inpatient psychiatric units paid under the IPF PPS) of the hospital in the computation of Factor 3, in order to better capture the treatment costs of the uninsured by the hospital. In response to those public comments, we stated our belief that there may be some merit to including insured low-income days from exempt units of the hospital in order to better capture the full costs of the treatment of the uninsured by the hospital insofar as those data may be publicly available, subject to audit, and used for payment purposes. We also indicated that we believed it would be prudent to consider the degree to which these data meet these conditions before adopting this recommendation. Therefore, we stated that we would consider including this recommendation among our proposals in future rulemaking. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have conducted an analysis of the impact of adopting this recommendation. That analysis has indicated that the inclusion of Medicaid and Medicare-SSI days for exempt inpatient units does not significantly change the distribution of uncompensated care payments to hospitals, with the exception of a few hospitals with high utilization associated with those exempt units that E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28102 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules would see increases in their uncompensated care payments. Furthermore, Medicaid and SSI days for inpatient rehabilitation units have been audited and are used for payment purposes under the IRF PPS; specifically, these data are used to calculate the low-income payment (LIP) adjustment under the IRF PPS. However, the data for inpatient psychiatric units are not generally audited and have not been used previously for payment purposes. Therefore, we are not proposing at this time to include those days in the calculation of a hospital’s share of uncompensated care payments. As we indicated earlier, we believe it would be appropriate to include such data in the calculation of uncompensated care payments only insofar as those data may be publicly available, subject to audit, and used for payment purposes. The use of data for inpatient psychiatric units would fail the second and third conditions. At the same time, we do not believe that including only inpatient rehabilitation unit days without inpatient psychiatric unit days would improve the accuracy of the uncompensated care payment calculation. We also observe, as we have previously noted, that the statutory references under section 1886(d)(5)(F) of the Act to ‘‘days’’ apply only to hospital acute care inpatient days. Section 412.106(a)(1)(ii) of the regulations therefore provides that, for purposes of DSH payments, ‘‘the number of patient days in the hospital includes only those days attributable to units or wards of the hospital providing acute care services generally payable under the prospective payment system and excludes’’ other days. In the absence of compelling reasons to do otherwise, we believe it is preferable to maintain consistency with this longstanding precedent in the context of this temporary method for determining uncompensated care payments. However, we are inviting public comments on this issue. The statute also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as ‘‘the amount of uncompensated care for such hospital for a period selected by the Secretary. . . .’’ (emphasis added). Section 1886(r)(2)(C)(ii) of the Act defines the denominator as ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 for such period’’ (emphasis added). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that process, we also determined the time period from which to calculate the numerator and denominator of the Factor 3 quotient in a way that would be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for hospitals that we estimate will qualify for Medicare DSH payments using the most recently available historical data and for those hospitals that we do not estimate will qualify for Medicare DSH payments but that may ultimately qualify for Medicare DSH payments at the time of cost report settlement. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), therefore, we adopted the policy to calculate the numerator and the denominator of Factor 3 for hospitals based on the most recently available full year of Medicare cost report data (including the most recently available data that may be used to update the SSI ratios) with respect to a Federal fiscal year. In other words, we use data from the most recently available full year cost report for the Medicaid days and the most recently available SSI ratios (that is, latest available SSI ratios before the beginning of the Federal fiscal year) for the Medicare SSI days. We noted that these data are publicly available, subject to audit, and used for payment purposes. While we recognized that older data also meet these criteria, we often use the most recently available data for payment determinations. Furthermore, in the FY 2014 IPPS interim final rule with comment period (78 FR 61195), we revised our policy to also include supplemental cost report data submitted to CMS only by IHS hospitals in order allow their Medicaid days to be used to calculate Factor 3. Therefore, for FY 2014, we used data from the most recently available full year cost report for the Medicaid days and the most recently available SSI ratios, which meant data from the 2010/ 2011 cost reports for the Medicaid days, supplemental 2011 cost report data submitted to CMS by IHS hospitals, and the FY 2011 SSI ratios for the Medicare SSI days to estimate Factor 3 for FY 2014. For FY 2015, we are again proposing to use data from the most recently available full year cost report for the Medicaid days (that is, we are proposing to use the 2012 cost report, PO 00000 Frm 00126 Fmt 4701 Sfmt 4702 unless that cost report is unavailable or reflects less than a full 12-month year; in the event the 2012 cost report is for less than 12 months, we are proposing to use the cost report from 2012 or 2011 that is closest to being a full 12-month cost report), supplemental cost report data submitted to CMS only by IHS hospitals and the most recently available SSI ratios. For purposes of this proposed rule, we are using data from the December 2013 update of the 2011/ 2012 Medicare cost reports for the Medicaid days and the FY 2011 SSI ratios for the Medicare SSI days. Consistent with our FY 2014 IPPS interim final rule with comment period (78 FR 61195), for FY 2015, we also are using supplemental cost report data provided by IHS hospitals to CMS as of December 2013 in order to calculate the proposed Factor 3. For the FY 2015 IPPS final rule, we intend to use the March 2014 update of the 2011/2012 Medicare cost reports, supplemental cost report data submitted to CMS by IHS hospitals as of March 2014, and the most recently available SSI ratios (FY 2012 SSI ratios and, if not available, the FY 2011 SSI ratios) to calculate Factor 3. We believe the March update to the Medicare cost reports will be the most recently available data to calculate Factor 3 at the time of publication of the FY 2015 IPPS final rule. We believe this is consistent with CMS’ historical policy to use the best available data when setting the payment rates and factors in both the proposed and final rules. Furthermore, this is consistent with our approach in other areas of IPPS, where we historically use the March update of cost report data and MedPAR claims data to calculate IPPS relative weights, budget neutrality factors, the outlier threshold, and the standardized amount for the IPPS final rule. If we were to wait for a later update of the cost report data to become available, this could cause delay of the publication of the IPPS final rule. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642), we discussed several specific issues concerning the use of cost report data to determine Factor 3. One issue concerned the process and data to be employed in determining Factor 3 in the case of hospital mergers. Specifically, two hospitals that merged in 2011 with one surviving provider number requested that we account for the merger by including data from both hospitals’ cost reports immediately prior to the merger in the calculation of the Factor 3 amount. In that final rule, we had calculated Factor 3 using only the surviving hospital’s cost report data and SSI ratio data. In the final rule (78 FR E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 50602), we responded to the public comment that Factor 3 would be calculated based on the low-income insured patient days (that is, Medicaid days and SSI days) under the surviving CCN, based on the most recent available data for that CCN (for FY 2014, from the cost report for 2011 or 2010). We noted that this was consistent with the treatment of other IPPS payment factors, where data used to calculate a hospital’s Medicare DSH payment adjustment, CCRs for outlier payments, and wage index values are tied to a hospital’s CCN. Data associated with a CCN that is no longer in use are not used to determine those IPPS hospital payments under the surviving CCN. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have received additional input from hospitals that have undergone mergers that suggest using only the surviving CCN produces an estimate of the surviving hospital’s uncompensated care burden that is lower than warranted. For FY 2015, for example, Factor 3 of the uncompensated care payment calculation would be determined using 2011/2012 cost reports. As a result, for any mergers occurring between FY 2011 and FY 2015, Factor 3 of the uncompensated care payment for FY 2015 would reflect only the data of the hospital with the surviving CCN, not the combination of the data from the two hospitals that merged. We believe that revising our methodology to incorporate data from both of the hospitals that merged could improve our estimate of the uncompensated care burden of the merged hospital. Accordingly, we are proposing to revise our methodology for determining Factor 3 to incorporate data from both merged hospitals until data for the merged hospitals become available under the surviving CCN. In addition, because the data systems used to calculate Factor 3 do not identify hospitals that have merged, we also are proposing to establish a process to identify hospitals that have merged after the period of the historical data that are being used to calculate Factor 3, up to a point in time during ratesetting for that Federal fiscal year. Under this approach, we would combine the data for the merged hospitals to calculate Factor 3 of the uncompensated care payment. Specifically, we are proposing that we would identify the hospitals that merged after the period from which data are being used to calculate Factor 3 (for FY 2015, 2012 and 2011) but before the publication of each year’s final rule. For purposes of this proposal, we are defining a merger to be an acquisition where the Medicare provider agreement VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 of one hospital is subsumed into the provider agreement of the surviving provider. We would not consider an acquisition where the new owner voluntarily terminates the Medicare provider agreement of the hospital it purchased by rejecting assignment of the previous owner’s provider agreement to be a merger. We believe it is appropriate to combine data to calculate Factor 3 for a merged hospital where the Medicare provider agreement of one hospital is subsumed into the provider agreement of the surviving provider because, in this type of acquisition as described in the September 6, 2013 Survey & Certification Memorandum S&C: 13–60– ALL (https://www.cms.gov/Medicare/ Provider-Enrollment-and-Certification/ SurveyCertificationGenInfo/Downloads/ Survey-and-Cert-Letter-13-60.pdf), the buyer is subject to all applicable statutes and regulations and to the terms and conditions under which the assigned agreement was originally issued. These include, but are not limited to, Medicare requirements to adjust payments to account for prior overpayments and underpayments, even if they relate to a pre-acquisition period (successor liability), and to adjust payments to collect civil monetary penalties. Therefore, we believe it is appropriate to also retain the data of the subsumed hospital to calculate the uncompensated care payment for the merged hospital. Conversely, by rejecting assignment of the Medicare provider agreement of the subsumed hospital, the surviving provider has voluntarily terminated the Medicare provider agreement and is precluded from having successor liability for Medicare overpayments or underpayments that would have otherwise been made to the subsumed provider. Furthermore, when the surviving hospital rejects automatic assignment of the existing provider agreement, but wishes to participate in the Medicare program, the merged hospital is considered an initial applicant to the Medicare program. In an instance in which the surviving provider has rejected assignment of the Medicare provider agreement of the subsumed provider, it would not seem appropriate to use data from the subsumed provider for purposes of Medicare payment, including for the calculation of a hospital’s uncompensated care payment. For FY 2015, we are proposing to identify mergers by querying the Medicare contractors. We believe it is appropriate to obtain merger information from the Medicare contractors, as a copy of each final sales PO 00000 Frm 00127 Fmt 4701 Sfmt 4702 28103 agreement/transaction indicating the effective date of the acquisition is generally submitted to the Medicare contractors once an acquisition is finalized. For the purpose of this proposed rule, we requested that the Medicare contractors provide us with a list of mergers that occurred between October 1, 2010 (the first day of FY 2011, which is the earliest date that would be included in any 2011 cost report data that are used to calculate a hospital’s Factor 3) through January 2014 (when we started preparing for the FY 2015 IPPS proposed rule). On the basis of this information, we would then combine the data elements of any hospitals that had merged to calculate the uncompensated care payment for the merged hospital. Specifically, we would combine the Medicaid days from the most recently available full year cost reports and the SSI days from the most recently available SSI ratios tied to the two CCNs prior to the merger to calculate the merged hospital’s Factor 3. For FY 2015, we would combine the Medicaid days from either the 2011 or 2012 cost reports and would use the most recently available SSI ratios available at the time the final rule is developed. In order to confirm these mergers and the accuracy of the data used to determine each merged hospital’s uncompensated care payment, we are proposing to publish a table on the CMS Web site, in conjunction with the issuance of the proposed and final rules for a fiscal year, containing a list of the mergers that we are aware of and the computed uncompensated care payment for each merged hospital. A copy of this table is being published on the CMS Web site in conjunction with the issuance of this proposed rule. The affected hospitals would then have the opportunity to comment during the public comment period on the accuracy of this information. We are proposing to treat hospitals that merge after the development of the final rule similar to new hospitals. For these newly merged hospitals, we would not have data currently available to calculate a Factor 3 amount that accounts for the merged hospital’s uncompensated care burden. In addition, we would not have data to determine if the newly merged hospital is eligible for Medicare DSH payment and, therefore, eligible for uncompensated care payments for the applicable fiscal year because the only data we would have to make this determination are those for the surviving CCN. Accordingly, we are proposing to treat newly merged hospitals in a similar manner as new E:\FR\FM\15MYP2.SGM 15MYP2 28104 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hospitals, such that the newly merged hospital’s final uncompensated care payment would be determined at cost report settlement where the numerator of the newly merged hospital’s Factor 3 would be based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year. We are proposing that the interim uncompensated care payments for the newly merged hospitals would be based on only the data of the surviving hospital’s CCN at the time of the preparation of the final rule for the applicable fiscal year. In other words, for newly merged hospitals, eligibility to receive interim uncompensated care payments and the amount of any interim uncompensated care payments would be based on the Medicaid days from either the 2011 or 2012 cost reports and the most recently available SSI ratios available at the time the final rule is developed for only the surviving CCN. However, at cost report settlement, we would determine the newly merged hospital’s final uncompensated care payments based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year. That is, we would revise the numerator of Factor 3 for the newly merged hospital to reflect the Medicaid and SSI days reported on the cost report for the applicable fiscal year. We are inviting public comment on our proposed change to the treatment of hospital mergers in the calculation of a hospital’s uncompensated care payment. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) 1. Background Section 1885(d)(5)(G) of the Act provides special payment protections, under the IPPS, to a Medicaredependent, small rural hospital (MDH). (For additional information on the MDH program and the payment methodology, we refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684.)) As we discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684), section 3124 of the Affordable Care Act extended the expiration of the MDH program from the end of FY 2011 (that is, for discharges occurring before October 1, 2011) to the end of FY 2012 (that is, for discharges occurring before October 1, 2012). Under prior law, as specified in section 5003(a) of Public Law 109–171 (DRA 2005), the MDH program was to be in effect through the end of FY 2011 only. Since the extension of the MDH program through FY 2012 provided by VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 section 3124 of the Affordable Care Act, the MDH program has been further extended multiple times. First, section 606 of the ATRA of 2012 (Pub. L. 112– 240) extended the MDH program through FY 2013 (that is, for discharges occurring before October 1, 2013.) Second, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113– 67) extended the MDH program through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014.) In the FY 2014 interim final rule with comment period that appeared in the Federal Register on March 18, 2013 (79 FR 15025 through 15027), we discussed the expiration of the MDH program on March 31, 2014, and explained how providers may be affected by the 6-month extension of the MDH program under Public Law 113–67 and described the steps to reapply for MDH status for FY 2014, as applicable. Generally, a provider that was classified as an MDH as of September 30, 2013, was reinstated as an MDH effective October 1, 2013, with no need to reapply for MDH classification. However, if the MDH had classified as an SCH or cancelled its rural classification under § 412.103(g) effective on or after October 1, 2013, the effective date of MDH status may not be retroactive to October 1, 2013. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649) and the FY 2014 interim final rule with comment period (79 FR 15025 through 15027), we made conforming changes to the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the extensions of the MDH program provided for by the ATRA and Pathway for SGR Reform Act, respectively. Lastly, under current law, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) provides for a 1year extension of the MDH program effective from April 1, 2014 through March 31, 2015. Specifically, section 106 of Public Law 113–93 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking ‘‘April 1, 2014’’ and inserting ‘‘April 1, 2015’’. Section 106 of Public Law 113–93 also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. We intend to address the extension of the MDH program for the second half of FY 2014 (that is, from April 1, 2014 through September 30, 2014) under Public Law 113–93 in a separate Federal Register notice. For additional information on the extensions of the MDH program after FY 2012, we refer readers to the following rules: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53413 through PO 00000 Frm 00128 Fmt 4701 Sfmt 4702 53414); the FY 2013 IPPS notice that appeared in the Federal Register on March 7, 2013 (78 FR 14689); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649); and the FY 2014 interim final rule with comment period (79 FR 15025 through 15027). 2. Provisions of Public Law 113–93 for FY 2015 Prior to the enactment of Public Law 113–93, under section 1106 of Public Law 113–67, the MDH program authorized by section 1886(d)(5)(G) of the Act was set to expire midway through FY 2014. Section 106 of Public Law 113–93 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year extension of the MDH program, effective from April 1, 2014 through March 31, 2015. Section 106 of Public Law 113–93 also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. In this proposed rule, we are proposing to make conforming changes to the regulations at §§ 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program for the first 6 months of FY 2015 made by section 106 of Public Law 113–93. 3. Expiration of the MDH Program Because section 106 of Public Law 113–93 extends the MDH program through the first half of FY 2015 only, effective April 1, 2015, the MDH program will no longer be in effect. Because the MDH program is not authorized by statute beyond March 31, 2015, beginning April 1, 2015, all hospitals that previously qualified for MDH status will no longer have MDH status and will be paid based on the Federal rate. As noted earlier, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we revised our SCH policies to allow MDHs to apply for SCH status and be paid as such under certain conditions, following expiration of the MDH program at the end of FY 2012. We codified these changes in the regulations at § 412.92(b)(2)(i) and § 412.92(b)(2)(v). For additional information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We note that those same conditions apply to MDHs that intend to apply for SCH status with the expiration of the MDH program on March 31, 2015. Specifically, the existing regulations at § 412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval of SCH status that is the day following the expiration date of the MDH program. In accordance with these regulations, in order for an MDH to receive SCH status E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules effective April 1, 2015, it must apply for SCH status at least 30 days before the end of the MDH program; that is, the MDH must apply for SCH status by March 1, 2015. The MDH also must request that, if approved as an SCH, the SCH status be effective with the expiration of the MDH program provision; that is, the MDH must request that the SCH status, if approved, be effective April 1, 2015, immediately after its MDH status expires with the expiration of the MDH program on March 31, 2015. We note that an MDH that applies for SCH status in anticipation of the expiration of the MDH program would not qualify for the April 1, 2015 effective date upon approval if it does not apply by the March 1, 2015 deadline. The provider would instead be subject to the usual effective date for SCH classification, that is, 30 days after the date of CMS’ written notification of approval as specified at § 412.92(b)(2)(i). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 H. Hospital Readmissions Reduction Program: Proposed Changes for FY 2015 Through FY 2017 (§§ 412.150 Through 412.154) 1. Statutory Basis for the Hospital Readmissions Reduction Program Section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act, added a new section 1886(q) to the Act. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program,’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those applicable hospitals may be reduced to account for certain excess readmissions. Section 1886(q)(1) of the Act sets forth the methodology by which payments to ‘‘applicable hospitals’’ will be adjusted to account for excess readmissions. In accordance with section 1886(q)(1) of the Act, payments for discharges from an ‘‘applicable hospital’’ will be an amount equal to the product of the ‘‘base operating DRG payment amount’’ and the adjustment factor for the hospital for the fiscal year. That is, ‘‘base operating DRG payments’’ are reduced by a hospital-specific adjustment factor that accounts for the hospital’s excess readmissions. Section 1886(q)(2) of the Act defines the base operating DRG payment amount as ‘‘the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (o) [the Hospital VBP Program]) for a discharge if this subsection did not apply; reduced by . . . any portion of such payment VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 amount that is attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d).’’ Paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments, IME payments, DSH adjustment payments, and add-on payments for low-volume hospitals, respectively. Furthermore, section 1886(q)(2)(B) of the Act specifies special rules for defining ‘‘the payment amount that would otherwise be made under subsection (d)’’ for certain hospitals, including policies for SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374), we finalized policies to implement the statutory provisions related to the definition of ‘‘base operating DRG payment amount’’ with respect to those hospitals. Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges . . . ’’ Section 1886(q)(3)(C) of the Act establishes the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. Section 1886(q)(4) of the Act defines the terms ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio. . . for such hospital for such applicable period minus 1.’’ The ‘‘excess readmissions ratio’’ is a hospital-specific ratio based on each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmissions ratio as the ratio of actual-over-expected readmissions; specifically, the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable PO 00000 Frm 00129 Fmt 4701 Sfmt 4702 28105 hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. Section 1886(q)(5) of the Act provides definitions of ‘‘applicable condition,’’ ‘‘expansion of applicable conditions,’’ ‘‘applicable hospital,’’ ‘‘applicable period,’’ and ‘‘readmission.’’ The term ‘‘applicable condition’’ (which is addressed in detail in section IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through 51666)) is defined as a ‘‘condition or procedure selected by the Secretary among conditions and procedures for which: (i) Readmissions . . . represent conditions or procedures that are high volume or high expenditures . . . and (ii) measures of such readmissions . . . have been endorsed by the entity with a contract under section 1890(a) [of the Act] . . . and such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ Section 1886(q)(5)(B) of the Act also requires the Secretary, beginning in FY 2015, ‘‘to the extent practicable, [to] expand the applicable conditions beyond the 3 conditions for which measures have been endorsed . . . to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and procedures as determined appropriate by the Secretary.’’ Section 1886(q)(5)(C) of the Act defines ‘‘applicable hospital,’’ that is, a hospital subject to the Hospital Readmissions Reduction Program, as a ‘‘subsection (d) hospital or a hospital that is paid under section 1814(b)(3) [of the Act], as the case may be.’’ The term ‘‘applicable period,’’ as defined under section 1886(q)(5)(D) of the Act, ‘‘means, with respect to a fiscal year, such period as the Secretary shall specify.’’ As explained in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671), the ‘‘applicable period’’ is the period during which data are collected in order to calculate various ratios and payment adjustments under the Hospital Readmissions Reduction Program. Section 1886(q)(6) of the Act sets forth the public reporting requirements for hospital-specific readmission rates. Section 1886(q)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(q) of the Act. Finally, section 1886(q)(8) of the Act requires the Secretary to collect data on readmission rates for all hospital E:\FR\FM\15MYP2.SGM 15MYP2 28106 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 inpatients (not just Medicare patients) for a broad range of both subsection (d) and non-subsection(d) hospitals, in order to calculate the hospital-specific readmission rates for all such hospital inpatients and to publicly report these ‘‘all-patient’’ readmission rates. 2. Regulatory Background The payment adjustment factor set forth in section 1886(q) of the Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676), we addressed the issues of the selection of readmission measures and the calculation of the excess readmissions ratio, which will be used, in part, to calculate the readmissions adjustment factor. Specifically, in that final rule, we finalized policies that relate to the portions of section 1886(q) of the Act that address the selection of and measures for the applicable conditions, the definitions of ‘‘readmission’’ and ‘‘applicable period,’’ and the methodology for calculating the excess readmissions ratio. We also established policies with respect to measures for readmission for the applicable conditions and our methodology for calculating the excess readmissions ratio. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401), we finalized policies that relate to the portions of section 1886(q) of the Act that address the calculation of the hospital readmission payment adjustment factor and the process by which hospitals can review and correct their data. Specifically, in that final rule, we addressed the base operating DRG payment amount, aggregate payments for excess readmissions and aggregate payments for all discharges, the adjustment factor, applicable hospital, limitations on review, and reporting of hospital-specific information, including the process for hospitals to review readmission information and submit corrections. We also established a new Subpart I under 42 CFR part 412 (§§ 412.150 through 412.154) to codify rules for implementing the Hospital Readmissions Reduction Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 50676), we finalized our policies that relate to refinement of the readmissions measures and related methodology for the current applicable conditions, expansion of the ‘‘applicable conditions’’ beginning for FY 2015, and clarification of the process for reporting hospital-specific information, including the opportunity to review and submit corrections. We also established policies VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 related to the calculation of the adjustment factor for FY 2014. 3. Overview of Proposals and Policies for the FY 2015 Hospital Readmissions Reduction Program In this proposed rule, we are— • Proposing to make refinements to the readmissions measures and related methodology for FY 2015 and subsequent years (section IV.H.4. of the preamble of this proposed rule); • Proposing to expand the scope of ‘‘applicable conditions’’ for FY 2017 to include coronary artery bypass graft (CABG) (section IV.H.6. of the preamble of this proposed rule); • Discussing the maintenance of technical specifications for quality measures (section IV.H.7. of the preamble of this proposed rule); • Describing a waiver from the Hospital Readmissions Reduction Program for hospitals formerly paid under section 1814(b)(3) of the Act (§ 412.154(d)) (section IV.H.8. of the preamble of this proposed rule); • Proposing to specify the adjustment factor floor for FY 2015 (section IV.H.9. of the preamble of this proposed rule); • Proposing to specify the applicable period for FY 2015 (section IV.H.10. of the preamble of this proposed rule); • Proposing to make changes to the calculation of the aggregate payments for excess readmissions to include two additional readmissions measures (chronic obstructive pulmonary disease (COPD) and THA/TKA) (section IV.H.11. of the preamble of this proposed rule); and • Discussing whether to establish an exceptions process to address hospitals with extraordinary circumstances (section IV.H.12. of the preamble of this proposed rule). 4. Proposed Refinement of the Readmission Measures and Related Methodology for FY 2015 and Subsequent Years Payment Determinations a. Proposed Refinement of Planned Readmission Algorithm for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through 50655), we finalized for 2014 and subsequent years’ payment determinations the use of the CMS Planned Readmission Algorithm Version 2.1 in the AMI, HF, PN, COPD and THA/TKA readmission measures. The algorithm identifies readmissions PO 00000 Frm 00130 Fmt 4701 Sfmt 4702 that are planned and occur within 30 days of discharge from the hospital. A complete description of the CMS Planned Readmission Algorithm Version 2.1, which includes lists of planned diagnoses and procedures, can be found on our Web site (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). NQF has endorsed the use of the algorithm for these measures. Last year’s stakeholder comments supported the incorporation of the CMS Planned Readmission Algorithm Version 2.1 and suggested that we update it on a regular basis. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50652), we agreed to continually review the CMS Planned Readmission Algorithm and make updates as needed. Subsequently we have identified and made improvements to the algorithm. We are proposing to use the revised version, the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, COPD, and THA/TKA readmission measures for FY 2015 and subsequent payment determinations. We are also proposing to use this algorithm for the CABG readmission measure proposed for inclusion in the Hospital Readmissions Reduction Program starting in FY 2017. Version 3.0 incorporates improvements that were made based on a validation study of the algorithm. Researchers reviewed 634 patients’ charts at 7 hospitals, classified readmission as planned or unplanned based on the chart review, and compared the results to the claimsbased algorithm’s classification of the readmissions. The findings suggested the algorithm was working well but could be improved. Specifically, the study suggested the need to make small changes to the tables of procedures and conditions used in the algorithm to classify readmission as planned or unplanned. The algorithm uses the Agency for Healthcare Research and Quality’s (AHRQ’s) Clinical Classification Software (CCS) to group thousands of procedure and diagnosis codes into fewer categories of related procedures or diagnoses. The algorithm then uses four tables of procedures and diagnoses categories and a flow diagram to classify tables as planned or unplanned. For all measures, the first table identifies procedures that, if present in a readmission, classify the readmission as planned. The second table identifies primary discharge diagnoses that always classify readmissions as planned. Because almost all planned admissions are for E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules procedures or surgeries, a third table identifies procedures for which patients are typically admitted; if any of these procedures are coded in the readmission, we classify a readmission as planned as long as that readmission does not have an acute (unplanned) primary discharge diagnosis. The fourth table lists the acute (unplanned) primary discharge diagnoses that disqualify readmissions that include one or more of the potentially planned procedure in the third table as planned. These tables are structured the same across all measures but the specific procedure and conditions they contain vary slightly for certain measures based on clinical considerations for each cohort. The final proposed tables for each measure can be found on our Web site under the Measure Methodology reports (available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). Version 3.0 modifies two of these tables by removing or adding procedures or conditions to improve the accuracy of the algorithm. First, validation study revealed that the algorithm could be improved by removing two procedure CCS categories from the third table, the potentially planned procedure table: CCS 211— Therapeutic Radiation and CCS 224— Cancer Chemotherapy. Typically, patients do not require admission for scheduled Therapeutic Radiation treatments (CCS 211). The study found that readmissions that were classified as planned because they included Therapeutic Radiation were largely unplanned. The algorithm was also more accurate when CCS 224—Cancer Chemotherapy was removed from the potentially planned procedure table. The second table of the algorithm classifies all readmissions with a principal diagnosis of Maintenance Chemotherapy as planned. Most patients who receive cancer chemotherapy have both a code for Cancer Chemotherapy (CCS 224) and a principal discharge diagnosis of Maintenance Chemotherapy (CCS 45). In the validation study, the readmissions for patients who received Cancer Chemotherapy (CCS 224) but who did not have a principal diagnosis of Maintenance Chemotherapy were largely unplanned, so removing CCS 224 from the potentially planned procedure table improved the algorithm’s accuracy. Therefore, Version 3.0 removes CCS 211 and CCS 224 from the list of potentially planned procedures to improve the accuracy of the algorithm. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 As noted above, the algorithm uses a table of acute principal discharge diagnoses to help identify unplanned readmissions. Readmissions that have a principal diagnosis listed in the table are classified as unplanned, regardless of whether they include a procedure in the potentially planned procedure table. The validation study identified one diagnosis CCS that should be added to the table of acute diagnoses to more accurately identify truly unplanned admissions as unplanned: Hypertension with Complications (CCS 99). Hypertension with complications is a diagnosis that is rarely associated with planned readmissions. In addition, the validation study identified a subset of ICD–9–CM diagnosis codes within two CCS diagnosis categories that should be added to the acute diagnosis table to improve the algorithm. CCS 149, Pancreatic Disorders, includes the code for acute pancreatitis; clinically there is no situation in which a patient with this acute condition would be admitted for a planned procedure. Therefore, Version 3.0 adds the ICD–9 code for acute pancreatitis, 577.0, to the acute primary diagnosis table to better identify unplanned readmissions. Finally, CCS 149, Biliary Tract Disease, is a mix of acute and nonacute diagnoses. Adding the subset of ICD–9–CM codes within this CCS group that are for acute diagnoses to the list of acute conditions improves the accuracy of the algorithm for these acute conditions while still ensuring that readmissions for planned procedures, like cholecystectomies, are counted accurately as planned. For more detailed information on how the algorithm is structured and the use of tables to identify planned procedures and diagnoses, we refer readers to discussion of the CMS Planned Readmission Algorithm Version 2.1 in our reports (available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). As noted above, readers can find the specific Version 3.0 tables for each measure in the measure updates and specifications reports at the above link. We invite public comment on these proposals. b. Proposed Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort In this proposed rule, for FY 2015 and subsequent years, we are proposing to refine the measure cohort for the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty PO 00000 Frm 00131 Fmt 4701 Sfmt 4702 28107 (TKA) All-Cause Unplanned 30-Day Risk-Standardized Readmission Measure. Currently, the THA/TKA Readmission Measure adopted for the Hospital Readmissions Reduction Program is intended to only include patients who have an elective THA or TKA. This measure therefore excludes patients who have a principal discharge diagnosis of femur, hip, or pelvic fracture on their index admission since hip replacement for hip fracture is not an elective procedure. However, after hospitals reviewed their hospitalspecific THA/TKA Readmission Measure data during the national dry run conducted during September and October of 2012, we learned that hospitals code hip fractures that occur during the same admission as a THA as either a principal or secondary diagnosis. According to feedback received from hospitals participating in the dry run, the measure methodology failed to identify and therefore appropriately exclude a small number of patients (that is, 0.42 percent of patients in 2009–2010 data) with hip fracture who had non-elective total hip arthroplasty. To ensure that all such hip fracture patients are excluded from the measure, we are proposing to refine the measure to exclude patients with hip fracture coded as either principal or secondary diagnosis during the index admission. We believe this refinement is responsive to comments from hospitals and will allow us to accurately exclude patients who were initially admitted for a hip fracture and then underwent total hip arthroplasty, making their procedure nonelective. We invite public comments on this proposal. c. Anticipated Effect of Proposed Refinements on Measures The proposed refinement of the CMS Planned Readmission Algorithm Version 2.1 to Version 3.0 would have had the following effects on the measures based on our analyses of discharges between July 2009 and June 2012, if these changes had been applied for FY 2014. We note that these statistics are for illustrative purposes only, and we are not proposing to revise the measure calculations for the FY 2014 payment determination. Rather, we are proposing to apply these changes to the readmission measures for the FY 2015 payment determination and subsequent years. Among hospitals that were subject to the Hospital Readmissions Reduction Program in FY 2014 (Table IV.H.1), the number of eligible discharges based on E:\FR\FM\15MYP2.SGM 15MYP2 28108 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the July 2009 through June 2012 data were 494,121 discharges for AMI; 1,165,606 discharges for HF; 954,033 discharges for PN; 926,433 discharges for COPD; and 858,266 discharges for hip/knee. The proposed 30-day readmission rate (excluding the planned readmissions) would remain constant for AMI and COPD; increase by 0.1 percentage points for HF and PN; and increase by 0.4 percentage points for hip/knee. The new national readmission (unplanned) rate for each condition would have been 17.9 percent for AMI; 23.0 percent for HF; 17.7 percent for PN; 21.1 percent for COPD; and 5.27 percent for hip/knee. The number of readmissions considered planned (and, therefore, not counted as a readmission) would decrease by 319 for AMI; 1,313 for HF; 866 for PN, 547 for COPD; and 298 for hip/knee. The proposed modification of the hip/ knee measure cohort would have had the following effects on the measure: the measure cohort would have been reduced by 0.37 percent; the crude readmission rate would have been reduced by 0.02 absolute percentage points; and the mean RSRR would have been reduced by 0.03 absolute percentage points. TABLE IV.H.1.—COMPARISON OF PLANNED READMISSION ALGORITHMS V 2.1 AND 3.0 FOR AMI/HF/PN/COPD/HK READMISSION MEASURES [Based on 2009–2012 discharges from 3,025 hospitals] AMI HF V 3.0 Number of Discharges .......... Number of Unplanned Readmissions ..... Readmission Rate ............... Number of Planned Readmissions ..... Planned Readmission Rate .. % of Readmissions that are Planned .......... V 2.1 V 3.0 494,121 494,121 1,165,606 88,567 88,248 17.9% mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Hip/Knee V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 1,165,606 954,033 954,033 926,433 926,433 858,266 858,266 268,072 266,759 169,213 168,347 195,595 195,048 45,205 44,907 17.9% 23.0% 22.9% 17.7% 17.6% 21.1% 21.1% 5.27% 5.23% 11,577 11,896 15,293 16,606 5,867 6,733 5,858 6,405 2,283 2,581 2.3% 2.4% 1.3% 1.4% 0.6% 0.7% 0.6% 0.7% 0.3% 0.3% 11.6% 11.9% 5.4% 5.9% 3.4% 3.8% 2.9% 3.2% 4.8% 5.4% In FY 2014 IPPS/LTCH PPS final rule we finalized for FY 2015 two new condition specific readmission measures: (1) Hospital-level 30-day allcause risk-standardized readmission rate following elective total hip arthroplasty (THA) and total knee arthroplasty (TKA) (NQF #1551); (2) Hospital-level 30-day all-cause riskstandardized readmission rate following chronic obstructive pulmonary disease (COPD) (NQF #1891), bringing the total number of finalized applicable conditions to five over the past two years of implementation. We also noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657) that commenters requested that we delay adding other condition-specific measures. In view of these requests and our belief that it is reasonable to allow more time for hospitals to become familiar with these 5 applicable conditions, before adding other applicable conditions we are not proposing any new applicable conditions for FY 2016. 20:20 May 14, 2014 Jkt 232001 V 2.1 COPD V 3.0 5. No Proposed Expansion of the Applicable Conditions for FY 2016 VerDate Mar<15>2010 PN 6. Proposed Expansion of the Applicable Conditions for FY 2017 to Include the Patients Readmitted Following Coronary Artery Bypass Graft (CABG) Surgery Measure a. Background Under section 1886(q)(5)(B) of the Act, ‘‘[b]eginning with FY 2015, the Secretary shall, to the extent practicable, expand the applicable conditions beyond the 3 conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) . . . to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission [MedPAC] in its report to Congress in June 2007, and to other conditions and procedures as determined appropriate by the Secretary.’’ The four conditions and procedures recommended by MedPAC are: (1) Coronary artery bypass graft (CABG) surgery; (2) chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI); and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act directs the Secretary, in selecting an ‘‘applicable condition,’’ to choose from among readmissions ‘‘that represent conditions or procedures that are high volume or high expenditures under this title (or other criteria specified by the Secretary).’’ PO 00000 Frm 00132 Fmt 4701 Sfmt 4702 In accordance with section 1886(q)(5)(A) of the Act, effective for the calculation of the readmissions payment adjustment factors in FY 2017, we are proposing to expand the scope of applicable conditions and procedures to include patients readmitted following CABG surgery. This proposal is consistent with the prior FY 2014 IPPS/ LTCH PPS final rule (78 FR 50657) where we indicated our intent to explore quality measures that address CABG readmission rates. We describe this measure in detail below. We are proposing the inclusion of the condition of CABG readmissions to the Hospital Readmissions Reduction Program based on MedPAC’s recommendations. For this condition, we developed a Hospital-Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure. The National Quality Forum (NQF) Measure Applications Partnership (MAP) Hospital workgroup conditionally supported this measure for use in the Hospital Readmissions Reduction Program. The condition for support is based on attainment of NQF endorsement. On February 5, 2014, we submitted the Hospital-Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (CABG) Surgery measure to NQF for endorsement. The rationale for expanding the applicable conditions and the measures used to estimate the excess readmissions ratio is described in detail below. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 b. Overview of the Proposed CABG Readmissions Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery Among the seven conditions MedPAC identified in its 2007 Report to Congress as having the highest potentially preventable readmission rate, CABG had the highest rate of readmissions within 15 days following discharge (13.5 percent) and second highest average Medicare payment per readmission ($8,136).27 The annual cost to Medicare for potentially preventable CABG readmissions was estimated at $151 million.28 Evidence also shows variation in readmissions rates for patients with CABG surgery, supporting the finding that opportunities exist for improving care. The median, 30-day, riskstandardized readmission rate among Medicare fee-for-service patients aged 65 or older hospitalized for CABG in 2009 was 17.2 percent, and ranged from 13.9 percent to 22.1 percent across 1,160 hospitals.29 Although data documenting readmission reductions in CABG are limited, there are data that support CABG readmission as an important quality metric.30 Studying readmission rates after CABG surgery in New York, Hannan, et al. found: (1) Wide variation in readmission rates; (2) the most common cause of readmission after CABG is complication related to the surgery; and (3) that hospital-level variables such as use of cardiac rehabilitation and length of stay influenced readmission rates.31 The authors also noted that readmission rates were not closely correlated to mortality rates and thus measuring readmission rates likely offers a 27 Medicare Payment Advisory Committee. Report to the Congress: Promoting Greater Efficiency in Medicare, 2007. 28 Ibid. 29 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 30 Rumsfield J, Allen L. Reducing Readmission Rates: Does Coronary Artery Bypass Graft Surgery Provide Clarity? JACC Cardiovasc Interv. May 2011;4(5):2. 31 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 complementary metric intended to assess a different domain of quality. Mortality measures are more likely to encourage improvements in clinical quality, including rapid triage, effective safety practices, and early intervention and coordination in the hospital. Readmission measures place an increased emphasis on aspects of quality related to effective transitions to the outpatient setting, clear communication with patients and caregivers, and collaboration across communities and providers. Together, these data suggest that reducing readmission rates following CABG surgery is an important target for quality improvement. In addition, inclusion of this measure in the Hospital Readmissions Reduction Program aligns with CMS’ Quality Strategy objectives to promote successful transitions of care for patients from the acute care setting to the outpatient setting, and to reduce short-term readmission rates. In its final recommendations for rulemaking, the MAP conditionally supported the inclusion of the proposed CABG measure pending NQF endorsement and implementation. In order to address this concern, we submitted the CABG readmission measure to NQF for endorsement on February 5, 2014. We believe the proposed HospitalLevel, 30-Day, All-Cause, Unplanned Readmission Measure Following CABG Surgery warrants inclusion in the Hospital Readmissions Reduction Program for FY 2017, because it meets the criteria in section 1886(q)(5)(A) of the Act, as a high cost, high volume condition that was recognized by MedPAC Report to Congress in 2007 as a specific medical condition to focus on for improving readmission rates. As with other readmission measures, this measure also excludes such unrelated readmissions as planned readmissions and transfers to other hospitals. For these reasons we believe this measure is appropriate for the Hospital Readmissions Reduction Program. We invite public comments on this proposal. c. Proposed Methodology for the CABG Measure: Hospital-Level, 30-Day, AllCause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery The proposed CABG readmission measure assesses hospitals’ 30-day, allcause risk-standardized rate of unplanned readmission following admission for a CABG procedure. In general, the measure uses the same approach to risk-adjustment and hierarchical logistic modeling (HLM) methodology that is specified for the PO 00000 Frm 00133 Fmt 4701 Sfmt 4702 28109 AMI, HF, PN, COPD and THA/TKA readmission measures that we previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case-mix), the number of patients it treats, and the quality of care it provides. The HLM methodology is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and, therefore, the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. The measure methodology defines hospital case-mix based on the clinical diagnoses provided in the hospitals’ claims for the hospitals’ patient inpatient and outpatient visits for the 12 months prior to the hospitalization for CABG, as well as those present in the claims for care at admission. However, the methodology specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. We discuss the measure methodology below. (1) Data Sources The proposed CABG readmission measure is based on data derived from administrative claims. It uses Medicare administrative data from hospitalizations for fee-for-service Medicare beneficiaries hospitalized for a CABG procedure. (2) Definition of Outcome The proposed CABG readmission measure defines 30-day, all-cause readmission as an unplanned subsequent inpatient admission to any applicable acute care facility for any cause within 30 days of the date of discharge from the index hospitalization. A number of studies demonstrate that improvements in care at the time of discharge can reduce 30day readmission rates.32 33 Thirty days is 32 Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency Department Visit and Readmission in Patients Hospitalized for Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct. 2010;170:1664– 1670. 33 Nelson EA, Maruish ME, Axler JL.: Effects of Discharge Planning and Compliance with E:\FR\FM\15MYP2.SGM Continued 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28110 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules a meaningful timeframe for hospitals because readmissions are more likely attributable to care received within the index hospitalization and during the transition to the outpatient setting. The proposed CABG readmission measure assesses all-cause unplanned readmissions (excluding planned readmissions) rather than readmissions for CABG only. We include all unplanned readmissions for several reasons. First, from the patient perspective, a readmission for any reason is likely to be an undesirable outcome of care, even though not all readmissions are preventable. Second, limiting the measure to CABG-related readmissions may focus quality improvement efforts too narrowly rather than encouraging broader initiatives aimed at improving the overall care within the hospital and care transitions from the hospital setting. Moreover, it is often hard to exclude quality issues and accountability for a readmission based on the documented cause of readmission. For example, a patient who underwent a CABG surgery and developed a hospital-acquired infection might ultimately be readmitted for sepsis. It would be inappropriate to consider such a readmission to be unrelated to the care the patient received for their CABG surgery. Finally, while the measure does not presume that each readmission is preventable, quality improvement interventions generally have shown reductions in all types of readmissions. The proposed measure does not count planned readmissions as readmissions. Planned readmissions are identified in claims data using the CMS Planned Readmission Algorithm Version 3.0 that detects planned readmissions that may occur within 30 days of discharge from the hospital. Version 2.1 of the algorithm was finalized for use in the Hospital Readmissions Reduction Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through 50655). We have since updated the algorithm to Version 3.0 as part of yearly measure maintenance. The proposed CABG readmission measure uses the planned readmission algorithm, tailored for CABG patients. We adapted the algorithm for this group of patients with input from Cardiothoracic surgeons and other experts, narrowing the types of readmissions considered planned since planned readmissions following CABG are less common and less varied than among patients discharged from the hospital following a medical admission. More detailed information on how the Outpatient Appointments on Readmission Rates. Psychiatr Serv. July 1 2000;51(7):885–889. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 proposed CABG readmission measure incorporates the CMS Planned Readmission Algorithm Version 3.0 can be found in the 2012 CABG Readmission Measure Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). For the proposed CABG readmission measure, unplanned readmissions that fall within the 30-day post-discharge timeframe from the index admission would not be counted as readmissions for the index admission if they were preceded by a planned readmission. (3) Cohort of Patients In order to include a clinically coherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and non-cardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures; that is, CABG procedures performed without concomitant high-risk cardiac and noncardiac procedures.34 Limiting the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes; therefore, the proposed measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort suitable for a riskadjusted outcome measure. For detailed information on the cohort definition, we refer readers to the 2012 CABG Readmission Measure Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). (4) Inclusion and Exclusion Criteria The proposed CABG readmission measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare fee-for-service enrollment 34 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. PO 00000 Frm 00134 Fmt 4701 Sfmt 4702 to allow for adequate data for risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who are discharged against medical advice (excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); (2) admissions for patients who die during the initial hospitalization (these patients are not eligible for readmission); (3) admissions for patients with subsequent qualifying CABG procedures during the measurement period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery; therefore, we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort); and (4) admissions for patients without at least 30 days post-discharge enrollment in Medicare fee-for-service (excluded because the 30-day readmission outcome cannot be assessed in this group). (5) Transferred Patients and Attribution of Readmission Outcome Among medical conditions, such as AMI, heart failure and pneumonia, transfers between acute care facilities can occur for a variety of different reasons and it is likely that the discharging hospital has the most influence over a patient’s risk of readmission and therefore the readmission outcome is appropriately assigned to the hospital that discharges the patient. For that reason, the currently publicly reported AMI, heart failure and pneumonia readmission measures attribute the readmission outcome to the hospital discharging the patient, even if that is not the hospital that initially admitted the patient. In contrast, following CABG surgery, transfer to another acute care facility after CABG is most likely due to a complication of the CABG procedure or the peri-operative care the patient received. Therefore, the care provided by the hospital performing the CABG procedure likely dominates readmission risk, even among transferred patients. This viewpoint is supported by the high proportion of CABG readmissions for diagnoses such as heart failure, pleural effusion and pneumonia and endorsed by the clinical experts on both the Yale New Haven Hospital Health Services Corporation, Center for Outcomes Research and Evaluation (YNHHSC/ CORE), and the Society of Thoracic Surgeons (STS) CABG readmission measure development working groups E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules and our TEP. Therefore, for this measure, the readmission outcome is attributed to the hospital performing the first (‘‘index’’) CABG, even if this is not the discharging hospital. For example, a patient may be admitted to hospital A for a CABG that qualifies them for inclusion in the measure and is then transferred to hospital B. The initial admission to hospital A and the admission to hospital B are considered one acute episode of care, made up of two inpatient admissions. The measure identifies transferred patients as those who are admitted to an acute care hospital on the same day or following day of discharge from an eligible admission. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (6) Risk-Adjustment The proposed CABG readmission measure adjusts for differences across hospitals in the level of risk their patients have for readmission relative to patients cared for by other hospitals. The measure uses administrative claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. The model does not adjust for socioeconomic status or race because risk adjusting for these characteristics would hold hospitals with a large proportion of patients of minority race or low socioeconomic status to a different standard of care than other hospitals. Rather, this measure seeks to illuminate quality differences, and risk adjustment for socioeconomic status or race would obscure such quality differences. (7) Calculating the Excess Readmissions Ratio The proposed CABG readmission measure uses the same methodology and statistical modeling approach as the other Hospital Readmissions Reduction Program measures. We published a detailed description of how the readmission measures estimate the excess readmissions ratio in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381). In summary, we are proposing to adopt the Hospital-Level, 30-Day, AllCause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure in the Hospital Readmissions Reduction Program beginning in FY 2017. We note that the set of hospitals for which this measure is calculated for the Hospital Readmissions Reduction Program differs from those used in calculations for the Hospital IQR Program. The Hospital Readmissions VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Reduction Program includes only subsection (d) hospitals as defined in 1886(d)(1)(B) of the Act (and, if not waived from participating, hospitals paid under section 1814(b)(3) of the Act), while the Hospital IQR Program calculations include non-IPPS hospitals such as CAHs, cancer hospitals, and hospitals located in the Territories of the United States. However, we believe that the CABG readmissions measure is appropriate for use in both programs. We invite public comment on this proposal. 7. Maintenance of Technical Specifications for Quality Measures Technical specification of the re admission measures are provided at our Web site in the Measure Methodology Reports (available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). Additional resources about the Hospital Readmissions Reduction Program and measure technical specifications and methodology are on the QualityNet Web site on the Resources Web page (available at: https://www.qualitynet. org/dcs/ContentServer?c=Page&page name=QnetPublic%2FPage%2FQnet Tier3&cid=1228772412995). Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF endorsed. As part of its regular maintenance process for NQF-endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. We note that NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates required by the NQF into the measure specifications we have adopted for the Hospital Readmissions Program so that these measures remain up-to-date. The NQF regularly maintains its endorsed measures through annual and triennial reviews, which may result in the NQF PO 00000 Frm 00135 Fmt 4701 Sfmt 4702 28111 requiring updates to the measures. We note for this calendar year the AMI readmission measure is undergoing the NQF maintenance endorsement process. For the Hospital Readmissions Reduction Program, we are proposing to follow the finalized processes outlined for addressing changes to adopted measures in the Hospital IQR Program ‘‘Maintenance of Technical Specifications for Quality Measures’’ section found in section IX.A.1.b. of the preamble of this proposed rule. We believe this proposal adequately balances our need to incorporate NQF updates to NQF-endorsed Hospital Readmissions Reduction Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We invite public comment on this proposal. 8. Waiver From the Hospital Readmissions Reduction Program for Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (§ 412.152 and § 412.154(d)) The definition of ‘‘applicable hospital’’ under section 1886(q)(5)(C) of the Act also includes hospitals paid under section 1814(b)(3) of the Act. Section 1886(q)(2)(B)(ii) of the Act, however, allows the Secretary to exempt such hospitals from the Hospital Readmissions Reduction Program, provided that the State submit an annual report to the Secretary describing how a similar program to reduce hospital readmissions in that State achieves or surpasses the measured results in terms of health outcomes and cost savings established by Congress for the program as applied to ‘‘subsection (d) hospitals.’’ The State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dualeligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. E:\FR\FM\15MYP2.SGM 15MYP2 28112 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 As part of this agreement, the State of Maryland also elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act. Therefore, section 1886(q)(2)(B)(ii) of the Act is no longer applicable to Maryland hospitals. The effect of Maryland hospitals no longer being paid under 1814(b)(3) of the Act is that they are not entitled to be exempted from the Hospital Readmissions Reduction Program under section 1886(q)(2)(B)(ii) of the Act and, but for the model, would be included in the Hospital Readmissions Reduction Program. In other words, the exemption from the Hospital Readmissions Reduction Program under section 1814(b)(3) of the Act no longer applies. However Maryland hospitals will not be participating in the Hospital Readmissions Reduction Program because section 1886(q) and its implementing regulations have been waived for purposes of the model, subject to the terms of the agreement. We are proposing to make conforming changes to the implementing regulations to reflect this change. Under § 412.152, we are proposing to delete from the definition of an ‘‘applicable hospital’’ the following language: ‘‘or a hospital in Maryland that is paid under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the hospital inpatient prospective payment system.’’ Under § 412.154, we are proposing to delete § 412.154(d) in its entirety. We invite public comment on these proposals. 9. Floor Adjustment Factor for FY 2015 (§ 412.154(c)(2)) Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. Specifically, it states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges . . . .’’ The calculation of this ratio is codified at § 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act specifies the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. We codified the floor adjustment factor at § 412.154(c)(2) of the regulations (77 FR 53386). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Consistent with 1886(q)(3) of the Act, codified at § 412.154(c)(2), the adjustment factor is either the greater of the ratio or, for FY 2015 and subsequent fiscal years, a floor adjustment factor of 0.97. Under our established policy, the ratio is rounded to the fourth decimal place. In other words, for FY 2015 and subsequent fiscal years, a hospital subject to the Hospital Readmissions Reduction Program will have an adjustment factor that is between 1.0 and 0.9700. 10. Applicable Period for FY 2015 Under section 1886(q)(5)(D) of the Act, the Secretary has the authority to specify the applicable period with respect to a fiscal year under the Hospital Readmissions Reduction Program. We finalized our policy to use 3 years of claims data to calculate the readmission measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition of ‘‘applicable period’’ in the regulations at 42 CFR 412.152 as the 3year period from which data are collected in order to calculate excess readmissions ratios and adjustments for the fiscal year, which includes aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment. Consistent with the definition at § 412.152, we established that the applicable period for FY 2014 under the Hospital Readmissions Reduction Program is the 3-year period from July 1, 2009, to June 30, 2012. That is, we determined the excess readmissions ratios and calculate the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2014 using data from the 3-year time period of July 1, 2009 to June 30, 2012, as this was the most recent available 3-year period of data upon which to base these calculations (78 FR 50669). In this proposed rule, for FY 2015, consistent with the definition at § 412.152, we are proposing an ‘‘applicable period’’ for the Hospital Readmissions Reduction Program to be the 3-year period from July 1, 2010 to June 30, 2013. In other words, we are proposing that the excess readmissions ratios and the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2015 would be calculated based on data from the 3-year time period of July 1, 2010 to June 30, 2013. We note that for the purpose of modeling the readmissions PO 00000 Frm 00136 Fmt 4701 Sfmt 4702 payment adjustments for FY 2015 in this proposed rule, the excess readmissions ratios will be based on the applicable period from FY 2014 (that is July 1, 2009 to June 30, 2012) and the MedPAR claims data to calculate the readmissions payment adjustments will be based on the proposed applicable period for FY 2015 (that is July 1, 2010 to June 30, 2013). We invite public comment on these proposals. 11. Proposed Inclusion of THA/TKA and COPD Readmissions Measures To Calculate Aggregate Payments for Excess Readmissions Beginning in FY 2015 Under the Hospital Readmissions Reduction Program the ‘‘base operating DRG payment amount’’ defined at § 412.152 is used both to determine the readmission adjustment factor that accounts for excess readmissions under section 1886(q)(3) of the Act and to determine which payment amounts will be adjusted to account for excess readmissions under section 1886(q) of the Act. Consistent with section 1886(q)(2) of the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53383), under the regulations at § 412.152, we define the ‘‘base operating DRG payment amount’’ and specify that it does not include adjustments or addon payments for IME, DSH, outliers and low-volume hospitals as required by section 1886(q)(2) of the Act. Furthermore, consistent with section 1886(q)(2)(B)(i) of the Act, for SCHs and for MDHs for FY 2013, the definition of ‘‘base operating DRG payment amount’’ at § 412.152 excludes the difference between the hospital’s applicable hospital-specific payment rate and the Federal payment rate. For FY 2015 and subsequent years, for purposes of calculating the payment adjustment factors and applying the payment methodology, we are proposing that the base operating DRG payment amount for MDHs includes the difference between the hospital-specific payment rate and the Federal payment rate (as applicable). Section 1886(q)(3)(B) of the Act specifies the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges. . . .’’ The definition of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges,’’ as well as a methodology for calculating the numerator of the ratio (aggregate payments for excess readmissions) and the denominator of the ratio (aggregate E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payments for all discharges) are codified at § 412.154(c)(2) of the regulations (77 FR 53387). Section 1886(q)(4) of the Act sets forth the definitions of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘for a hospital for an applicable period, the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio . . . for such hospital for such applicable period minus 1.’’ We codified this definition of ‘‘aggregate payments for excess readmissions’’ under the regulations at § 412.152 as the product, for each applicable condition, of: (1) The base operating DRG payment amount for the hospital for the applicable period for such condition; (2) the number of admissions for such condition for the hospital for the applicable period; and (3) the excess readmissions ratio for the hospital for the applicable period minus 1 (77 FR 53675). The excess readmissions ratio is a hospital-specific ratio calculated for each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmissions ratio as the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. The methodology for the calculation of the excess readmissions ratio was finalized in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51673). ‘‘Aggregate payments for excess readmissions’’ is the numerator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program (as described in further detail later in this section). The term ‘‘aggregate payments for all discharges’’ is defined at section 1886(q)(4)(B) of the Act as ‘‘for a hospital for an applicable period, the sum of the base operating DRG payment amounts for all discharges for all conditions from such hospital for such applicable period.’’ ‘‘Aggregate payments for all discharges’’ is the denominator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. We codified this definition of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 ‘‘aggregate payments for all discharges’’ under the regulations at § 412.152 (77 FR 53387). We finalized the inclusion of two additional applicable conditions, COPD and THA/TKA, to the Hospital Readmissions Reduction Program beginning for FY 2015 in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657 through 50664). In this section, we discuss the proposed methodology to include these two additional measures in the calculation of the readmissions payment adjustment for FY 2015. Specifically, we are proposing how the addition of COPD and THA/TKA applicable conditions would be included in the calculation of the aggregate payments for excess readmissions, which is the numerator of the readmissions payment adjustment. We note that this proposal does not alter our established methodology for calculating aggregate payments for all discharges, that is, the denominator of the ratio (77 FR 53387). As discussed above, when calculating the numerator (aggregate payments for excess readmissions), we determine the base operating DRG payments for the applicable period. ‘‘Aggregate payments for excess readmissions’’ (the numerator) is defined as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio . . . for such hospital for such applicable period minus 1.’’ When determining the base operating DRG payment amount for an individual hospital for such applicable period for such condition, we use Medicare inpatient claims from the MedPAR file with discharge dates that are within the same applicable period to calculate the excess readmissions ratio. We use MedPAR claims data as our data source for determining aggregate payments for excess readmissions and aggregate payments for all discharges, as this data source is consistent with the claims data source used in IPPS rulemaking to determine IPPS rates. For FY 2015, we are proposing to use MedPAR claims with discharge dates that are on or after July 1, 2010, and no later than June 30, 2013. Under our established methodology that we use the update of the MedPAR file for each Federal fiscal year, which is updated 6 months after the end of each Federal fiscal year within the applicable period, as our data source (that is, the March PO 00000 Frm 00137 Fmt 4701 Sfmt 4702 28113 updates of the respective Federal fiscal year MedPAR files) for the final rules. The FY 2010 through FY 2013 MedPAR data files can be purchased from CMS. Use of these files allows the public to verify the readmissions adjustment factors. Interested individuals may order these files through the CMS Web site at: https:// www.cms.hhs.gov/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web page describes the files and provides directions and further detailed instructions for how to order the data sets. Persons placing an order must send the following: A Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check for $3,655 to: • If using the U.S. Postal Service: Centers for Medicare and Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. • If using express mail: Centers for Medicare and Medicaid Services, OFM/ Division of Accounting–RDDC, Mailstop C#–07–11, 7500 Security Boulevard, Baltimore, MD 21244–1850. For this proposed rule, we are proposing to determine aggregate payments for excess readmissions and aggregate payments for all discharges using data from MedPAR claims with discharge dates that are on or after July 1, 2010, and no later than June 30, 2013. However, we note that for the purpose of modeling the proposed FY 2015 readmissions payment adjustment factors for this proposed rule, we are using excess readmissions ratios for applicable hospitals from the FY 2014 Hospital Readmissions Reduction Program applicable period. For the final rule, applicable hospitals will have had the opportunity to review and correct data from the proposed FY 2015 applicable period of July 1, 2010 to June 30, 2013 before they are made public under our policy regarding the reporting of hospital-specific information, which is discussed later in this section. In this proposed rule, for FY 2015, we are proposing to use MedPAR data from July 1, 2010 through June 30, 2013. Specifically, in this proposed rule, we are using the March 2011 update of the FY 2010 MedPAR file to identify claims within FY 2010 with discharges dates that are on or after July 1, 2010, the March 2012 update of the FY 2011 MedPAR file to identify claims within FY 2011, the March 2013 update of the FY 2012 MedPAR file to identify claims within FY 2012, and the December 2013 update of the FY 2013 MedPAR file to identify claims within FY 2013 with E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28114 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules discharge dates no later than June 30, 2013. For the final rule, we are proposing to use the same MedPAR files as listed above for claims within FY 2010, FY 2011 and FY 2012. For claims within FY 2013, we are proposing to use in the final rule the March 2014 update of the FY 2013 MedPAR file. In order to identify the admissions for each condition, including the two additional conditions THA/TKA and COPD, to calculate the aggregate payments for excess readmissions for an individual hospital, for FY 2015, we are proposing to identify each applicable condition using the ICD–9–CM codes used to identify applicable conditions to calculate the excess readmissions ratios. Under our existing policy, we identify eligible hospitalizations and readmissions of Medicare patients discharged from an applicable hospital having a principal diagnosis for the measured condition in an applicable period (76 FR 51669). The discharge diagnoses for each applicable condition are based on a list of specific ICD–9–CM codes for that condition. These codes are posted on the QualityNet Web site at: https://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures > Readmission Measures > Measure Methodology. In order to identify the applicable conditions to calculate the aggregate payments for excess readmissions, for FY 2015, we are proposing to identify the claim as an applicable condition consistent with the methodology to identify conditions to calculate the excess readmissions ratio. In other words, the applicable conditions of AMI, HF and PN are identified for the calculation of aggregate payments for excess readmissions if the ICD–9–CM code for that condition is listed as the principal diagnosis on the claim. In order to identify claims with the applicable condition of THA/TKA, we are proposing that any claim that has the procedure codes for THA/TKA listed in any diagnosis/procedure field of the claim would be included in the calculation of aggregate payments for readmissions, consistent with the methodology to calculate the excess readmissions ratio for THA/TKA. In order to identify claims with the applicable condition of COPD, we are proposing to identify claims that either have the ICD–9–CM code for that condition is listed as the principal diagnosis on the claim or has a principal diagnosis of some respiratory failure along with secondary diagnosis of COPD. Under our established methodology for calculating aggregate payments for readmissions, admissions that are not VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 considered index admissions for the purpose of the readmissions measures are excluded from the calculation of the excess readmissions ratio, and therefore also are not considered admissions for the purposes of determining a hospital’s aggregate payments for excess readmissions (78 FR 50670 through 50876). With the addition of THA/TKA and COPD as applicable conditions beginning in FY 2015, we are proposing to modify our current methodology to identify the admissions included in the calculation of ‘‘aggregate payments for excess readmissions’’ for THA/TKA and COPD in the same manner as the original applicable conditions (AMI, HF and PN). That is, THA/TKA and COPD admissions that would not considered index admissions in the readmissions measures also would not considered admissions for the purposes of calculation a hospital’s aggregate payments for excess readmissions. In this proposed rule, for FY 2015, we are proposing to continue to apply the same exclusions to the claims in the MedPAR file as we applied for FY 2014 (78 FR 50670 through 50673), and we are proposing to apply those exclusions for the two additional applicable conditions, THA/TKA and COPD. For FY 2015, in order to have the same types of admissions to calculate aggregate payments for excess readmissions as is used to calculate the excess readmissions ratio, we are proposing to identify admissions for all five applicable conditions, AMI, HF, PN, THA/TKA and COPD, for the purposes of calculating aggregate payments for excess readmissions as follows: • We would exclude admissions that are identified as an applicable condition if the patient died in the hospital, as identified by the discharge status code on the MedPAR claim. • We would exclude admissions identified as an applicable condition for which the patient was transferred to another provider that provides acute care hospital services (that is, a CAH or an IPPS hospital), as identified through examination of contiguous stays in MedPAR at other hospitals. • We would exclude admissions identified as an applicable condition for patients who are under the age of 65, as identified by linking the claim information to the information provided in the Medicare Enrollment Database. • For conditions identified as AMI, we would exclude claims that are same day discharges, as identified by the admission date and discharge date on the MedPAR claim. • We would exclude admissions for patients who did not have Medicare PO 00000 Frm 00138 Fmt 4701 Sfmt 4702 Parts A and B FFS enrollment in the 12 months prior to the index admission, based on the information provided in the Medicare Enrollment Database. • We would exclude admissions for patients without at least 30 days postdischarge enrollment in Medicare Parts A and B fee-for-service, based on the information provided in the Medicare Enrollment Database. • We would exclude all multiple admissions within 30 days of a prior index admission’s discharge date, as identified in the MedPAR file, consistent with how multiple admissions within 30 days of an index admission are excluded from the calculation of the excess readmissions ratio. These exclusions are consistent with our current methodology, which was established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50671). In addition to the exclusions described above for all five applicable conditions, for FY 2015, we are proposing the following steps to identify admissions specifically for THA/TKA for the purposes of calculating aggregate payments for excess readmissions: • We are proposing to exclude admissions for THA/TKA for all transfer cases regardless of whether the discharge was a transfer to another hospital or from another hospital, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We are proposing to exclude admissions for THA/TKA for cases where the discharge includes a femur, hip, or pelvic fracture coded in the principal or secondary diagnosis fields, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We are proposing to exclude admissions for THA/TKA for cases where the discharge includes a mechanical complication coded in the principal diagnosis field, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We are proposing to exclude admissions for THA/TKA for cases where the discharge includes a malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, or bone/ bone marrow or a disseminated malignant neoplasm coded in the principal diagnosis field, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We are proposing to exclude admissions for THA/TKA for cases where the discharge includes more than two hip/knee procedures. • We are proposing to exclude admissions for THA/TKA for cases that meet either any of the following conditions or following procedures E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules concurrent with THA/TKA: revision procedures; partial hip arthroplasty (PHA) procedures; resurfacing procedures; and removal of implanted devices/prostheses. Furthermore, we are proposing to only identify Medicare FFS claims that meet the criteria (that is, claims paid for under Medicare Part C (Medicare Advantage) would not be included in this calculation), consistent with the methodology to calculate excess readmissions ratios based solely on admissions and readmissions for Medicare FFS patients. Therefore, consistent with our established methodology, for FY 2015, we would exclude admissions for patients enrolled in Medicare Advantage as identified in the Medicare Enrollment Database. This proposal is consistent with how admissions for Medicare Advantage patients are identified in the calculation of the excess readmissions ratios under our established methodology. The tables below list the ICD–9–CM codes we are proposing to use to identify each applicable condition to calculate the 28115 aggregate payments for excess readmissions under this proposal for FY 2015. The tables include the ICD–9–CM codes we are proposing to use to identify the two conditions, THA/TKA and COPD, added to the Hospital Readmissions Reduction Program beginning for FY 2015. These ICD–9– CM codes also would be used to identify the applicable conditions to calculate the excess readmissions ratios, consistent with our established policy (76 FR 51673 through 51676). ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES ICD–9–CM Code 480.0 ............................. 480.1 ............................. 480.2 ............................. 480.3 ............................. 480.8 ............................. 480.9 ............................. 481 ................................ 482.0 ............................. 482.1 ............................. 482.2 ............................. 482.30 ........................... 482.31 ........................... 482.32 ........................... 482.39 ........................... 482.40 ........................... 482.41 ........................... 482.42 ........................... 482.49 ........................... 482.81 ........................... 482.82 ........................... 482.83 ........................... 482.84 ........................... 482.89 ........................... 482.9 ............................. 483.0 ............................. 483.1 ............................. 483.8 ............................. 485 ................................ 486 ................................ 487.0 ............................. 488.11 ........................... Description of code Pneumonia due to adenovirus. Pneumonia due to respiratory syncytial virus. Pneumonia due to parainfluenza virus. Pneumonia due to SARS-associated coronavirus. Viral pneumonia: pneumonia due to other virus not elsewhere classified. Viral pneumonia unspecified. Pneumococcal pneumonia [streptococcus pneumoniae pneumonia]. Pneumonia due to klebsiella pneumoniae. Pneumonia due to pseudomonas. Pneumonia due to hemophilus influenzae [h. influenzae]. Pneumonia due to streptococcus unspecified. Pneumonia due to streptococcus group a. Pneumonia due to streptococcus group b. Pneumonia due to other streptococcus. Pneumonia due to staphylococcus unspecified. Pneumonia due to staphylococcus aureus. Methicillin Resistant Pneumonia due to Staphylococcus Aureus. Other staphylococcus pneumonia. Pneumonia due to anaerobes. Pneumonia due to escherichia coli [e.coli]. Pneumonia due to other gram-negative bacteria. Pneumonia due to legionnaires’ disease. Pneumonia due to other specified bacteria. Bacterial pneumonia unspecified. Pneumonia due to mycoplasma pneumoniae. Pneumonia due to chlamydia. Pneumonia due to other specified organism. Bronchopneumonia organism unspecified. Pneumonia organism unspecified. Influenza with pneumonia. Influenza due to identified novel H1N1 influenza virus with pneumonia. ICD–9–CM CODES TO IDENTIFY HEART FAILURE (HF) CASES ICD–9–CM Code 402.01 402.11 402.91 404.01 ........................... ........................... ........................... ........................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 404.03 ........................... 404.11 ........................... 404.13 ........................... 404.91 ........................... 404.93 ........................... 428.xx ........................... VerDate Mar<15>2010 Code description Hypertensive heart disease, malignant, with heart failure. Hypertensive heart disease, benign, with heart failure. Hypertensive heart disease, unspecified, with heart failure. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified failure and chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease. Heart Failure. 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00139 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28116 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules ICD–9–CM CODES TO IDENTIFY ACUTE MYOCARDIAL INFARCTION (AMI) CASES ICD–9–CM Code 410.00 410.01 410.10 410.11 410.20 410.21 410.30 410.31 410.40 410.41 410.50 410.51 410.60 410.61 410.70 410.71 410.80 410.81 410.90 410.91 Description of code ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI (anterolateral wall)—episode of care unspecified. (anterolateral wall)—initial episode of care. (other anterior wall)—episode of care unspecified. (other anterior wall)—initial episode of care. (inferolateral wall)—episode of care unspecified. (inferolateral wall)—initial episode of care. (inferoposterior wall)—episode of care unspecified. (inferoposterior wall)—initial episode of care. (other inferior wall)—episode of care unspecified. (other inferior wall)—initial episode of care. (other lateral wall)—episode of care unspecified. (other lateral wall)—initial episode of care. (true posterior wall)—episode of care unspecified. (true posterior wall)—initial episode of care. (subendocardial)—episode of care unspecified. (subendocardial)—initial episode of care. (other specified site)—episode of care unspecified. (other specified site)—initial episode of care. (unspecified site)—episode of care unspecified. (unspecified site)—initial episode of care. ICD–9–CM CODES TO IDENTIFY CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD) CASES ICD–9–CM Code Description of code 491.21 ........................... Obstructive chronic bronchitis; With (acute) exacerbation; acute exacerbation of COPD, decompensated COPD, decompensated COPD with exacerbation. Obstructive chronic bronchitis; with acute bronchitis. Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis. Unspecified chronic bronchitis. Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar, centrilobular, obstructive, panacinar, panlobular, unilateral, vesicular. MacLeod’s syndrome; Swyer-James syndrome; unilateral hyperlucent lung. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, unspecified. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with status asthmaticus. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with (acute) exacerbation. Chronic: nonspecific lung disease, obstructive lung disease, obstructive pulmonary disease (COPD) NOS. NOTE: This code is not to be used with any code from categories 491–493. Other diseases of lung; acute respiratory failure; respiratory failure NOS. Other diseases of lung; acute respiratory failure; other pulmonary insufficiency, acute respiratory distress. Other diseases of lung; acute respiratory failure; acute and chronic respiratory failure. Other ill-defined and unknown causes of morbidity and mortality; respiratory arrest, cardiorespiratory failure. 491.22 ........................... 491.8 ............................. 491.9 ............................. 492.8 ............................. 493.20 ........................... 493.21 ........................... 493.22 ........................... 496 ................................ 518.81 * ......................... 518.82 * ......................... 518.84 * ......................... 799.1 * ........................... * Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22). ICD–9–CM CODES TO IDENTIFY TOTAL HIP ARTHROPLASTY/TOTAL KNEE ARTHROPLATY (THA/TKA) CASES ICD–9–CM Code Description of code mstockstill on DSK4VPTVN1PROD with PROPOSALS2 81.51 ................ 81.54 ................ Total hip arthroplasty. Total knee arthroplasty. For FY 2015, we are proposing to calculate aggregate payments for excess readmissions, using MedPAR claims from July 1, 2010 to June 30, 2013, to identify applicable conditions based on the same ICD–9–CM codes used to identify the conditions for the readmissions measures, and to apply the proposed exclusions for the types of admissions discussed above. To calculate aggregate payments for excess readmissions, we are proposing to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 calculate the base operating DRG payment amounts for all claims in the 3-year applicable period for each applicable condition (AMI, HF, PN, COPD and THA/TKA) based on the claims we have identified as described above. Once we have calculated the base operating DRG amounts for all the claims for the five applicable conditions, we are proposing to sum the base operating DRG payments amounts by each condition, resulting in five summed amounts, one amount for each of the five applicable conditions. We are proposing to then multiply the amount for each condition by the respective excess readmissions ratio minus 1 when that excess readmissions ratio is greater than 1, which indicates that a hospital has performed, with respect to readmissions for that applicable condition, worse than the average hospital with similar patients. Each PO 00000 Frm 00140 Fmt 4701 Sfmt 4702 product in this computation represents the payments for excess readmissions for that condition. We are proposing to then sum the resulting products which represent a hospital’s proposed ‘‘aggregate payments for excess readmissions’’ (the numerator of the ratio). Because this calculation is performed separately for each of the five conditions, a hospital’s excess readmissions ratio must be less than or equal to 1 on each measure to aggregate payments for excess readmissions (and thus a payment reduction under the Hospital Readmissions Reduction Program). We note that we are not proposing any changes to our existing methodology to calculate ‘‘aggregate payments for all discharges’’ (the denominator of the ratio). We are proposing the following methodology for FY 2015 as displayed in the chart below. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules FORMULAS TO CALCULATE THE READMISSIONS ADJUSTMENT FACTOR Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI × (Excess Readmissions Ratio for AMI–1)] + [sum of base operating DRG payments for HF × (Excess Readmissions Ratio for HF–1)] + [sum of base operating DRG payments for PN × (Excess Readmissions Ratio for PN–1)] + [sum of base operating DRG payments for COPD) × (Excess Readmissions Ratio for COPD–1)] + [sum of base operating DRG payments for THA/TKA × (Excess Readmissions Ratio for THA/ TKA–1)]. * Note, if a hospital’s excess readmissions ratio for a condition is less than/equal to 1, then there are no aggregate payments for excess readmissions for that condition included in this calculation. Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments for all discharges). Proposed Readmissions Adjustment Factor for FY 2015 is the higher of the ratio or 0.9700. * Based on claims data from July 1, 2010 to June 30, 2013 for FY 2015. We invite public comment on these proposals. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676), we indicated that commenters had requested a potential waiver or exemption process for hospitals located in areas that experience disasters or other extraordinary circumstances, even though we had not proposed an extraordinary circumstance exceptions/ exemptions (ECE) policy for the Hospital Readmissions Reduction Program. We noted that there are several policy and operational considerations in developing a disaster exemption process for the Hospital Readmissions Reduction Program. We welcome public comment on whether an exemption process should be implemented, and the policy and operational considerations for a potential Hospital Readmissions Reduction Program ECE policy. I. Hospital Value-Based Purchasing (VBP) Program 1. Statutory Background Section 1886(o) of the Act, as added by section 3001(a)(1) of the Affordable Care Act, requires the Secretary to establish a hospital value-based purchasing program (the Hospital VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Value-Based Purchasing (VBP) Program) under which value-based incentive payments are made in a fiscal year to hospitals that meet performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. Section 1886(o)(1)(B) of the Act states that the Hospital VBP Program applies to payments for hospital discharges occurring on or after October 1, 2012. In accordance with section 1886(o)(6)(A) of the Act, we are required to make valuebased incentive payments under the Hospital VBP Program to hospitals that meet or exceed performance standards for a performance period for a fiscal year. As further required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each hospital’s value-based payment percentage on the hospital’s Total Performance Score (TPS) for a specified performance period. In accordance with section 1886(o)(7) of the Act, the total amount available for value-based incentive payments for a fiscal year will be equal to the total amount of the payment reductions for all participating hospitals for such fiscal year, as estimated by the Secretary. For FY 2014, the available funding pool was equal to 1.25 percent of the base-operating DRG payments to all participating hospitals, as estimated by the Secretary. The size of the applicable percentage has increased to 1.50 percent for FY 2015 and will increase to 1.75 percent for FY 2016, and to 2.0 percent for FY 2017 and successive fiscal years. Section 1886(o)(1)(C) of the Act generally defines the term ‘‘hospital’’ for purposes of the Hospital VBP Program as a subsection (d) hospital (as that term is defined in section 1886(d)(1)(B) of the Act), but excludes from the definition of the term ‘‘hospital,’’ with respect to a fiscal year: (1) A hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program) for such fiscal year; (2) a hospital for which, during the performance period for the fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients; and (3) a hospital for which there are not a minimum number (as determined by the Secretary) of measures that apply to the hospital for the performance period for the fiscal year involved, or for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year. PO 00000 Frm 00141 Fmt 4701 Sfmt 4702 28117 2. Overview of Previous Hospital VBP Program Rulemaking We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), FY 2012 IPPS/ LTCH PPS final rule (76 FR 51653 through 51660), CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547), FY 2013 IPPS/ LTCH PPS final rule (77 FR 53567 through 53614), FY 2014 IPPS/LTCH PPS final rule (78 FR 50676 through 50707), and CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121) for further descriptions of our policies for the Hospital VBP Program. We have also codified certain requirements for the Hospital VBP Program at §§ 412.160 through 412.167 of our regulations. 3. FY 2015 Payment Details a. Payment Adjustments Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce the base operating DRG payment amount for a hospital for each discharge in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) of the Act, the sum total of these reductions in a fiscal year must equal the total amount available for value-based incentive payments for all eligible hospitals for the fiscal year, as estimated by the Secretary. We finalized details on how we would implement these provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573) and refer readers to that rule for further details. Under section 1886(o)(7)(C)(iii) of the Act, the applicable percent for the FY 2015 Hospital VBP Program is 1.50 percent. Using the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), we estimate that the total amount available for value-based incentive payments for FY 2015 is $1.4 billion, based on the December 2013 update of the FY 2013 MedPAR file. We intend to update this estimate for the FY 2015 IPPS/LTCH PPS final rule, using the March 2014 update of the FY 2013 MedPAR file. As finalized in the FY 2013 IPPS/ LTCH PPS final rule, as referenced above, we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its TPS. We will then calculate a value-based incentive payment adjustment factor that will be applied to the base operating DRG payment amount for each discharge occurring in FY 2015, on a per-claim basis. We are publishing proxy value- E:\FR\FM\15MYP2.SGM 15MYP2 28118 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules based incentive payment adjustment factors in Table 16 of this proposed rule (which is available via the Internet on the CMS Web site). The proxy factors are based on the TPSs from the FY 2014 Hospital VBP Program. These FY 2014 performance scores are the most recently available performance scores that hospitals have been given the opportunity to review and correct. The slope of the linear exchange function used to calculate those proxy valuebased incentive payment adjustment factors was 2.0952951561. This slope, along with the estimated amount available for value-based incentive payments, is also published in Table 16. We intend to update this table as Table 16A in the final rule (which will be available via the Internet on the CMS Web site) to reflect changes based on the March 2014 update to the FY 2013 MedPAR file. We also intend to update the slope of the linear exchange function used to calculate those updated proxy value-based incentive payment adjustment factors. The updated proxy value-based incentive payment adjustment factors for FY 2015 will continue to be based on historic FY 2014 Program TPSs because hospitals will not have been given the opportunity to review and correct their actual TPSs for the FY 2015 Hospital VBP Program until after the FY 2015 IPPS/LTCH PPS final rule is published. After hospitals have been given an opportunity to review and correct their actual TPSs for FY 2015, we will add Table 16B (which will be available via the Internet on the CMS Web site) to display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2015 Hospital VBP Program. We expect that Table 16B will be posted on the CMS Web site in October 2014. adjustment factors and applying the payment methodology, we are proposing that the base operating DRG payment amount for MDHs will include the difference between the hospitalspecific payment rate and the Federal payment rate (as applicable). We are also proposing to revise the definition of base operating DRG payment amount in § 412.160 paragraph (2) of our regulations to reflect this change. We welcome comments on this proposal. b. Base Operating DRG Payment Amount Definition for MedicareDependent Small Rural Hospitals (MDHs) Section 106 of Public Law 113–93, the Protecting Access to Medicare Act of 2014 (PAMA), extended the MDH program through March 31, 2015. We note that that the special treatment for MDHs under section 1886(o)(7)(D)(ii)(I) of the Act, with regard to definition of base operating DRG payment amount, does not apply to discharges occurring after FY 2013. For FY 2015 and subsequent years, for purposes of calculating the payment In the FY 2013 IPPS/LTCH PPS final rule, we finalized our proposal to readopt measures from the prior program year for each successive program year, unless proposed and finalized otherwise (for example, because one or more of the measures is ‘‘topped-out’’ or for other policy reasons). We stated our belief that this policy would facilitate measure adoption for the Hospital VBP Program for future years, as well as align the Hospital VBP Program with the Hospital IQR Program (77 FR 53592). The FY 2016 Hospital VBP Program includes the following measures: 4. Measures for the FY 2017 Hospital VBP Program a. Measures Previously Adopted FINALIZED MEASURES FOR THE FY 2016 HOSPITAL VBP PROGRAM Clinical Process of Care Domain AMI–7a .................. IMM–2 ................... PN–6 ..................... SCIP–Inf–2 ............ SCIP–Inf–3 ............ SCIP–Inf–9 ............ SCIP–Card–2 ........ SCIP–VTE–2 ......... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization. Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery. Patient Experience of Care Domain HCAHPS ............... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. Outcome Domain mstockstill on DSK4VPTVN1PROD with PROPOSALS2 CAUTI ................... CLABSI ................. MORT–30–AMI ..... MORT–30–HF ....... MORT–30–PN ....... PSI–90 .................. SSI ........................ Catheter-Associated Urinary Tract Infection. Central Line-Associated Blood Stream Infection. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Complication/patient safety for selected indicators (composite). Surgical Site Infection: • Colon. • Abdominal Hysterectomy. Efficiency Domain MSPB–1 ................ VerDate Mar<15>2010 Medicare Spending per Beneficiary. 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00142 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules b. Proposed Changes Affecting Topped Out Measures mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (1) Proposed Removal of Six ToppedOut Measures For the FY 2017 Hospital VBP Program measure set, we evaluated whether any measures that we previously adopted are now ‘‘topped out’’ by focusing on two criteria: (1) National measure data showing statistically indistinguishable performance levels at the 75th and 90th percentiles; and (2) national measure data showing a truncated coefficient of variation (TCV) less than 0.10. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497) for further discussion of these current ‘‘topped-out’’ criteria and to our proposal below to modify the second criterion. Based on our evaluation of the most recently available data, we believe that PN–6, SCIP–Card–2, SCIP–Inf–2, SCIP– Inf–3, SCIP–Inf–9, and SCIP–VTE–2 are all now ‘‘topped-out.’’ Therefore, we are proposing to remove these six measures from the FY 2017 Hospital VBP measure set because measuring hospital performance on these measures will have no meaningful effect on a hospital’s TPS. We believe that removing these ‘‘topped-out’’ measures will continue to ensure that we make valid statistical comparisons through our finalized scoring methodology, and will reduce the reporting burden on participating hospitals. We welcome public comment on this proposal. (2) Proposed Change to Truncated Coefficient of Variation Criterion to Determine Whether a Measure is Topped Out As stated above, we have adopted two criteria for determining the ‘‘toppedout’’ status of Hospital VBP Program measures: • Statistically indistinguishable performance at the 75th and 90th percentiles; and • Truncated coefficient of variation < 0.10. We are proposing to modify the second criterion to the following: • Truncated coefficient of variation ≤ 0.10. The coefficient of variation (CV) is a common statistic that expresses the standard deviation as a percentage of the sample mean in a way that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad distribution of individual hospital scores, with large and presumably meaningful differences between hospitals in relative VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 performance. A small CV would indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not useful to draw distinctions among individual hospitals’ measure performance. By proposing to change the truncated CV from ‘‘less than’’ to ‘‘less than or equal to’’ 0.10 under our ‘‘topped out’’ test, we will better be able to distinguish measures with significant variation in performance among hospitals and more accurately apply determine what measures are ‘‘topped out’’ for purposes of the Program. We welcome public comments on this proposal. c. Proposed New Measures for the FY 2017 Hospital VBP Program We considered if we should adopt additional measures for the FY 2017 Hospital VBP Program. We considered which measures are eligible for adoption based on the statutory requirements, including specification under the Hospital IQR Program and posting dates on the Hospital Compare Web site, and our priorities for quality improvement as outlined in the NQS (available for download at https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/QualityInitiativesGenInfo/ Downloads/CMS-Quality-Strategy.pdf). We believe that the following three proposed measures meet the statutory requirements for inclusion in the FY 2017 Hospital VBP Program. We also believe that these measures represent important components of quality improvement in the acute inpatient hospital setting. (1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF #1716) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF #1716) is a risk-adjusted outcome measure monitoring hospital onset of MRSA bloodstream infection events using the standardized infection ratio (MRSA bacteremia SIR) among all inpatients in the facility, and is reported via CDC’s National Healthcare Safety Network (NHSN). We adopted this measure beginning with the FY 2015 payment determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630), and initial measure data were posted on Hospital Compare in December 2013. We remain concerned about the persistent public health threat presented by MRSA infections. According to a 2013 study available at the NIH Web site, MRSA ‘‘results in longer hospitalization, increased expenses, and PO 00000 Frm 00143 Fmt 4701 Sfmt 4702 28119 poorer patient prognosis,’’ and MRSA ‘‘has been swiftly increasing worldwide over the past several decades.’’ 35 As we noted in the FY 2012 IPPS/LTCH PPS final rule, invasive MRSA infections may cause about 18,000 deaths during a hospital stay a year.36 The MAP supported the direction of the MRSA bacteremia measure for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https://www.qualityforum.org/ WorkArea/linkit.aspx?Link Identifier=id&ItemID=72746. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set, the measure should be applied following public reporting on Hospital Compare, and that the most recent version of the NQFendorsed measure should be applied. We believe that this measure is eligible for the Hospital VBP Program based on the MAP recommendation, our adoption of the most recent NQFendorsed version under the Hospital IQR Program, and our posting of measure data on Hospital Compare. Based on the continued danger that MRSA infections present to patients and to the public health, we further believe that this measure is appropriate for the Hospital VBP Program. Therefore, we are proposing to adopt the MRSA bacteremia measure for the FY 2017 Hospital VBP Program, and we are proposing to place the measure into the Safety domain. We invite public comment on this proposal. (2) Clostridium difficile Infection (NQF #1717) Clostridium difficile Infection (NQF #1717) is a risk-adjusted outcome measure monitoring hospital onset of C. difficile infection events using the standardized infection ratio (C. difficile SIR) among all inpatients in the facility, and is reported via CDC’s NHSN. We adopted this measure for the FY 2015 payment determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 51631), and initial measure data were posted on Hospital Compare in December 2013. As with MRSA infections, we are concerned about the seriousness of C. difficile infections. According to a 2012 35 Tatokoro et al. BMC Urology 2013, 13:35. Available at https://www.ncbi.nlm.nih.gov/pmc/ articles/PMC3720197/pdf/1471-2490-13-35.pdf. 36 Catherine Liu, Arnold Bayer, et al., Clinical practice Guidelines for the treatment of MethicillinResistant Staphylococcus aureus Infections in Adult and Children. Infectious Disease Society of America 2011; 52:e18. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28120 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules study, ‘‘infection with Clostridium difficile is associated with poor outcomes for patients. Previous work has determined that, regardless of baseline risk of death, for every 10 patients that acquire C. difficile in hospital, 1 patient will die. Clostridium difficile is also associated with increased health care costs. One of the primary mechanisms by which C. difficile increases costs is by increasing the length of time patients spend in hospital.’’ 37 As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 51631), C. difficile infections have become more frequent, more severe, and more difficult to treat in recent years. Each year, tens of thousands of people in the United States get sick from C. difficile, including some otherwise healthy people who are not hospitalized or taking antibiotics. The MAP supported the direction of the C. difficile infection measure for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id &ItemID=72746. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set, the measure should be applied following public reporting on Hospital Compare, and that the most recent version of the NQFendorsed measure should be applied. We believe that this measure is eligible for the Hospital VBP Program based on the MAP recommendation, our adoption of the most recent NQFendorsed version under the Hospital IQR Program, and our posting of measure data on Hospital Compare, as well as the continued danger that C. difficile infections present to patients and the public health. Therefore, we are proposing to adopt the C. difficile SIR measure for the FY 2017 Hospital VBP Program, and we are proposing to place the measure into the Safety domain. We invite public comment on this proposal. (3) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) is a chart-abstracted measure that we adopted beginning with the FY 2015 payment determination for the 37 Forster et al. ‘‘The effect of hospital-acquired infection with Clostridium difficile on length of stay in hospital.’’ Canadian Medical Association Journal, January 10, 2012. Available at https:// www.ncbi.nlm.nih.gov/pmc/articles/PMC3255231/ pdf/1840037.pdf. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53530). Initial measure data were posted on Hospital Compare in December 2013. Although this is a chart-abstracted measure, we finalized our policy in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53529) that this measure would be collected in aggregated numerator, denominator, and exclusion counts per hospital via a Web-based tool, instead of collecting patient-level data from hospitals. As we described in the FY 2013 IPPS/ LTCH PPS final rule referenced above, the Strong Start Initiative (https:// www.innovation.cms.gov/initiatives/ strong-start/) was launched to help reduce early elective births. At launch, the HHS Secretary stated that more than half a million infants are born prematurely in America each year. Fortunately, the early elective birth rate has steadily decreased. In 2012, the number of early elective births had decreased to approximately 456,000 or 11.55 percent of the total number of births.38 Early elective births may require additional medical attention and early intervention services. Research indicates that elective deliveries before 39 weeks increase the risk of significant complications for mother and baby, as well as long-term health problems. 39 40 41 42 Early elective births are a public health problem that has significant consequences for families well into a child’s life. As a public campaign to reduce early elective births, the Strong Start Initiative’s objective is to test ways to reverse this trend by helping provide expectant mothers with the care they need for a healthy delivery and a healthy baby, and by focusing on reducing early elective deliveries, which can lead to a variety of health problems for mothers and infants. The Strong Start Initiative cuts across many agencies within HHS and involves external organizations including the March of Dimes, and the American College of Obstetricians and Gynecologists (ACOG). We believe that a reduction in the number of nonmedically indicated elective deliveries at ≥37 to <39 weeks gestation will result in a substantial decrease in neonatal morbidity and mortality, as well as a significant savings in healthcare costs. In addition, the rate of cesarean sections should decrease with fewer elective inductions, resulting in decreased length of stay and healthcare costs. The MAP supported adoption of the PC–01 Elective Delivery measure for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id&Item ID=72746. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set. We are proposing to adopt this measure for the Hospital VBP Program and we are proposing to place the measure into the Clinical Care—Process domain because we believe this measure furthers the NQS’s three-part aim of better health care for individuals, better health for populations, and lower costs for health care. In addition, although the PC–01 measure captures data from all applicable patients, we also believe that the measure is specifically relevant to the nearly 2 million Medicare beneficiaries who are aged 44 and under, most of who are dual eligible beneficiaries, who have the potential to be impacted by early elective births. In 2011, Medicare paid for roughly 14,000 births. We welcome public comment on this proposal. 38 Martin, JA, Hamilton, BE, Osterman, MJK, Curtin, SC, Mathews, TJ. (2013). Births: Final data for 2012. Natl Vital Stat Rpt. 62(9). Retrieved from https://www.cdc.gov/nchs/data/nvsr/nvsr62/nvsr62_ 09.pdf. 39 Glantz, J. (Apr. 2005). Elective induction vs. spontaneous labor associations and outcomes. J Reprod Med. 50(4):235–40. 40 Vardo, J., Thornburg, L., Glantz J., (2011). Maternal and neonatal morbidity among nulliparous women undergoing elective induction of labor. J. report med. 56(1–2): 25–30. 41 Tita, A., Landon, M., Spong, C., Lai, Y., Leveno, K., Varner, M., et al. (2009). Timing of elective repeat cesarean delivery at term and neonatal outcomes. [Electronic Version]. NEJM. 360:2, 111– 120. 42 Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., & Meyers, J. (2009). Neonatal and maternal outcomes associated with elective delivery. [Electronic Version]. Am J Obstet Gynecol. 200:156.e1–156.e4. d. Proposed Adoption of the Current CLABSI Measure (NQF #0139) for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50682 and 50686), we adopted the CLABSI measure for the FY 2016 Hospital VBP Program. We stated our belief that adopting the current CLABSI measure is consistent with the MAP’s recommendations in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id&Item ID=72746, to use the standardized infection ratio version of the measure until the reliability-adjusted CLABSI PO 00000 Frm 00144 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28121 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules measure is NQF-endorsed. We have stated our intent to consider adopting the reliability-adjusted CLABSI measure in future rulemaking. The reliability-adjusted standardized infection ratio (SIR) is an outcome measure that summarizes the healthcare-associated infection experience by type of infection (for example, central-line associated bloodstream infection, surgical site infection) for individual hospitals. The reliability-adjusted measure enables more meaningful statistical differentiation between hospitals by accounting for differences in patient case-mix, exposures to medical devices or procedures (for example, central line days, surgical procedure volume), and unmeasured factors that are not reflected in the unadjusted SIR and that cause variation in outcomes between hospitals. Accounting for these sources of variability enables better measure discrimination between hospitals and leads to more reliable quality measurements. However, in the absence of NQF endorsement of the reliability-adjusted measure and any additional MAP recommendations, and unless and until the Hospital IQR Program adopts the reliability adjustments, we believe we may only consider the current version of the CLABSI measure for adoption under the Hospital VBP Program. We continue to believe that the CLABSI measure encourages hospitals to minimize infection events that present significant health risks to patients. Therefore, we are proposing to adopt the current version of the CLABSI measure for the FY 2017 Hospital VBP Program and subsequent years. If a reliabilityadjusted version of the measure becomes available to us in the future, we will consider adopting it. We welcome public comment on this proposal. e. Summary of Previously Adopted and Proposed New Measures for the FY 2017 Hospital VBP Program The following table outlines the measures for the FY 2017 Hospital VBP Program that we are readopting, as well as those measures we are proposing to adopt. As discussed further below, this table includes the FY 2017 domains in which we would place the previously adopted measures, as well as the proposed domains in which we would place the newly proposed measures. PREVIOUSLY ADOPTED AND PROPOSED NEW MEASURES FOR THE FY 2017 HOSPITAL VBP PROGRAM Measure Description Domain CAUTI * ............................ CLABSI ** ......................... C. difficile *** .................... MRSA *** .......................... PSI–90 * ........................... SSI * ................................. MORT–30–AMI * .............. Catheter-Associated Urinary Tract Infection (NQF #0138) ...................................................... Central Line-Associated Blood Stream Infection (NQF #0139) ................................................ Clostridium difficile Infection (NQF #1717) ............................................................................... Methicillin-Resistant Staphylococcus aureus Bacteremia (NQF #1726) .................................. Complication/patient safety for selected indicators (composite) (NQF #0531) ........................ Surgical Site Infection: (NQF #0753) ........................................................................................ • Colon • Abdominal Hysterectomy Acute Myocardial Infarction (AMI) 30-day mortality rate (NQF #0230) .................................... MORT–30–HF * ................ Heart Failure (HF) 30-day mortality rate (NQF #0229) ............................................................ MORT–30–PN * ............... Pneumonia (PN) 30-day mortality rate (NQF #0468) ............................................................... AMI–7a * ........................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival (NQF #0164) ................ IMM–2 * ............................ Influenza Immunization (NQF #1659) ....................................................................................... PC–01 *** ......................... Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) ................................ MSPB–1 * ......................... Medicare Spending per Beneficiary (NQF #2158) ................................................................... HCAHPS * ........................ Hospital Consumer Assessment of Healthcare Providers and Systems Survey (NQF #0166) Safety. Safety. Safety. Safety. Safety. Safety. Clinical Care—Outcomes. Clinical Care—Outcomes. Clinical Care—Outcomes. Clinical Care—Process. Clinical Care—Process. Clinical Care—Process. Efficiency and Cost Reduction. Patient and Caregiver Centered Experience of Care/Care Coordination. * Measures readopted for the FY 2017 Hospital VBP Program. ** Measure adopted for the FY 2016 Hospital VBP Program but not previously subject to automatic readoption. *** Measures proposed for the FY 2017 Hospital VBP Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 5. Proposed Additional Measures for the FY 2019 Hospital VBP Program a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) (NQF #1550) is an outcome measure that we adopted beginning VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 with the FY 2015 payment determination under the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53516 through 53518). The measure assesses complications occurring after THA and TKA surgery from the date of the index admission to 90 days post date of the index admission. The outcome is one or more of the following complications: Acute myocardial infarction, pneumonia, or sepsis/septicemia within 7 days of admission; surgical site bleeding, pulmonary embolism or death within 30 PO 00000 Frm 00145 Fmt 4701 Sfmt 4702 days of admission; or mechanical complications, periprosthetic joint infection or wound infection within 90 days of admission. We posted THA/ TKA measure data on the Hospital Compare Web site in December 2013. We refer readers to the FY 2013 IPPS/ LTCH PPS final rule and to the THA/ TKA complication methodology report (https://qualitynet.org/dcs/Blob Server?blobkey=id&blobnocache=true& blobwhere=1228890067881& blobheader=multipart%2Foctet-stream& blobheadername1=Content- E:\FR\FM\15MYP2.SGM 15MYP2 28122 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Disposition&blobheadervalue1= attachment%3Bfilename%3DTHK_ CmpMsrUpdtSpecs_080113.pdf& blobcol=urldata&blobtable=Mungo Blobs) for additional details on the THA/TKA measure. We continue to believe that measuring and reporting risk-standardized complication rates will inform health care providers about opportunities to improve care, strengthen incentives for quality improvement, and promote improvements in the quality of care received by patients and in the outcomes they experience. We believe that THA/TKA is an important measure of clinical outcomes, and we therefore are proposing to adopt it for the FY 2019 Hospital VBP Program and subsequent years. The MAP supported the adoption of the measure for inclusion in the Hospital VBP Program in its MAP PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https:// www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID= 72746, noting it addresses a highvolume elective procedure with variation in performance. We are proposing to adopt this measure for FY 2019 based on the length of the measure’s reporting period and the time necessary to complete scoring calculations. Because it is an outcome measure, we are proposing to place it in the Clinical Care—Outcomes domain. We welcome public comments on this proposal. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 b. PSI–90 Measure In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698), we declined to finalize the PSI–90 measure for the FY 2019 Hospital VBP Program in order to adopt a more recent baseline period than would have been possible at that time. However, we did not intend to signal that we would not adopt the PSI– 90 measure for FY 2019 and subsequent years. We continue to believe that adopting this AHRQ PSI composite measure provides strong incentives for hospitals to ensure that patients are not harmed by the medical care they receive, which is a critical consideration in quality improvement. In order to clarify the measure’s status under the Hospital VBP Program and ensure that there is no confusion about our intent, we are proposing to readopt the PSI–90 measure for FY 2019 Hospital VBP Program and subsequent years. We welcome public comments on this proposal. VerDate Mar<15>2010 21:35 May 14, 2014 Jkt 232001 6. Possible Measure Topics for Future Program Years a. Care Transition Measure (CTM–3) Items for HCAHPS Survey We are considering proposing to add the Care Transition Measure from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey to the Patient and Caregiver Centered Experience of Care/ Care Coordination (PEC/CC) domain of the FY 2018 Hospital VBP Program. We seek public comments on this topic. The Care Transition Measure (CTM) was added to the HCAHPS Survey of hospital inpatients in January 2013 (77 FR 53513 through 53516). Three items were added to the HCAHPS Survey to create the new Care Transition Measure composite. After collecting four quarters of data on these items (January 2013 through December 2013), we intend to publicly report CTM scores for the first time on our Hospital Compare Web site in October 2014. Once the Care Transition Measure has been publicly reported on Hospital Compare for one year, in accordance with the statutory requirements of the Hospital VBP Program, we are considering proposing to adopt CTM as the ninth dimension of the HCAHPS survey in the PEC/CC domain for the FY 2018 Hospital VBP Program. We intend to propose that the PEC/CC domain in the FY 2018 Hospital VBP Program would have a baseline period of January 1, 2014 through December 31, 2014, and a performance period of January 1, 2016 through December 31, 2016. Currently, the PEC/CC domain (formerly known as the Patient Experience of Care domain) is comprised of eight dimensions of the HCAHPS Survey. Scoring in this domain is based on two elements: the HCAHPS Base Score and HCAHPS Consistency Points Score. For additional information on the calculation of the PEC/CC domain score, we refer readers to ‘‘A Step-by-Step Guide to Calculating the Patient Experience of Care Domain Score in the Hospital Value-Based Purchasing FY 2013 Actual Percentage Payment Summary Report,’’ at: https:// www.hcahpsonline.org/Hospital VBP.aspx. We specifically seek public comments on how the new CTM dimension should be included in the scoring methodology that we have adopted for the PEC/CC domain. In accordance with the finalized Hospital VBP Program scoring methodology for other domains, we are considering the ‘‘normalization’’ approach, which would introduce only minor changes to the original scoring formula, as follows. PO 00000 Frm 00146 Fmt 4701 Sfmt 4702 For purposes of the HCAHPS Base Score, the new CTM dimension would be calculated in the same manner as the eight existing HCAHPS dimensions; for further details, we refer readers to ‘‘A Step-by-Step Guide to Calculating the Patient Experience of Care Domain Score in the Hospital Value-Based Purchasing FY 2013 Actual Percentage Payment Summary Report,’’ at: https:// www.hcahpsonline.org/Hospital VBP.aspx. For each of the nine dimensions, Achievement Points (0–10 points) and Improvement Points (0–9 points) would be calculated, the larger of which will be summed across the nine dimensions to create a prenormalized HCAHPS Base Score (0–90 points, as compared to 0–80 points when only eight dimensions were included). The pre-normalized HCAHPS Base Score would then be multiplied by 8/9 (0.88888) and rounded according to standard rules (values of 0.5 and higher are rounded up, values below 0.5 are rounded down) to create the normalized HCAHPS Base Score. Each of the nine dimensions would be of equal weight, so that, as before, the normalized HCAHPS Base Score would range from 0 to 80 points. HCAHPS Consistency Points would then be calculated in the same manner as before and would continue to range from 0 to 20 points. The Consistency Points Score would now consider scores across all nine of the PEC/CC domain dimensions, whereas before it considered only the eight dimensions that preceded the CTM measure. The final element of the scoring formula would be the sum of the HCAHPS Base Score and the HCAHPS Consistency Points Score and would range from 0 to 100 points, as before. We welcome public comments on this approach to including the CTM–3 dimension in the PEC/CC domain score. b. Possible Future Efficiency and Cost Reduction Domain Measure Topics In the interest of expanding the Efficiency domain to include a more robust measure set, including measures that supplement the Medicare Spending per Beneficiary (MSPB) measure with more condition and/or treatment specific episodes, as well as facilitating alignment with the Physician ValueBased Payment Modifier (VM) Program, we are considering proposing to add new episode-based payment measures to the Hospital VBP Program through future rulemaking. Expanding the Efficiency domain to include such measures would create incentives for coordination between hospitals and physicians to optimize the care they provide to Medicare beneficiaries and E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules would increase alignment between the Hospital VBP and Physician VM Programs. Any future Hospital VBP Program measures would first be finalized for inclusion in the Hospital IQR Program and included on the Hospital Compare Web site for one year, as required by section 1886(o)(2)(C) of the Act. The six episode-based standardized payment measures we are considering are discussed below and are similar in many ways to the NQF-endorsed MSPB measure already included in the Efficiency domain. Like the MSPB measure, these episode-based standardized payment measures would include services initiated during an episode that spans from 3 days prior to a hospital admission through 30 days post-discharge from the hospital. We would sum the standardized Medicare payment amounts for Part A and Part B services provided during this timeframe and attribute them to the hospital at which the index admission occurred. Medicare payments included in these episode-based measures would be standardized according to the CMS standardization methodology finalized for the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626). Episodes in the six new measures would be risk-adjusted in a manner similar to the MSPB measure risk adjustment methodology finalized in the FY 2013 IPPS/LTCH PPS final rule (76 FR 51625 through 51626). The difference between the risk adjustment approaches stems from the fact that MSPB episodes are standardized at the Major Diagnostic Category (MDC) level, whereas two of the new episode-based measures, the hip episode measure and the knee episode measure, represent conditions that are in the same MDC. Accordingly, the new episode-based measures would be individually riskadjusted at the specific episode type level, in order to recognize the distinctions. The payment standardization methodology is available in the document entitled ‘‘CMS Price Standardization’’ and the MSPB risk adjustment methodology is included in the document entitled ‘‘MSPB Measure Information Form,’’ both available at: https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier4&cid= 1228772057350. The risk adjustment methodology specific to these six episode-based standardized payment measures can be found on the CMS Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/hospital-value-based- VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 purchasing/?redirect=/ hospital-value-based-purchasing. Risk adjustment and payment standardization would allow us to compare performance on these measures across hospitals. In contrast to the MSPB measure, we would only include Medicare payments for services that are clinically related to the health conditions treated during the hospital stay that triggered the episode. The aim of including these episodebased payment measures in the Hospital VBP Program would be to differentiate between hospitals that provide care efficiently (that is, high quality care at a lower cost to Medicare). We believe that risk-adjusted standardized Medicare payments are an appropriate indicator of efficiency as they allow us to compare hospitals without regard to such factors as geography and teaching status. This comparison is particularly important with clinically coherent episodes because it distinguishes the degree to which practice pattern variation influences the cost of care. We believe that creating incentives for appropriately reducing practice pattern variation is an important part of our aims to lower the cost of care appropriately and create better coordinated care for Medicare beneficiaries. Another notable difference between the episode-based measures we are considering and the MSPB measure occurs when, during the 30 days following discharge from an index admission, a beneficiary is readmitted for a condition that is clinically related to the index admission and that also triggers an episode-based cost measure episode. For example, if a beneficiary were discharged after a hip replacement, then readmitted for a revision 15 days later, the standardized Medicare payments associated with the revision would count toward the initial hip replacement/revision episode and would also trigger a new hip replacement/revision episode where the index admission would be that for the revision. Details of which admissions would begin a new episode and contribute to a preceding episode may be found at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/hospital-valuebased-purchasing/?redirect=/ hospital-value-based-purchasing. We are considering three medical and three surgical episodes for the initial expansion of the Efficiency domain. The medical episodes would address the following conditions: (1) Kidney/ urinary tract infection; (2) cellulitis; and (3) gastrointestinal hemorrhage. A medical episode would be ‘triggered’ by PO 00000 Frm 00147 Fmt 4701 Sfmt 4702 28123 an inpatient claim with a specified MS– DRG. The surgical episodes currently under consideration are (1) hip replacement/revision; (2) knee replacement/revision; and (3) lumbar spine fusion/refusion. A surgical episode would be triggered when an inpatient claim has one of the specified MS–DRGs and at least one of the procedure codes specified for that episode. We welcome public comment on the three medical and three surgical conditions that we are considering as new episode-based measures for initial expansion of the Efficiency domain. There are a number of other types of episodes that could also meet the episode selection criteria we describe below, including those related to heart and lung (for example, heart failure and pneumonia). We note that we are exploring data related to episodes for these types of conditions under the Physician VM Program. We welcome comment regarding the applicability of episode-based measures for these or other conditions for future expansion of the Efficiency domain. In selecting the six conditions around which we would develop episode measures for future expansion of the Efficiency domain, we considered the following five criteria: (1) The condition constitutes a significant share of Medicare payments for hospitalized patients during and surrounding the hospital stay; (2) the degree to which clinical experts consulted for this project agree that standardized Medicare payments for services provided during the episode can be linked to the care provided during the hospitalization; (3) episodes of care for the condition are comprised of a substantial proportion of payments for post-acute care, indicating episode payment differences are driven by utilization outside of the MS–DRG payment; (4) episodes of care for the condition reflect high variation in postdischarge payments, enabling differentiation between hospitals; and, (5) the medical condition is managed by general medicine physicians or hospitalists and the surgical conditions are managed by surgical subspecialists, enabling comparison between similar practitioner types within each episode measure. For analysis purposes, the five selection criteria were applied to 2012 Medicare acute inpatient hospital data in a hierarchical manner, to prioritize the inpatient conditions. After the selection criteria were applied, we narrowed the medical and surgical episodes to those episodes that are less complex, in order to allow CMS and hospitals to gain experience with this new measure type. Full details of the E:\FR\FM\15MYP2.SGM 15MYP2 28124 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules episode selection criteria are available on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/hospital-value-basedpurchasing/?redirect=/ hospital-value-based-purchasing. We welcome public comments on the episode selection criteria we utilized. Complete episode specifications, including the MS–DRG and ICD–9–CM procedure codes used to identify each of the episodes, details of episode construction methodology, and information on the clinical expert reviewers for this project are available on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/hospital-value-basedpurchasing/?redirect=/ hospital-value-based-purchasing. We welcome public comments on these specifications and the construction of the six episode-based payment measures that we are considering. 7. Previously Adopted and Proposed Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program a. Background Section 1886(o)(4) of the Act requires the Secretary to establish a performance period for the Hospital VBP Program for a fiscal year that begins and ends prior to the beginning of such fiscal year. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689 through 50692) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75020 through 75021) for the performance periods and baseline periods for the Clinical Process of Care, Patient Experience of Care, Outcome, and Efficiency domains for the FY 2016 Hospital VBP Program. As discussed further below, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted new NQS-based quality domains for FY 2017, and we are proposing to adopt performance and baseline periods using those new domains for the FY 2017 Hospital VBP Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 b. Previously Adopted Baseline and Performance Periods for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694 and 50698 through 50699), because of the time needed to process measure data for the three 30-day mortality measures (Clinical Care—Outcomes domain) and the PSI–90 measure (also referred to in previous rulemaking as the AHRQ patient safety PSI–90 composite VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 measure) (Safety domain), and in consideration of our policy goal to collect enough data to generate the most reliable scores possible, we adopted performance periods and performance standards for the 30-day mortality measures for FY 2017, FY 2018, and FY 2019, and for the PSI–90 measure for FY 2017 and FY 2018. c. Proposed Clinical Care—Process Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month performance period for the FY 2016 Clinical Process of Care domain measures of CY 2014 (January 1, 2014 through December 31, 2014). We also adopted a corresponding 12-month baseline period of CY 2012 (January 1, 2012, through December 31, 2012), for purposes of calculating improvement points and performance standards. Based on our review of FY 2013 and FY 2014 Hospital VBP performance period denominator data, we continue to believe that a 12-month performance period provides us with reliable and sufficient data for scoring Clinical Care—Process domain measures under the Hospital VBP Program. These data are available for public review on our Hospital Compare Web site. We are therefore proposing to adopt a 12-month performance period for FY 2017 Clinical Care—Process domain measures (including the proposed PC–01 measure) of CY 2015 (January 1, 2015, through December 31, 2015). We also are proposing to adopt a corresponding 12-month baseline period of CY 2013 (January 1, 2013, through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invite public comment on these proposals. d. Proposed Patient and CaregiverCentered Experience of Care/Care Coordination (PEC/CC) Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689), we adopted a 12month performance period for FY 2016 Patient Experience of Care domain measures of CY 2014, or January 1, 2014 through December 31, 2014, for the FY 2016 Hospital VBP Program. We also adopted a corresponding 12-month baseline period of CY 2012 (January 1, 2012 through December 31, 2012), for purposes of calculating improvement points and calculating performance standards. We continue to believe that a 12-month performance period PO 00000 Frm 00148 Fmt 4701 Sfmt 4702 provides us sufficient HCAHPS data on which to score hospital performance, which is an important goal both for CMS and for stakeholders. We are proposing to adopt a 12-month performance period for the FY 2017 PEC/CC domain of CY 2015 (January 1, 2015 through December 31, 2015). We also are proposing to adopt a corresponding 12-month baseline period of CY 2013 (January 1, 2013 through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invite public comment on these proposals. e. Proposed Safety Domain Performance Period and Baseline Period for NHSN Measures for the FY 2017 Hospital VBP Program In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75121), for the three NHSN HAI measures that we have adopted for the FY 2016 Hospital VBP Program (CAUTI, CLABSI, and SSI), we adopted an FY 2016 performance period of CY 2014 (January 1, 2014 through December 31, 2014), with a corresponding baseline period of CY 2012 (January 1, 2012 through December 31, 2012) for purposes of calculating improvement points and calculating performance standards. We continue to believe that a 12month performance period provides us with sufficient data on which to score hospital performance on NHSN measures in the Safety domain. We also note that 12-month performance and baseline periods are consistent with the reporting periods used for these measures under the Hospital IQR Program (78 FR 50689). Therefore, for the FY 2017 NHSN measures in the Safety domain (including the proposed CLABSI, C. difficile infection and MRSA bacteremia measures), we are proposing to adopt a performance period of CY 2015 (January 1, 2015 through December 31, 2015), and a corresponding baseline period of CY 2013 (January 1, 2013 through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invite public comment on these proposals. f. Proposed Efficiency and Cost Reduction Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month performance period for the MSPB measure for the FY 2016 Hospital VBP Program of CY 2014 (January 1, 2014, through December 31, 2014), with a E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules corresponding baseline period of CY 2012 (January 1, 2012, through December 31, 2012). This performance and baseline period enable us to collect sufficient measure data, while allowing time to calculate and incorporate MSPB measure data into the Hospital VBP Program scores in a timely manner. We are proposing to adopt a 12-month performance period for the FY 2017 Efficiency and Cost Reduction domain of CY 2015 (January 1, 2015 through December 31, 2015), with a corresponding baseline period of CY 2013 (January 1, 2013 through December 31, 2013). We note that this proposed performance and baseline period aligns with the performance and baseline periods for Clinical Care—Process, PEC/ CC, and certain Safety measures under the new domain structure. We invite public comments on these proposals. 28125 g. Summary of Previously Adopted and Proposed Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program The table below summarizes the proposed baseline and performance periods for the FY 2017 Hospital VBP Program (with previously adopted baseline and performance periods for the mortality and AHRQ PSI composite (PSI–90) measures noted). PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE AND BASELINE PERIODS FOR THE FY 2017 HOSPITAL VBP PROGRAM Domain Baseline period Safety: • PSI–90* .................................................... • NHSN (CAUTI, CLABSI, SSI, C. difficile Infection, MRSA Bacteremia). Clinical Care—Outcomes:. • Mortality * ................................................. (MORT–30–AMI, ......................................... MORT–30–HF, MORT–30–PN) Clinical Care—Process: • (AMI–7a, IMM–2, PC–01) ........................ Efficiency and Cost Reduction (MSPB–1) ......... Patient and Caregiver-Centered Experience of Care/Care Coordination (HCAHPS). Performance period • October 1, 2010–June 30, 2012 * ................ • January 1, 2013–December 31, 2013 .......................................................................... • October 1, 2013–June 30, 2015.* • October 1, 2010–June 30, 2012 * ................ • October 1, 2013–June 30, 2015.* January 1, 2013–December 31, 2013 ............. January 1, 2013–December 31, 2013 ............. January 1, 2013–December 31, 2013 ............. January 1, 2015–December 31, 2015. January 1, 2015–December 31, 2015. January 1, 2015–December 31, 2015. • January 1, 2015–December 31, 2015. * Previously adopted performance and baseline periods. We note that we intend to propose additional baseline and performance periods for the FY 2018 Hospital VBP Program in future rulemaking. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 8. Previously Adopted and Proposed Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program a. Previously Adopted and Proposed Performance Period and Baseline Period for the FY 2019 Hospital VBP Program for Clinical Care—Outcomes Domain Measures As described above, we have previously adopted the FY 2019 performance and baseline periods for the three 30-day mortality measures that we have adopted for the former Outcome domain and that we have since placed into the Clinical Care— Outcomes domain under the new domain structure. In this proposed rule, we are proposing to adopt the THA/TKA measure for the FY 2019 Hospital VBP Program and to place that measure in the Clinical Care—Outcomes domain. THA/TKA is reported to the Hospital IQR Program for 36-month time periods. However, we do not believe that we can feasibly adopt a 36-month performance period for this measure and adopt it for the FY 2019 Hospital VBP Program. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Based on the time needed to complete measure calculations and performance scoring, we believe that we must conclude the performance period for this measure by June 30, 2017. We believe that a 30-month performance period will result in sufficiently reliable quality measure data for purposes of Hospital VBP Program scoring, and our analysis of historic data supports our belief that comparisons between a 36month baseline period and a 30-month performance period will not result in significant differences in measure scores. Further, adopting this proposed performance period would enable us to include the measure in the FY 2019 Hospital VBP Program, which would ensure that hospitals continue focusing on measures of outcomes under the Hospital VBP Program and that we continue transitioning the Hospital VBP Program from its initial focus on process measures to outcome measures. We note that we have proposed below to adopt a 36-month performance period for the THA/TKA measure for the FY 2020 Hospital VBP Program. We have examined the correlation between hospitals’ performance on the THA/ TKA measure for 30-month and 36month periods, and we believe that the 30-month period meets our standard for moderate reliability of quality measure PO 00000 Frm 00149 Fmt 4701 Sfmt 4702 data during the specified time period. However, as with the 30-day mortality and PSI–90 measures, we are attempting to align performance periods under the Hospital VBP Program with reporting periods under the Hospital IQR Program, while introducing measures covering important clinical topics into the Hospital VBP Program as quickly as possible. We believe that our proposal for a 30-month performance period for this measure for the FY 2019 Hospital VBP Program allows us to bring the measure into the Program in FY 2019 and to accomplish that alignment beginning with the FY 2020 Hospital VBP Program. Therefore, we are proposing to adopt an FY 2019 performance period of January 1, 2015, through June 30, 2017, for the THA/TKA measure. Further, we are proposing to adopt an FY 2019 baseline period for this measure of July 1, 2010 to June 30, 2013, for purposes of calculating performance standards and awarding improvement points. We welcome public comments on these proposals. E:\FR\FM\15MYP2.SGM 15MYP2 28126 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules b. Proposed Performance Period and Baseline Period for the PSI–90 Safety Domain Measure for the FY 2019 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 5094), we adopted performance periods and baseline periods for the PSI–90 measure for the FY 2017 and FY 2018 Hospital VBP Programs. We adopted this policy in light of the time needed to process measure data and our policy goal to collect enough data to generate the most reliable measure scores possible. We stated our belief that aligning the Hospital VBP Program performance periods with the Hospital IQR Program reporting period duration would allow hospitals to review Hospital Compare measure rates when they are updated and incorporate this information into their quality improvement efforts, rather than having to wait until the Hospital VBP Program provides its scoring reports to hospitals. We stated our further belief that aligning the Hospital IQR Program and the Hospital VBP Program in this manner will minimize the burden on participating hospitals by aligning the time periods during which they must monitor their performance on this measure. We did not finalize a baseline period and performance period for the AHRQ PSI–90 measure for FY 2019 in that final rule (78 FR 50692 through 50694). We stated that, by declining to finalize the measure’s FY 2019 performance and baseline periods in that final rule, we would be able to adopt a more recent baseline period than we initially proposed. We stated that we intended to propose baseline and performance periods for the AHRQ PSI measure for the FY 2019 Hospital VBP Program in future rulemaking. We continue to believe that we should adopt performance and baseline periods of 24 months for the PSI–90 measure. Therefore, we are proposing to adopt an FY 2019 performance period for the PSI–90 measure of July 1, 2015 through June 30, 2017, with a corresponding 24month baseline period of July 1, 2011 through June 30, 2013, for purposes of calculating performance standards and awarding improvement points. We welcome public comments on these proposals. c. Summary of Previously Adopted and Proposed Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program The following table summarizes previously adopted and proposed performance and baseline periods for the FY 2019 Hospital VBP Program: PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE AND BASELINE PERIODS FOR CERTAIN MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Domain Baseline period Performance period Safety: • PSI–90 ..................................................................................... • July 1, 2011–June 30, 2013 ............................... • July 1, 2015–June 30, 2017. Clinical Care–Outcomes: • Mortality * ................................................................................. • July 1, 2009–June 30, 2012 * ............................. • July 1, 2010–June 30, 2013. (MORT–30–AMI, MORT–30–HF, MORT-30–PN) • THA/TKA ................................................................................. • July 1, 2010–June 30, 2013 * ............................. • January 1, 2015– June 30, 2017. * Previously adopted performance and baseline periods. We welcome public comment on these proposals. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 9. Proposed Performance Period and Baseline Period for the Clinical Care— Outcomes Domain for the FY 2020 Hospital VBP Program As described above with respect to the mortality measures, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694), we adopted performance periods and baseline periods for the three 30-day mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs. We adopted this policy in light of the time needed to process measure data and to ensure that we collect enough measure data for reliable performance scoring, as described further above. We continue to believe that we should adopt 36-month performance and baseline periods for the mortality measures when possible to accommodate those durations. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 We believe that a similar rationale applies to the new THA/TKA measure that we are proposing to adopt for the Clinical Care—Outcomes domain for the FY 2019 Hospital VBP Program, and which, under our policy of measure readoption, we generally would readopt for the FY 2020 Hospital VBP Program if finalized. As stated above, we have examined the correlation between hospitals’ performance on the THA/ TKA measure for 30-month and 36month periods, and we believe that the 30-month period meets our standard for moderate reliability of quality measure data during the specified time period. However, as with the 30-day mortality and PSI–90 measures, we are attempting to align performance periods under the Hospital VBP Program with reporting periods under the Hospital IQR Program, while introducing measures covering important clinical topics into the Program as quickly as possible. We PO 00000 Frm 00150 Fmt 4701 Sfmt 4702 believe that our proposal for a 30-month performance period for this measure for FY 2019 allows us to accomplish that alignment beginning with the FY 2020 Program. Therefore, we are proposing to adopt a 36-month performance period for the measures in the Clinical Care— Outcomes domain in the FY 2020 Hospital VBP Program (including the proposed THA/TKA measure for FY 2020, if that measure is adopted for the FY 2020 Hospital VBP Program) of July 1, 2015 through June 30, 2018, with a corresponding 36-month baseline period of July 1, 2010 through June 30, 2013, for purposes of calculating performance standards and awarding improvement points. The following table summarizes the proposed performance and baseline period for the Clinical Care—Outcomes domain for the FY 2020 Hospital VBP Program: E:\FR\FM\15MYP2.SGM 15MYP2 28127 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED PERFORMANCE AND BASELINE PERIOD FOR THE CLINICAL CARE—OUTCOMES DOMAIN FOR THE FY 2020 HOSPITAL VBP PROGRAM Domain Baseline period Clinical Care—Outcomes: • Mortality (MORT–30 AMI, MORT–30–HF, MORT– 30–PN). • THA/TKA ..................................................................... We welcome public comment on these proposals. 10. Proposed Performance Standards for the Hospital VBP Program a. Background Section 1886(o)(3)(A) of the Act requires the Secretary to establish performance standards for the measures selected under the Hospital VBP Program for a performance period for the applicable fiscal year. The performance standards must include levels of achievement and improvement, as required by section 1886(o)(3)(B) of the Act, and must be established and announced not later than 60 days before the beginning of the performance period for the fiscal year involved, as required by section 1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513) for further discussion of achievement and improvement standards under the Hospital VBP Program. In addition, when establishing the performance standards, section 1886(o)(3)(D) of the Act requires the Secretary to consider appropriate factors, such as: (1) Practical experience with the measures, including whether a significant proportion of hospitals failed to meet the performance standard during previous performance periods; (2) historical performance standards; (3) improvement rates; and (4) the opportunity for continued improvement. b. Performance Standards for the FY 2016 Hospital VBP Program In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through 53604), we Performance period • July 1, 2010–June 30, 2013 ............... • July 1, 2015–June 30, 2018. • July 1, 2010–June 30, 2013 ............... • July 1, 2015–June 30, 2018. adopted performance standards for FY 2015 and certain FY 2016 Hospital VBP Program measures. We also finalized our policy to update performance periods and performance standards for future Hospital VBP Program years via notice on the CMS Web site or another publicly available Web site. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our regulatory definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ at § 412.160 and adopted performance standards for additional FY 2016 Hospital VBP Program measures. We also adopted an interpretation of ‘‘achievement threshold’’ and ‘‘benchmark’’ under § 412.160 to not include the numerical values that result when the performance standards are calculated. We further adopted a policy under which we may update a measure’s performance standards for a fiscal year once if we identify data issues, calculation errors, or other problems that would significantly affect the displayed performance standards. We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50695 through 50698) for the complete set of FY 2016 performance standards. c. Previously Adopted Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698 through 50699), we adopted performance standards for the three 30-day mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs and for the PSI– 90 measure for the FY 2017 and FY 2018 Hospital VBP Programs. We refer readers to that final rule for those performance standards. d. Proposed Additional Performance Standards for the FY 2017 Hospital VBP Program In accordance with our finalized methodology for calculating performance standards (discussed more fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513)), we are proposing to adopt the following additional performance standards for the FY 2017 Hospital VBP Program. We note that the numerical values for the performance standards displayed below represent estimates based on the most recently available data, and we intend to update the numerical values in the FY 2015 IPPS/ LTCH PPS final rule. We note further that the MSPB measure’s performance standards are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. We note further that the performance standards for the NHSN measures (CAUTI, SSI, and proposed CLABSI, MRSA Bacteremia, and C. difficile Infection), the PSI–90 measure, and the MSPB measure are calculated with lower values representing better performance, in contrast to other measures, on which higher values indicate better performance. As discussed further in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50684), the performance standards for SSI are computed separately for each measure stratum, and we will award achievement and improvement points to each stratum separately, then compute a weighted average of the points awarded to each stratum by predicted infections. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES Measure ID Achievement threshold Description Benchmark Safety Measures CAUTI ............................... CLABSI ............................. C. difficile .......................... MRSA bacteremia ............ VerDate Mar<15>2010 Catheter-Associated Urinary Tract Infection ...... Central Line-Associated Blood Stream Infection Clostridium difficile Infection .............................. Methicillin-Resistant Staphylococcus aureus Bacteremia. 21:35 May 14, 2014 Jkt 232001 PO 00000 Frm 00151 Fmt 4701 0.8371 ....................................... 0. 4483 ...................................... 0.7927 ....................................... 0.8613 ....................................... Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 0.0000 0.0000 0.0000 0.0000 28128 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES— Continued Measure ID Description Achievement threshold PSI–90 * ............................ Complication/patient safety for selected indicators (composite) *. Surgical Site Infection. • Colon ........................................................... • Abdominal Hysterectomy ............................ 0.577321 * ................................. 0.397051 * • 0.7117 ................................... • 0.7509 ................................... • 0.0000 • 0.0000 SSI .................................... Benchmark Clinical Care—Outcomes Measures MORT–30–AMI * ............... MORT–30–HF * ................ MORT–30–PN * ................ Acute Myocardial Infarction (AMI) 30-day mortality rate *. Heart Failure (HF) 30-day mortality rate * .......... Pneumonia (PN) 30-day mortality rate * ............ 0.851458 * ................................. 0.871669 * 0.881794 * ................................. 0.882986 * ................................. 0.903985 * 0.908124 * Clinical Care—Process Measures AMI–7a ............................. IMM–2 ............................... PC–01 ............................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization ...................................... Elective Delivery Prior to 39 Completed Weeks Gestation. 0.954545 ................................... 1.000000 0.995882 ................................... 0.031250 ................................... 1.000000 1.000000 Efficiency and Cost Reduction Measure MSPB–1 ........................... Medicare Spending per Beneficiary ................... Median Medicare Spending per Beneficiary ratio across all hospitals during the performance period. Mean of the lowest decile Medicare Spending per Beneficiary ratios across all hospitals during the performance period. * Previously adopted performance standards. PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM PATIENT AND CAREGIVER-CENTERED EXPERIENCE OF CARE/CARE COORDINATION DOMAIN Floor (percent) HCAHPS survey dimension Communication with Nurses .................................................................................................. Communication with Doctors ................................................................................................. Responsiveness of Hospital Staff .......................................................................................... Pain Management .................................................................................................................. Communication about Medicines .......................................................................................... Hospital Cleanliness & Quietness ......................................................................................... Discharge Information ............................................................................................................ Overall Rating of Hospital ...................................................................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 We note that we intend to propose additional performance standards for the FY 2018 Hospital VBP Program in future rulemaking. We welcome public comments on these proposed performance standards. e. Proposed Performance Standards for the FY 2019 and FY 2020 Hospital VBP Programs As discussed further above, we have adopted certain Safety and Clinical VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Care—Outcomes domain measures for future program years in order to ensure that we can adopt performance periods and baseline periods of sufficient length for performance scoring purposes. We are also proposing to adopt the PSI–90 measure in the Safety domain and the THA/TKA measure in the Clinical Care—Outcomes domain for the FY 2019 Hospital VBP Program. We note that, as described above with respect to PO 00000 Frm 00152 Fmt 4701 Sfmt 4702 Achievement threshold 56.90 62.03 36.46 49.47 42.89 43.46 61.86 35.00 78.08 80.43 64.83 70.20 62.82 65.26 85.59 69.81 Benchmark (percent) 86.41 88.71 79.62 78.18 73.15 79.06 91.04 84.27 the NHSN measures, the PSI–90 measure, and the MSPB measure, for the THA/TKA measure, better performance is represented by lower values. Therefore, we are proposing to adopt the following performance standards for the FY 2019 Hospital VBP Program: E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28129 PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR CERTAIN SAFETY AND CLINICAL CARE— OUTCOMES DOMAIN MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Safety Measures PSI–90 ............................... Complication/patient safety for selected indicators (composite) ........................ 0.840421 0.589716 * 0.850671 * 0.883472 * 0.882334 0.032521 * 0.873263 * 0.908094 * 0.907906 0.022895 Outcomes Measures MORT–30–AMI * ................ MORT–30–HF * .................. MORT–30–PN * .................. THA/TKA ............................ Acute Myocardial Infarction (AMI) 30-day mortality rate * .................................. Heart Failure (HF) 30-day mortality rate * ........................................................... Pneumonia (PN) 30-day mortality rate * ............................................................. Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). * Previously adopted performance standards. We welcome public comments on these proposed performance standards. We also are proposing to adopt the following performance standards for the FY 2020 Hospital VBP Program: PROPOSED PERFORMANCE STANDARDS FOR CLINICAL CARE—OUTCOMES DOMAIN MEASURES FOR THE FY 2020 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Clinical Care—Outcomes Measures MORT–30–AMI .................. MORT–30–HF .................... MORT–30–PN .................... THA/TKA ............................ Acute Myocardial Infarction (AMI) 30-day mortality rate .................................... Heart Failure (HF) 30-day mortality rate ............................................................. Pneumonia (PN) 30-day mortality rate ............................................................... Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 We welcome public comments on these proposed performance standards. f. Proposed Technical Updates Policy for Performance Standards In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our regulatory definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ at § 412.160 and adopted performance standards for additional FY 2016 Hospital VBP Program measures. We also adopted an interpretation of ‘‘achievement threshold’’ and ‘‘benchmark’’ under § 412.160 to not include the numerical values that result when the performance standards are calculated. We further adopted a policy under which we may update a measure’s performance standards for a fiscal year once if we identify data issues, calculation errors, or other problems that would significantly change the displayed performance standards. Our historic practice has been to display Hospital VBP Program performance standards’ numerical values in rulemaking. We adopted this practice for the convenience of the public. Although we have typically expressed the performance standards for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 each Hospital VBP measure as a numerical value prior to the start of the performance period for that measure, we do not display numerical values for the MSPB measure because the measure is constructed as a measure of costs attributable to patient care during a specified episode of care during the performance period itself (77 FR 53601). We have stated that with respect to the MSPB measure, we do not believe it is helpful for hospitals to be compared against performance standards constructed from baseline period data given the potential changes in market forces and utilization practices that occur over time. Further, during the long interval between the time we first display the performance standards for all measures but the MSPB measure and the time that we calculate the achievement and improvement scores for those measures based on actual hospital performance, one or more of those measures might have been technically updated in a way that inhibits our ability to ensure that we are making appropriate comparisons between the baseline and performance period. For example, the software used to calculate the PSI–90 measure is PO 00000 Frm 00153 Fmt 4701 Sfmt 4702 0.853511 0.881394 0.882281 0.032521 0.875840 0.905962 0.909460 0.022895 regularly updated to incorporate coding changes, refinements based on the consensus development process, and refinements to improve specificity and sensitivity. The statistical modeling we use to adjust measure calculations for PSI–90 and HCAHPS also needs to be periodically updated to incorporate coefficient factors that more properly account for patient mix (both measures) and the HCAHPS survey data collection mode (HCAHPS survey). These types of technical updates do not substantively affect the measure rate calculation methodology, but they do sometimes affect our ability to make appropriate comparisons between the baseline and performance period if, for example, the baseline performance standards are tabulated using one version of the software and hospital performance during subsequent performance periods is tabulated with another version. We believe that in order to make the most accurate comparison of hospital performance across time, we should use the most updated version of the measure that is available at the time we calculate that performance because the updated version will produce the most valid measure rates. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28130 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Further, as part of its regular maintenance process for NQF-endorsed performance measures, NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. The NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures in order to maintain endorsement status. We believe that it is important to incorporate nonsubstantive updates required by the NQF, as well as nonsubstantive updates made to other measures, into the measure specifications we have adopted for the Hospital VBP Program so that these measures remain up-to-date and ensure that we make fair comparisons between the performance and baseline periods that we adopt under the Program. We also recognize that some updates to measures are substantive in nature and might not be appropriate for adoption without further rulemaking. With respect to what constitutes substantive versus nonsubstantive changes to measures, we would make this determination on a case-by-case basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that nonsubstantive changes may include updates to measures based upon changes to guidelines upon which the measures are based. Therefore, we are proposing to amend the definition of ‘‘performance standards’’ under § 412.160 to enable us to update performance standards’ numerical values to incorporate nonsubstantive technical updates that are made to Hospital VBP Program measures between the time that they are adopted for a particular program year and the time that we actually calculate hospital performance on those measures after the performance period for the program year has concluded. Further, we are proposing to inform hospitals of these technical updates through VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 postings on our Hospital VBP Program Web site, the QualityNet Web site, other educational outreach efforts, and/or the scoring reports that we provide for each program year. We note that these proposals, if finalized, may have the effect of superseding the performance standards that we establish prior to the start of the performance period for the affected measures, but we believe them to be necessary to ensure that the performance standards in the Hospital VBP Program’s scoring calculations enable the fairest comparisons between performance measured during the baseline period and performance period. We would continue to use rulemaking to adopt substantive updates to the measures we have adopted for the Hospital VBP Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example: changes in acceptable timing of medication, procedure/process, or test administration). We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. We are also proposing to include in our revised definition of ‘‘performance standards’’ under § 412.160 of our regulations the policy we adopted in the FY 2013 IPPS/LTCH final rule to update the performance standards once if we identify data issues, calculation errors, or other problems that would significantly change the standards (78 FR 50695). We are proposing to make this change so that our policies governing updates to the performance standards appear together. We welcome public comments on these proposals. We also specifically seek public comments on what we should consider to be substantive changes in measures’ performance standards, including whether or not we should consider certain changes in performance standards as a result of technical or non-substantive updates to be substantive. g. Request for Public Comments on ICD– 10–CM/PCS Transition The ICD–10–CM/PCS transition is scheduled to take place on October 1, 2015. After that date, we will collect nonelectronic health record-based quality measure data coded only in ICD–10–CM/PCS. Even though we expect that the endorsement status of the measures we have adopted for the Hospital VBP Program will remain the PO 00000 Frm 00154 Fmt 4701 Sfmt 4702 same, we are concerned that the transition to a new coding system might have unintended consequences on quality measure data denominators, statistical adjustment coefficients, and measure rates. We are concerned about the possible impacts on the Hospital VBP Program, and request public comments on how we should accommodate the transition. Specifically, we request comments on how, if at all, we should adjust performance scoring under the Hospital VBP Program to accommodate quality data coded under ICD–10–CM/PCS, or otherwise ensure fair and accurate comparisons under the Hospital VBP Program once the transition date has passed. For example, we could consider analyzing the effects of the ICD–10–CM/ PCS transition on hospitals’ measured performance and, if substantive differences result, retrospectively adjusting performance standards in order to ensure that they accurately reflect the underlying methodology. We could also consider performing similar adjustments to hospitals’ measure rates, measure scores, or TPSs once our analysis is completed. We also might consider scoring hospitals only on achievement if analysis indicates that we are unable to reliably and validly calculate improvement scores when comparing ICD–9–CM based baseline period data to ICD–10–CM/PCS based performance period data. However, while we intend to analyze the effects of the ICD–10–CM/PCS transition on hospitals’ performance, we do not have the necessary data for all hospitals at this time. We intend to take two steps to analyze ICD–10–CM/PCS potential impact before receiving ICD–10–CM/PCS-based fall 2015 discharge data in May 2016. First, we will assess measure specifications to qualitatively assess impact to measure denominators after CMS releases ICD–10–CM/PCS-based measure specifications in the future. Second, we intend to voluntarily solicit information from no more than 9 hospitals before October 1, 2015 to estimate the impact of ICD–10–CM/PCS on their Hospital VBP measure rates and denominator counts. We intend to use this information to inform both proposed and future Hospital VBP Program policy and measures. We welcome public comments on this topic. 11. Proposed FY 2017 Hospital VBP Program Scoring Methodology a. Proposed General Hospital VBP Program Scoring Methodology In the Hospital Inpatient VBP Program final rule (76 FR 26514), we adopted a E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules methodology for scoring clinical process of care, patient experience of care, and outcome measures. As noted in that rule, this methodology outlines an approach that we believe is well understood by patient advocates, hospitals, and other stakeholders because it was developed during a lengthy process that involved extensive stakeholder input, and was based on a scoring methodology we presented in a report to Congress. We also noted in that final rule that we had conducted extensive additional research on a number of other important methodology issues to ensure a high level of confidence in the scoring methodology. In addition, we believe that, for reasons of simplicity, transparency, and consistency, it is important to score hospitals using the same general methodology each year, with appropriate modifications to accommodate new domains and measures. We finalized a similar scoring methodology for the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 through 51656). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604 through 53605), for the FY 2015 Hospital VBP Program, we finalized our proposal to use these same general scoring methodologies to score hospital performance for the FY 2015 Hospital VBP Program. In that rule, we stated that we believe these scoring methodologies continue to appropriately capture hospital quality as reflected by the finalized quality measure sets. We also noted that readopting the finalized scoring methodology from prior program years represents the simplest and most consistent policy for providers and the public. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50699), we readopted the finalized general scoring methodology adopted for the FY 2015 Hospital VBP Program for the FY 2016 Hospital VBP Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted new quality domains based on the NQS for FY 2017 and subsequent years. We continue to agree with the reasoning for the scoring methodology outlined in the FY 2013 IPPS/LTCH PPS final rule and summarized above. Therefore, we are proposing to adopt the general scoring methodology adopted for the FY 2016 Hospital VBP Program 28131 for the FY 2017 Hospital VBP Program, with appropriate modifications to accommodate the new quality domains that we have previously adopted. These proposed modifications to our scoring methodology are limited to reclassified quality domains, new placements for measures within those domains, and domain weighting. We discuss below a proposal to revise the finalized domain weighting for FY 2017. We welcome public comment on this proposal. b. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals That Receive a Score on All Domains In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted our proposal to align the Hospital VBP Program’s quality measurement domains with the NQS’ quality priorities, with certain modifications. We adopted this realignment beginning with the FY 2017 Hospital VBP Program. We also adopted the following domains and domain weights for the FY 2017 Hospital VBP Program for hospitals that receive a score in all newly aligned domains. PREVIOUSLY ADOPTED DOMAINS AND DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS Domain Weight Safety ................................................................................................................................................................................................ Clinical Care: • Clinical Care—Outcomes ....................................................................................................................................................... • Clinical Care—Process .......................................................................................................................................................... Efficiency and Cost Reduction ......................................................................................................................................................... Patient and Caregiver Centered Experience of Care/Care Coordination ........................................................................................ 15 percent. 35 percent. • 25 percent. • 10 percent. 25 percent. 25 percent. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 However, as discussed in more detail above, we are proposing to remove six ‘‘topped out’’ measures from the FY 2017 Clinical Care—Process subdomain. We believe that the proposed substantial reduction in the number of measures adopted for the Clinical Care—Process subdomain, if finalized, warrants reconsideration of the finalized domain weighting for FY 2017 that we adopted in the FY 2014 IPPS/LTCH PPS final rule. As described in more detail above, we are proposing to re-adopt the CLABSI measure and to adopt two new measures (MRSA Bacteremia and C. difficile Infection) for the Safety domain for FY 2017 Hospital VBP Program and subsequent years, and, if finalized, they would raise the total number of measures in this domain for FY 2017 to six. Because we are proposing to make changes in the number of measures in only two domains (Safety and Clinical Care), we focused our proposed domain weighting changes in this proposed rule on these domains only. Because we continue to believe that hospitals should be provided strong incentives to perform well on measures of patient safety, in view of the new measures we are proposing to add to that domain, we are proposing to revise the previously finalized domain weighting for the FY 2017 Hospital VBP Program for hospitals receiving a score on all newly aligned domains as follows: PROPOSED REVISED DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS Domain Weight Safety ................................................................................................................................................................................................ Clinical Care: • Clinical Care—Outcomes ....................................................................................................................................................... • Clinical Care—Process .......................................................................................................................................................... Efficiency and Cost Reduction ......................................................................................................................................................... 20 percent. 30 percent. • 25 percent. • 5 percent. 25 percent. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00155 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28132 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED REVISED DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS—Continued Domain Weight Patient and Caregiver Centered Experience of Care/Care Coordination ........................................................................................ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 We welcome public comments on this proposal. c. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals Receiving Scores on Fewer Than Four Domains In prior program years, we finalized a policy that hospitals must have received domain scores on all finalized domains in order to receive a TPS. However, because the Hospital VBP Program has evolved from its initial two domains to an expanded measure set with additional domains, we considered whether it was appropriate to continue this policy. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606 through 53607), we finalized our proposal that, for the FY 2015 Hospital VBP Program and subsequent years, hospitals with sufficient data to receive at least two out of the four domain scores that existed for the FY 2015 Hospital VBP Program (that is, sufficient cases and measures to receive a domain score on at least two domains) will receive a TPS. We also finalized our proposal that, for hospitals with at least two domain scores, TPSs would be reweighted proportionately to the scored domains to ensure that the TPS is still scored out of a possible 100 points and that the relative weights for the scored domains remain equivalent to the weighting which occurs when there are scores in all four domains. We believe that this approach allows us to include relatively more hospitals in the Hospital VBP Program while continuing to focus on reliably scoring hospitals on their quality measure performance. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through 50702), we continued this approach for the FY 2016 Hospital VBP Program and subsequent fiscal years for purposes of eligibility for the program even though, based on the NQS, we adopted four NQS-based domains for the FY 2017 Hospital VBP Program (78 FR 50702 through 50704), which include the subdivided Clinical Care domain. In light of the four NQS-based domains we have adopted, we have reconsidered the appropriate minimum number of domains (that is, the number of domains on which hospitals must receive scores) in order to receive a TPS. We are concerned that requiring just two out of the four NQS-based domains VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 in order to receive a TPS may be insufficient to ensure robust quality measurement under the Hospital VBP Program. Further, given the transition to NQS-based domains that we have adopted, we believe an additional independent analysis of appropriate minimum numbers of domains under the new domain structure is appropriate. We commissioned that analysis from our Reports & Analytics contractor for the Hospital VBP Program. The results of that analysis informed our proposal below, and we intend to post a summary of the reliability and minimum numbers analysis on the CMS Web site during the public comment period. We believe that requiring three out of the four NQSbased domains appropriately balances our desire to be as inclusive as possible with Hospital VBP Program requirements while ensuring that TPSs under the Program are sufficiently reliable. Therefore, we are proposing to require that, for the FY 2017 Hospital VBP Program and subsequent years, hospitals must receive domain scores on at least three quality domains in order to receive a TPS. For purposes of the Clinical Care domain score, we are proposing to consider either the Clinical Care—Process or Clinical Care— Outcome subdomains as one domain in order to meet this proposed requirement. By adopting this policy, we believe we will continue to allow as many hospitals as possible may participate in the program while ensuring that reliable TPSs result. However, we would only reweight hospitals’ TPSs once, and will therefore not reallocate the Clinical Care—Process and Clinical Care—Outcome subdomains’ weighting within the Clinical Care domain if a hospital does not have sufficient data for one of the subdomains. For example, a hospital receiving domain scores on all domains except the Clinical Care—Process subdomain would not have the 5 percent weighting from the Clinical Care—Process subdomain reallocated entirely to the Clinical Care—Outcome subdomain. Instead, the 5 percent weighting from the Clinical Care— Process subdomain would be proportionately reallocated across all domains. PO 00000 Frm 00156 Fmt 4701 Sfmt 4702 25 percent. We welcome public comments on this proposal. 12. Proposed Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program’s Quality Domains a. Previously Adopted Minimum Numbers of Cases and FY 2016 Proposed Minimum Numbers of Cases In the Hospital Inpatient VBP Program final rule (76 FR 26527 through 26531), we adopted minimum numbers of at least 10 cases on at least 4 measures for hospitals to receive a Clinical Process of Care domain score. In the same final rule, we adopted a minimum number of 100 HCAHPS surveys for a hospital to receive a Patient Experience of Care domain score. In the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74532 through 74534), we adopted a minimum number of 10 cases for the mortality measures that we adopted for FY 2014. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a new minimum number of 25 cases for the mortality measures for FY 2015. In the same final rule, we adopted a minimum number of 25 cases for the MSPB measure (77 FR 53609 through 53610), a minimum of three cases for any underlying indicator for the PSI–90 measure based on AHRQ’s measure methodology (77 FR 53608 through 53609), and a minimum of one predicted infection for NHSNbased surveillance measures based on CDC’s minimum case criteria (77 FR 53608 through 53609). However, we note that we adopted these case minimums for FY 2015 only, although we intended to adopt them for FY 2015 and subsequent years. We continue to believe that the finalized minimum numbers of cases described above are appropriate and provide sufficiently reliable data for scoring purposes under the Hospital VBP Program. Therefore, we are proposing to adopt the specified case minimums for the FY 2016 Hospital VBP Program and subsequent years. We welcome public comment on this proposal. We note that we are proposing below to specify minimum numbers of measures for the FY 2017 Hospital VBP Program and subsequent years based on the new domain structure. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (2) Clinical Care—Outcomes Subdomain b. Proposed Minimum Number of Measures—Safety Domain As described in more detail above, we have proposed to adopt six quality measures in the Safety domain for the FY 2017 Hospital VBP Program. Of these measures, five are NHSN-based surveillance measures, and one is the PSI–90 measure. After consideration of these measures and of previous independent analyses of the necessary minimum number of measures adopted for the Outcome domain, whose measures formed the basis for part of the new Safety domain, we are proposing to adopt a minimum number of three measures for the Safety domain for FY 2017 and subsequent years. We believe this proposal balances our desire to be as inclusive as possible with the Hospital VBP Program and the need for reliable quality measurement data on which to base TPSs. We would also like to clarify that we will continue to score hospitals on NHSN measures if, as we discussed with respect to the CLABSI measure (77 FR 53608) and the SSI measure (78 FR 50684), the hospital has met CDC’s minimum case criteria, or one predicted infection during the applicable period. We welcome public comments on this proposal. c. Proposed Minimum Number of Measures—Clinical Care Domain mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (1) Background In the FY 2014 IPPS/LTCH PPS final rule, we adopted a new domain structure for the FY 2017 Hospital VBP Program and subsequent years based on the National Quality Strategy. In that final rule, we adopted a Clinical Care domain that was subdivided into the Clinical Care—Process and Clinical Care—Outcomes subdomains. We adopted these subdomains in order to ensure that we place the appropriate domain weighting on measures of clinical processes and measures of clinical outcomes. We believe the same consideration is appropriate for determining minimum numbers of measures for each subdomain, and based on prior independent analyses conducted of the appropriate minimum numbers for the Clinical Process of Care and Outcome domains whose measures formed the basis for the new Clinical Care domain, are proposing separate minimum numbers for each of these subdomains below. As described further above, we also attempted to balance our desire to be as inclusive as possible with the Hospital VBP Program and the need for reliable quality measurement data on which to base Total Performance Scores. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707), we adopted a minimum number of two measures in the former Outcome domain. We stated our belief that this minimum number is appropriate for the expanded Outcome domain that formed the basis for the Clinical Care—Outcomes subdomain because adding measure scores beyond the minimum number of measures has the effect of enhancing the domain score’s reliability. As noted above, the Clinical Care— Outcomes subdomain now contains the three 30-day mortality measures, and based on previous independent analysis of the appropriate minimum number of measures for the Outcome domain that formed the basis for the Clinical Care— Outcomes domain (available on our Web site at: https://cms.hhs.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/hospital-valuebased-purchasing/Downloads/HVBP_ Measure_Reliability-.pdf), we continue to believe that a minimum number of two measures within the subdomain appropriately balances scoring reliability with inclusiveness under the Program. As noted above, we intend to post a summary of the reliability and minimum numbers analysis on the CMS Web site during the public comment period. Therefore, we are proposing to adopt a minimum number of two measures in the Clinical Care— Outcomes subdomain for FY 2017 and subsequent years. We welcome public comment on this proposal. (3) Clinical Care—Process Subdomain We have reconsidered the finalized minimum number of measures given the significant reduction in Clinical Care— Process measures due to ‘‘topped-out’’ removals that we are proposing in this proposed rule. We are concerned that requiring hospitals to report on all three proposed Clinical Care—Process measures for the FY 2017 Hospital VBP Program, or even requiring two out of three measures, could prevent a significant proportion of participating hospitals from receiving a Clinical Care—Process subdomain score. We are aware that relatively few hospitals report data for the AMI–7a measure, and the proposed PC–01 measure will only include hospitals that provide maternity services. In accordance with our preference for including as many hospitals as possible in the Hospital VBP Program while ensuring the reliability of the domain score and based on a prior independent analysis conducted with respect the Clinical PO 00000 Frm 00157 Fmt 4701 Sfmt 4702 28133 Process of Care domain that formed the basis for the Clinical Care—Process domain, we are proposing to require hospitals to report a minimum of one measure in the Clinical Care—Process subdomain for the FY 2017 Hospital VBP Program and subsequent years to receive a domain score. We welcome public comment on this proposal. d. Proposed Minimum Number of Measures—Efficiency and Cost Reduction Domain Because the MSPB measure remains the only measure within the Efficiency and Cost Reduction domain for FY 2017, we are proposing to require that hospitals receive a MSPB measure score in order to receive an Efficiency and Cost Reduction domain score. If we adopt additional measures for this domain in the future, we will consider if we should revisit this policy. We welcome public comments on this proposal. e. Proposed Minimum Number of Measures—Patient and Caregiver Centered Experience of Care/Care Coordination (PEC/CC) Domain As with the MSPB measure adopted for the Efficiency and Cost Reduction domain described further above, we have not adopted additional measures for the PEC/CC domain. Because the HCAHPS survey measure remains the only measure within the PEC/CC domain for FY 2017, we are proposing to require that hospitals receive a HCAHPS survey measure score in order to receive a PEC/CC domain score. If we adopt additional measures for this domain in the future, we will consider if we should revisit this policy. We welcome public comments on this proposal. 13. Applicability of the Hospital VBP Program to Maryland Hospitals Section 1886(o)(1)(C) of the Act specifies the hospitals for which the Hospital VBP Program applies. Specifically, the term ‘‘hospital’’ is defined under section 1886(o)(1)(C)(i) of the Act as a ‘‘subsection (d) hospital (as defined in section 1886(d)(1)(B) [of the Act]).’’. Section 1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to the definition of the term ‘‘hospital’’ with respect to a fiscal year. Section 1886(o)(1)(C)(iv) of the Act states that in the case of a hospital that is paid under section 1814(b)(3) of the Act, the Secretary may exempt the hospital from the Hospital VBP Program if the State submits an annual report to the Secretary describing how a similar program in the State for a participating E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28134 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under the Hospital VBP Program. We have interpreted the reference to section 1814(b)(3) of the Act to mean those Maryland hospitals that were paid under section 1814(b)(3) of the Act and that, absent the ‘‘waiver’’ provided by section 1814(b)(3) of the Act, would have been paid under the IPPS. The State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dualeligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to hospitals paid under section 1814(b)(3)of the Act, including but not limited to section 1886(o)(1)(C)(iv) of the Act, which provides an exemption for hospitals paid under section 1814(b)(3) of the Act from the application of the Hospital VBP Program if the State which is paid under that section meets certain requirements. In order to implement the Maryland All-Payer Model, we have waived certain provisions of the Act, and the corresponding implementing regulations, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement. The effect of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Maryland hospitals no longer being paid under 1814(b)(3) is that they are not entitled to be exempted from the Hospital VBP Program under section 1886(o)(1)(C)(iv) of the Act and, but for the model, would be included in the Hospital VBP Program. In other words, although the exemption from the Hospital VBP Program no longer applies, Maryland hospitals will not be participating in the Hospital VBP Program because section 1886(o) of the Act and its implementing regulations have been waived for purposes of the model, subject to the terms of the agreement. Accordingly, we are proposing to make conforming revisions to § 412.160, in the definition of ‘‘base-operating DRG payment amount’’ and to § 412.161, which describes the applicability of the Hospital VBP Program. We are proposing to delete references in these regulations to hospitals paid under section 1814(b)(3) of the Act because, at this time, there are no hospitals paid under that section. We welcome public comment on these proposals. 14. Disaster/Extraordinary Circumstance Exception Under the Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50704 through 50706), we adopted a disaster/extraordinary circumstance exception. We refer readers to that final rule for the policy’s details. We note that we are currently in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form, previously approved under OMB control number 0938–1171. J. Proposed Changes to the HospitalAcquired Condition (HAC) Reduction Program 1. Background We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50708) for a general overview of the HAC Reduction Program. 2. Statutory Basis for the HAC Reduction Program Section 3008 of the Affordable Care Act added section 1886(p) to the Act to provide an incentive for applicable hospitals to reduce the incidence of HACs. Section 1886(p) of the Act requires the Secretary to make an adjustment to payments to ‘‘applicable hospitals’’ effective beginning on October 1, 2014 and for subsequent programs years. Section 1886(p)(1) of PO 00000 Frm 00158 Fmt 4701 Sfmt 4702 the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ will be adjusted to account for HACs with respect to discharges occurring during FY 2015 or later. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection (d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average, of conditions acquired during the applicable period, as determined by the Secretary. Section 1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and apply a riskadjustment methodology. Sections 1886(p)(3) and (p)(4) of the Act define ‘‘hospital-acquired conditions’’ and ‘‘applicable period’’, respectively. The term ‘‘hospitalacquired condition’’ means ‘‘a condition identified in subsection 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary.’’ The term ‘‘applicable period’’ means, with respect to a fiscal year, a period specified by the Secretary. Section 1886(p)(5) of the Act requires that, prior to FY 2015 and each subsequent fiscal year, the Secretary provides the delivery of confidential reports to applicable hospitals with respect to HACs of the applicable hospital during the applicable period. Section 1886(p)(6)(A) of the Act sets forth the reporting requirements by which the Secretary would make information available to the public regarding HACs for each applicable hospital. Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the HACs of the applicable hospital prior to such information being made public. Section 1886(p)(6)(C) of the Act requires that, once corrected, the HAC information be posted on the Hospital Compare Web site on the Internet in an easily understandable format. Section 1886(p)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(p) of the Act. These determinations include what qualifies E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules as an applicable hospital, the specifications of a HAC, the Secretary’s determination of an applicable period, the provision of confidential reports submitted to the applicable hospital, and the information publically reported on the Hospital Compare Web site. 3. Implementation of the HAC Reduction Program for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729), we presented the general framework for implementation of the HAC Reduction Program for the FY 2015 implementation. We included the following provisions for the program: (a) The relevant definitions applicable to the program; (b) the payment adjustment under the program; (c) the measure selection and conditions for the program, including a risk-adjustment and scoring methodology; (d) performance scoring; (e) the process for making hospital-specific performance information available to the public, including the opportunity for a hospital to review the information and submit corrections; and (f) limitation of administrative and judicial review. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967), we established the rules governing the payment adjustment under the HAC Reduction Program at Subpart I of 42 CFR Part 412 (§§ 412.170 and 412.172). We also amended existing § 412.150 (the section that describes the basis and scope of Subpart I of Part 412, which contains the regulations governing adjustments to the base operating DRG payment amounts under the IPPS for inpatient operating costs) to incorporate the basis and scope of §§ 412.170 and 412.172 for the HAC Reduction Program. In accordance with the provisions of section 1886(p) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we included, under § 412.170, definitions for the terms ‘‘hospital-acquired condition,’’ ‘‘applicable hospital,’’ and ‘‘applicable time period’’ (78 FR 50967). In § 412.170, we defined ‘‘hospitalacquired condition’’ as a condition as described in section 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary. We defined an ‘‘applicable hospital’’ as ‘‘a hospital described in section 1886(d)(1)(B) of the Act (including a hospital in Maryland that is paid under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospital inpatient prospective payment system) as long as the hospital meets the criteria specified under § 412.172(e)’’ (78 FR 50967). We specified that this definition does not include hospitals and hospital units excluded from the IPPS, such as LTCHs, cancer hospitals, children’s hospitals, IRFs, IPFs, CAHs, and Puerto Rico hospitals. We defined the ‘‘applicable period’’ as, with respect to a fiscal year, the 2-year period (as specified by the Secretary) from which data are collected in order to calculate the Total HAC Score for the HAC Reduction Program. Below we summarize the specific provisions for the HAC Reduction Program that were established in the FY 2014 IPPS/LTCH PPS final rule for implementation in FY 2015. b. Payment Adjustment Under the HAC Reduction Program, Including Exemptions (1) Basic Payment Adjustment Section 1886(p)(1) of the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ will be adjusted to account for HACs with discharges beginning on October 1, 2014. Section 1886(p)(1) of the Act specifies that the amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. As specified in the statute, this payment adjustment is calculated and made after payment adjustments under sections 1886(o) and 1886(q) of the Act, the Hospital VBP Program and the Hospital Readmissions Reduction Program respectively, are calculated and made. (We note that the Hospital VBP Program is discussed in section IV.I. of the preamble of this proposed rule and the Hospital Readmissions Reduction Program is discussed in section IV.H. of the preamble of this proposed rule.) Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection (d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average of hospitals that report conditions acquired during the applicable period, as determined by the Secretary. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR50967), we specified in § 412.172(b) of the regulations that, for applicable hospitals, beginning with discharges PO 00000 Frm 00159 Fmt 4701 Sfmt 4702 28135 occurring during FY 2015, the amount of payment under § 412.172, or section 1814(b)(3) of the Act, as applicable, for such discharges shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under § 412.172, or section 1814(b)(3) of the Act. This amount of payment will be determined after the application of the payment adjustment under the Hospital Readmissions Reduction Program under § 412.154, and the adjustment made under the Hospital VBP Program under § 412.162, and section 1814(l)(4) but without regard to this section 1886(p) of the Act. (2) Applicability to Maryland Hospitals Section 1886(p)(2)(c) of the Act specifies that the Secretary may exempt hospitals paid under 1814(b)(3) ‘‘from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the state for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.’’ Accordingly, a program established by the State of Maryland that could serve to exempt hospitals in the State from the HAC Reduction Program would focus on hospitals operating under the waiver provided by section 1814(b)(3) of the Act, that is, those hospitals that would otherwise have been paid by Medicare under the IPPS, absent this provision. As we stated in section IV.J.3. of the preamble of this proposed rule, because hospitals paid under section 1814(b)(3) of the Act are subsection (d) hospitals, they are included in determining ‘‘applicable hospitals’’ (subject to the payment adjustment under the HAC Reduction Program), and unless the Secretary exempts these hospitals from the application of payment adjustments under the HAC Reduction Program under the authority of section 1886(p)(2)(C) of the Act, they are considered to be ‘‘applicable hospitals’’ (subject to the payment adjustments in the HAC Reduction Program) under the HAC Reduction Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967 through 50968), we established criteria for evaluation to determine whether Maryland will be exempted from the application of the payment adjustments under the HAC Reduction Program for a given fiscal year. Under § 412.172(c), we specified that ‘‘CMS will determine whether to exempt Maryland hospitals that are paid under section 1814(b)(3) of the Act and not under the hospital inpatient E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28136 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules prospective payment system. . . .’’ and that, absent the provisions of section 1814(b)(3) of the Act, to make payment under section 1886(d) of the Act exempt from the application of payment adjustments under the HAC Reduction Program, provided that the State submits an annual report to the Secretary describing how a similar program to reduce hospital acquired conditions in that State achieves or surpasses the measured results in terms of health outcomes and cost savings for the HAC Reduction Program as applied to hospitals described in section 1886(d)(1)(B) of the Act. We specified in the regulations that ‘‘CMS will establish criteria for evaluation of Maryland’s annual report to the Secretary to determine whether Maryland will be exempted from the application of payment adjustments under this program for a given fiscal year.’’ We also specified that Maryland’s annual report to the Secretary and request for exemption from the HAC Reduction Program must be resubmitted and reconsidered annually. We provided that, for FY 2015, Maryland must submit a preliminary report to us by January 15, 2014 and a final report to us by June 1, 2014. We noted that our criteria to evaluate Maryland’s program is for FY 2015, the first year of the payment adjustment under the HAC Reduction Program, and that our evaluation criteria may change through notice and comment rulemaking as this program evolves. The State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Social Security Act (‘‘Act’’), as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow states to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out Section 1115A with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare reimburse Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under Section 1814(b)(3) of the Act. Because Maryland hospitals are no longer reimbursed under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to section 1814(b)(3) hospitals, including but not limited to section 1886(p)(2)(C) of the Act, which provides exemptions for hospitals paid under section 1814(b)(3) from the application of the HAC Reduction Program. However, in order to implement the Maryland All-Payer Model, CMS has waived certain provisions of the Act for Maryland hospitals, including section 1886(p), and the corresponding implementing regulations, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement. In other words, although section 1886(p)(2)(C) of the Act no longer applies to Maryland hospitals, Maryland hospitals will not be participating in the HAC Reduction Program because section 1886(p) of the Act and its implementing regulations have been waived for purposes of the model, subject to the terms of the agreement. Consequently, we are proposing that the Total HAC scores for Maryland hospitals will not be included when identifying the top quartile of all hospitals with respect to their Total HAC Score during the applicable period. As a result of changes to the status of Maryland hospitals under 1814(b)(3) of the Act described above, we are proposing conforming changes to these regulations and seek public comment on this proposal. Specifically, we are proposing to remove the entire contents of paragraph (c) under § 412.172 and reserve the paragraph (c) designation. c. Measure Selection and Conditions, Including a Risk-Adjustment Scoring Methodology (1) General Selection of Measures We are not proposing any new measures for the HAC Reduction Program in this FY 2015 proposed rule. Although we are not required under section 1886(p) of the Act to address specific measure scoring methodologies and domain weights regarding the HAC Reduction Program in notice-andcomment rulemaking, as required under the Hospital VBP program, we believe that it is important to set forth such scoring methodologies for each PO 00000 Frm 00160 Fmt 4701 Sfmt 4702 individual HAC measure, in order for the public to understand how the measures adopted in previous rulemaking relate to the performance methodology used to determine the applicable hospitals subject to the payment adjustment under the HAC Reduction Program. However, below we set forth the specific measure scoring methodology and domain weights regarding the HAC Reduction Program for FY 2015 as finalized in the FY 2014 IPPS/LTCH PPS final rule. (2) Updates on AHRQ PSI–90, and CDC NHSN CLABSI and CAUTI Measures For FY 2015, we will keep the AHRQ PSI–90 composite measure (in Domain 1) that we adopted in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50717) as it is currently endorsed by NQF. However, we note that the AHRQ PSI– 90 composite measure is currently undergoing NQF maintenance review. The PSI–90 composite consists of eight component indicators: PSI–3 Pressure ulcer rate; PSI–6 Iatrogenic pneumothorax rate; PSI–7 Central venous catheter-related blood stream infections rate; PSI–8 Postoperative hip fracture rate; PSI–12 Postoperative PE/ DVT rate; PSI–13 Postoperative sepsis rate; PSI–14 Wound dehiscence rate; and PSI–15 Accidental puncture & laceration rate. AHRQ is considering the addition of PSI–9 (Perioperative hemorrhage rate), PSI–10 (Perioperative physiologic metabolic derangement rate) and PSI–11 (Post-operative respiratory failure rate) or a combination of these three measures into the PSI–90 composite. We consider the inclusion of measures in the PSI–90 composite to be a significant change to the PSI–90 composite that we finalized in the FY 2014 IPPS/LTCH PPS final rule. Should the changes be significant, we will issue notice-and-comment rulemaking prior to requiring reporting of this composite. Similarly, the CDC NHSN CatheterAssociated Urinary Tract Infection (CAUTI) and Central Line-Associated Blood Stream Infection (CLABSI) measures in Domain 2 that we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717) for FY 2015 also are currently undergoing NQF maintenance review. Should the changes be significant, we will issue notice-andcomment rulemaking prior to requiring reporting of the changes made to CDCs NHSN CLABSI and CAUTI measures. For FY 2015, we will keep CDC’s NHSN CAUTI and CLABSI measures in Domain 2 as they are currently endorsed. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (3) Measure Selection In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the following measures for selection: (i) The AHRQ PSI–90 composite measure for Domain 1 and the CDC NHSN measures CAUTI and CLABSI for Domain 2 for FY 2015; (ii) addition of CDC NHSN Surgical Site Infection (SSI) measure for FY 2016; and (iii) addition of CDC NHSN Methicillin-Resistant Staphylococcus aureus (MRSA) Bactremia and C. difficile measures for FY 2017. Several of these measures are already part of the Hospital IQR Program and are reported on the Hospital Compare Web site. (4) Measure Risk-Adjustment Methodology In the FY 2014 IPPS/LTCH PPS final rule, we established that we will use the existing measure-level risk-adjustment that is already part of the methodology for the individual measures for Domains 1 and 2 in order to fulfill this requirement (78 FR 50719). We codified the use of this methodology under § 412.172(d) of the regulations. The AHRQ PSI–90 composite measure and the CDC NHSN measures selected for the program are risk-adjusted and reliability-adjusted. Specifically, risk factors such as the patient’s age, gender, comorbidities, and complications will be considered in the calculation of the measure rates so that hospitals serving a large proportion of sicker patients are not unfairly penalized. We noted that the risk-adjustment methodology for these measures meets NQF endorsement criteria. We believe that such riskadjustment is appropriate, pursuant to section 1886(p) of the Act. We will continue to examine the impact of the additional measures in the program, and propose refinements to the program if necessary. Should changes to the risk-adjustment models for the measures be adopted during NQF endorsement maintenance processes, we will propose adopting these changes as soon as possible through rulemakings. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (5) Measure Calculations In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717 through 50719), we established that we will perform measure calculations for the AHRQ PSI– 90 composite measure under Domain 1 and the CDC NHSN measures under Domain 2. We stated that measure calculations for the AHRQ PSI–90 composite measures included using ICD–9–CM diagnosis and/or procedure codes and, for the principal and secondary diagnoses, a present on admission (POA) indicator value VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 associated with all diagnoses on the claim. We also stated that subsection (d) Maryland hospitals paid under the waiver at section 1814(b)(3) of the Act also must report on whether a diagnosis is present on admission (78 FR 50718). (As noted in section IV.J.3.b.(2) of the preamble of this proposed rule, in order to implement the new Maryland AllPayer Model, Maryland elected to no longer have Medicare payment made to Maryland hospitals in accordance with section 1814(b)(3) of the Act, effective January 1, 2014. Although CMS has waived certain provisions of the Act for Maryland hospitals as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement, CMS has not waived the POA indicator reporting requirement. In other words, the changes to the status of Maryland hospitals under section 1814(b)(3) of the Act as described above do not in any way change the POA indicator reporting requirement for Maryland hospitals.) We also finalized that the same rules under the Hospital IQR Program be applied to determine how the AHRQ PSI–90 composite measure and CDC NHSN measures are applied and calculated. (6) Applicable Time Period In the FY 2014 IPPS/LTCH final rule (78 FR 50717), we adopted a 2-year applicable period to collect data that would be used to calculate the Total HAC Score for FY 2015. For Domain 1 (AHRQ PSI–90 composite measure), we established a 2-year data period to calculate the measures based on recommendations from AHRQ, the measure developer, as we believed that the 24-month data period will provide hospitals and the general public the most current data available. The 24month data period also will allow time to complete the complex calculation process for these measures, to perform comprehensive quality assurance to enhance the accuracy of measure results, and to disseminate confidential reports on hospital-level results to individual hospitals. As such, for FY 2015, we will use the 24-month period from July 1, 2011 through June 30, 2013 as the applicable time period for the AHRQ PSI–90 composite measure. The claims for all Medicare FFS beneficiaries discharged during this period will be included in the calculation of measure results for FY 2015. This includes claims data from the 2011, 2012, and 2013 Inpatient Standard Analytic Files (SAFs). The CDC NHSN measures, CAUTI and CLABSI, are currently collected and calculated on a quarterly basis. PO 00000 Frm 00161 Fmt 4701 Sfmt 4702 28137 However, for the purpose of the HAC Reduction Program, we will use 2 years of data to calculate the Domain 2 score. For FY 2015, we will use calendar years 2012 and 2013 for the HAC Reduction Program. As noted above, we codified the definition of ‘‘applicable time period’’ in the FY 2014 IPPS/LTCH PPS final rule at § 412.170. d. Criteria for Applicable Hospitals and Performance Scoring Policy The HAC Reduction Program does not contain specific statutory directives on scoring methods, as found with other programs. Therefore, our main concern when establishing scoring methods for the HAC Reduction Program was to align with existing scoring methodologies in similar hospital programs. Accordingly, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50721), we finalized a scoring methodology that aligns with the achievement scoring methodology currently used under the Hospital VBP Program (78 FR 27629). We believe aligning the scoring methodologies reduces confusion associated with multiple scoring methodologies. Additionally, we note that alignment benefits the hospital stakeholders who have prior experience with the Hospital VBP Program. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629), we proposed to implement a methodology for assessing the top quartile of applicable hospitals for HACs based on performance standards, where we would score each hospital based on whether they fall in the top quartile for each applicable measure and where in the top quartile they fall. In addition, we proposed to calculate a Total HAC Score for each hospital by summing the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiplying each domain score by a proposed weight (Domain 1—AHRQ Patient Safety Indicators 50 percent, Domain 2—CDC NHSN Measures 50 percent), and adding together the weighted domain scores to determine the Total HAC Score. We reviewed the public input on the proposed 75th percentile benchmark. Several commenters requested that a change to the proposed minimum benchmark for scoring each measure was necessary. We agreed with these commenters, and in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50722), we modified our proposal and established that the scoring will begin at the minimum value for each measure rather than the 75th percentile. The methodology finalized in the FY 2014 E:\FR\FM\15MYP2.SGM 15MYP2 28138 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules IPPS/LTCH PPS final rule will assess the top quartile of applicable hospitals for HACs based on the Total HAC Score. The support for Domain 2 measures in general, coupled with multiple recommendations, and specifically those from MedPAC, to provide more weight to Domain 2 measures led us to conclude that such scoring changes are necessary. Therefore, we finalized a different weight for each Domain than originally proposed (78 FR 50721). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722), we further specified that we will calculate a Total HAC Score for each hospital by using the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiply each domain score by the following weights: Domain 1—(AHRQ PSI–90 composite measure), 35 percent; and Domain 2— (CDC NHSN measures), 65 percent; and combine the weighted domain scores to determine the Total HAC Score (§ 412.172(e)(3)). We use each hospital’s Total HAC Score to determine the top quartile of subsection (d) hospitals (applicable hospitals) that are subject to the payment adjustment beginning with discharges on or after October 1, 2014. With respect to a subsection (d) hospital, we identify the top quartile of all hospitals that are subsection (d) hospitals with respect to their rate of HACs during the applicable period (§ 412.172(e)(1)). We use a Total HAC Score to identify applicable hospitals and identify the 25 percent of hospitals with the highest Total HAC Scores as applicable hospitals (§ 412.172(e)(2)). We finalized the PSI–90 composite measure for Domain 1. Because hospitals may not have complete data for every AHRQ indicator in the composite measure for this Domain 1 measure, we finalized the same methodology used for the Hospital VBP Program to determine the minimum number of indicators with complete data to be included in the calculation of the Domain measure. Additionally, we finalized the following rules to determine the number of AHRQ indicators to be included in the calculation for a hospital’s Domain 1 score. In this discussion, ‘‘complete data’’ refers to whether a hospital has enough eligible discharges to calculate a rate for a measure. Complete data for the AHRQ PSI–90 composite measure means the hospital has three or more eligible discharges for at least one component indicator. Specifically— If a hospital does not have ‘‘complete data’’ for the PSI–90 composite, we will not calculate a Domain 1 score for that hospital. If a hospital has ‘‘complete data’’ for at least one indicator for the AHRQ PSI– 90 composite, we will calculate a Domain 1 score. The calculation of the SIR for the CDC measures requires that the facility have a ≥ 1 predicted HAI event. The predicted number of events is calculated using the national HAI rate and the denominator counts (that is, number of device days, procedure days, or patient days depending on the HAI). In the event an SIR cannot be calculated because the facility has <1 predicted infection, Domain 1 scores exclusively will be used to calculate a HAC score. In other words, we will exclude from the overall HAC score calculation any measure for which an SIR cannot be calculated for the reason set out above. Because of the differences among the measures for the HAC Reduction Program and the distribution of measure results, simply adding up the measure results to calculate the domain or Total HAC Score will make the scores less meaningful to hospitals and the general public. As a result, as we indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50720 through 50725), points will be assigned to hospitals’ performance for each measure. This approach aligns with the Hospital VBP Program for measuring hospital achievement. In particular, the Hospital VBP Program assigns up to 10 points for each measure based on a hospital’s performance result for that measure for a given time period. We note that, for the HAC Reduction Program, unlike the Hospital VBP Program where a higher score means better performance, the more points a hospital receives on a measure corresponds with a poorer score performance. For the HAC Reduction Program, we finalized use of a slightly different methodology for scoring points, depending on the specific measure (Table C in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included below). Specifically— • For the AHRQ Patient Safety for Selected Condition (PSI–90) composite in Domain 1, point assignment will be based on a hospital’s score for the composite measure. • For the PSI–90 composite measure, 1 to 10 points will be assigned to the hospital. • For the CDC NHSN measures in Domain 2, point assignment for each measure will be based on the SIR for that measure. • For each SIR, 1 to 10 points will be assigned to the hospital for each measure (CAUTI and CLABSI for FY 2015). • The Domain 2 score will consist of the average of points assigned to the SIR (CAUTI and CLABSI for FY 2015). TABLE C—CALCULATION OF DOMAIN 1 AND 2 MEASURES FOR FY 2015 Individual measure score (points) Measure name Measure result Scenario Domain 1 AHRQ PSI–90 *** ............... Weighted average of rates of component indicators. Standard Infection Ratio (SIR) .......... Composite value ................................ 1—10. SIR ..................................................... 1—10 (refer to Figure A). Domain 2 CLABSI. CDC NHSN CAUTI mstockstill on DSK4VPTVN1PROD with PROPOSALS2 *** These measure rates are risk-adjusted and reliability-adjusted. For all measures finalized for the HAC Reduction Program, we will use the following rules to determine the number of points assigned to a measure (78 FR 50723 through 50725). Based on the distribution for PSI–90 rates for all the hospitals, we will divide the results into percentiles in increments of 10 with the lowest percentile ranges meaning better VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 performance. Hospitals with PSI–90 rates within the lowest tenth percentile will be given one point; those with PSI– 90 rates within the second lowest percentile range (between the 11th and 20th percentile) will be given 2 points, and so forth. PO 00000 Frm 00162 Fmt 4701 Sfmt 4702 FIGURE A—POINT ASSIGNMENT FOR HOSPITAL A’S PSI–90 SCORE If Hospital A’s PSI–90 rate falls into this percentile 1st–10th ................................ 11th–20th .............................. 21st–30th .............................. E:\FR\FM\15MYP2.SGM 15MYP2 Then assign this number of points 1 2 3 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules FIGURE A—POINT ASSIGNMENT FOR payment reduction for nonsubmission HOSPITAL A’S PSI–90 SCORE— of quality reporting data. In the FY 2014 IPPS/LTCH PPS final Continued If Hospital A’s PSI–90 rate falls into this percentile Then assign this number of points 31st–40th .............................. 41st–50th .............................. 51st–60th .............................. 61st–70th .............................. 71st–80th .............................. 81st–90th .............................. 91st–100th ............................ 4 5 6 7 8 9 10 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 For Domain 2, we will obtain measure results that hospitals submitted to the CDC NHSN for the Hospital IQR Program. The CDC NHSN HAI measures capture adverse events that occurred within intensive care units (ICUs), including pediatric and neonatal units. For the Hospital IQR Program, hospitals that elected to participate in the reporting program (that is, had an active IQR pledge), but did not have ICUs, can apply for an ICU waiver so that they will not be subject to the 2-percent VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 rule, we noted in the second quarter of 2012, among the 3,321 IPPS hospitals with an active IQR pledge for data submission, 377 (or 10.1 percent) applied and received an ICU waiver. At the same time, 2,939 hospitals (88.5 percent) of the IPPS hospitals did not have an ICU waiver and submitted data for the CDC HAI CLABSI measure, while 4 hospitals (0.1 percent) that had no ICU waiver failed to submit data to the NHSN. For the same quarter, of the 3,321 IPPS hospitals with an active IQR pledge, 2,935 (88.4 percent) that did not have an ICU waiver submitted data for the CDC HAI CAUTI measure, whereas 8 hospitals (0.2 percent) did not submit data. Because data availability for the two CDC HAI measures impact the score for Domain 2 and eventually the Total HAC Score, we aim to encourage hospitals with an ICU that did not submit data to begin data submission, and to reward hospitals that have already submitted data to continue data submission for all the CDC HAI PO 00000 Frm 00163 Fmt 4701 Sfmt 4702 28139 measures. To this end, we finalized the following rules (Figure B in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50724), which is included below): • If a hospital has an ICU waiver for the CDC HAI measures, we will use only the Domain 1 score to calculate its Total HAC Score. • If a hospital does not have an ICU waiver for a CDC HAI measure: Æ If the hospital does not submit data for the CDC HAI measures, we will assign 10 points to that measure for that hospital. Æ If the hospital does submit data for at least one CDC NHSN measure: D If there are ‘‘complete data’’ (that is, enough adverse events to calculate the SIR) for at least one measure, we will use those data to calculate a Domain 2 score and use the hospital’s Domain 1 and Domain 2 scores to calculate the Total HAC Score. D If there are not enough adverse events to calculate the SIR for any of the measures, we will use only the hospital’s Domain 1 score to calculate its Total HAC Score. BILLING CODE 4120–01–P E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules BILLING CODE 4120–01–C (1) Clarification of Finalized Measure Result Scoring for FY 2015 and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we finalized for the HAC Reduction Program a scoring VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 methodology that divides the measure results into percentiles in increments of 10 and assigns points (1 to 10) in accordance with the percentile into which the hospital’s measure result falls. Our preliminary analysis of the measures showed that multiple PO 00000 Frm 00164 Fmt 4701 Sfmt 4702 hospitals had the same measure results, and that in certain instances, the number of hospitals with the same measure results exceeded the number of hospitals for their appropriate percentile. Consequently a few hospitals with the same measure results fall into E:\FR\FM\15MYP2.SGM 15MYP2 EP15MY14.001</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28140 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 the next higher percentile. In these instances, we will assign the same point for all hospitals with the same measure results, and that point will be based on the prior or the lowest appropriate percentile. For example, if, for the CAUTI measure, 13 percent of hospitals have an SIR of 0, we will assign a point of 1 to all 13 percent of hospitals, even though, arguably, 10 percent of them fall into the first percentile, and 3 percent of the 13 percent fall into the second percentile. Because each percentile range ideally represents 10 percent of hospitals, we will assign a point of 2 to the remaining 7 percent of hospitals in the second percentile because their SIR is larger than 0. We believe this is the most favorable method for scoring measure results for hospitals. We note that randomly assigning some hospitals with the same SIR a higher (for example, less favorable) score would be both arbitrary and capricious, which are prohibited by the Administrative Procedure Act. (2) Proposed Clarification of FY 2015 Finalized Narrative of Rules To Calculate the Total HAC Score In the FY 2014 IPPS/LTCH PPS final rule, we finalized a series of rules to determine how to calculate the Domain 2 score and ultimately the Total HAC Score when there were waivers for the collection of CDC NHSN HAI measures (78 FR 50723). We also illustrated and finalized these rules in Figure B of the final rule (78 FR 50724). We are proposing to clarify that the narrative for Figure B should also include ‘‘other waivers’’ that waive hospitals from collecting CDC HAI measure data. The clarified rules that we are proposing are as follows for the collection of CDC HAI measures: • If a hospital has an ICU waiver or other waiver for the CDC NHSN HAI measures, we will use only the Domain 1 score to calculate its Total HAC Score. • If a hospital does not have an ICU waiver or other waiver for the CDC HAI measures: Æ If the hospital does not submit data for the CDC HAI measures, we will assign 10 points to that measure for that hospital. Æ If the hospital does submit data for at least one CDC NHSN measure: D If there are ‘‘complete data’’ (that is, enough adverse events to calculate the SIR) for at least one measure, we will use those data to calculate a Domain 2 score and use the hospital’s Domain 1 and Domain 2 scores to calculate the Total HAC Score. D If there are not enough adverse events to calculate the SIR for any of the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 measures, we will use only the hospital’s Domain 1 score to calculate its Total HAC Score. As discussed earlier, if a hospital has enough data to calculate the PSI–90 composite score for Domain 1 and ‘‘complete data’’ for at least one measure in Domain 2, the scores of the two domains will contribute to the Total HAC Score at 35 percent for Domain 1 and 65 percent for Domain 2. However, if a hospital does not have enough data to calculate the PSI–90 composite score for Domain 1 but it has ‘‘complete data’’ for at least one measure in Domain 2, its Total HAC Score will depend entirely on its Domain 2 score. Similarly, if a hospital has ‘‘complete data’’ to calculate the PSI–90 composite score in Domain 1 but none of the measures in Domain 2, its Total HAC Score will be based entirely on its Domain 1 score. If the hospital does not have ‘‘complete data’’ to calculate the PSI–90 composite score for Domain 1 or any of the measures in Domain 2, we will not calculate a Total HAC Score for this hospital. e. Reporting Hospital-Specific Information, Including the Review and Correction of Information (1) Confidential Reports to Applicable Hospitals Section 1886(p)(5) of the Act requires the Secretary to provide confidential reports to the applicable hospitals with respect to HACs. To meet the requirements under section 1886(p)(5) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we finalized the provision of confidential reports for the HAC Reduction Program to include information related to claims-based measure data for the PSI measures, the domain score for each domain, and the Total HAC Score (78 FR 50725). We noted that we use chart-abstracted measures in the HAC Reduction Program, and such information will be contained in the reports hospitals currently receive as part of the Hospital IQR Program and can be reviewed and corrected through the process specified for that program. We stated that we believe that this method would reduce the burden on hospitals, by alleviating the need to correct data present in two different programs. (2) Availability of Information to the Public Section 1886(p)(6)(A) of the Act requires the Secretary to ‘‘make information available to the public regarding HAC rates of each subsection (d) hospital’’ under the HAC Reduction Program. Section 1886(p)(6)(C) of the PO 00000 Frm 00165 Fmt 4701 Sfmt 4702 28141 Act requires the Secretary to post the HAC information for each applicable hospital on the Hospital Compare Web site in an easily understood format. Section 1886(p)(6)(B) of the Act also requires the Secretary to ‘‘ensure that an applicable hospital has the opportunity to review, and submit corrections for, the HAC information to be made public for each hospital.’’ To meet the requirements under section 1886(p)(6)(C) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we finalized policies that the following information will be made public on the Hospital Compare Web site relating to the HAC Reduction Program: (1) Hospital scores with respect to each measure; (2) each hospital’s domain specific score; and (3) the hospital’s Total HAC Score (78 FR 50725). (3) Review and Correction of Information Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that each hospital has the opportunity to review and submit corrections for the information to be made available to the public with respect to each hospital under section 1886(p)(6)(A) of the Act prior to such information being made available to the public. In the FY 2014 IPPS/LTCH PPS final rule, we codified the reporting of hospital-specific information at § 412.172(f) (78 FR 50968), in which CMS will make information available to the public regarding HAC rates of all hospitals described in section 1886(d)(1)(B) of the Act, including hospitals in Maryland paid under section 1814(b)(3) of the Act, under the HAC Reduction Program (paragraph (f)). As noted in section IV.J.3.b.(2) of the preamble of this proposed rule, in order to implement the new Maryland AllPayer Model, Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act, effective January 1, 2014. In summary, we established that CMS will provide each hospital with confidential hospital-specific reports and discharge level information used in the calculation of its Total HAC Score (paragraph (f)(1) of § 412.172). Hospitals will have a period of 30 days after receipt of the information provided under paragraph (f)(1) to review and submit corrections for the hospitalacquired conditions domain score for each condition that is used to calculate the Total HAC Score for the fiscal year. The administrative claims data used to calculate a hospital’s Total HAC Score for those conditions for a fiscal year will not be subject to review and correction E:\FR\FM\15MYP2.SGM 15MYP2 28142 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (paragraph (f)(2)). CMS will post the Total HAC Score for the applicable conditions for a fiscal year for each applicable hospital on the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725 through 50728) for detailed discussions of the above provisions. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (4) Preliminary Analysis of the HAC Reduction Program In order to model estimated payment changes for this FY 2015 IPPS/LTCH PPS proposed rule, we conducted a preliminary analysis of the HAC Reduction Program using currently available historical data as a proxy for the actual data that will be used to determine hospital performance under the program. The results of this preliminary analysis can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/ under the FY 2015 IPPS Proposed Rule Home Page link as Table 17.—FY 2015 Preliminary Analysis of the HospitalAcquired Condition Reduction Program. When the actual data for the performance periods finalized in the FY 2014 IPPS/LTCH PPS rule for each measure are available, hospitals will have an opportunity to review and submit corrections as discussed in section IV.J.3.e.(3) of the preamble of this proposed rule. f. Limitation on Administrative and Judicial Review Section 1886(p)(7) of the Act provides that there will be no administrative or judicial review under Section 1869 of the Act, under Section 1878 of the Act, or otherwise for any of the following: • The criteria describing an applicable hospital under section 1886(p)(2)(A) of the Act. • The specification of hospital acquired conditions under section 1886(p)(3) of the Act. • The specification of the applicable period under section 1886(p)(4) of the Act. • The provision of reports to applicable hospitals under section 1886(p)(5) of the Act. • The information made available to the public under section 1886(p)(6) of the Act. In the FY 2014 IPPS/LTCH PPS final rule, we included these statutory provisions under § 412.172(g) of the regulations (78 FR 50729 and 50968). We note that section 1886(p)(6) of the Act requires the Secretary to make information available to the public regarding HAC scores of each applicable VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospital under the HAC Reduction Program. Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made available to the public, prior to that information being made public. We believe that the review and correction process explained above in section IV.I.3.e. of the preamble of this proposed rule will provide hospitals with the opportunity to correct data prior to its release on the Hospital Compare Web site. 4. Proposed Maintenance of Technical Specifications for Quality Measures Technical specifications of the HAC measures for the Agency for Health Research and Quality (AHRQ) Patient Safety Indicator 90 (PSI–90) in Domain 1 can be found at AHRQ’s Web site at: https://qualityindicators.ahrq.gov/ Modules/PSI_TechSpec.aspx. Technical specifications for the CDC NHSN’s HAI measures in Domain 2 can be found at CDC’s NHSN Web site at: https:// www.cdc.gov/nhsn/acute-care-hospital/ index.html. Both Web sites provide measure updates and other information necessary to guide hospitals participating in the collection of HAC Reduction Program data. Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF-endorsed. As part of its regular maintenance process for NQF-endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. We note that NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates required by the NQF into the measure specifications we have adopted for the HAC Reduction Program, so that these measures remain up-to-date. For the HAC Reduction Program, we are proposing to follow the finalized processes outlined for addressing PO 00000 Frm 00166 Fmt 4701 Sfmt 4702 changes to adopted measures in the Hospital IQR Program ‘‘Maintenance of Technical Specifications for Quality Measures’’ section found in section IX.A.1.b. of the preamble of this proposed rule. We believe this proposal adequately balances our need to incorporate updates to HAC Reduction Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We invite public comments on this proposal. 5. Extraordinary Circumstances Exceptions/Exemptions In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50711), we indicated that we had received public comments requesting a potential waiver or exemption process for hospitals located in areas that experience disasters or other extraordinary circumstances (EC), even though we did not propose an extraordinary circumstance exceptions/ exemptions (ECE) policy for the HAC Reduction Program. We stated in the FY 2014 IPPS/LTCH PPS final rule that we were reviewing this issue and might consider such a proposal in future rulemaking. We also noted that should we consider a policy we intend to focus on several policy and operational considerations in developing a disaster exemption process for the HAC Reduction Program. We welcome public comments on whether an exemption process should be implemented and the policy and operational considerations for a potential HAC Reduction Program ECE policy. 6. Implementation of the HAC Reduction Program for FY 2016 a. Measure Selection and Conditions, Including a Risk-Adjustment Scoring Methodology (1) General Selection of Measures In the FY 2014 IPPS/LTCH PPS final rule, we finalized measures for FY 2015 and onwards, but only finalized a scoring methodology for FY 2015 for the HAC Reduction Program (78 FR 50712 through 50713). We are not proposing any new additional measures for the HAC Reduction Program for FY 2016 in this proposed rule. We note that AHRQ’s PSI–90 Composite measure and CDC’s NHSN CLABSI (NQF #0138) and CAUTI (NQF #0139) measures were submitted in January 2014 and December 2013, respectively, as part of the NQF maintenance endorsement process. As noted in the FY 2014 IPPS/ E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules LTCH PPS final rule (78 FR 50719), should changes to the risk-adjustment models for the measures be adopted during NQF endorsement maintenance processes, CMS will adopt these changes as soon as possible. Finally, although we are not required under section 1886(p) of the Act to address specific measure scoring methodologies regarding the HAC Reduction Program in notice-and-comment rulemaking, as required under the Hospital VBP Program, we believe that it is important to set forth such scoring methodologies for each individual HAC measure, in order for the public to understand how the measures discussed and finalized in this year’s rulemaking relate to the performance methodology used to determine the applicable hospitals subject to the payment adjustment under the HAC Reduction Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (2) Measure Selection and Scoring Methodology for FY 2016 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50713), we finalized for FY 2016 and onwards CDC’s NHSN Surgical Site Infection measure (NQF #0753) and its measure methodology. The SSI and other measure specifications are available at: https:// www.qualityforum.org/QPS/ QPSTool.aspx. To locate a specific measure, search by the NQF number: (1) for the SSI measure use NQF #0753; (2) for the CLABSI measure use NQF #0139; and (3) for the CAUTI measure use NQF #0138. For SSI updates related to CMS programs and the use of CDC’s NHSN measures, we refer readers to the Web site at: https://www.cdc.gov/nhsn/acutecare-hospital/ssi. The SSI measure explanation of SIR in the NHSN enewsletter is available at: https:// www.cdc.gov/nhsn/PDFs/Newsletters/ NHSN_NL_OCT_2010SE_final.pdf. CDC’s SSI measure was finalized as a Domain 2 measure in the calculation of the Total HAC Score. We are not proposing to change CDC’s measure methodology for the SSI measure. b. Measure Risk-Adjustment In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure riskadjustment for AHRQ’s PSI–90 Composite for Domain 1 and the riskadjustment for CDC’s NHSN measures for Domain 2. In this proposed rule, we are not proposing any risk-adjustment changes for any of the measures finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50718 through 50719). c. Measure Calculations In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 calculations for AHRQ’s PSI–90 Composite measure for Domain 1 and the measure calculations for CDC’s NHSN measures for Domain 2. In this proposed rule, we are not proposing any measure calculation changes for any of the measures finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50718 through 50719). d. Applicable Time Period In the FY 2014 IPPS/LTCH PPS final rule, we finalized and codified policy at § 412.170 that there will be a 2-year applicable time period to collect data used to calculate the Total HAC Score (78 FR 50717). For the Domain 1 AHRQ PSI–90 Composite measure, we are proposing for FY 2016 a 24-month period from July 1, 2012 through June 30, 2014 as the applicable time period. The claims for all Medicare FFS beneficiaries discharged during this period would be included in the calculation of measure results for FY 2016. This includes claims data from the 2012, 2013, and 2014 Inpatient Standard Analytic Files (SAFs). The Domain 2 CDC NHSN measures (CAUTI, CLABSI, and SSI) are currently collected and calculated on a quarterly basis. However, for the purpose of the HAC Reduction Program, we will use 2 years of data to calculate the Domain 2 score. For FY 2016, we are proposing to use calendar years 2013 and 2014 for all three Domain 2 measures in the HAC Reduction Program. e. Criteria for Applicable Hospitals and Performance Scoring For FY 2016, we are proposing a change to the scoring methodology of the Total HAC Score. This proposal is intended to address the implementation of CDC’s NHSN SSI measure in Domain 2 finalized for implementation in FY 2016. (1) Finalized Scoring Methodology for Domains 1 and 2 for FY 2015 We finalized a scoring methodology for the Total HAC Score in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722). This finalized scoring methodology is similar to the achievement scoring methodology currently used under the Hospital VBP Program. With respect to an applicable hospital, we finalized that CMS will identify the top quartile of all hospitals with respect to their Total HAC Score during the applicable period (§ 412.170). In addition, we finalized that the Total HAC Score will be determined by the following three steps: (1) Each measure result will be scored as outlined in the FY 2014 IPPS/LTCH PPS final rule (78 PO 00000 Frm 00167 Fmt 4701 Sfmt 4702 28143 FR 50723); (2) Domain scores will be determined by the scores assigned to the measures within the domain; and (3) the Total HAC Score will be determined by the sum of the weighted domains. For FY 2015, the Total HAC Score is the sum of the Domain 1 score multiplied by 35 percent plus the Domain 2 score multiplied by 65 percent. For further details of the general scoring methodology finalized for the HAC Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50719 through 50725). (2) Proposed Scoring Methodology of Domain 2 and New Weighting of Domains 1 and 2 for FY 2016 We are proposing to adjust the scoring methodology of Domain 2 and the weighting of Domains 1 and 2 beginning in FY 2016 due to the addition of CDC’s NHSN SSI measure. For the scoring of CDC’s NHSN SSI measure, we are proposing an identical process of assigning points to the SSI measure results. We note that the SSI measure, reported via CDC’s NHSN, is currently specified under the Hospital IQR program and is restricted to colon procedures (including incision, resection or anastomosis of the large intestine and large-to-small and smallto-large bowel anastomosis), and abdominal hysterectomy procedures including those performed by laparoscope. The SSI measure assesses SSIs based on the type of surgery procedures (that is, the SSI measure is stratified into infections that occur with colonic procedures and those that occur in abdominal hysterectomy procedures). We also note that patient age and a preoperative health score are risk factors taken into account using the Standardized Infection Ratio (SIR) (78 FR 20625). Use of an SIR is consistent with CDC’s NHSN CLABSI and CAUTI measures that also report SIRs. In order to calculate an SSI measure score for Domain 2, we are proposing to calculate an abdominal hysterectomy procedure SSI SIR and a colonic procedure SSI SIR and pool both SIRs for each hospital. We are proposing pooling the abdominal hysterectomy SSI SIR and colonic procedure SSI SIR as this would provide a single SSI SIR, which is consistent with reporting a single SSI SIR as meant by design of the NQF endorsed measure (NQF #0753), and would allow a risk-adjusted weighting of the surgical volume among the two procedures. We are proposing that a pooled SSI SIR for an applicable hospital is the sum of all observed infections among abdominal hysterectomy and colonic procedures divided by the sum of all predicted E:\FR\FM\15MYP2.SGM 15MYP2 28144 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules infections among abdominal hysterectomy and colonic procedures performed at the applicable hospital. The pooled SSI SIR would be scored in the same manner as all measures finalized for the HAC Reduction Program (refer to Figure A in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included above in this proposed rule). To determine a Domain 2 score, we are proposing taking the average of the three CDC HAI SIR scores. We noted in the FY 2014 IPPS/ LTCH PPS final rule that there will be instances in which applicable hospitals may not have data on all four measures and therefore a set of rules was finalized to determine how to score each Domain. We are proposing to follow the same finalized rules used to determine scoring of Domains 1 and 2 (FY 2014 IPPS/LTCH PPS final rule (78 FR 50723 through 50725)0 and the proposed changes in section IV.I.6.b. of this proposed rule. We invite public comments on this proposal. In addition, for FY 2016 we are proposing to weight Domain 1 at 25 percent, and Domain 2 at 75 percent. We are proposing to decrease Domain 1’s weight from 35 percent to 25 percent for two reasons. First, with the implementation of CDC’s SSI measure, we believe the weighting of both domains needs to be adjusted to reflect the addition of a fourth measure; and second, in keeping with public comments from the FY 2014 IPPS/LTCH PPS final rule, MedPAC and others stated that Domain 2 should be weighted more than Domain 1. Finally, the Total HAC Score for applicable hospitals would be the sum of the weighted scores from Domain 1 (weighted at 25 percent) and Domain 2 (weighted at 75 percent). We invite public comments on this proposal. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 f. Proposed Rules To Calculate the Total HAC Score for FY 2016 We are proposing to adopt the ‘‘Proposed Clarification of FY 2015 Finalized Narrative of Rules to Calculate the Total HAC Score’’ as discussed in section IV.I.3.e. of the preamble of this proposed rule. We invite public comments on this proposal. 7. Future Considerations for the Use of Electronically Specified Measures We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data submitted to CMS for the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Hospital IQR Program. CMS has become aware of some hospitals and health systems that have developed or adopted a methodology to identify and measure all-cause harm through their electronic health record (EHR) systems. Some hospitals and health systems are able to use the results of these electronic measures to address adverse events at the point of care and to track improvement over time. Many of these measures capture a broad range of common hospital-acquired conditions that may not be captured by existing national measures (examples include measures of adverse drug events and hypoglycemia). Given that these measures are captured using clinical data from EHR systems, collection of HAC data will allow CMS to align measures across multiple settings. We are seeking comment as to whether the use of a standardized electronic composite measure of allcause harm should be used in the HAC reduction program in future years in addition to, or in place of, claims-based measures assessing HACs. We welcome any suggestions of specific all-cause harm electronic measures, including detailed measure specifications. Specifically, we invite public comments on the feasibility and the perceived value of such a measure, and what would be the most appropriate weighting of this measure in the Total HAC Performance Score. In addition, we are requesting suggestions on the timeframe for which such standardized electronic composite measure of allcause harm should be proposed. We intend for the future direction of electronic quality measure reporting to significantly enhance the tracking of HACs under the HAC Reduction Program. We will continue to work with measure stewards and developers to develop new measure concepts, and conduct pilot, reliability and validity testing as part of efforts to promote the adoption of Certified Electronic Health Record Technology in hospitals. K. Payments for Indirect and Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 Through 413.83) 1. Background Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99–272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. PO 00000 Frm 00168 Fmt 4701 Sfmt 4702 Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital’s allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital’s cost reporting period beginning in FY 1984 (that is, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital’s updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital’s Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the hospital inpatient prospective payment system (IPPS) for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital’s IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital’s number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital to the number of inpatient hospital beds. The calculation of both direct GME and IME payments is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. Therefore, Congress, through the Balanced Budget Act of 1997 (Pub. L. 105–33), established a limit on the number of allopathic and osteopathic residents that a hospital may include in its FTE resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital’s unweighted FTE count of residents for purposes of direct GME may not exceed the hospital’s unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 applied effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap. The Affordable Care Act made a number of statutory changes relating to the determination of a hospital’s FTE resident count for direct GME and IME payment purposes and the manner in which FTE resident limits are calculated and applied to hospitals under certain circumstances. Regulations implementing these changes are discussed in the November 24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53416). 2. Proposed Changes in the Effective Date of the FTE Resident Cap, 3-Year Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for New Programs in Teaching Hospitals Section 1886(h)(4)(H)(i) of the Act requires the Secretary to establish rules for calculating the direct GME caps for new teaching hospitals that are training residents in new medical residency training programs established on or after January 1, 1995. Under section 1886(d)(5)(B)(viii) of the Act, such rules also apply to the establishment of a hospital’s IME cap on the number of FTE residents training in new programs. We implemented these statutory requirements in rules published in the August 29, 1997 Federal Register (62 FR 46002 through 46008) and in the May 12, 1998 Federal Register (63 FR 26323 through 26325 and 26327 through 26336). Generally, under existing regulations at 42 CFR 413.79(e)(1) (for direct GME) and 42 CFR 412.105(f)(1)(vii) (for IME), if a hospital did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or before December 31, 1996, and it begins to participate in training residents in a new medical residency training program (allopathic or osteopathic) on or after January 1, 1995, the hospital’s unweighted FTE resident cap (which would otherwise be zero) may be adjusted based on the sum of the product of the highest number of FTE residents in any program year during the third year of the first new program’s existence, for each new residency training programs established during that 3-year period, and the minimum accredited length for each type of program. The number of FTE resident cap slots that a teaching hospital receives for each new program may not exceed the number of accredited slots that are available for each new program. Once a hospital’s FTE resident cap is VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 established, no subsequent cap adjustments may be made for new programs, unless the teaching hospital is a rural hospital. A rural hospital’s FTE resident caps may be adjusted for participation in subsequent new residency training programs. A hospital that did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or before December 31, 1996, may only receive a permanent FTE resident cap adjustment for training residents in a truly ‘‘new’’ residency training program; no permanent cap adjustment would be given for training residents associated with an existing program. That is, if a hospital that did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or before December 31, 1996, serves as a training site for residents in a program that exists or existed previously at another teaching hospital that remains open, that ‘‘new’’ teaching hospital does not receive a ‘‘new program’’ cap adjustment because it is not participating in training residents in a truly ‘‘new’’ program. However, it may be possible for that ‘‘new’’ teaching hospital to receive a temporary cap adjustment if it enters into a Medicare GME affiliation agreement with the existing teaching hospital as specified at § 413.79(f) (for direct GME) and § 412.105(f)(1)(vi) (for IME). (For a detailed discussion of the distinctions between a new medical residency training program and an existing medical residency training program, we refer readers to the August 27, 2009 final rule (74 FR 43908 through 43920). For a detailed discussion regarding participation in Medicare GME affiliation agreements, we refer readers to 74 FR 43574.) For new programs started prior to October 1, 2012, hospitals that did not yet have an FTE resident cap established had a ‘‘3-year window’’ in which to participate in and ‘‘grow’’ new programs, before the FTE resident caps for IME and direct GME were permanently set for the hospital beginning with the fourth program year of the first new program start. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425), we revised the regulations at § 413.79(e) to increase the cap-building period for new programs from 3 years to 5 years. That is, for a hospital that did not yet have an FTE resident cap established, the hospital’s FTE resident cap is effective beginning with the sixth program year of the first new program’s existence. This revised policy is effective for urban hospitals that first begin to participate in training PO 00000 Frm 00169 Fmt 4701 Sfmt 4702 28145 residents in their first new program on or after October 1, 2012, and for rural hospitals that start a new program on or after October 1, 2012. In that final rule, we also finalized a methodology used to calculate a cap adjustment for an individual hospital if residents in a new program rotate to more than one hospital (or hospitals). The methodology is based on the sum of the products of the following three factors: (1) The highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate; (2) the number of years in which residents are expected to complete the program, based on the minimum accredited length for each type of program; and (3) the ratio of the number of FTE residents in the new program that trained at the hospital over the entire 5-year period to the total number of FTE residents that trained at all hospitals over the entire 5year period. Finally, we made minor revisions to the regulation text at §§ 413.79(e)(2) through (e)(4) for purposes of maintaining consistency throughout § 413.79(e). We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) for further details regarding the methodology for calculating the FTE resident caps. While the FY 2013 IPPS/LTCH PPS final rule discussed the methodology for calculating the FTE resident caps to be effective beginning with the sixth program year of the first new program’s existence, for hospitals that do not yet have FTE resident caps established, that final rule did not discuss when the 3year rolling average for IME and direct GME or the intern- and resident-to-bed (IRB) ratio cap for IME is effective for FTE residents training in new programs. The regulations regarding the 3-year rolling average and the IRB ratio cap with respect to new medical residency training programs were established in the following Federal Register rules: the FY 1998 IPPS final rule with comment period (62 FR 46002 through 46008); the May 12, 1998 final rule (63 FR 26323 through 26325 and 26327 through 26336); FY 2000 IPPS final rule (64 FR 41518 through 41523); and the FY 2002 IPPS final rule (66 FR 39878 through 39883). Specifically, the regulations at § 412.105(f)(1)(v) regarding the 3-year rolling average and new medical residency training programs for IME state: ‘‘If a hospital qualified for an adjustment to the limit established under paragraph (f)(1)(iv) of this section for new medical residency programs created under paragraph (f)(1)(vii) of E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28146 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules this section, the count of residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (f)(l)(v) for a period of years. Residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, for each new program started, the period of years equals the minimum accredited length for each new program. The period of years for each new program begins when the first resident begins training in each new program.’’ In addition, the regulations for the interaction of the IRB ratio cap and new medical residency training programs for IME at § 412.105(a)(1)(ii) state: ‘‘The exception for new programs described in paragraph (f)(1)(vii) of this section applies to each new program individually for which the full-time equivalent cap may be adjusted based on the period of years equal to the minimum accredited length of each new program.’’ The regulations at § 413.79(d)(5) regarding the interplay of the 3-year rolling average with new medical residency training programs for direct GME similarly state: ‘‘If a hospital qualifies for an adjustment to the limit established under paragraph (c)(2) of this section for new medical residency programs created under paragraph (e) of this section, the count of the residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (d), for a period of years. Residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph (d), for each new program started, the period of years equals the minimum accredited length for each new program. The period of years begins when the first resident begins training in each new program.’’ Therefore, the FTE resident caps for IME and direct GME are always effective beginning with the start of the sixth program year of the first new program started for urban hospitals that do not yet have FTE resident caps established (§ 413.79(e)(1)(iii)), and for rural hospitals, beginning with the start of the sixth program year of each new VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 individual program started (§ 413.79(e)(3)), regardless of the fact that other new programs may have started after the start of the first new program. However, the timing of when the 3-year rolling average for IME and direct GME and the IRB ratio cap for IME are first applied is dependent upon the minimum accredited length of each new program started within the 5-year window. For example, new teaching Hospital A participates in training residents in new medical residency training programs for the first time beginning on July 1, 2013. On July 1, 2013, Hospital A participates in training residents in a new family medicine program (minimum accredited length is 3 years), on July 1, 2014, it also participates in training residents in a new sports medicine fellowship (minimum accredited length is 1 year), and on July 1, 2015, it also participates in training residents in a new general surgery program (minimum accredited length is 5 years). For the purpose of establishing Hospital A’s FTE resident caps, the 5-year growth window for Hospital A closes on June 30, 2018, and the IME and direct GME FTE resident caps for Hospital A are effective on July 1, 2018, the beginning of the sixth program year of the first new program’s existence; that is, family medicine. However, the 3-year rolling average and the IRB ratio cap are effective at different points in time. Because the family medicine residency is 3 years in length, FTE residents in the new family medicine program are subject to the 3year rolling average and the IRB ratio cap beginning on July 1, 2016. Because the sports medicine fellowship is a 1year program, and it started on July 1, 2014, the number of sports medicine FTE residents must be included in the 3-year rolling average and is subject to the IRB ratio cap effective on July 1, 2015. Lastly, the FTE residents in the new general surgery program would only be subject to the rolling average and the IRB ratio cap effective July 1, 2020. The Medicare cost report worksheets on CMS Form 2552–10 for IME (Worksheet E, Part A) and for direct GME (Worksheet E–4) currently can accommodate reporting of FTE residents separately based on whether those FTE residents are in new medical residency training programs and are not subject to the FTE resident cap (line 16 of Worksheet E, Part A, and line 15 of Worksheet E–4). However, these cost report worksheets are not designed to accommodate reporting of FTE residents that are exempt from the FTE resident cap, but are subject to the rolling average and IRB ratio cap, because the PO 00000 Frm 00170 Fmt 4701 Sfmt 4702 ‘‘period of years’’ equal to the minimum accredited length of each new program started has already expired. The reverse also may occur, as in the example above with the new general surgery program started by Hospital A, where the FTE resident caps are effective July 1, 2018, but the number of FTE residents in the general surgery program would not be subject to the rolling average or the IRB ratio cap until July 1, 2020. Complicating matters further is the fact that, while the effective dates of these policies associated with new medical residency training program FTE residents are effective on a program year basis (that is, July 1), many teaching hospitals do not have a fiscal year that begins on July 1. Therefore, under the existing policy, the number of FTE residents needs to be prorated, and special accommodations need to be made to calculate the portion of FTE residents that are subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap for the respective portions of the hospital’s cost reporting period occurring on and after July 1. Integrating the rolling average, the IRB ratio cap, and the FTE resident caps for residents in new medical residency training programs in an accurate manner on the Medicare cost report has proved challenging to the point where we have had to deal with each instance brought to our attention by the new teaching hospital or by a Medicare contractor on an individual and manual basis (in order to ensure application of a consistent methodology). In fact, the Medicare cost report instructions direct the hospital to do the following: for CMS Form 2552–10, Worksheet E, Part A, line 10—‘‘. . . Contact your contractor for instructions on how to complete this line if you have a new program for which the period of years is less than or more than three years. . . .’’; for CMS Form 2552–10, Worksheet E–4, line 6—‘‘. . . Contact your contractor for instructions on how to complete this line if you have a new program for which the period of years is less than or greater than 3 years. . . .’’ The Medicare contractors, in turn, have been instructed to contact CMS for instructions on how to report the number of FTE residents that are still within the ‘‘period of years’’ of the new program. The ‘‘three years’’ referenced in the Form 2552–10 cost report instructions are based on the 3-year growth window for new medical residency training programs that is in effect for new programs started prior to October 1, 2012, when, within the 3year growth window, new teaching hospitals also may have started new E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules medical residency training programs with different minimum accredited lengths. (We note that while the previous Form 2552–96 cost report did not include the same instructions, CMS did deal with the reporting of the number of FTE residents in new medical residency training programs on an individual basis when requests for assistance were brought to its attention.) However, these instructions also apply for new medical residency training programs started with different minimum accredited lengths on and after October 1, 2012. In this proposed rule, we are proposing to simplify and streamline the timing of when FTE residents in new medical residency training programs are subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap, both for urban teaching hospitals that have not yet had FTE resident caps established under § 413.79(e)(1) and for rural teaching hospitals that may or may not have FTE resident caps established under § 413.79(e)(3). That is, we are proposing that the methodology for calculating the FTE resident caps for hospitals that participate in training residents in new medical residency training programs would continue to be the same methodology instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) for new medical residency training programs started on or after October 1, 2012, specified at § 413.79(e)(1). However, once the FTE resident caps are calculated, we are proposing to change the timing of when the FTE resident caps would be effective, to synchronize the effective dates and the application of the 3-year rolling average and the IRB ratio cap with each applicable hospital’s fiscal year begin date. Specifically, we are proposing that the FTE resident caps would continue to be calculated as finalized in the FY 2013 IPPS/LTCH PPS final rule—the methodology is based on the sum of the products of the following three factors: (1) The highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate; (2) the number of years in which residents are expected to complete the program, based on the minimum accredited length for each type of program; and (3) the ratio of the number of FTE residents in the new program that trained at the hospital over the entire 5-year period to the total number of FTE residents that trained at all hospitals over the entire 5year period. However, once calculated VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 in this manner, we are proposing that, instead of the FTE resident caps being effective beginning with the sixth program year of the first new program start, those FTE resident caps, rolling average, and IRB ratio cap would be effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started. Using the example of Hospital A that we presented earlier, assume Hospital A has a January 1 to December 31 cost reporting year. The first new program started, family medicine, was started on July 1, 2013. A sports medicine fellowship and a general surgery program also were started timely within the 5-year growth window. Hospital A has 5 program years to grow its FTE resident caps, from July 1, 2013 through June 30, 2018. The FTE resident caps would be calculated based on the 5 program years in accordance with the methodology established at § 413.79(e)(1) in the FY 2013 IPPS/ LTCH PPS final rule; therefore, the hospital would wait until after June 30, 2018 to obtain the FTE counts to calculate the FTE resident caps. However, we are proposing that those IME and direct GME FTE resident caps, once calculated after June 30, 2018, instead of being effective on July 1, 2018, would be effective at the beginning of Hospital A’s cost reporting period that precedes July 1, 2018; that is, the FTE resident caps for Hospital A would be effective permanently on January 1, 2018, the start of Hospital A’s cost reporting period that precedes the start of the sixth program year of the first new program started. The hospital could file its fiscal year end December 31, 2018 cost report including the FTE resident caps applicable to the entire cost reporting period accordingly. As noted earlier, we are proposing that, for all new medical residency training programs in which the hospital participates during the 5-year growth window, the FTEs in those new programs also would be subject to the 3year rolling average and the IRB ratio cap simultaneously with the effective date of the FTE resident caps, at the beginning of the applicable hospital’s cost reporting period that precedes the beginning of the sixth program year of the first new program started. Again, using the example of Hospital A that we presented earlier, the FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would all be subject to the 3-year rolling average and IRB ratio cap beginning on January 1, 2018. With regard to reporting on the Medicare cost PO 00000 Frm 00171 Fmt 4701 Sfmt 4702 28147 report, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, we are proposing that the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported so as not to be included in the IME rolling average or the IRB ratio cap, and so as not to be included in the direct GME rolling average. (On the CMS Form 2552–10, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, this means that the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported on Worksheet E, Part A, line 16, and on Worksheet E–4, line 15). However, on Hospital A’s cost report for fiscal year ending December 31, 2018, the number of FTE residents in these three programs would be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly. (On the CMS Form 2552–10, for Hospital A’s cost report for fiscal year ending December 31, 2018, this means that none of the FTE residents in these three programs would be reported on Worksheet E, Part A, line 16 for IME, and Worksheet E–4, line 15 for direct GME. Instead, all of the FTE residents would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME, in order to be subject to the FTE resident cap, the 3year rolling average, and the IRB ratio cap.) We note that once the 3-year rolling average is effective in that cost reporting period that includes the sixth program year of the first new program started, the number of FTE residents in the new programs also must be reported both as part of the prior year FTE resident counts and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. In the example that we presented earlier, Hospital A has a fiscal year that begins on January 1. If Hospital A’s fiscal year begin date would have been October 1, then, as proposed, while the sixth program year of the first new program started would still be July 1, 2018, the FTE residents caps, the 3-year rolling average, and the IRB ratio cap would be effective on October 1, 2017, the fiscal year begin date that precedes July 1, 2018, the sixth program year. If Hospital A’s fiscal year begin date would have been July 1, the FTE E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28148 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules residents caps, the 3-year rolling average, and the IRB ratio cap would instead be effective on July 1, 2017, the fiscal year begin date that precedes July 1, 2018, the sixth program year. We understand that this proposal, if finalized, would reduce the amount of time that the new medical residency training programs would be exempt from the FTE resident caps. However, even though we are proposing to make the effective date of the FTE resident caps earlier than under current policy, because we also are proposing that the calculation of the FTE resident caps would still be based on the highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate, a new teaching hospital would still have the full 5 program years to grow its program(s), and its FTE resident caps would reflect a full 5 years of growth. Therefore, because, by the fifth program year, a program should, in most typical circumstances, have grown to its full capacity, barring unusual circumstances, the FTE resident caps that would take effect under the proposed policy at the beginning of the fiscal year that precedes the sixth program year should accommodate the FTE resident count training in the fifth and subsequent program years. Therefore, we believe that this proposal to streamline and synchronize the effective dates of the FTE resident caps, the 3-year rolling average, and the IRB ratio cap not only is easier to comprehend and to implement, but also is reasonable and equitable in its effect on the IME and direct GME payments of hospitals establishing FTE resident caps. Specifically, if this proposal is finalized, there would no longer be a need for CMS Form 2552–10, Worksheet E, Part A, line 10 and Worksheet E–4, line 6 to instruct hospitals to contact their contractor for instructions on how to complete those lines, as both hospitals and Medicare contractors would understand how to report the number of FTE residents in new programs, even when those programs have different accredited lengths. Instead, hospitals and Medicare contractors would follow the methodology instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) to calculate the FTE resident caps for new medical residency training programs started on or after October 1, 2012, and once the FTE resident caps are calculated, hospitals and Medicare contractors would implement the FTE resident caps, the 3- VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 year rolling average, and the IRB ratio cap effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started. Under this proposed methodology, FTE residents and FTE resident caps would no longer need to be prorated, and we would no longer need to make special accommodations to calculate the portion of FTE residents that are subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap for the respective portions of the hospital’s cost reporting period occurring on and after July 1. The existing CMS Form 2552–10 already accommodates this proposed methodology, unlike the complicated process currently in place. Thus, clarity, efficiency, and payment accuracy would be improved for hospitals, contractors, and CMS. With regard to rural hospitals that, under § 413.79(e)(3) of the regulations, may receive FTE resident cap adjustments at any time for participating in training residents in new programs, we are proposing a similar policy, with modifications reflecting the fact that each new program in which the rural hospital participates receives its own 5year growth window before the rural hospital’s FTE resident cap is adjusted based on that new program. That is, we are proposing that, for rural hospitals, the FTE resident caps, the 3-year rolling average, and the IRB ratio cap for each new program started would be effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each new program started. For example, rural Hospital B has a fiscal year that begins on January 1. It starts a family medicine program on July 1, 2013, and a general surgery program on July 1, 2016. The sixth program year for the family medicine program begins on July 1, 2018. The sixth program year for the general surgery program begins on July 1, 2021. With regard to Medicare cost reporting, during Hospital B’s fiscal years end dates of December 31, 2013 through and including December 31, 2017, the number of family medicine FTE residents would be reported so as not to be included in the IME 3-year rolling average or the IRB ratio cap, and so as not to be included in the direct GME 3-year rolling average. (This means that on CMS Form 2552–10, during Hospital B’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 16 for IME, PO 00000 Frm 00172 Fmt 4701 Sfmt 4702 and on Worksheet E–4, line 15, for direct GME. Instead, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 16, and Worksheet E–4, line 15.) Then, beginning with Hospital B’s cost report for fiscal year ending December 31, 2018, the number of FTE residents in only the family medicine program would be subject to the FTE residents caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly in order to be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap. (This means that on CMS Form 2552–10, beginning with Hospital B’s cost report ending December 31, 2018, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME.) Because the general surgery program started on July 1, 2016, for Hospital B’s fiscal year end dates of December 31, 2016 through and including fiscal year end date of December 31, 2020, the number of general surgery FTE residents would be reported (on Worksheet E, Part A, line 16) so as not to be included in the IME 3-year rolling average or the IRB ratio cap, and (on Worksheet E–4, line 15), so as not to be included in the direct GME 3-year rolling average. Then, beginning with Hospital B’s cost report for fiscal year ending December 31, 2021, the number of FTE residents in the general surgery program would be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly (on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME), in order to be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap. We note that once the 3-year rolling average is effective in that cost reporting period that includes the sixth program year of each new program started, the number of FTE residents in the new programs also must be reported as part of the prior year FTE resident counts, and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. We are proposing that this policy regarding the effective dates of the FTE residency caps, the 3-year rolling average, and the IRB ratio cap for FTE residents in new medical residency training programs would be consistent with the methodology for calculation of the FTE resident caps as described in the FY 2013 IPPS/LTCH PPS final rule, and implemented in the regulations at E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules §§ 413.79(e)(1) and (e)(3). That is, because the policy providing a 5-year growth period for establishing the FTE resident caps (§§ 413.79(e)(1) and (e)(3)) is effective for new programs started on or after October 1, 2012, this proposal is effective for urban hospitals that first begin to participate in training residents in their first new medical residency training program, and for rural hospitals, on or after October 1, 2012. We also are proposing to revise the regulations for IME and direct GME, respectively, at § 412.105(a)(1)(ii) for the IME IRB ratio cap, at § 412.105(f)(1)(v) for the IME 3-year rolling average, and at § 413.79(d)(5) for the direct GME 3year rolling average to reflect that the exception from the IRB ratio cap and the 3-year rolling average for new programs applies to each new program individually during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each individual new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3). After the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and after the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each individual new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3), FTE residents participating in new medical residency training programs are included in the hospital’s IRB ratio cap and the 3-year rolling average. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Proposed Changes to IME and Direct GME Policies as a Result of New OMB Labor Market Area Delineations a. New Program FTE Resident Cap Adjustment for Rural Hospitals Redesignated as Urban As stated earlier in this proposed rule, under existing regulations, a new teaching hospital that starts training residents for the first time on or after October 1, 2012, has 5 years from when it first begins training residents in its first new program to build its FTE resident cap. If the teaching hospital is a rural teaching hospital, it can continue VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to receive permanent cap adjustments for training residents in new programs after the initial 5-year cap-building period that applies to new teaching hospitals ends. (We refer readers to section IV.K.2. of the preamble of this proposed rule for a discussion of our proposal to change the effective dates for when the FTE resident cap, the 3year rolling average, and the IRB ratio cap are applied to new teaching hospitals and to new programs at rural teaching hospitals.) In section III.B. of the preamble of this proposed rule, we discuss the policies we are proposing to implement as a result of the new OMB labor market area delineations announced in the February 28, 2013 OMB Bulletin No. 13–01. As a result of the new OMB delineations, some teaching hospitals may be redesignated from being located in a rural area to an urban area, thereby losing their ability to increase their FTE resident caps for new programs started after their initial 5-year cap-building period ends. We have been asked whether a rural teaching hospital that already has a cap and is redesignated as urban while it is in the process of establishing another new program(s) can still receive a permanent cap adjustment for that new program(s). We believe that because the hospital had already started training residents in the new program(s) while it was rural, the former rural hospital should be permitted to continue building its new program(s) and receive a permanent FTE resident cap adjustment for that new program(s). Therefore, we are proposing to revise the regulations to allow a hospital that was rural as of the time it started training residents in a new program(s) and is redesignated as urban for Medicare payment purposes during its cap-building period for that program(s) to be able to continue building that program(s) for the remainder of the capbuilding period and receive a permanent FTE resident cap adjustment for that new program(s). Once the capbuilding period for the new program(s) that was started while the hospital was still rural expires, the teaching hospital that has been redesignated as urban would no longer be able to receive any additional permanent cap adjustments. We are proposing that the teaching hospital must be actively training residents in the new program while it is still rural, that is, prior to the redesignation taking effect, in order for the hospital to continue receiving a cap adjustment for the new program. For example, if a rural hospital begins training residents in a new internal medicine program on July 1, 2013, and PO 00000 Frm 00173 Fmt 4701 Sfmt 4702 28149 begins training residents in a new general surgery program on July 1, 2014, and the rural hospital is redesignated as urban effective on October 1, 2014, the teaching hospital would be able to continue receiving a cap adjustment for both the new internal medicine program and the new general surgery program after it has been redesignated as urban. However, if the rural hospital is redesignated as urban effective on October 1, 2014, and started training residents in a new internal medicine program on July 1, 2013, but did not start training residents in a new general surgery program while it was still rural, that is, prior to October 1, 2014, the teaching hospital would receive a permanent cap adjustment for the new internal medicine program, but would not receive a cap adjustment for the new general surgery program. We are proposing to revise the regulations at § 412.105(f)(1)(iv)(D) for IME and § 413.79(c)(6) for direct GME to implement this proposed change. We are proposing that these regulatory revisions be effective for cost reporting periods beginning on or after October 1, 2014. The proposed regulations at § 412.105(f)(1)(iv)(D) read as follows: ‘‘A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, may retain the increases to its FTE resident cap that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this section while it was located in a rural area. Effective for cost reporting periods beginning on or after October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS and was training residents in a new program prior to the redesignation becoming effective, the redesignated urban hospital may retain any existing increases to its FTE resident cap and receive an increase to its FTE resident cap for the new program in which it was training residents when the redesignation became effective, in accordance with paragraph (f)(1)(vii) of this section.’’ The proposed regulations at § 413.79(c)(6) read as follows: ‘‘A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003, may retain the increases to its FTE resident cap that it received under paragraphs (c)(2)(i), (e)(1)(iii), and (e)(3) of this section while it was located in a rural area. Effective for cost reporting E:\FR\FM\15MYP2.SGM 15MYP2 28150 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 periods beginning on or after October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, and was training residents in a new program prior to the redesignation becoming effective, the redesignated urban hospital may retain any existing increases to its FTE resident cap, and receive an increase to its FTE resident cap for the new program in which it was training residents when the redesignation became effective, in accordance with paragraph (e) of this section.’’ b. Participation of Redesignated Hospital in Rural Training Track To encourage the training of residents in rural areas, section 407(c) of Public Law 106–113 amended section1886(h)(4)(H) of the Act to add a provision that, in the case of a hospital that is not located in a rural area (an urban hospital) that establishes separately accredited approved medical residency training programs (or rural tracks) in a rural area or has an accredited training program with an integrated rural track, the Secretary shall adjust the urban hospital’s cap on the number of FTE residents under subparagraph (F), in an appropriate manner in order to encourage training of physicians in rural areas. Section 407(c) of Public Law 106–113 was made effective for direct GME payments to hospitals for cost reporting periods beginning on or after April 1, 2000, and for IME payments applicable to discharges occurring on or after April 1, 2000. We refer readers to the August 1, 2000 interim final rule with comment period (65 FR 47033 through 47037) and the FY 2002 IPPS final rule (66 FR 39902 through 39909) where we implemented section 407(c) of Public Law 106–113. The regulations at § 413.79(k) specify that, subject to certain criteria, an urban hospital may count the FTE residents in the rural track in addition to those FTE residents subject to its cap up to a ‘‘rural track FTE limitation’’ for that hospital. In the FY 2006 IPPS final rule, we revised the regulations at § 413.79(k) to add a new paragraph (7) to state that if an urban hospital had established a rural track program with a rural hospital and that hospital subsequently becomes urban due to the implementation of the new labor market area definitions announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit for rural track programs established before the implementation of the new labor market area definitions. We also stated that, in order for the urban hospital to receive VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 a cap adjustment for a new rural track program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location designations adopted by CMS (70 FR 47456; 47489). As discussed earlier in this section, we are proposing to implement, effective October 1, 2014, the new OMB labor market area delineations announced in the February 28, 2013 OMB Bulletin No. 13–01. As a result of the new delineations, certain areas can be redesignated from urban to rural or from rural to urban, which may, in turn, affect GME policies that require the participation of rural teaching hospitals. For example, as noted above, in order for an urban teaching hospital to receive a FTE resident cap adjustment for training residents in a rural track, the residents must rotate for more than onehalf of the duration of the program to a rural hospital(s) or rural nonprovider(s) site. We have received a question as to what happens to a rural track when a rural hospital that is participating as the rural site is redesignated as urban, while the rural track for the urban hospital is in the process of being established. That is, what happens to the rural track when the rural hospital is redesignated as urban during the period that is used to establish the urban hospital’s rural track FTE limitation, prior to the effective date of the urban hospital’s rural track FTE limitation being established? Existing regulations at § 413.79(k)(7) address the scenario where a rural hospital that is participating as the rural site is redesignated as urban, after the rural track FTE limitation for the urban hospital has already become effective. Specifically, the regulations at § 413.79(k)(7) state that if an urban hospital had established a rural track with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of new labor market area definitions announced by OMB June 6, 2003, the urban hospital may continue to adjust its FTE resident limit for the rural track programs established prior to the adoption of the new labor market area definitions. Therefore, consistent with the existing regulations at § 413.79(k)(7) and with our proposal to allow rural hospitals redesignated as urban to continue receiving a FTE resident cap adjustment for new programs that started while the redesignated hospital was still rural, we are proposing to revise the existing regulations applicable to urban hospitals generally. Specifically, we are proposing to address the status of the ‘‘original’’ PO 00000 Frm 00174 Fmt 4701 Sfmt 4702 urban hospital’s rural track FTE limitation, in the situation where a rural hospital that is participating in the original urban hospital’s rural track is located in an area redesignated by OMB as urban during the 3-year period that is used to calculate the urban hospital’s rural track FTE limitation. We are proposing that, in these situations, the original urban hospital’s opportunity to receive a rural track FTE limitation would not be negatively impacted by the fact that the rural hospital with which it has partnered to be the rural site for its rural training track is located in an area redesignated by OMB as urban during the 3-year period that is used to calculate the urban hospital’s rural track FTE limitation. That is, we are proposing that the original urban hospital may receive a rural track FTE limitation for that new rural track program. With regard to the status of the rural hospital that is partnered with the urban hospital to serve as a rural training site for the rural training track program, as mentioned earlier, existing regulations at § 413.79(k)(7) address the scenario where a rural hospital that is participating as the rural site is redesignated as urban, after the rural track FTE limitation for the urban hospital has already become effective. (We note that we are proposing to apply the existing policy at § 413.79(k)(7), which applies to redesignations that occurred on June 6, 2003, in a similar manner, to redesignations announced by OMB after June 6, 2003, as well.) In addition, we are proposing that once the rural hospital is redesignated as located in an urban area due to the implementation of the new OMB labor market area delineations, regardless of whether that redesignation occurs during the 3-year period that is used to establish the rural track FTE limitation for the urban hospital, or after the 3-year period that is used to establish the rural track FTE limitation for the urban hospital, the redesignated urban hospital can no longer qualify as the rural site and the ‘‘original’’ urban hospital would not be able to count those residents under its rural track FTE limitation if it continues to use the redesignated urban hospital as the rural site for purposes of the rural track. However, because the redesignated urban hospital was rural when residents started training in the rural track, we are proposing to provide for a 2-year transition period during which either of the following two conditions must be met in order for the ‘‘original’’ urban hospital to be able to count the residents under its rural track FTE limitation E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules when the 2-year transition period ends: (1) the redesignated newly urban hospital must reclassify back to rural under § 412.103 of the regulations; or (2) the ‘‘original’’ urban hospital must find a new geographically rural site to participate as the rural site for purposes of the rural track. We note that we are proposing to apply these two criteria both in the case where the rural hospital is redesignated as urban after the urban hospital already has its rural track FTE limit established, and also in the case where the rural hospital is redesignated as urban during the 3-year period when the rural track program is still growing, prior to the rural track FTE limit being established. This 2-year transition period would begin when new OMB labor market area delineations take effect for Medicare payment purposes and would end exactly 2 years from that date. During this 2-year transition period, we would hold the ‘‘original’’ urban hospital harmless and would pay the ‘‘original’’ urban hospital for the FTE residents in the rural track. At the end of the 2-year transition period, in order for the urban hospital to receive payment for a rural track program under § 413.79(k)(1) or (k)(2), either the redesignated urban hospital must be granted reclassification as rural under § 412.103 or the ‘‘original’’ urban hospital must already be training FTE residents at a geographically rural site. We note that, because the rural reclassification provision of § 412.103 only applies to IPPS hospitals and for purposes of section 1886(d) of the Act, it only applies to IPPS hospitals for IME payment purposes and not for direct GME payment purposes because direct GME is authorized under section 1886(h) of the Act. Therefore, if the redesignated hospital reclassifies as rural under § 412.103, the ‘‘original’’ urban hospital would only be able to count FTE residents towards its rural track FTE limitation for IME payment purposes, but not for direct GME payment purposes. In addition, we note that this discussion has centered on the scenario where a rural hospital that is the rural site for purposes of the rural track has been redesignated as urban. Under such a scenario, the redesignated urban hospital does have an option to reclassify as rural. However, as noted above, the reclassification only applies to IPPS hospitals for IME payment purposes. If a nonprovider site is functioning as the rural site under § 413.79(k)(2) for purposes of the rural track and the area where that nonprovider site is located is redesignated as urban, the nonprovider site would not have the option of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reclassifying as rural and, therefore, the ‘‘original’’ urban hospital would be required to find a new geographically rural site within the 2-year transition period in order for the ‘‘original’’ urban hospital to receive payment for a rural track program under § 413.79(k)(1) or (k)(2). The following examples illustrate how the proposed policy would be applied to a rural track in which the rural site is a hospital and the rural hospital has been redesignated as urban: • An urban teaching hospital and a rural teaching hospital are participating in training residents in a new rural track program that begins July 1, 2014. Effective October 1, 2014, the rural hospital is redesignated as urban. We are proposing that the timeframe for the urban hospital to build the rural track program for purposes of calculating its rural track FTE limitation would continue to be through June 30, 2017. During the time period of October 1, 2014 to September 30, 2016, the redesignated urban hospital would continue participating as a rural hospital and the urban hospital would count FTE residents it is training that are in the rural track for IME and direct GME. However, in order for the ‘‘original’’ urban hospital to continue to get paid for its rural track program after September 30, 2016, then, by September 30, 2016, the redesignated urban hospital must either reclassify as rural under § 412.103 of the regulations for purposes of IME payment only, or the urban hospital must find a new geographically rural hospital or nonprovider site to train the residents in the rural track for more than one-half of their training. If neither of these conditions is met, by September 30, 2016, the ‘‘original’’ urban hospital would not able to receive payment for that specific program as a rural training track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training must be provided in a rural setting. • Another scenario could be one in which the rural hospital is redesignated as urban after the 3-year cap-building period for the rural track has passed. For example, the rural track program began July 1, 2007, but effective October 1, 2014, the rural hospital is redesignated as urban. We are proposing in this scenario that, by September 30, 2016, either the redesignated urban hospital must reclassify to rural under § 412.103 for purposes of IME payment only, or the ‘‘original’’ urban hospital must find a new geographically rural site that can participate as the rural site for purposes of the rural track. If neither of these PO 00000 Frm 00175 Fmt 4701 Sfmt 4702 28151 conditions is met by September 30, 2016, the ‘‘original’’ urban hospital would not be able to receive payment for that specific program as a rural track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training must be provided in a rural setting. We note that if the ‘‘original’’ urban hospital was not able to meet one of the two proposed conditions noted earlier in this section by the end of the 2-year transition period, but at some point later is able to meet one of the two proposed conditions, we are proposing that the ‘‘original’’ urban hospital would be able to ‘‘revive’’ and use its already established rural track FTE limitation from that point forward. In the instance where the ‘‘original’’ urban hospital’s rural track FTE limitation was not set because the hospital was not able to meet one of the two proposed conditions by the end of the 2-year transition period, which fell within the 3-year cap-building timeframe, but at some point later is able to meet one of the two proposed conditions, we are proposing that the ‘‘original’’ urban hospital would be able to have a rural track FTE limitation calculated and established based on the highest number of FTE residents in any program year training in the rural track in the third year of the program, even if during the third year of the program, the ‘‘original’’ urban hospital was not in compliance with the two proposed conditions. Consistent with similar policy discussed in the FY 2002 IPPS final rule (66 FR 39905), it would be the responsibility of the hospitals involved to provide the necessary information regarding the rotations of the residents in the third program year to the Medicare contractor in order for the calculation to be completed and the rural track FTE limit to be set. In summary, we are proposing that any time a rural hospital participating in a rural track is in an area redesignated by OMB as urban after residents started training in the rural track and during the 3-year period that is used to calculate the urban hospital’s rural track FTE limitation, the urban hospital may receive a cap adjustment for that rural track after it has been redesignated as urban. Furthermore, we are proposing that, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limitation, or after the 3year period used to calculate the urban hospital’s rural track FTE limitation, the redesignated urban hospital can continue to be considered a rural hospital for purposes of the rural track E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28152 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules for up to 2 years. However, by the end of those 2 years, either the redesignated urban hospital must reclassify as rural under § 412.103 for purposes of IME payment only (in addition, this reclassification option only applies to IPPS hospitals, not nonprovider sites) or the ‘‘original’’ urban hospital must have found a new site in a geographically rural area that will serve as the rural site for purposes of the rural track in order for the ‘‘original’’ urban hospital to receive payment under § 413.79(k)(1) or (k)(2). We are proposing to revise the regulations at § 413.79(k)(7) to implement these provisions and to establish that these changes would be effective for cost reporting periods beginning on or after October 1, 2014. The proposed regulations at § 413.79(k)(7) read as follows: ‘‘(i) Effective for cost reporting periods beginning prior to October 1, 2014, if an urban hospital had established a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) for the rural track programs established prior to the adoption of such new labor market area definitions. In order to receive an adjustment to its FTE resident cap for a new rural track residency program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location designations adopted by CMS. (ii) Effective for cost reporting periods beginning on or after October 1, 2014, if an urban hospital had started a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and, during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) and subject to paragraph (k)(7)(iii) for the rural track programs established prior to the adoption of such new OMB standards for delineating statistical areas. (iii) Effective for cost reporting periods beginning on or after October 1, 2014, if VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 an urban hospital had established a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, or after the 3-year period used to calculate the urban hospital’s rural track FTE limit, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) based on the rural track programs established prior to the change in the hospital’s geographic designation. In order for the urban hospital to receive or use the adjustment to its FTE resident cap for training FTE residents in the rural track residency program that was established prior to the most recent OMB standards for delineating statistical areas adopted by CMS, one of the following two conditions must be met by the end of a 2-year period that begins when the most recent OMB standards for delineating statistical areas are adopted by CMS: The hospital that has been redesignated from rural to urban must reclassify as rural under § 412.103 of this chapter, for purposes of IME only; or the urban hospital must find a new site that is geographically rural consistent with the most recent geographical location delineations adopted by CMS. In order to receive an adjustment to its FTE resident cap for an additional new rural track residency program, the urban hospital must establish a rural track program with sites that are geographically rural based on the most recent geographical location delineations adopted by CMS.’’ We also have determined that there is an outdated, incorrect reference included in the definition of ‘‘Rural track FTE limitation’’ under § 413.75(b). The reference included in the definition is ‘‘§ 413.79(l)’’. The correct reference is ‘‘§ 413.79(k)’’. Therefore, we are proposing to make a technical correction to the definition of ‘‘Rural track FTE limitation’’ so that it reads ‘‘means the maximum number of residents (as specified in § 413.79(k)) training in a rural track residency program that an urban hospital may include in its FTE count and that is in addition to the number of FTE residents already included in the hospital’s FTE cap.’’ PO 00000 Frm 00176 Fmt 4701 Sfmt 4702 4. Proposed Clarification of Policies on Counting Resident Time in Nonprovider Settings Under Section 5504 of the Affordable Care Act In the November 24, 2010 final rule with comment period (75 FR 71808, 72134 through 72141, and 72153), we implemented section 5504 of the Affordable Care Act regarding counting resident time in nonprovider settings. We also mentioned the scope of section 5504 of the Affordable Care Act in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27638) and final rule (78 FR 50735). Section 5504(a) of the Affordable Care Act made changes to section 1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of Medicare direct GME payments on a prospective basis. Notably, section 5504(a)(3) of the Affordable Care Act amended the Act effective for ‘‘cost reporting periods beginning on or after July 1, 2010,’’ for direct GME, to permit hospitals to count the time that a resident trains in activities related to patient care in a nonprovider site in its FTE count if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site. Section 5504(b)(2) of the Affordable Care Act made similar changes to section 1886(d)(5)(B)(iv) of the Act for IME payment purposes, with the provision being effective for discharges occurring on or after July 1, 2010, for IME. In connection with those periods and discharges, if more than one hospital incurs the residency training costs in a nonprovider setting, under certain circumstances, sections 5504(a)(3) and (b)(2) of the Affordable Care Act allow each hospital to count a proportional share of the training time that a resident spends training in that setting, as determined by a written agreement between the hospitals. When Congress enacted section 5504 of the Affordable Care Act, it retained the statutory language which provides that a hospital can only count the time so spent by a resident under an approved medical residency training program in its FTE count if that one single hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting.’’ In doing so, Congress also revised the statutory language in sections 5504(a)(1) and (b)(1) to explicitly make this longstanding substantive standard and requirement applicable to ‘‘cost reporting periods beginning before July 1, 2010’’ for direct GME, and to ‘‘discharges occurring on E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules or after October 1, 1997, and before July 1, 2010,’’ for IME (sections 1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act). Beginning at least as early as 1988, the Secretary consistently noted in the preamble of various rules that the statute only allowed a hospital to count the time that its residents spent training in a nonprovider site in the FTE resident count for direct GME and IME purposes if that single hospital incurred ‘‘all of substantially all’’ of the costs of the training program in that setting. For a full discussion of the longstanding substantive standard and requirement that a hospital can only count residents training if that one single hospital incurs all or substantially all of the costs for the training, we refer readers to the discussion in the November 24, 2010 final rule with comment period (75 FR 72134 through 72141), in the May 11, 2007 final rule (72 FR 26953 and 26969), and in the August 1, 2003 final rule (68 FR 45439). Section 5504(c) of the Affordable Care Act specifies that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of the date of the enactment of this Act on the issue of payment for indirect costs of medical education . . . or for direct graduate medical education costs. . . .’’ The date of enactment of the Affordable Care Act was March 23, 2010. In the November 24, 2010 final rule with comment period, we revised the regulations at § 412.105(f)(1)(ii)(E) for IME and §§ 413.78(f) and (g) for direct GME to reflect the changes made by section 5504 of the Affordable Care Act. Section 413.78(g) is the implementing regulation that corresponds to the statutory amendments set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act. The introductory regulatory language of § 413.78(g) explicitly states that paragraph (g) governs only ‘‘cost reporting periods beginning on or after July 1, 2010.’’ Paragraph (g)(5) of § 413.78 also expressly states that the paragraph is limited to ‘‘cost reporting periods beginning on or after July 1, 2010.’’ Accordingly, we have repeatedly stated, and we believe that the existing regulation makes plain, that paragraph (g) of § 413.78 ‘‘is explicitly made applicable only to ‘cost reporting periods beginning on or after July l, 2010,’ whereas earlier cost reporting periods are governed by other preceding paragraphs of § 413.78’’ (78 FR 50735). In addition, we also revised the definition of ‘‘all or substantially all of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the costs for the training program in the nonhospital setting’’ in the regulations at § 413.75(b) to reflect that both the statute and regulations require that, for cost reporting periods beginning on and after July 1, 2007 and before July 1, 2010, one hospital must by itself incur ‘‘all or substantially all of the costs’’ of the residents training in the nonprovider site in order for the hospital to receive Medicare IME and direct GME payment for that training. Finally, we also revised the IME regulations at § 412.105 to reflect these statutory amendments, by incorporating by reference § 413.78(g). Despite the fact that sections 5504(a) and (b) of the Affordable Care Act provide clear effective dates with respect to the amendments provided therein to sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act, and that the preamble discussion of the implementation of these provisions and further discussion of the statutory amendments in the November 24, 2010 final rule with comment period and in the August 19, 2013 final rule provide further explanation that, specifically, nothing in section 5504(c) overrides those effective date (75 FR 72136), we have received questions about the applicability of section 5504(c) and the associated regulation text at § 413.78(g)(6). Specifically, questions have been raised with respect to the applicability of sections 5504(c) of the Affordable Care Act and § 413.78(g)(6) of the regulations to periods prior to July 1, 2010, particularly if a hospital had, as of March 23, 2010, appealed an IME or direct GME issue for a settled cost reporting period occurring prior to July 1, 2010. As noted earlier, section 5504(c) of the Affordable Care Act provides that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of . . . [March 23, 2010] on the issue of payment for indirect costs of medical education . . . or for direct graduate medical education costs. . . .’’ Upon revisiting the existing regulation text, we determined that § 413.78(g)(6) was not written in a manner that is as consistent with section 5504(c) of the Affordable Care Act and reflective of our reading of that provision and our policy as it could be. Specifically, § 413.78(g)(6) states, ‘‘The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section cannot be applied in a manner that would require the reopening of settled cost reports, except those cost reports on which there is a jurisdictionally proper PO 00000 Frm 00177 Fmt 4701 Sfmt 4702 28153 appeal pending on direct GME or IME payments as of March 23, 2010.’’ In this proposed rule, we are reiterating our existing interpretation of the statutory amendments made by sections 5504(a), (b), and (c) of the Affordable Care Act and also proposing to clarify the regulation text implementing these provisions by revising the language at § 413.78(g)(6) to read more consistently with the language in section 5504(c) of the Affordable Care Act and to ensure no further confusion with respect to the applicability of section 5504(c) of the Affordable Care Act and § 413.78(g)(6) of the regulations. We believe that sections 5504(a) and (b) of the Affordable Care Act contained three primary directives (a fourth regarding recordkeeping requirement is tangential to this discussion): (1) Under sections 5504(a)(1) and (b)(1) of the Affordable Care Act (sections 1886(h)(4)(E)(i) and 1886(d)(5)(B)(iv)(I) of the Act), for ‘‘cost reporting periods beginning before July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after October 1, 1997, and before July 1, 2010’’ for IME, these sections explicitly retained the statutory language that provides that a hospital can only count the time so spent by a resident under an approved medical residency training program in its FTE count if a hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting’’; (2) under sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after July 1, 2010’’ for IME, these sections eliminated the ‘‘all or substantially all’’ requirement, instead requiring a hospital to incur the residents’ salaries and fringe benefits for the time spent at the nonprovider site; and (3) under sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after July 1, 2010’’ for IME, these sections created a new provision with regard to allowing more than one hospital to share the costs of residents training in a nonprovider setting under certain circumstances, in order for each hospital to count a proportional share of the FTE training time in the nonprovider setting. Separately from sections 5504(a) and (b) of the Affordable Care Act, section 5504(c) of the Affordable Care Act, as mentioned earlier, specifies that the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28154 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of’’ March 23, 2010, the date of the enactment of the Affordable Care Act, on the issue of payment for IME and direct GME. When we proposed to implement section 5504(c) in the August 3, 2010 proposed rule (75 FR 46385) and when we implemented section 5504(c) in the November 24, 2010 final rule with comment period (75 FR 72136), we had to consider what new meaning it was adding to sections 5504(a) and (b) of the Affordable Care Act because unlike, for example, section 5505 of the Affordable Care Act which has an effective date prior to enactment of the Affordable Care Act and, therefore, would apply to prior cost reporting periods, section 5504’s applicable effective date for the new standards it creates was July 1, 2010, a date that came after enactment of the Affordable Care Act and was fully prospective. As we stated in the November 24, 2010 final rule with comment period (75 FR 72136), ‘‘Section 5504(c) is fully prospective with an explicit effective date of July 1, 2010, for the new standards it creates. Nothing in section 5504(c) overrides that effective date. Section 5504(c) merely notes that the usual discretionary authority of Medicare contractors to reopen cost reports is not changed by the provisions of section 5504; it simply makes clear that Medicare contractors are not required by reason of section 5504 to reopen any settled cost report as to which a provider does not have a jurisdictionally proper appeal pending. It does not require reopening in any circumstance; and the new substantive standard is, in any event, explicitly prospective. We believe if Congress had wanted to require such action or to apply the new standards to cost years or discharges prior to July 1, 2010, it would have done so in far more explicit terms.’’ We also noted in that rule (75 FR 72139) that ‘‘[the] statute does not provide CMS discretion to allow the counting of resident time spent in shared nonprovider site rotations for cost reporting periods beginning prior to July l, 2010.’’ We continue to believe that Congress was clear in amending sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to provide for new standards to be applied only prospectively, effective for cost reporting periods beginning on or after, and discharges occurring on or after, VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 July 1, 2010. We also continue to believe that the plain meaning of section 5504(c) of the Affordable Care Act is that the Secretary is not required to reopen a cost report when there is no jurisdictionally proper appeal pending as of March 23, 2010, the date of the enactment of the Affordable Care Act, on the issue of payment for IME and direct GME. Therefore, we believe that section 5504(c) of the Affordable Care Act is merely a confirmation of the Secretary’s existing discretionary authority in one particular context, and that sections 5504(a) and (b) of the Affordable Care Act and their effective dates become all the more prominent, and are not affected by section 5504(c). As noted earlier, we revised the regulations at § 412.105(f)(1)(ii)(E) for IME, and § 413.78(g) for direct GME, to reflect the changes made by section 5504 of the Affordable Care Act in the November 24, 2010 final rule with comment period. We reiterate here that the introductory language of § 413.78(g) explicitly states that paragraph (g) governs only ‘‘cost reporting periods beginning on or after July 1, 2010’’ and paragraph (g)(5) also expressly states that the paragraph is limited to ‘‘cost reporting periods beginning on or after July 1, 2010’’ (78 FR 50735 and 78 FR 27639). As we noted before, we believe that the paragraphs of the regulations which precede paragraph (g), particularly paragraphs (c) through (f), consistent with the statute, make clear that a hospital may only count the time so spent by a resident under an approved medical residency training program in its FTE count, in connection with its pre-July l, 2010 cost reporting periods and pre-July l, 2010 patient discharges, if that one single hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting.’’ Separately, we believe that the new standards set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act and implemented by regulation at §§ 413.78(g) and 412.105(f)(1)(ii)(E), allowing cost sharing under certain circumstances do not ever apply to preJuly 1, 2010 cost reporting periods and pre-July l, 2010 patient discharges. Moreover, we continue to believe the language in paragraph (g)(6) (along with the remainder of paragraph (g)) only applies to cost reporting periods beginning on or after July 1, 2010 and does not apply retroactively to cost reporting periods beginning before July 1, 2010. We had intended that the language under § 413.78(g) do no more than simply paraphrase the language in section 5504(c) of the Affordable Care Act. PO 00000 Frm 00178 Fmt 4701 Sfmt 4702 Accordingly, we believe that it is apparent that the provisions of sections 5504(a)(3) and (b)(2) of the Affordable Care Act are not to be applied prior to July l, 2010, irrespectively of whether a hospital may have had a jurisdictionally proper appeal pending as of March 23, 2010, on an IME or direct GME issue from a cost reporting period occurring prior to July 1, 2010. In this proposed rule, we are reiterating our existing interpretation of the statutory amendments made by sections 5504(a) and (b) of the Affordable Care Act and also are proposing to clarify the regulatory text that implements these provisions by revising the § 413.78(g)(6) to be more consistent with the language at section 5504(c) of the Affordable Care Act. We are proposing to revise the regulatory language to read as follows: ‘‘The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section shall not be applied in a manner that requires reopening of any settled cost reports as to which there is not a jurisdictionally proper appeal pending as of March 23, 2010, on direct GME or IME payments. Cost reporting periods beginning before July 1, 2010 are not governed by paragraph (g) of this section.’’ The IME regulations at § 412.105(f)(1)(ii)(E) include a reference to § 413.78(g)(6); therefore, no proposed change is needed to this section. 5. Proposed Changes to the Review and Award Process for Resident Slots Under Section 5506 of the Affordable Care Act In the past, if a teaching hospital closed, its direct GME and IME FTE resident cap slots would be ‘‘lost’’ because those cap slots are associated with a specific hospital’s Medicare provider agreement, which would be retired upon the hospital’s closure. Under existing regulations at § 413.79(h) for direct GME and § 412.105(f)(1)(ix) for IME, a hospital that is training FTE residents at or in excess of its FTE resident caps and takes in residents displaced by the closure of another teaching hospital may receive a temporary increase to its FTE resident caps so that it may receive direct GME and IME payment associated with those displaced FTE residents. However, those temporary FTE resident caps are tied to those specific displaced FTE residents, and the temporary caps expire when those displaced residents complete their training program. Section 5506 of the Affordable Care Act amended section 1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital’s FTE resident caps. The Secretary is directed to ensure that the aggregate number of FTE resident cap slots distributed shall be equal to the aggregate number of slots in the closed hospital’s direct GME and IME FTE resident caps, respectively. For a detailed discussion of the regulations implementing section 5506 of the Affordable Care Act, we refer readers to the November 24, 2010 final rule with comment period (75 FR 72212 through 72238) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through 53448). a. Effective Date of Slots Awarded Under Section 5506 of the Affordable Care Act In distributing slots permanently under the provisions of section 5506 of the Affordable Care Act, section 5506(d) provides that ‘‘the Secretary shall give consideration to the effect of the amendments made by this section on any temporary adjustment to a hospital’s FTE cap under § 413.79(h) . . . (as in effect on the date of enactment of this Act) in order to ensure that there is no duplication of FTE slots . . .’’ In consideration of this statutory language, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53437), we stated that in distributing slots permanently under section 5506, we would be cognizant of the number of FTE residents for whom a temporary FTE cap adjustment was provided under existing regulations at § 413.79(h), and when those residents will complete their training, at which point the temporary slots associated with those displaced residents would then be available for permanent redistribution. Therefore, in initially developing ranking criteria and application materials that we would use to award available slots, we considered how to interpret this statutory language at section 5506(d) of the Affordable Care Act within the context of our existing GME regulations and section 5506’s amendment to section 1886(h) of the Act generally. In the November 24, 2010 final rule with comment period and the FY 2013 IPPS/LTCH PPS final rule (75 FR 72216 and 77 FR 53436, respectively), we discussed the various ranking criteria that we would use for hospitals applying for slots from closed hospitals. Currently, if after distributing the slots from a closed hospital to increase the FTE caps for applying hospitals that fall within Ranking Criteria One, Two, and Three, there are still excess slots available and any of those excess slots VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 are associated with displaced residents for whom temporary cap adjustments under § 413.79(h) are in place, any slots awarded to hospitals that fall within Ranking Criteria Four through Eight are permanently assigned only once the displaced residents have completed their training and the temporary cap adjustments associated with those residents have expired. That is, in applying the requirement for ‘‘no duplication of FTE slots’’ set forth in section 5506(d), we currently consider all temporary cap adjustments received by hospitals on a national basis and not specifically the hospital that is applying for cap slots under section 5506, when deciding the effective date for slots permanently awarded to hospitals applying under Ranking Criteria Four through Eight. Specifically, in the November 24, 2010 final rule with comment period, we stated that we believe the ‘‘no duplication of FTE slots’’ requirement applies across all hospitals. Therefore, although a hospital may not have received a temporary cap adjustment under § 413.79(h), other hospitals may have taken in residents and received temporary cap adjustments for the same program, and we believed that the appropriate policy was to delay the slots associated with that program from being permanently distributed until it is known that any and all temporary cap adjustments for those slots have expired (75 FR 72227) Applying this policy to an example, if Hospital A is training displaced residents and is receiving a temporary cap adjustment under § 413.79(h) for training those residents and Hospital B, which is not receiving a temporary cap adjustment for training any displaced residents, has applied under Ranking Criterion Five to expand its internal medicine program, as explained in the November 24, 2010 final rule with comment period, we would only award permanent slots under section 5506 to Hospital B on a flow basis; that is, effective after each displaced resident completes his/her training, and, therefore, the temporary cap adjustments associated with that resident expire at Hospital A. However, the policy of applying the ‘‘no duplication of FTE slot’’ requirement at section 5506(d) of the Affordable Care Act to all hospitals rather than simply to each specific hospital that is applying for slots has thus far proven to be a very complex process due to the number of displaced residents and the timing of multiple graduation dates which must be tracked and considered when awarding slots on a permanent basis. We believe this PO 00000 Frm 00179 Fmt 4701 Sfmt 4702 28155 practice has delayed the awarding of slots and is also unnecessarily burdensome for hospitals applying under Ranking Criteria Four through Eight that are not receiving any cap adjustments for training displaced residents under § 413.79(h). We believe the current policy that we apply for ‘‘no duplication of FTE slots’’ is unnecessarily burdensome for these hospitals because, instead of receiving their permanent slots under section 5506 as soon as possible, the hospitals may receive their section 5506 awards with staggered effective dates due to the graduation dates of displaced FTE residents training at other hospitals that did receive temporary adjustments under § 413.79(h). While we believe that awarding permanent slots to a hospital that is simultaneously receiving a temporary cap adjustment for training displaced FTE residents under § 413.79(h) would clearly be a duplication of FTE slots and contrary to the statutory directive, we believe there is flexibility in interpreting this statutory language and that the statute does not require such a policy to be applied to hospitals that are not receiving temporary cap adjustments under § 413.79(h). Furthermore, in considering the specific statutory language regarding ‘‘no duplication of FTE slots,’’ section 5506(d) in part provides that ‘‘The Secretary of Health and Human Services shall give consideration to the effect of the amendments made by this section on any temporary adjustment to a hospital’s FTE cap under section 413.79(h) of title 42, Code of Federal Regulations (as in effect on the date of enactment of this Act) in order to ensure that there is no duplication of FTE slots.’’ Because this language refers to ‘‘a hospital,’’ we believe the statute provides us with the flexibility to apply the ‘‘no duplication of FTE slots’’ requirement on a hospital-specific basis, considering separately whether each hospital did or did not receive a temporary cap adjustment under § 413.79(h), rather than on a national all-hospital basis. Bearing in mind the statutory language and our experience to date in awarding slots as well as the unnecessary burden placed on hospitals that are receiving section 5506 slots, but are not receiving temporary cap adjustments under § 413.79(h), we believe it is appropriate to propose a policy that would provide for a more efficient and faster method for awarding of slots to hospitals applying under Ranking Criteria Four through Eight. Therefore, we are proposing that, effective for section 5506 application E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28156 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules rounds announced on or after October 1, 2014, for purposes of applying the requirement for ‘‘no duplication of FTE slots,’’ we would only require that there be no duplication of FTE slots on a hospital-specific basis. That is, in determining the effective date for slots awarded permanently under section 5506, we would only be concerned with whether the hospital that is applying for slots is also receiving a temporary cap adjustment under § 413.79(h) for training displaced residents. When awarding slots to the applying hospital, we would not be concerned whether any other hospital is receiving a temporary cap adjustment for training displaced residents under § 413.79(h). For example, if Hospital A is receiving a temporary cap adjustment under § 413.79(h) for training displaced residents in its general surgery program but is applying under Ranking Criterion Five to start a pediatrics program and Hospital B is not receiving a temporary cap adjustment for training displaced residents and is applying under Ranking Criterion Eight to expand a cardiology program, in awarding section 5506 slots, we would only allow Hospital A to receive a permanent adjustment to its FTE cap for training residents in its pediatrics program once its temporary adjustments for the displaced residents training in the general surgery program have expired. We would not consider displaced residents when awarding section 5506 slots to Hospital B. In conjunction with our proposal to interpret the ‘‘no duplication of FTE slots’’ requirement to apply on a hospital-specific basis to hospitals that are receiving temporary cap adjustments under § 413.79(h), we are proposing to amend the effective dates of section 5506 slots received under Ranking Criteria Four through Eight for those hospitals that are not receiving temporary cap adjustments under § 413.79(h). (We refer readers to section IV.K.5.c. of the preamble of this proposed rule where we discuss our proposal to amend Ranking Criteria Seven and Eight.) Existing policy requires that slots awarded under Ranking Criteria Four through Eight for expanding an existing residency training program or starting a new residency training program are effective the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after displaced residents complete their training. If a hospital is awarded slots under Ranking VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Criterion Eight for cap relief, slots are effective the date of CMS’ award announcement, or the July 1 after displaced residents complete their training, whichever is later. However, because we are proposing an alternative approach to interpreting section 5506(d) that would permit us to apply the ‘‘no duplication of FTE slots’’ requirement on a hospital-specific basis, we are proposing to change the effective date for slots received under Ranking Criteria Four through Eight so that if a hospital is not receiving a temporary cap adjustment under § 413.79(h), the slots awarded under section 5506 would be effective when the hospital can demonstrate to its MAC that the slots needed for a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). If a hospital is awarded slots under Ranking Criteria Four through Eight and is receiving a temporary cap adjustment to train displaced residents under § 413.79(h), the current policy would apply such that the slots are awarded on a permanent basis, the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after an equivalent amount of a displaced FTE resident(s) complete their training. For example, assume in a hypothetical situation that there is a closed teaching hospital, and that another hospital takes in two displaced FTE residents, for which the hospital is receiving a temporary cap adjustment under § 413.79(h). One resident is graduating on June 30, 2016, and the second resident is graduating on June 30, 2018. Assume that when the section 5506 Round is announced, the hospital also applies for two slots to expand an internal medicine program under Ranking Criterion Five. In January of 2017, CMS awards two permanent slots to the hospital under Ranking Criterion Five. For the program year starting July 1, 2017, the hospital successfully demonstrates to the MAC that it filled the two additional internal medicine positions. Because one displaced FTE resident already graduated on June 30, 2016, the MAC may approve one slot on a permanent basis effective July 1, 2017. However, the hospital would have to wait until July 1, 2018, to receive from the MAC the permanent slot for the second displaced internal medicine resident because the second displaced PO 00000 Frm 00180 Fmt 4701 Sfmt 4702 FTE resident is not graduating until June 30, 2018. We are not proposing any changes to the effective date for slots awarded under Ranking Criterion One, Ranking Criterion Two, or Ranking Criterion Three. Consistent with existing policy, if a hospital is applying under Ranking Criterion One or Ranking Criterion Three and is not receiving a temporary cap adjustment for training displaced residents under § 413.79(h), the effective date of the section 5506 slots is the date of the hospital closure. If a hospital is applying under Ranking Criterion One or Ranking Criterion Three and is receiving a temporary cap for training displaced residents under § 413.79(h), the effective date of the section 5506 slots is after the displaced resident(s) graduate. If a hospital is receiving a temporary cap for training displaced residents under § 413.79(h), and is applying under Ranking Criterion One or Ranking Criterion Three and is also separately applying under Ranking Criterion Four or subsequent Ranking Criteria, for slots awarded under Ranking Criteria One or Three, the effective date of the section 5506 slots is after the displaced resident(s) graduate. For slots awarded under Ranking Criteria Four or subsequent Ranking Criteria, the slots are awarded the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after an equivalent amount of a displaced FTE resident(s) at the hospital complete their training. Therefore, for such a hospital, the effective dates of slots awarded under Ranking Criteria One/Three, and Ranking Criteria Four through Eight might coincide. Also, consistent with existing policy, if a hospital is applying under Ranking Criterion Two, the effective date of the permanent award of section 5506 slots is the date of the hospital closure. We discuss these existing policies in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53437 through 53445). The following list includes the current and proposed ranking criteria along with the current and proposed effective dates. • Current Ranking Criterion One: The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff). • Proposed Ranking Criterion One: The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff). The applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS proposed rule on the CMS Web site. (This language reflects the proposed modification of Ranking Criterion One. We refer readers to section IV.K.5.c. of the preamble of this proposed rule where we discuss this proposed modification.) Æ Current Policy: If the hospital is receiving a temporary cap adjustment, slots are effective the day after the graduation date(s) of actual displaced resident(s). If the hospital is not receiving a temporary cap adjustment, slots are effective with the date of the hospital closure. Æ Proposed Policy: No change. • Current Ranking Criterion Two: The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the closed hospital under the terms of that affiliation agreement. • Clarified Ranking Criterion Two: The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. (This language reflects our clarification in this proposed rule regarding inclusion of emergency Medicare GME affiliation agreements in Ranking Criterion Two. We refer readers to section IV.K.5.d. of the preamble of this proposed rule where we discuss this clarification.) Æ Current Policy: Slots are effective with the date of the hospital closure. Æ Proposed Policy: No change. • Ranking Criterion Three: The applying hospital took in residents displaced by the closure of the hospital, but is not assuming an entire program or programs, and will use the additional slots to continue training residents in the same programs as the displaced residents, even after those displaced residents complete their training (that is, the applying hospital is permanently expanding its own existing programs). Æ Current Policy: If the hospital is receiving temporary cap adjustment, slots are effective the day after the graduation date(s) of actual displaced resident(s). If the hospital is not receiving a temporary cap adjustment, slots are effective with the date of the hospital closure. PO 00000 Frm 00181 Fmt 4701 Sfmt 4702 28157 Æ Proposed Policy: No change. • Ranking Criterion Four: The program does not meet Ranking Criteria 1, 2, or 3, and the applying hospital will use additional slots to establish a new or expand an existing geriatrics residency program. • Ranking Criterion Five: The program does not meet Ranking Criteria 1 through 4, the applying hospital is located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. • Ranking Criterion Six: The program does not meet Ranking Criteria 1 through 5, and the applying hospital is not located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. • Current Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program and/or for cap relief. • Proposed Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. (This language reflects our proposal in this proposed rule to revise Ranking Criteria Seven and Eight. We refer readers to section IV.K.5.c. of the preamble of this proposed rule where we discuss our proposals to amend Ranking Criteria Seven and Eight.) Æ Current Policy for Ranking Criteria Four through Seven: The later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled, and therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after displaced residents complete their training. Æ Proposed Policy for Ranking Criterion Four through Proposed Ranking Criterion Seven: If the hospital is receiving a temporary cap adjustment for training displaced residents, the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled, and therefore, are needed as of a particular date (usually E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28158 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules July 1, possibly retroactive), or the July 1 after displaced residents complete their training. If the hospital is not receiving a temporary cap adjustment, when the hospital can demonstrate to the MAC that the slots needed for a new program or program expansion are actually filled, and therefore, are needed as of a particular date (usually July 1, possibly retroactive). • Current Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program or for cap relief. • Proposed Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. (This language reflects our proposal in this proposed rule to revise Ranking Criterion Eight. We refer readers to section IV.K.5.c. of the preamble of this proposed rule where we discuss our proposals to amend Ranking Criterion Eight.) Æ Current Policy: If slots are for starting or expanding a nonprimary care or nongeneral surgery program, the effective date is same as that for Ranking Criteria Four through Seven. If slots are for cap relief (under current policy), the effective date is the effective date of CMS’ award announcement, or after displaced residents complete their training, whichever is later. Æ Proposed Policy for Proposed Ranking Criterion Eight: If the hospital is receiving a temporary cap adjustment for training displaced residents, the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after displaced residents complete their training. If the hospital is not receiving a temporary cap adjustment, when the hospital can demonstrate to the MAC that the slots needed for a new program or program expansion are actually filled, and therefore, are needed as of a particular date (usually July 1, possibly retroactive). In summary, we are proposing that, effective for section 5506 application rounds announced on or after October 1, 2014, the statutory provision at section 5506(d) requiring the Secretary to consider temporary cap adjustments under § 413.79(h) and to ensure no duplication of FTE slots, be interpreted in a manner such that the requirement for ‘‘no duplication of FTE slots’’ is VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 applied on a hospital-specific basis rather than across all hospitals receiving temporary cap adjustments under § 413.79(h). Consistent with this proposed change, we are proposing to amend the effective date for slots received under Ranking Criteria Four through Eight so that if a hospital is not receiving a temporary cap adjustment under § 413.79(h), the slots awarded under section 5506 would be effective when the hospital can demonstrate to its MAC that the slots needed for a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). b. Proposal To Remove Seamless Requirement Under current policy, if a hospital is applying under Ranking Criterion One or Three, the hospital must show that it is seamlessly replacing displaced FTE residents with new FTE residents once the displaced residents graduate (75 FR 72219 and 72221 through 72222). We have stated that in instances where a hospital seamlessly operates an entire program or part of a program from the closed hospital (or takes over an entire program prior to the hospital’s closure), such a hospital is demonstrating a strong commitment to maintain GME programs in the community for the long term and should we awarded slots under higher ranking criteria (75 FR 72216). Therefore, we required that, in order to receive slots under Ranking Criterion One and Three, the applying hospital must demonstrate that upon graduation of the displaced FTE residents that it is training, the slots held by those displaced FTEs are seamlessly replaced with new FTE residents (75 FR 72219 and 72221 through 72222). In the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53441), in response to concerns associated with the seamless requirement and timeline used by the National Resident Match Program or other resident match services, we revised the seamless requirement. We stated that in the instance where a teaching hospital closed after December 31 of an academic year, in order for a hospital to qualify under Ranking Criterion One or Three for cap slots associated with displaced FTE residents who will graduate June 30 of the academic year in which the applying hospital took in the displaced FTE residents, the applying hospital must be able to demonstrate that it will fill slots vacated by displaced FTE residents by July 1 of the second academic year following the hospital closure. However, in the instance where a teaching hospital closed before PO 00000 Frm 00182 Fmt 4701 Sfmt 4702 December 31 of an academic year, in order for a hospital to qualify under Ranking Criterion One or Three for cap slots associated with displaced FTE residents who will graduate June 30 of the academic year in which the applying hospital took in the displaced FTE residents, the applying hospital must be able to demonstrate that it will seamlessly fill slots vacated by displaced FTE residents by that July 1; that is, the day immediately after the June 30 that the displaced FTE residents graduate (77 FR 53441 through 53442). We also revised the CMS Application Form to instruct a hospital applying under Ranking Criterion One or Three to list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents (77 FR 53446). Because Ranking Criteria One and Three fall under Demonstrated Likelihood Criterion 2, the hospital is taking over all of part of an existing residency program from the closed hospital, or expanding an existing residency training program, the requirement to include a list with the names and graduation dates of specific displaced residents who have been or will be seamlessly replaced was added under Demonstrated Likelihood Criterion 2 on the CMS Application Form. In addition to the match deadlines associated with the National Resident Matching Program and match deadlines associated with matching into osteopathic programs, we have recently been made aware of other match deadlines associated with certain fellowship programs. From the experience we have had so far in reviewing section 5506 applications, where we have observed the complexity of tracking various match deadlines as well as the intersection between these deadlines and when the section 5506 awards are announced by CMS, we are proposing to remove the seamless requirement for slots awarded under Ranking Criterion One and Three effective for section 5506 application rounds announced on or after October 1, 2014. We are not proposing to make any other additional changes to Ranking Criterion One or Three; that is, the hospital must still be training displaced residents and must either take over or have taken over an entire program from the closed hospital and continue operating that program in the same manner in which it was operated by the closed hospital or the hospital must take over part of a closed hospital’s program and permanently expand its own program as a result of training displaced E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules residents. Hospitals would continue to be required to submit supporting documentation when applying under Ranking Criterion One or Three that indicates that they have made a commitment to take over the closed hospital’s program or that they have made the commitment to permanently expand their own residency training program resulting from taking over part of a closed hospital’s program. In determining the effective date of slots awarded under Ranking Criterion One or Three where the hospital has been training residents that were displaced by the closed hospital and receiving a temporary cap adjustment under § 413.79(h), the hospital would work with its MAC to determine when it could be permanently awarded the slots based on the graduation dates of the displaced residents it is training. Consistent with our proposal, we are proposing to remove the following requirement under Demonstrated Likelihood Criterion 2 on the CMS Application Form: ‘‘Hospitals applying for slots under option (a) which correlates to Ranking Criterion 1 or (b) which correlates to Ranking Criterion 3 must list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents. The list may be added as an attachment to this application.’’ We are proposing to replace this requirement with the following requirement under Demonstrated Likelihood Criteria 1 and 2’’ ‘‘Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (Y/N)’’ so that we are aware which hospitals are receiving temporary cap adjustments for training displaced residents under § 413.79(h), and when we award slots, we would know which hospitals to instruct to work with their MACs to determine when the slots could be permanently awarded to them based on the graduation dates of the displaced residents they are training. In summary, we are proposing to remove the seamless requirement currently included as part of Ranking Criterion One or Three. We also are proposing to remove from the CMS Application Form, the following requirement: ‘‘Hospitals applying for slots under option a) which correlates to Ranking Criterion 1 or b) which correlates to Ranking Criterion 3 must list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 seamlessly replaced by new residents. This list may be added as an attachment to this application.’’ c. Proposed Revisions to Ranking Criteria One, Seven, and Eight for Applications Under Section 5506 In the November 24, 2010 final rule with comment period (75 FR 72223), we finalized the Ranking Criteria within each of the three first statutory priority categories (that is, same or contiguous CBSAs, same State, and same region) to be used to rank applications for assignment of slots under section 5506 of the Affordable Care Act. For each application, we assigned slots based on Ranking Criteria, with Ranking Criterion One being the highest ranking and Ranking Criterion Seven being the lowest. For a detailed discussion of the ranking categories, we refer readers to the November 24, 2010 final rule with comment period (75 FR 72212 through 72240). After reviewing applications submitted during the first section 5506 application process (those applications that were due to CMS on April 1, 2011), we observed that the overwhelming majority of applications fell under Ranking Criterion Seven; that is, the applying hospital seeks the slots for purposes that do not fit into any of Ranking Criterion One through Ranking Criterion Six. These applications included applications from hospitals that applied for FTE cap slots for both primary care and/or general surgery and for nonprimary care specialties as well as applications for general cap relief. The sheer number of applications we received under Ranking Criterion Seven indicate a need to further prioritize among the applicants that would have qualified under Ranking Criterion Seven. Therefore, in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53434 through 53437), we finalized changes to the Ranking Criteria, replacing Ranking Criterion Seven with two separate Ranking Criteria (Ranking Criterion Seven and Ranking Criterion Eight) resulting in a total of eight Ranking Criteria. Under the Ranking Criteria, as modified by the FY 2013 IPPS/LTCH PPS final rule, a hospital that is applying both for the purpose of establishing or expanding primary care or general surgery programs, and in addition is requesting slots for the purpose of establishing or expanding nonprimary care or nongeneral surgery programs and/or for cap relief must submit an application requesting additional FTE slots for its primary care or general surgery programs under Ranking Criterion Seven. The hospital’s request for additional FTE slots to PO 00000 Frm 00183 Fmt 4701 Sfmt 4702 28159 establish or expand a nonprimary care or nongeneral surgery program and/or for additional FTE slots for cap relief would then be made under Ranking Criterion Eight. Prior to this change, if a hospital applied for additional FTE slots to establish or expand both a primary care or general surgery program in addition to a nonprimary care or nongeneral surgery program and/or for additional FTE slots for cap relief, all of its applications (with the exception of Ranking Criteria One through Three) would fall under Ranking Criteria Seven. For a complete list of the Ranking Criteria, we refer readers to section IV.K.5.a. of the preamble of this proposed rule, which discusses the background for preservation of resident cap positions from closed hospitals under section 5506 of the Affordable Care Act. After reviewing applications and making awards under several more rounds of section 5506 applications, we have observed that, as hospital closings continue to occur, there has been a significant increase in the time between a hospital’s closure and the announcement of section 5506 awards by CMS. We believe that this delay is partly due to the administratively burdensome task of processing, reviewing, and responding to such a large number of applications for each hospital closure, or each round of section 5506 awards. When implementing section 5506 in the November 24, 2010 final rule with comment period (75 FR 72212 through 72249), we initially envisioned the reviewing of applications and awarding of section 5506 FTE slots as being a more streamlined and expedient process. However, as a practical matter, we have found that process has been much more resource and time intensive than we had originally anticipated. This is partly due to the time and resources needed to properly apply the process established by CMS in reviewing section 5506 applications and awarding FTE cap slots. Since the initial implementation of section 5506, we have attempted to be responsive to these unexpected delays by refining the ranking criteria to make the review process less administratively burdensome. However, these changes did not alleviate the process to the desired extent. Furthermore, we have observed that, while many of the applications submitted to CMS are applications requesting FTE slots for purposes of general cap relief, we have more often than not awarded no slots at all for cap relief. This is due in large part to the limited number of slots E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28160 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules available (many of the closed teaching hospitals did not have large FTE resident caps) and an overwhelming demand for those slots from applicants who apply for FTE slots for reasons other than cap relief. Since we finalized the modified Ranking Criterion Seven and added Ranking Criterion Eight in the FY 2013 IPPS/LTCH PPS final rule, we have announced three new rounds of section 5506 applications due to the closures of six hospitals. We have received a total of 424 applications from hospitals seeking cap relief. Of those 424 applications, only 6 applications were ultimately awarded FTE slots, which is only 1.42 percent of the total cap relief applications. We believe that the ratio of cap relief awardees to cap relief applications does not warrant the administrative burden and the delay in announcements of section 5506 awards that result from the large number of cap relief applications submitted to CMS that are invariably denied. Therefore, in an effort to streamline the review process and to facilitate publishing section 5506 awards in a more timely manner, we are proposing to modify Ranking Criterion Eight so that Ranking Criterion Eight would only apply to hospitals seeking FTE slots to establish or expand a nonprimary care or nongeneral surgery program. Ranking Criterion Eight would no longer be applicable to hospitals seeking FTE cap slots for cap relief. Our proposal to eliminate section 5506 awards of FTE slots for cap relief is consistent with current policy goals to increase training in primary care and general surgery. By proposing to eliminate awarding of FTE slots for residents that are already being trained by a hospital, there will be more FTE resident slots available to award to other hospitals seeking to establish or expand a primary care or general surgery program under Ranking Criteria Four through Seven. Accordingly, we are proposing to revise Ranking Criterion Eight so that it reads as follows: Proposed Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. In light of the modifications we are proposing to Ranking Criterion Eight, we believe it is also necessary to modify the language of proposed Ranking Criterion Seven to specify the types of applications that would properly be made under this Ranking Criterion; that is, we are proposing to remove the reference to cap relief from Ranking Criterion Seven so that it read as follows: VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Proposed Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. Separately, we also are proposing a change related to Ranking Criterion One. Current ranking Criterion One is for an applying hospital that assumed an entire program or programs from the hospital that closed. We are proposing to revise Ranking Criterion One to provide priority to hospitals in one scenario. Section 5503 of the Affordable Care Act amended section 1886(h) of the Act by adding new paragraph (8), which provided for the permanent reduction and distribution of residency slots. Section 1886(h)(8)(A)(ii) of the Act provides specific exceptions to the application of the reduction at section 1886(h)(8)(A)(i) of the Act, and expressly states: ‘‘Exceptions—This subparagraph shall not apply to (I) a hospital located in a rural area (as defined in subsection (d)(2)(D)(ii)) with fewer than 250 acute care inpatient beds.’’ The November 24, 2010 final rule with comment period (75 FR 72147) describes the agency’s interpretation of this statutory provision. As of the time that this proposed rule is posted on the CMS Web site, we are aware of one instance in which CMS erroneously reduced a hospital’s FTE resident cap contrary to this statutory exception. We are proposing to amend Ranking Criterion One under section 5506 to provide priority to a hospital which had FTE resident cap slots erroneously removed under section 5503 contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act. We are proposing to revise Ranking Criterion One as follows: b Ranking Criterion One. The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff). The applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting PO 00000 Frm 00184 Fmt 4701 Sfmt 4702 of the FY 2015 IPPS proposed rule on the CMS Web site. d. Clarification to Ranking Criterion Two Regarding Emergency Medicare GME Affiliation Agreements Ranking Criterion Two gives preference to applying hospitals that received slots under the terms of a Medicare GME affiliation agreement from the closed hospital. Under section 1886(h)(4)(H)(ii) of the Act, hospitals may form a Medicare GME affiliated group and elect to aggregate their respective FTE resident caps and apply them on an aggregate basis. The regulations at 42 CFR 413.75(b) and 413.79(f) implemented this statutory provision, providing specific rules for sharing FTE resident cap slots among members of the Medicare GME affiliated group, one such rule being that member hospitals must have a ‘‘shared rotational arrangement.’’ A ‘‘shared rotational arrangement’’ is defined at 42 CFR 413.75(b) as a residency training program under which a resident(s) participates in training at two or more hospitals in that program. Specifically, Ranking Criterion Two states the following: Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. A question has been raised as to whether hospitals that were members of an emergency Medicare GME affiliation agreement with the closed hospital prior to its closure may be considered under Ranking Criterion Two as well. The regulations at 42 CFR 413.79(f)(7) E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules govern emergency Medicare GME affiliation agreements, which are applicable in the instance where a statutory section 1135 waiver is invoked. In this situation, due to emergency conditions, the ‘‘home’’ hospital is unable to continue to train its residents. Therefore, under the terms of the emergency Medicare GME affiliation agreement, the ‘‘home’’ hospital may agree to temporarily transfer FTE resident cap slots to ‘‘host’’ hospitals that would train the displaced residents during the emergency period. In the November 24, 2010 final rule with comment period (75 FR 72216), we stated that ‘‘section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a) of the Affordable Care Act, directs the Secretary to give preference to hospitals that are members of the same affiliated group as the hospital that closed. We believe that, generally, if the applying hospital was affiliated to receive slots from the hospital that closed, then the applying hospital was relying on that number of FTE resident slots that it received in order to maintain its fair share of the cross-training of the residents in the jointly operated programs. In the absence of those slots received from the closed hospital, the applying hospital may not be able to continue training that number of FTE residents, and those same residents would not only be displaced from the closed hospital, but might essentially become ‘displaced’ from the affiliated hospitals in which they were used to doing a portion of their training. Accordingly, we proposed this ranking criterion to allow hospitals that were affiliated with the closed hospitals to at least maintain their fair share of the training of the residents in the programs that they had jointly operated with the closed hospital.’’ In determining whether Ranking Criterion Two may encompass emergency Medicare GME affiliation agreements, we considered the key differences and similarities between regular Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements. Regarding the differences, in the case of emergency affiliations, there may not have been historical cross-training or jointly operated programs between the applicant hospital and the hospital that closed. Furthermore, after the natural disaster that precipitates the section 1135 waiver, the ‘‘home’’ hospital would be in no condition to train its share of residents, which is why the ‘‘shared rotational arrangement’’ requirements at 42 CFR 413.79(f)(2) for regular Medicare GME affiliation agreements are waived for emergency VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Medicare GME affiliation agreements. However, it is often true with emergency affiliations that a hospital agrees to take over the training of the hospital in need, ‘‘receiving’’ FTE cap slots and residents from the ‘‘home’’ hospital, thereby creating the training relationship. In the event where, following the disaster that triggers the section 1135 waiver, a hospital should actually close, the ‘‘host’’ hospital that accepted the residents perhaps might even continue to train its share of the residents in the program after the hospital closes. Therefore, emergency affiliation agreements are similar to regular affiliation agreements in that the ‘‘host’’ hospital received FTE cap slots from the ‘‘home’’ hospital to train the ‘‘home’’ hospital’s residents. Further, in the event that the ‘‘home’’ hospital closes, triggering a Round of section 5506, the ‘‘host’’ hospital also would need those FTE cap slots in order to continue training the share of its program for which it had taken responsibility under the emergency Medicare GME affiliation agreement before the ‘‘home’’ hospital closed. As we stated in the November 24, 2010 final rule with comment period (75 FR 72219 through 72220), ‘‘we believe the intent of section 5506 is to promote continuity and limit disruption in residency training. In that light, we believe it is logical to give preference to a hospital that received slots under the terms of the Medicare GME affiliation agreement so that the hospital could continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, avoiding the displacement of even more residents. . . .’’ We further stated that we ‘‘. . . are only giving preference to hospitals that received slots from the closed hospital under the terms of the Medicare GME affiliation agreement, so that the hospital could continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement. . . .’’ Finally, we stated ‘‘that the hospital or hospitals that were most recently affiliated with and received slots from the closed hospital would have the most immediate need for those slots.’’ While the circumstances may vary, we believe that ‘‘host’’ hospitals under emergency Medicare GME affiliation agreements could fulfill much of the same role as hospitals that received slots from the hospital that closed under regular Medicare GME affiliation agreements. That is, continuity of training would be encouraged and disruption would be mitigated, to the extent that the ‘‘host’’ hospital could PO 00000 Frm 00185 Fmt 4701 Sfmt 4702 28161 document to CMS that it would continue to ‘‘train at least the number of FTE residents it had trained under the terms of the’’ emergency Medicare GME affiliation agreement, and in doing so, would demonstrate it has the ‘‘most immediate need for those slots’’ as compared to another hospital. Given these similarities between regular Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements, we believe that the existing Ranking Criterion Two may be read to already encompass emergency Medicare GME affiliation agreements. Accordingly, we are clarifying the existing Ranking Criterion Two to include emergency Medicare GME affiliation agreements, to read as follows: b Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. We are making these changes to Ranking Criterion Two in the Section 5506 Application Form. We are including below a revised Section 5506 Application Form that reflects all of the proposed changes discussed above. E:\FR\FM\15MYP2.SGM 15MYP2 28162 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules CMS Application Form As Part of the Application for the Increase in a Hospital’s FTE Cap(s) under Section 5506 of the Affordable Care Act: Preservation of FTE Cap Slots from Teaching Hospitals that Close Directions: Please fill out the information below for each residency program for which the applicant hospital intends to use the increase in its FTE cap(s). If the hospital is applying for slots for a particular program, but the requested slots in that program qualify under two different ranking criteria, submit two separate application forms accordingly. If the hospital is applying for slots associated with a Medicare GME affiliation agreement with a hospital that closed, that application must be submitted separately from an individual program request. NAME OF HOSPITAL: lllllll MEDICARE PROVIDER NUMBER (CCN): lllllllllllllll NAME OF MEDICARE CONTRACTOR: llllllllllllllllll l CORE-BASED STATISTICAL AREA (CBSA in which the hospital is physically located—write the 5 digit code here): lllllllllllllll COUNTY NAME (in which the hospital is physically located): llllllll Complete the following, as applicable: 1. Name of Specialty Training Program: llllllllllllll 2. Medicare GME Affiliated Group: ll (Check one): b Allopathic Program b Osteopathic Program NUMBER OF FTE SLOTS REQUESTED FOR SPECIFIC PROGRAM (OR OVERALL IF SEEKING SLOTS ASSOCIATED WITH A MEDICARE GME AFFILIATED GROUP) AT YOUR HOSPITAL: Direct GME:llll IME:llll mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Section A: Demonstrated Likelihood Criteria (DLC) of Filling the FTE Slots The applicant hospital must provide documentation to demonstrate the likelihood of filling requested slots under section 5506 within the 3 academic years immediately following the application deadline to receive slots after a particular hospital closes. Please indicate the specific use for which you are requesting an increase in your hospital’s FTE cap(s). If you are requesting an increase in the hospital’s FTE cap(s) for a combination of DLC1, DLC2, or DLC3, you must complete a separate CMS Application Form for each DLC and specify the distinct VerDate Mar<15>2010 21:35 May 14, 2014 Jkt 232001 criterion from the list below within each Form. Demonstrated Likelihood Criterion 1: Establishing a New Residency Program The hospital does not have sufficient room under its direct GME FTE cap or IME FTE cap, or both, and will establish a new residency program in the specialty. Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (Y/N)llll The hospital must check at least one of the following: Application for approval of the new residency program has been submitted to the ACGME, AOA or the ABMS (The hospital must attach a copy.) The hospital has submitted an institutional review document or program information form concerning the new program in an application for approval of the new program. (The hospital must attach a copy.) The hospital has received written correspondence from the ACGME, AOA or ABMS acknowledging receipt of the application for the new program, or other types of communication from the accrediting bodies concerning the new program approval process (such as notification of site visit). (The hospital must attach a copy.) The hospital has other documentation demonstrating that it has made a commitment to start a new program (The hospital must attach a copy.) Demonstrated Likelihood Criterion 2: Taking Over All or Part of an Existing Residency Program from the Closed Hospital, or Expanding an Existing Residency Program The hospital does not have sufficient room under its direct GME FTE cap or IME FTE cap, or both, and (a) has permanently taken over the closed hospital’s entire residency program, or (b) is permanently expanding its own previously established and approved residency program resulting from taking over part of a residency program from the closed hospital, or (c) is permanently expanding its own existing residency program. Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (Y/N) llll PO 00000 Frm 00186 Fmt 4701 Sfmt 4702 The hospital must check at least one of the following: Application for approval to take over the closed hospital’s residency program has been submitted to the ACGME, AOA, or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) Application for approval of an expansion of the number of approved positions in its residency program resulting from taking over part of a residency program from the closed hospital has been submitted to the ACGME, AOA or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) Application for approval of an expansion of the number of approved positions in its residency program has been submitted to the ACGME, AOA or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) The hospital currently has unfilled positions in its residency program that have previously been approved by the ACGME, AOA, or the ABMS, and is now seeking to fill those positions. (The hospital must attach documentation clearly showing its current number of approved positions, and its current number of filled positions). The hospital has submitted an institutional review document or program information form concerning the program in an application for approval of an expansion to the program (The hospital must attach a copy). Demonstrated Likelihood Criterion 3: Receiving Slots by Virtue of Medicare GME Affiliated Group Agreement or Emergency Medicare GME Affiliated Group Agreement With Closed Hospital The hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, the applying hospital was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. (Copies of EACH of the following must be attached.) Copies of the recent Medicare GME affiliation agreement (or emergency Medicare GME affiliation agreement) of which the applying hospital and the closed hospital were a member of before the hospital closed. Copies of the most recent accreditation letters for all of the hospital’s training programs in which the hospital had a shared rotational arrangement (as defined at § 413.75(b)) with the closed hospital. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Section B. Level Priority Category (Place an ‘‘X’’ in the appropriate box that is applicable to the level priority category that describes the applicant hospital.) First, to hospitals located in the same core-based statistical area (CBSA) as, or in a CBSA contiguous to, the hospital that closed. Second, to hospitals located in the same State as the closed hospital. Third, to hospitals located in the same region as the hospital that closed. Fourth, if the slots have not yet been fully distributed, to qualifying hospitals in accordance with the criteria established under section 5503, ‘‘Distribution of Additional Residency Positions’’ Section C. Ranking Criteria (Place an ‘‘X’’ in the box for each criterion that is appropriate for the applicant hospital and for the program for which the increase in the FTE cap is requested.) b Ranking Criterion One. The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 staff). The applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS proposed rule on the CMS Web site. Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. Ranking Criterion Three. The applying hospital took in residents displaced by the closure of the hospital, but is not assuming an entire program or programs, and will use the additional slots to continue training residents in the same programs as the displaced residents, even after those displaced residents complete their training (that is, the applying hospital is permanently expanding its own existing programs). Ranking Criterion Four. The program does not meet Ranking Criteria 1, 2, or 3, and the applying hospital will use additional slots to establish a new or expand an existing geriatrics residency program. b Ranking Criterion Five: The program does not meet Ranking Criteria 1 through 4, the applying hospital is located in a HPSA, and will use all the PO 00000 Frm 00187 Fmt 4701 Sfmt 4702 28163 additional slots to establish or expand a primary care or general surgery residency program. Ranking Criterion Six: The program does not meet Ranking Criteria 1 through 5, and the applying hospital is not located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. Application Process and CMS Central Office Mailing Address for Receiving Increases in FTE Resident Caps In order for hospitals to be considered for increases in their FTE resident caps, each qualifying hospital must submit a timely application. The following information must be submitted on applications to receive an increase in FTE resident caps: D The name and Medicare provider number, and Medicare contractor (to which the hospital submits its cost report) of the hospital. The total number of requested FTE resident slots for direct GME or IME, or both. A completed copy of the CMS Application Form for each residency program for which the hospital intends to use the requested increase in FTE residents. Source documentation to support the assertions made by the hospital on the CMS Application Form. FTE resident counts for direct GME and IME and FTE resident caps for direct GME and IME reported by the hospital in the most recent as-filed cost report. Include copies of Worksheets E, Part A, and E–4. An attestation, signed and dated by an officer or administrator of the hospital who signs the hospital’s Medicare cost report, with the following information: ‘‘I hereby certify that I understand that misrepresentation or falsification of any information contained in this application may be punishable by criminal, civil, and administrative action, fine and/or imprisonment under E:\FR\FM\15MYP2.SGM 15MYP2 28164 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules federal law. Furthermore, I understand that if services identified in this application were provided or procured through payment directly or indirectly of a kickback or were otherwise illegal, criminal, civil, and administrative action, fines and/or imprisonment may result. I also certify that, to the best of my knowledge and belief, it is a true, correct, and complete application prepared from the books and records of the hospital in accordance with applicable instructions, except as noted. I further certify that I am familiar with the laws and regulations regarding Medicare payment to hospitals for the training of interns and residents.’’ CMS Central Office Mailing Address Centers for Medicare & Medicaid Services (CMS) Director, Division of Acute Care 7500 Security Boulevard Mailstop C4–08–06 Baltimore, MD 21244–1850 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 6. Proposed Clarification and Policy Change Applicable To Direct GME Payments to Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for Training Residents in Approved Programs Under section 1886(k) of the Act, and as implemented in the regulations at 42 CFR 405.2468(f), federally qualified health centers (FQHCs) and rural health clinics (RHCs) may receive payment for the costs of direct GME for training residents in an approved program under certain circumstances. Specifically, the regulations at § 405.2468(f)(1) state: ‘‘Effective for that portion of cost reporting periods occurring on or after January 1, 1999, if an RHC or an FQHC incurs ‘all or substantially all’ of the costs for the training program in the nonhospital setting as defined in § 413.75(b) of this chapter, the RHC or FQHC may receive direct graduate medical education payment for those residents.’’ We refer readers to the July 31, 1998 final rule (63 FR 40986) for a detailed discussion of this longstanding policy. As noted earlier, the regulatory text of § 405.2468(f)(1) incorporates the definition of ‘‘all or substantially all of the costs for the training program in a nonhospital setting’’ that is defined at § 413.75(b), as part of a number of definitions applicable generally to hospital direct GME payments and those regulations at § 413.76 through § 413.83. Section 413.75(b) is based on the statutory provision at section 1886(h)(4)(E) of the Act, which establishes the requirements that hospitals must meet in order to receive direct GME payment for residents training in nonprovider settings. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The statutory use of the phrase ‘‘all or substantially all of the costs for the training program in that setting’’ is located in section 1886(h)(4)(E) of the Act, as added by section 9314 of the Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99–509) (OBRA ‘86). For a detailed discussion of the implementation of section 9314 of OBRA ‘86, we refer readers to the September 29, 1989 final rule (54 FR 40292). Section 1886(h)(4)(E) of the Act, as added by OBRA ’86, established the requirements that hospitals must meet in order to receive direct GME payment for residents training in nonprovider settings. However, section 5504(a) of the Affordable Care Act made changes to section 1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of direct GME payments. In making these changes to section 1886(h)(4)(E) of the Act, section 5504(a) of the Affordable Care Act amended the Act prospectively, effective with ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, by removing the phrase ‘‘all or substantially all of the costs for the training program in that setting’’ and instead permitting hospitals to count the time that residents train in activities related to patient care in a nonprovider site if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site. In effect, this amendment reduced the costs that hospitals must incur for residents training in nonprovider settings. Based on this statutory amendment, in the November 24, 2010 final rule with comment period (75 FR 72134), we revised the regulations at § 412.105(f)(1)(ii)(E) for IME and §§ 413.78(f) and (g) for direct GME to reflect the changes made by section 5504(a) of the Affordable Care Act. In addition, we revised the regulatory definition of ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ in order to implement the statutory amendment and apply the effective date as set forth in the statute to cost reporting periods beginning on or after July 1, 2010. Specifically, the regulations at § 413.75(b), which define ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ were revised as follows: ‘‘(1) Effective on or after January 1, 1999 and for cost reporting periods beginning before July 1, 2007, the residents’ salaries and fringe benefits PO 00000 Frm 00188 Fmt 4701 Sfmt 4702 (including travel and lodging where applicable) and the portion of the cost of teaching physicians’ salaries and fringe benefits attributable to direct graduate medical education (GME); and ‘‘(2) Effective for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2010, at least 90 percent of the total of the costs of the residents’ salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physicians’ salaries attributable to nonpatient care direct GME activities.’’ Ultimately, with regard to the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of direct GME payments, the phrase ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ no longer applies, effective for cost reporting periods beginning on and after July 1, 2010. In the November 24, 2010 final rule with comment period (75 FR 72134), we amended the regulations applicable to direct GME payments to hospitals at §§ 413.75(b) and 413.78(g) to reflect the changes made by section 5504(a) of the Affordable Care Act. However, at that time, we inadvertently did not make conforming changes to the regulations at § 405.2468(f)(1) to clarify the requirements that FQHCs and RHCs must meet in order to receive direct GME payment for training residents in their facilities. Therefore, in compliance with our longstanding policy that FQHCs and RHCs must meet the same requirements applicable to teaching hospitals for direct GME payments with respect to training residents in nonprovider settings, in this proposed rule, we are providing clarification that, based on statutory amendments discussed earlier, the applicable policy cross-referenced in § 405.2468(f)(1) has changed for cost reporting periods beginning on or after July 1, 2010. In addition, to ensure statutory and regulatory consistency, we are proposing to revise the regulations at § 405.2468(f)(1) to add a sentence at the end of the paragraph as follows: ‘‘However, in connection with cost reporting periods for which ‘all or substantially all of the costs for the training program in the nonhospital setting’ is not defined in § 413.75(b) of this chapter, if an RHC or an FQHC incurs the salaries and fringe benefits (including travel and lodging where applicable) of residents training at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical education payment for those residents.’’ E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 L. Rural Community Hospital Demonstration Program 1. Background Section 410A(a) of Public Law 108– 173 required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing ‘‘rural community’’ hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost-based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that— • Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act; • Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report; • Provides 24-hour emergency care services; and • Is not designated or eligible for designation as a CAH under section 1820 of the Act. Section 410A(a)(4) of Public Law 108– 173 specified that the Secretary was to select for participation no more than 15 rural community hospitals in rural areas of States that the Secretary identified as having low population densities. Using 2002 data from the U.S Census Bureau, we identified the 10 States with the lowest population density in which rural community hospitals were to be located in order to participate in the demonstration: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). CMS originally solicited applicants for the demonstration in May 2004; 13 hospitals began participation with cost reporting periods beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals withdrew from the program and converted to CAH status. This left nine hospitals participating at that time. In 2008, we announced a solicitation for up to six additional hospitals to participate in the demonstration program. Four additional hospitals were selected to participate under this solicitation. These four additional hospitals began under the demonstration payment methodology with the hospital’s first cost reporting period starting on or after July 1, 2008. At that time, 13 hospitals were participating in the demonstration. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Five hospitals (3 of the hospitals were among the 13 hospitals that were original participants in the demonstration program and 2 of the hospitals were among the 4 hospitals that began the demonstration program in 2008) withdrew from the demonstration program during CYs 2009 and 2010. (Three of these hospitals indicated that they would be paid more for Medicare inpatient hospital services under the rebasing option allowed under the SCH methodology provided for under section 122 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110–275). One hospital restructured to become a CAH, and one hospital closed.) In CY 2011, one hospital that was among the original set of hospitals that participated in the demonstration withdrew from the demonstration. These actions left seven of the originally participating hospitals (that is, hospitals that were selected to participate in either 2004 or 2008) participating in the demonstration program as of June 1, 2011. Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111–148) amended section 410A of Public Law 108–173, which established the rural community hospital demonstration program. Sections 3123 and 10313 of the Affordable Care Act changed the rural community hospital demonstration program in several ways. First, the Secretary is required to conduct the demonstration program for an additional 5-year period that begins on the date immediately following the last day of the initial 5-year period. Further, the Affordable Care Act requires, in the case of a rural community hospital that is participating in the demonstration program as of the last day of the initial 5-year period, the Secretary to provide for the continued participation of such rural hospital in the demonstration program during the 5-year extension, unless the hospital makes an election, in such form and manner as the Secretary may specify, to discontinue participation (section 410A(g)(4)(A) of Pub. L. 108–173, as added by section 3123(a) of the Affordable Care Act and further amended by section 10313 of such Act). In addition, the Affordable Care Act provides that, during the 5-year extension period, the Secretary shall expand the number of States with low population densities determined by the Secretary to 20 (section 410A(g)(2) of Pub. L. 108–173, as added by section 3123(a) and amended by section 10313 of the Affordable Care Act). Further, the Secretary is required to use the same criteria and data that the Secretary used to determine the States under section PO 00000 Frm 00189 Fmt 4701 Sfmt 4702 28165 410A(a)(2) of Public Law 108–173 for purposes of the initial 5-year period. The Affordable Care Act also allows not more than 30 rural community hospitals in such States to participate in the demonstration program during the 5year extension period (section 410A(g)(3) of Pub. L. 108–173, as added by section 3123(a) of the Affordable Care Act and as further amended by section 10313 of such Act). We published a solicitation for applications for additional participants in the rural community hospital demonstration program in the Federal Register on August 30, 2010 (75 FR 52960). Applications were due on October 14, 2010. The 20 States with the lowest population density that were eligible for the demonstration program are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). We approved 19 new hospitals for participation in the demonstration program. We determined that each of these new hospitals would begin participating in the demonstration with its first cost reporting period beginning on or after April 1, 2011. Three of these 19 hospitals declined participation prior to the start of the cost reporting periods for which they would have begun the demonstration. In addition to the 7 hospitals that were selected in either 2004 or 2008, the new selection led to a total of 23 hospitals in the demonstration. During CY 2013, one additional hospital among the set selected in 2011 withdrew from the demonstration, similarly citing a relative financial advantage to returning to the customary SCH payment methodology, which left 22 hospitals participating in the demonstration. In addition, section 410A(c)(2) of Public Law 108–173 required that, ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ This requirement is commonly referred to as ‘‘budget neutrality.’’ Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral in its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28166 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules same hospitals in the absence of the demonstration program. Typically, this form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program’s participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, makes it extremely unlikely that this demonstration program could be viable under the usual form of budget neutrality. Specifically, cost-based payments to participating small rural hospitals are likely to increase Medicare outlays without producing any offsetting reduction in Medicare expenditures elsewhere. Therefore, a rural community hospital’s participation in this demonstration program is unlikely to yield benefits to the participant if budget neutrality were to be implemented by reducing other payments for these same hospitals. In the past 10 IPPS final regulations, spanning the period for which the demonstration program has been implemented, we have adjusted the national inpatient PPS rates by an amount sufficient to account for the added costs of this demonstration program, thus applying budget neutrality across the payment system as a whole rather than merely across the participants in the demonstration program. As we discussed in the FYs 2005 through 2014 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR 53449, and 78 FR 50740, respectively), we believe that the language of the statutory budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. In light of the statute’s budget neutrality requirement, in this FY 2015 IPPS/ LTCH PPS proposed rule, we are proposing to continue to use the methodology we finalized in FY 2013 to calculate a budget neutrality adjustment factor to the FY 2015 national IPPS rates. In general terms, in each of these previous years, we used available cost reports for the participating hospitals to derive an estimate of the additional costs attributable for the demonstration. Prior to FY 2013, we used finalized, or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 settled, cost reports, as available, and ‘‘as submitted’’ cost reports for hospitals for which finalized cost reports were not available. Annual market basket percentage increase amounts provided by the CMS Office of the Actuary reflecting the growth in the prices of inputs for inpatient hospitals were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53452), we used ‘‘as submitted’’ cost reports (for cost reporting periods ending in CY 2010) for each hospital participating in the demonstration in estimating the costs of the demonstration. In addition, in FY 2013, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. Finally, in each of the previous years, an annual update factor provided by the CMS Office of the Actuary reflecting growth in the volume of inpatient operating services was also applied. For the budget neutrality calculations in the IPPS final rules for FYs 2005 through 2011, the annual volume adjustment applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, and 2014, it was 3 percent. For a detailed discussion of our budget neutrality offset calculations, we refer readers to the IPPS final rule applicable to the fiscal year involved. In general, for FYs 2005 through 2009, we based the budget neutrality offset estimate on the estimated cost of the demonstration in an earlier given year. For these periods, we derived that estimated cost by subtracting the estimated amount that would otherwise be paid without the demonstration in an earlier given year from the estimated amount for the same year that would be paid under the demonstration under the reasonable cost-based methodology authorized by section 410A of Public Law 108–173. (We note that section 410A of Pub. L. 108–173 was later amended by the Affordable Care Act.) The reasonable cost-based methodology authorized by section 410A of Public Law 108–173, as amended, is hereafter referred to as the ‘‘reasonable cost methodology.’’ (We ascertained the estimated amount that would be paid in an earlier given year under the reasonable cost methodology and the estimated amount that would otherwise be paid without the demonstration in an earlier given year from ‘‘as submitted’’ cost reports that were submitted by the hospitals prior to the inception of the demonstration.) We then updated the PO 00000 Frm 00190 Fmt 4701 Sfmt 4702 estimated cost described above to the current year by multiplying it by the market basket percentage increases applicable to the years involved and the applicable annual volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule, data from finalized cost reports reflecting the participating hospitals’ experience under the demonstration were available. Specifically, the finalized cost reports for the first 2 years of the demonstration, that is, cost reports for cost reporting years beginning in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These data showed that the actual costs of the demonstration for these years exceeded the amounts originally estimated in the respective final rules for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we included in the budget neutrality offset amount an amount in addition to the estimate of the demonstration costs in that fiscal year. This additional amount was based on the amount that the costs of the demonstration for FYs 2005 and 2006 exceeded the budget neutrality offset amounts finalized in the IPPS rules applicable for those years. Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we have continued to propose a methodology for calculating the budget neutrality offset amount to account for both the estimated demonstration costs in the upcoming fiscal year and an amount by which the actual demonstration costs corresponding to an earlier, given year (which would be known once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. However, we noted in the FYs 2011, 2012, and 2013 IPPS final rules that, because of a delay affecting the settlement process for cost reports for IPPS hospitals occurring on a larger scale than merely for the demonstration, we were unable to finalize this component of the budget neutrality offset amount accounting for the amount by which the actual demonstration costs in a given year exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule for cost reports of demonstration hospitals dating to those beginning in FY 2007. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we adopted changes to the methodology for calculating the budget neutrality offset amount in an effort to further improve and refine it. We noted that the revised methodology varied, in part, from that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698 through E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 51705). Specifically, in adopting refinements to the methodology, our objective was to simplify the calculation so that it included as few steps as possible. In addition, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. We stated that we believed this approach would maximize the precision of our calculation because it would more closely replicate payments made with and without the demonstration. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453) for a detailed discussion of the methodology we used for FY 2013. We noted that, although we were making changes to certain aspects of the budget neutrality offset amount calculation for FY 2013, several core components of the methodology would remain unchanged. For example, we continued to include in the budget neutrality offset amount methodology the estimate of the demonstration costs for the upcoming fiscal year and the amount by which the actual demonstration costs corresponding to an earlier year (which would be determined once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. However, finalized cost reports for the hospitals participating in the demonstration were not available for FYs 2007, 2008, 2009, and 2010 at the time of development of the FY 2013 IPPS/LTCH PPS final rule. Therefore, we were unable to finalize this component of the budget neutrality offset calculation. We stated in the final rule that we expected settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (FYs 2007, 2008, 2009, and 2010) to be available prior to the FY 2014 IPPS/LTCH PPS proposed rule. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through 50744), we determined the final budget neutrality offset amount to be applied to the FY 2014 IPPS rates to be $52,589,741. This amount was comprised of two distinct components: (1) the final resulting difference between the estimated reasonable cost amount to be paid under the demonstration to the 22 participating hospitals in FY 2014 for covered inpatient hospital services and the estimated amount that would otherwise be paid to such hospitals in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 FY 2014 without the demonstration (this amount was $46,549,861); and (2) the amount by which the actual costs of the demonstration for FY 2007, as shown in the finalized cost reports for the hospitals that participated in the demonstration during FY 2007, exceeded the budget neutrality offset amount that was finalized in the FY 2007 IPPS final rule (this amount, $6,039,880, was derived from finalized cost reports for cost reporting periods beginning in FY 2007 for the 9 hospitals that participated in the demonstration during that year). 2. Proposed FY 2015 Budget Neutrality Offset Amount For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we are proposing in this FY 2015 IPPS/LTCH PPS proposed rule to continue to use the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule to calculate a budget neutrality adjustment factor to be applied to the FY 2015 national IPPS payment rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we revised our methodology in that final rule to further improve and refine the calculation of the budget neutrality offset amount and to simplify the methodology so that it includes only a few steps. Consistent with the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule, the proposed methodology for calculating the estimated FY 2015 demonstration cost for the participating hospitals is as follows: Step 1: For each of the participating hospitals, we are proposing to identify the general reasonable cost amount calculated under the reasonable cost methodology for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for the hospital’s cost reporting period ending in CY 2012). The general reasonable cost amount calculated under the reasonable cost methodology is hereafter referred to as the ‘‘reasonable cost amount.’’ As we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to streamline our methodology for calculating the budget neutrality offset amount would be to use cost reports with the same status and from the same time period for all hospitals participating in the demonstration. Because ‘‘as submitted’’ cost reports ending in CY 2012 are the most recent available cost reports, we believe they would be an accurate predictor of the costs of the demonstration in FY 2015 because they give us a recent picture of the participating hospitals’ costs. PO 00000 Frm 00191 Fmt 4701 Sfmt 4702 28167 Because section 410A of Public Law 108–173 stipulates swing-bed services are to be included among the covered inpatient hospital services for which the demonstration payment methodology applies, we are proposing to include the cost of these services, as reported on the cost reports for the hospitals that provide swing-bed services, within the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services under the demonstration. As indicated above, we are proposing to use ‘‘as submitted’’ cost reports for the hospital’s cost reporting period ending in CY 2012 for this calculation. We are proposing to sum the two above-referenced amounts to calculate the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We are proposing to multiply this sum (that is, the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services for all participating hospitals) by the FY 2013, FY 2014, and FY 2015 IPPS market basket percentage increases, which are formulated by the CMS Office of the Actuary. In this proposed rule, the current estimate of the FY 2015 IPPS market basket percentage increase provided by the CMS Office of the Actuary is specified in section IV.B.1. of the preamble of this proposed rule. We are proposing to use the final FY 2015 IPPS market basket percentage increase in the final rule. We also are proposing to then multiply the product of the general total estimated FY 2012 reasonable cost amount for all participating hospitals and the market basket percentage increases applicable to the years involved by a 3-percent annual volume adjustment for FYs 2013 through 2015—the result would be the general total estimated FY 2015 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We are proposing to apply the IPPS market basket percentage increases applicable for FYs 2013 through 2015 to the FY 2012 reasonable cost amount described above to model the estimated FY 2015 reasonable cost amount under the demonstration. We are proposing to use the IPPS market basket percentage increases because we believe that these update factors appropriately indicate the trend of increase in inpatient hospital operating costs under the reasonable cost methodology for the years involved. The 3-percent annual volume adjustment was stipulated by the CMS Office of the Actuary and is being proposed because it is intended to E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28168 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules accurately reflect the tendency of hospitals’ inpatient caseloads to increase. We acknowledge the possibility that inpatient caseloads for small hospitals may fluctuate, and are proposing to incorporate into the estimate of demonstration costs a factor to allow for a potential increase in inpatient hospital services. Step 2: For each of the participating hospitals, we are proposing to identify the general estimated amount that would otherwise be paid in FY 2012 under applicable Medicare payment methodologies for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2012) if the demonstration was not implemented. Similarly, as in Step 1, for the hospitals that provide swing-bed services, we are proposing to identify the estimated amount that generally would otherwise be paid for these services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2012) and include it in the total FY 2012 general estimated amount that would otherwise be paid for covered inpatient hospital services without the demonstration. We are proposing to sum these two amounts in order to calculate the estimated FY 2012 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration. We are proposing to multiply the above amount (that is, the estimated FY 2012 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration) by the FYs 2013 through 2015 IPPS applicable percentage increases. In this proposed rule, the current estimate of the FY 2015 applicable percentage increase is specified in section IV.B. of this preamble. This methodology differs from Step 1, in which we are proposing to apply the market basket percentage increases to the sum of the hospitals’ general total FY 2012 estimated reasonable cost amount for covered inpatient hospital services. We believe that the IPPS applicable percentage increases are appropriate factors to update the estimated amounts that generally would otherwise be paid without the demonstration. This is because IPPS payments would constitute the majority of payments that would otherwise be made without the demonstration and the applicable percentage increase is the factor used under the IPPS to update the inpatient hospital payment rates. Hospitals participating in the demonstration VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 would be participating under the IPPS payment methodology if they were not in the demonstration. (We are proposing to use the final FY 2015 applicable percentage increase in the final rule.) Then we are proposing to multiply the product of the estimated FY 2012 total payments that generally would otherwise be made without the demonstration and the applicable IPPS percentage increases for the years involved by a 3-percent annual volume adjustment for FYs 2013 through 2015. The result would be the general total estimated FY 2015 costs that would otherwise be paid without the demonstration for covered inpatient hospital services to the participating hospitals. Step 3: We are proposing to subtract the amount derived in Step 2 (representing the sum of estimated amounts that generally would otherwise be paid to the participating hospitals for covered inpatient hospital services for FY 2015 if the demonstration were not implemented) from the amount derived in Step 1 (representing the sum of the estimated reasonable cost amount that generally would be paid under the demonstration to all participating hospitals for covered inpatient hospital services for FY 2015). We are proposing that the resulting difference would be one component of the estimated amount for which an adjustment to the national IPPS rates would be calculated (as further discussed below). For this proposed rule, the resulting difference is $53,673,008. This estimated amount is based on the specific assumptions identified regarding the data sources used, that is, ‘‘as submitted’’ recently available cost reports. Also, we note that if updated data become available prior to the FY 2015 IPPS/LTCH PPS final rule, we would use them to the extent appropriate to estimate the costs of the demonstration program in FY 2015. Therefore, this estimated budget neutrality offset amount might change in the final rule, depending on the availability of updated data. In addition, similar to previous years, we are proposing to include in the budget neutrality offset amount the amount by which the actual demonstration costs corresponding to an earlier given year (which would be determined once we had finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. For this FY 2015 IPPS/ LTCH PPS proposed rule, we have calculated the amount by which the actual costs of the demonstration in FY 2008 (that is, the costs of the PO 00000 Frm 00192 Fmt 4701 Sfmt 4702 demonstration for the 10 hospitals that participated in FY 2008, as shown in these hospitals’ finalized cost reports for the cost report period beginning in that fiscal year), exceeded the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule. We have calculated this amount to be $10,389,771 for this proposed rule. However, we are noting that if updated data become available prior to the FY 2015 IPPS/LTCH PPS final rule, we would use them to the extent appropriate to determine this amount. Therefore, this amount might change in the final rule, depending on the availability of updated data. We also are currently working with the MACs that service the hospitals participating in the demonstration to obtain finalized cost reports for FYs 2009, 2010, and 2011. Similar to previous years, we are proposing that if settled cost reports for all of the demonstration hospitals that participated in an applicable year (FYs 2009, 2010, or 2011) are available prior to the FY 2015 IPPS/LTCH PPS final rule, we would include in the budget neutrality offset amount any additional amounts by which the final settled costs of the demonstration for the year (FYs 2009, 2010, or 2011) exceed the budget neutrality offset amount applicable to such year as finalized in the respective year’s IPPS final rule. Therefore, the total budget neutrality offset amount that we are proposing to be applied to the FY 2015 IPPS rates is $64,062,779. This is the sum of two separate components: (1) The difference between the total estimated FY 2015 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals for covered inpatient hospital services and the total estimated amount that would otherwise be paid to the participating hospitals in FY 2015 without the demonstration ($53,673,008); and (2) the amount by which the actual costs of the demonstration for FY 2008 (as shown in the finalized cost reports for cost reporting periods beginning in FY 2008 for the hospitals that participated in the demonstration during FY 2008) exceed the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule ($10,389,771). We are proposing that the resulting total ($64,062,779) would be the amount for which an adjustment to the national IPPS rates would be calculated. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules M. Requirement for Transparency of Hospital Charges Under the Affordable Care Act mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Overview Hospitals determine their charges for items and services provided to patients. While Medicare does not pay billed charges, hospital reported charges are used in determining Medicare’s national payment rates (for example, billed charges are adjusted to cost to determine how much to pay for one type of case relative to another). Although the Medicare payment amount for a discharge under the IPPS or a service furnished under the OPPS is not based directly on the hospital’s charges for the individual services provided, we believe that hospital charges nevertheless remain an important component of our healthcare system. For example, hospital charges are often billed, in full, to uninsured patients who cannot benefit from discounts negotiated by insurance companies. Hospital charges also vary significantly by hospital, making it challenging for patients to compare the cost of similar services across hospitals. In 2013, we released data that demonstrated significant variation across the country and within communities in what hospitals charge for a number of common inpatient and outpatient services. These data also showed that hospital charges for services furnished in both the inpatient setting and the outpatient setting were, in general, significantly higher than the amount paid by Medicare under the IPPS or the OPPS. The data that we released are posted on the Web site at: https://www/cms.gov/ResearchStatistics-Data-and-Systems/StatisticsTrends-and-Reports/Medicare-ProviderCharge-Data/. Our intent in releasing these data was to enable the public to examine the relationship between the amounts charged by individual hospitals for comparable services and Medicare’s payment for that inpatient or outpatient care. We believe that providing charge data comparisons is introducing both transparency and accountability to hospital pricing, and we are continuing to pursue opportunities to report on hospital charging practices. 2. Transparency Requirement Under the Affordable Care Act The Affordable Care Act contains a provision that is consistent with our effort to improve the transparency of hospital charges. As a result of the Affordable Care Act, section 2718(e) of the Public Health Service Act requires that ‘‘[e]ach hospital operating within VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.’’ In this proposed rule, we are reminding hospitals of their obligation to comply with the provisions of section 2718(e) of the Public Health Service Act. Hospitals are responsible for establishing their charges and are in the best position to determine the exact manner and method by which to make those charges available to the public. Therefore, we are providing hospitals with the flexibility to determine how they make a list of their standard charges public. Our guidelines for implementing section 2718(e) of the Public Health Service Act are that hospitals either make public a list of their standard charges (whether that be the chargemaster itself or in another form of their choice), or their policies for allowing the public to view a list of those charges in response to an inquiry. We encourage hospitals to undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals. We expect that hospitals will update the information at least annually, or more often as appropriate, to reflect current charges. We are confident that hospital compliance with this statutory transparency requirement will greatly improve the public accessibility of charge information. As hospitals make data publicly available in compliance with section 2718(e) of the Public Health Service Act, we also will continue to review and post relevant charge data in a consumer friendly way, as we previously have done by posting on the CMS Web site the following hospital and physician charge information: May and June 2013 hospital charge data releases; 2013 physician data requests for information; and the April 2014 physician data releases and data provided on geographic variation in payments and payments per beneficiary. N. Medicare Payment for Short Inpatient Hospital Stays Some members of the hospital community have expressed support for the general concept of an alternative payment methodology under the PO 00000 Frm 00193 Fmt 4701 Sfmt 4702 28169 Medicare program for short inpatient hospital stays. We are interested in public comments on such a payment methodology, specifically how it might be designed. There are several issues of consideration that would inform how such a payment methodology would be devised. Below we outline some specific questions and considerations that we have identified as critical for developing such a methodology. This list of questions and considerations is not exhaustive, and we welcome additional questions, suggestions, and input from stakeholders. • Defining short or low cost inpatient hospital stays: One issue would be how to define a short inpatient hospital stay for the purpose of determining the appropriate Medicare payment. For instance, would a short inpatient hospital stay be one where the average length of stay for the MS–DRG is short or would it be atypically short or low cost cases relative to other cases within same MS– DRG? There are significant differences in mean lengths of stay among MS– DRGs. (We refer readers to Table 5.— List of Proposed Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay for this proposed rule, which is available via the Internet on the CMS Web site.) For example, many frequently billed MS–DRGs have historically had mean lengths of stay of approximately 2 days, such as MS–DRG 313 (Chest Pain). Other MS–DRGs such as MS–DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours with MCC) have had longer lengths of stay. If we adopted a policy that paid less for atypically low-cost or short-stay cases relative to the average case in the same MS–DRG, we believe such a policy is more likely to affect an MS–DRG like MS–DRG 871 that has a longer average length of stay or higher average cost associated with the typical patient. Such a policy is less likely to apply to MS– DRG 313 because the typical case is already low cost or short stay. • Determining appropriate payment for short inpatient hospital stays: Another issue would be how to determine the appropriate payment once a short stay has been identified. Some have suggested a per diem based payment amount, perhaps modelled on the existing transfer payment policy. Again, such a policy is far more likely to affect payment for an atypically shortstay or low-cost case in an MS–DRG with a longer average length of stay. For short-stay cases in an MS–DRG where the average length of stay for the MS– DRG is short, this methodology would E:\FR\FM\15MYP2.SGM 15MYP2 28170 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 be unlikely to affect payment as the full IPPS payment would be made in 1 or 2 days. For these types of short-stay cases, one relevant issue to address may be that payment for the same case will be very different under the OPPS and the IPPS depending upon whether the patient has been formally admitted to the hospital as an inpatient, pursuant to a physician order. Under what circumstances should the IPPS payment amount be limited to the OPPS payment amount and under what circumstances might it be appropriate for the payment amount to be higher? If it were appropriate for the payment amount to be higher, how would the amount of the additional payment be determined? We welcome input on these and other issues related to an alternative payment methodology under the Medicare program for short inpatient hospital stays. O. Suggested Exceptions to the 2Midnight Benchmark In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through 50954), we discussed modifications and clarifications to CMS’ longstanding policy on how Medicare contractors review inpatient hospital and CAH admissions for payment purposes. Under that final rule, we established a 2-midnight benchmark for determining the appropriateness of an inpatient hospital admission versus treatment on an outpatient basis. We provided in regulations at § 412.3(e)(1) that, in addition to services designated as inpatient only, surgical procedures, diagnostic tests, and other treatments are generally appropriate for inpatient hospital admission and payment under Medicare Part A when the physician (1) expects the beneficiary to require a medically necessary hospital stay that crosses at least 2 midnights and (2) admits the beneficiary to the hospital based upon that expectation. The FY 2014 policy responded to both hospital calls for more guidance about when an inpatient admission and Part A payment are appropriate, and beneficiaries’ concerns about increasingly long stays as outpatients due to hospital uncertainties about payment. In the FY 2014 IPPS/LTCH PPS final rule, at § 412.3(e)(2), we recognized that if an unforeseen circumstance, such as a beneficiary’s death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis and hospital inpatient payment may be made under Medicare Part A. We also clarified, in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 both the final rule and subsequent subregulatory guidance, that the unforeseen circumstances specified at § 412.3(e)(2) are not all-inclusive and could also include additional circumstances such as unexpected clinical improvement, election of hospice care, or departure against medical advice. The FY 2014 IPPS/LTCH PPS final rule also indicated that there are exceptions to the 2-midnight benchmark. In other words, we expect there to be cases in which an admitting practitioner expects the beneficiary’s length of stay to last less than 2 midnights and yet inpatient admission would still be appropriate. For example, we specified that procedures on the OPPS inpatient only list are always appropriately inpatient, regardless of the actual time expected at the hospital, so long as the procedure is medically necessary and performed pursuant to a physician order and formal admission. In addition to procedures contained on the OPPS inpatient only list, we noted in the FY 2014 IPPS/LTCH PPS final rule that there may be other rare and unusual circumstances in which a hospital stay expected to last less than 2 midnights would nonetheless be appropriate for inpatient hospital admission and Part A payment. We indicated that we would explore other potential exceptions to the generally applicable benchmark and would detail any such rare and unusual circumstances in subregulatory guidance. As part of this process, throughout the year, we have accepted and considered suggestions from stakeholders on this topic. In January 2014, we identified medically necessary, newly initiated mechanical ventilation (excluding anticipated intubations related to minor surgical procedures or other treatment) as the first rare and unusual exception to the 2-midnight rule and announced it on the CMS Web site. We recognize that there could be additional rare and unusual circumstances that we have not identified that justify inpatient admission and Part A payment absent an expectation of care spanning at least 2 midnights and are inviting further feedback on this issue. Suggestions can be sent to CMS via written correspondence or emailed to SuggestedExceptions@cms.hhs.gov with ‘‘Suggested Exceptions to the 2Midnight Benchmark’’ in the subject line. We will continue to respond to these suggestions through subregulatory guidance, such as postings on the CMS Web site or manual instruction. PO 00000 Frm 00194 Fmt 4701 Sfmt 4702 V. Proposed Changes to the IPPS for Capital-Related Costs A. Overview Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capitalrelated costs. The IPPS for capitalrelated costs was initially implemented in the Federal fiscal year (FY) 1992 IPPS final rule (56 FR 43358), in which we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). FY 2001 was the last year of the 10year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.) The basic methodology for determining capital prospective payments using the Federal rate is set forth in § 412.312 of the regulations. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). In addition, under § 412.312(c), hospitals also may receive outlier payments under the capital IPPS for extraordinarily high-cost cases that qualify under the thresholds established for each fiscal year. B. Additional Provisions 1. Exception Payments The regulations at § 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under §§ 412.348(b) E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at § 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). Under § 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital’s control. Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186). 2. New Hospitals Under the capital IPPS, § 412.300(b) of the regulations defines a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with § 412.304(c)(2), under the capital IPPS a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital-related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Hospitals Located in Puerto Rico Section 412.374 of the regulations provides for the use of a blended payment amount for prospective payments for capital-related costs to hospitals located in Puerto Rico. Accordingly, under the capital IPPS, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capitalrelated costs. In general, hospitals located in Puerto Rico are paid a blend of the applicable capital IPPS Puerto Rico rate and the applicable capital IPPS Federal rate. Capital IPPS payments to hospitals located in Puerto Rico are computed based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate. For additional details on capital IPPS payments to hospitals located in Puerto Rico, we refer readers VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). C. Proposed Annual Update for FY 2015 The proposed annual update to the capital PPS Federal and Puerto Ricospecific rates, as provided for at § 412.308(c), for FY 2015 is discussed in section III. of the Addendum to this proposed rule. We note that, in section II.D. of the preamble of this proposed rule, we present a discussion of the MS–DRG documentation and coding adjustment, including previously finalized policies and historical adjustments, as well as the recoupment adjustment to the standardized amounts under section 1886(d) of the Act that we are proposing for FY 2015 in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110–90 by section 631 of the ATRA. Because section 631 of the ATRA requires CMS to make a recoupment adjustment only to the operating IPPS standardized amount, we are not proposing a similar adjustment to the national or Puerto Rico capital IPPS rates (or to the operating IPPS hospital-specific rates or Puerto Ricospecific standardized amount). This approach is consistent with our historical approach regarding the application of the recoupment adjustment authorized by section 7(b)(1)(B) of Public Law 110–90. In section II.D.7. of the preamble of this proposed rule, we also note our discussion in the FY 2014 IPPS/LTCH PPS final rule of the possibility of applying an additional prospective adjustment to account for the cumulative MS–DRG documentation and coding effect through FY 2010. In that same final rule (78 FR 50515 through 50517 and 50747), we stated that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, we believe the most appropriate additional adjustment is ¥0.55 percent. We did not apply an additional prospective adjustment in FY 2014 for the cumulative MS–DRG documentation and coding effect through FY 2010, consistent with the approach taken for the operating IPPS standardized amount (and hospital-specific rates). We continue to believe that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, the most appropriate additional adjustment is ¥0.55 percent. However, we are not proposing such an adjustment to the capital Federal rate in FY 2015, consistent with the approach taken for the operating IPPS PO 00000 Frm 00195 Fmt 4701 Sfmt 4702 28171 standardized amount (and hospitalspecific rates) as discussed in section II.D.7. of the preamble of this proposed rule. We will consider whether such an adjustment to the capital IPPS Federal rate is appropriate in future years’ rulemaking. VI. Proposed Changes for Hospitals Excluded from the IPPS A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2015 Certain hospitals excluded from a prospective payment system, including children’s hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. A per discharge limit (the target amount as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital’s own cost experience in its base year, and updated annually by a rate-of-increase percentage. For each cost reporting period, the updated target amount is multiplied by total Medicare discharges during that period and applies as an aggregate upper limit (the ceiling as defined in § 413.40(a) of total inpatient operating costs for a hospital’s cost reporting period. In accordance with § 403.752(a) of the regulations, RNHCIs also are subject to the rate-ofincrease limits established under § 413.40 of the regulations discussed above. As explained in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50747), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children’s hospitals, cancer hospitals, and RNHCIs. Consistent with §§ 412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update the target amounts for short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. For the reasons explained in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50747), we are proposing to continue to use the percentage increase in the IPPS operating market basket to update the target amounts for children’s hospitals, cancer hospitals, RNHCIs, and shortterm acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern E:\FR\FM\15MYP2.SGM 15MYP2 28172 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Mariana Islands, and American Samoa for FY 2015 and subsequent fiscal years. In addition, because we have revised and rebased the IPPS operating market basket to a FY 2010 base year, we are proposing to continue to use the percentage increase in the FY 2010based IPPS operating market basket to update these target amounts for FY 2015 and subsequent fiscal years. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 50603) for a further discussion of the revision and rebasing of the IPPS operating market to a FY–2010 base year.) Accordingly, for FY 2015, the rate-ofincrease percentage to be applied to the target amount for these children’s hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa would be the FY 2015 percentage increase in the FY 2010based IPPS operating market basket. For this proposed rule, based on IHS Global Insight, Inc.’s 2014 first quarter forecast, we estimated that the FY 2010based IPPS operating market basket update for FY 2015 is 2.7 percent (that is, the estimate of the market basket rate-of-increase). We are proposing that if more recent data become available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2015. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 B. Proposed Updates to the Reasonable Compensation Equivalent (RCE) Limits on Compensation for Physician Services Provided in Providers (§ 415.70) 1. Background Under section 1848 of the Act and 42 CFR Parts 414 and 415, medical or surgical services furnished by physicians to individual Medicare beneficiaries generally are billed and paid under Medicare Part B on a fee-forservice basis under the Medicare Physician Fee Schedule (MPFS). As required by section 1887(a)(2)(B) of the Act, the amount of allowable compensation for services furnished by physicians to providers that are paid by Medicare on a reasonable cost basis is subject to reasonable compensation equivalent (RCE) limits. Under these limits, Medicare recognizes as reasonable, for purposes of payment to the provider, the lower of the actual cost of the services furnished by the physician to the provider (that is, any form of compensation to the physician) or an RCE. The allowable compensation costs for physicians’ services to a provider are described in § 415.55 of the regulations. Under § 415.60(a) of the regulations, for purposes of applying the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 RCE limits, ‘‘physician compensation costs means monetary payments, fringe benefits, deferred compensation, and any other items of value (excluding office space and billing and collection services) that a provider or other organization furnishes a physician in return for the physician’s services’’ to the provider. On March 2, 1983, we published a final rule in the Federal Register that codified regulations to implement section 1887(a)(2)(B) of the Act (currently at 42 CFR 415.70) and established the first set of RCE limits (48 FR 8902). In accordance with § 415.70(a)(2), RCE limits do not apply to the costs of physician compensation attributable to furnishing inpatient hospital services for which payment is made under the IPPS or to the costs of physician compensation attributable to approved GME programs that are payable under §§ 413.75 through 413.83 of the regulations. In addition, under § 415.70(a)(3), compensation that a physician receives for activities that may not be paid for under either Medicare Part A or Part B is not considered in applying these RCE limits. Furthermore, in accordance with § 413.70, RCE limits are not used in determining the reasonable costs that CAHs incur in compensating physicians for services furnished to the CAH. The RCE limits apply equally to all physicians’ services to providers that are payable on a reasonable cost basis under Medicare. If a physician receives any compensation from one or more providers for his or her services to the provider (that is, those services that benefit patients generally), payment to those providers for the costs of such compensation is subject to the RCE limits. The RCE limits are not applied to payment for services that are identifiable medical or surgical services to individual patients and paid under the MPFS, even if the physician agrees to accept compensation (for example, from a hospital) for those services. Payments to teaching hospitals that have elected to be paid for physicians’ services to the provider on a reasonable cost basis in accordance with section 1861(b)(7) of the Act are subject to the limits (68 FR 45458). 2. Overview of the Current RCE Limits a. Application of the RCE Limits Currently, we use the RCE limits to compute Medicare payments when a physician is compensated by a provider that is subject to the RCE limits. We also use these limits when the physician is compensated by any other providerrelated organization for physician PO 00000 Frm 00196 Fmt 4701 Sfmt 4702 administrative, supervisory, and other services to the provider under Medicare. In applying the RCE limits, we compute the Medicare payments using information submitted on the cost report, and ensure that each compensated physician is assigned to the most appropriate specialty category. The current physician specialty categories for RCE limits are General/ Family Practice, Internal Medicine, Surgery, Pediatrics, OB/GYN, Radiology, Psychiatry, Anesthesiology, Pathology, and Total. If there is no specific specialty category (for example, for an emergency room physician), we use the ‘‘Total’’ category, for which the RCE limits are calculated based on mean annual income data for all physicians. If the physician’s contractual compensation covers all duties, activities, and services furnished to the provider and, under a reassignment, all physicians’ services furnished to individual patients of the provider, and the physician is employed by the provider full time, we use the RCE limit for the appropriate specialty, adjusted by the physician’s allocation agreement (which reflects the percentage of total time spent performing services furnished to the provider) to arrive at the Medicare program’s share of the provider’s allowable physician compensation costs (§ 415.60). In the absence of an allocation agreement, we would assume that 100 percent of the compensation paid to the physician by the provider is related to physicians’ services for which payment is made under the MPFS and that there are no allowable physician compensation costs to the provider (§ 415.60(f)(2)). If a physician’s compensation from the provider represents payment only for services that benefit patients generally (that is, the physician bills for all services furnished to individual patients), we use the appropriate specialty RCE limit. If a physician is employed by a provider to furnish services of general benefit to patients on other than a full-time basis, the RCE limit will be adjusted to reflect the hours the physician actually worked, as reported on the provider’s cost report, related to a full work year of 2,080 hours. b. Exceptions to the RCE Limits Some providers such as small or rural hospitals may be unable to recruit or maintain an adequate number of physicians at a compensation level within the prescribed RCE limits. In accordance with section 1887(a)(2)(C) of the Act and § 415.70(e) of the regulations, if a provider can demonstrate to the MAC its inability to E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules recruit or maintain physicians at a compensation level allowable under the RCE limits (as documented, for example, by unsuccessful advertising through national medical or health care publications), the MAC may grant the provider an exception to the RCE limits established under these rules. Such exceptions would allow the provider to be paid based on costs for compensation higher than the RCE limit. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 c. Methodology for Establishing the RCE Limits In the March 2, 1983 final rule with comment period (48 FR 8902), we published the initial RCE limits, along with the methodology used to calculate those limits, that were applicable to cost reporting periods beginning during CYs 1982 and 1983. As part of that same rule, we established regulations that outline our general authority to develop, publish, and apply RCE limits (currently at § 415.70). Section 415.70(b) of the regulations specifies that we establish the methodology for determining annual RCE limits, considering, to the extent possible, average physician incomes by specialty and type of location, using the best available data. The methodology for establishing the initial RCE limits was based on the analysis contained in an internal working paper, ‘‘A Methodology for Determination of Reasonable FTE Compensation for Hospital-Based Physicians.’’ 43 (Copies of this working paper are available on the CMS Web site at: https://www.cms.gov/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/.) As outlined in this working paper, our methodology for establishing the initial reasonable levels of compensation includes the following five steps (for additional discussion of this methodology, we refer readers to the March 2, 1983 final rule with comment period (48 FR 8902)): Step 1: We estimated the national average (mean) income for all physicians using 1979 physician net incomes from the American Medical Association (AMA) Periodic Survey of Physicians (PSP), published by the AMA in its Profile of Medical Practices, 1981. Step 2: We projected physicians’ 1979 base net income levels to the appropriate future year to account for changes in net income levels occurring after the period for which we have data using the Consumer Price Index for All 43 Cantwell, James R. and Sobaski, William J., A Methodology for Determination of Reasonable FTE Compensation for Hospital-Based Physicians, Working Paper No. OR–32, revised December 1982. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Urban Consumers (CPI–U), and projected the results using forecasts of the CPI–U for future years. Step 3: We determined the relationship between average net income for all physicians (estimated in the first step above) and net income of certain categories of specialist physicians that are commonly compensated by providers for services that generally benefit Medicare beneficiaries resulting in separate specialty adjusters for nine physician specialties as well as the adjuster for the ‘‘Total’’ category. Step 4: We also adjusted each of these specialty (including the ‘‘Total’’) adjusters for differences in costs between types of geographic locations using Standard Metropolitan Statistical Areas (SMSAs) as defined by the Office of Management and Budget (OMB). Step 5: Using the AMA PSP data, we calculated the average hours practiced per year for each specialty and location adjuster combination, which we then related to a standard full-time equivalent (FTE) work year of 2,080 hours. We used these ratios to weight the specialty-location adjusters from the previous step. This same methodology was used to update the RCE limits published in a notice in the Federal Register on May 5, 1997 (62 FR 24483). These updated RCE limits were effective for cost reporting periods beginning on or after May 5, 1997. For RCE limits established prior to January 1, 1998, we used the CPI–U to update the RCE limits. In a final rule with comment period published in the Federal Register on October 31, 1997 (62 FR 59075), we finalized a policy to use the Medicare Economic Index (MEI) to update the RCE limits (rather than the CPI–U), effective for cost reporting periods beginning on or after January 1, 1998. We adopted the MEI as the applicable update factor in order to achieve a measure of consistency in the methodologies used to determine payments to physicians for medical and surgical services furnished to individual patients and reasonable compensation levels for services that are of general benefit to a provider’s patients. However, we did not update the RCE limits at that time. In the FY 2004 IPPS final rule published in the Federal Register on August 1, 2003 (68 FR 45458), we published updated RCE limits that were effective for cost reporting periods beginning on or after January 1, 2004. We updated the RCE limits using the CPI–U to adjust the data to 1997, and the MEI to adjust the data from 1998 to 2004. In addition, we continued to PO 00000 Frm 00197 Fmt 4701 Sfmt 4702 28173 adjust the RCE limits to account for differences in salary levels by location, as well as by specialty. For the location adjustment, we continued to base the geographical classifications of the providers on Metropolitan Statistical Areas (MSAs) (the OMB changed the area name to describe metropolitan areas in the 1980’s from SMSAs to MSAs, but the definition of MSAs differed only slightly from the previously used SMSAs). 3. Proposed Changes to the RCE Limits In accordance with § 415.70(b), when establishing the methodology to determine the RCE limits, we consider, to the extent possible, the average physician incomes by specialty and type of location using the best available data. Since the initial RCE limits were developed, we have adjusted the RCE data to account for specialty and location (as discussed earlier in this section). In this proposed rule, we are proposing to use the most recent MEI data to update the RCE limits and to replace the RCE limits that have been in effect since January 1, 2004. We believe that doing so will enhance the accuracy of the RCE limits. In addition, for the reasons discussed below, we are proposing to eliminate the location adjustment to the RCE data, while continuing to adjust the RCE limits by specialty. We are not proposing changes to any of the other existing policies with respect to the application of and exceptions to the RCE limits. In establishing the initial and subsequently updated RCE limits, we included an adjustment to account for differences in salary levels based on the location of the provider using geographic classifications based on the MSAs as defined by the OMB. We assigned an appropriate MSA designation based on the State/county in which the provider is located. We included a table in each of the previous RCE limit notices and rules, whereby each MSA designation was grouped into one of three categories: Metropolitan areas with a population greater than 1 million, metropolitan areas with a population less than 1 million, and nonmetropolitan areas. The MSA designation of the provider is then used to identify the appropriate RCE limit. To update the current RCE limits by location under the current methodology, we would need to use, as in past updates, the MSA designations that correspond with the update period. However, since 2003, the OMB no longer updates or uses MSAs. We considered continuing to use the MSA designations, as we have in the past, but we would have no way to account for E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28174 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules shifts in populations among MSAs because the OMB no longer updates geographic classifications based on MSA designations. The OMB regularly updates the geographic definitions, and the counties included in each area, to account for population shifts due to migrations, birth, and death rates but currently the OMB uses Core-Based Statistical Area (CBSA) designations rather than MSAs. If we were to continue to use the MSA designation, providers could potentially be underpaid or overpaid if the population of their MSA changed significantly from 2004. Therefore, we determined that, because the MSA designations are no longer updated, it would not be appropriate to continue using the previous location adjustment methodology. The most recent geographic delineations used by the OMB are CBSAs, a term used to refer to both Metropolitan and Micropolitan Statistical Areas. However, CBSA delineations do not match the MSA definitions that were used to develop the initial and subsequently updated RCE limits. As noted above, we have used the AMA PSP data to develop previous and current RCE limits. The AMA PSP data were collected from 1970 to 1980 and included physicians’ income, hours worked, and MSA-based population information. The data that have been used to develop and update the RCE limits were developed using MSAs as the geographic unit. It is not possible to exactly crosswalk the MSA designations to the CBSA designations in order to update the RCE limits using the current location adjustment methodology. Even if it was possible to crosswalk the MSAs to the CBSAs, it would not be appropriate to use the MSA-based AMA PSP data to develop CBSA-based RCE limits. There have been significant changes in the populations of the MSA-based locations contained in the AMA PSP data that could not be translated into CBSAs. As such, that data would no longer be valid as the basis to develop RCE limits based on CBSAs The OMB has cautioned users about using the new CBSA designations. For instance, in OMB’s 2010 ‘‘Standards for Delineating Metropolitan and Micropolitan Statistical Areas (CBSAs)’’ published on June 28, 2010 in the Federal Register (75 FR 37246), OMB states: ‘‘OMB establishes and maintains these areas solely for statistical purposes. In reviewing and revising these areas, OMB does not take into account or attempt to anticipate any public or private sector nonstatistical uses that may be made of the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 delineations. These areas are not designed to serve as a general-purpose geographic framework applicable for nonstatistical activities or for use in program funding formulas. ‘‘Furthermore, the Metropolitan and Micropolitan Statistical Area Standards do not produce an urban-rural classification, and confusion of these concepts can lead to difficulties in program implementation. Counties included in Metropolitan and Micropolitan Statistical Areas and many other counties may contain both urban and rural territory and populations. . . . OMB urges agencies, organizations, and policy makers to review carefully the goals of nonstatistical programs and policies to ensure that appropriate geographic entities are used to determine eligibility for the allocation of Federal funds.’’ (Emphasis in original.) For CMS to accurately update the location-adjusted RCE limits using the CBSAs, we believe it would be necessary to use a new data source for information on physician salaries, specialties, location, and hours worked; and the data would need to be allocated to different geographic areas based on CBSAs. The AMA PSP collected data from a large sample of office-based physicians. We considered using data that are currently collected and publicly available. We could not find a reliable dataset that contained all of the necessary data elements needed to update the location-adjusted RCE limits based on CBSAs. The most reliable data we could find came from the Bureau of Labor Statistics (BLS) Occupational Employment Statistics (OES). The BLS OES data are collected annually, and capture a large and diverse population of physicians and corresponding CBSA. We believe the BLS OES data are the most current, reliable source of income data for physicians. Although, the BLS OES is very reliable and collects data points for physician specialties, salary, and location, it does not collect detailed information for all 10 specialties; the ‘‘Radiology’’ and ‘‘Pathology’’ specialties are not separately captured. As such, we did not believe it was appropriate to use the BLS OES data to create an updated RCE limit if we would not have data available for two specialties. We also weighed the benefit of collecting updated information from physicians (through use of a new nationwide survey) in order to obtain the data necessary for application of an appropriate locality adjustment based on CBSAs against the burden placed on such physicians in providing such data. In order to have a dataset that could accurately capture all the necessary PO 00000 Frm 00198 Fmt 4701 Sfmt 4702 information, we would need to collect data from a large population of physicians, including a sufficient sample size for each physician specialty in each CBSA. We weighed the burden that such a nationwide survey would entail for all physicians, including office-based physicians, to be asked to respond to an in-depth survey regarding their salary, specialty, location, hours worked, and other practice information against the benefit of using updated, CBSA-based information to include a location adjustment for the providers that are subject to the RCE limits. When the RCE limits were developed in 1983, other than inpatient acute care hospitals paid under the IPPS, most provider types were reimbursed on a reasonable cost basis. Since then, providers such as skilled nursing facilities (SNFs), long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs), and home health agencies (HHAs) that previously were paid on a reasonable cost basis have transitioned to prospective payment systems and are no longer subject to the RCE limits. As of FY 2011 (the most recent cost report year for which we have complete data), our data show that there were only 59 children’s hospitals and cancer hospitals and 46 teaching hospitals (that have elected to be paid for physicians’ services to the provider on a reasonable cost basis) that are subject to the RCE limits. As such, we believe the benefit that could be gained by gathering the new data that would be necessary to maintain a location adjustment for the RCE limits is outweighed by the burden of conducting such a comprehensive survey of physicians. Furthermore, we analyzed how the elimination of the location adjustment would affect the accuracy and appropriateness of the proposed RCE limits. To perform this analysis, we needed a reliable source of physician income data (without a location adjustment) which could be compared to the RCE limits without a location adjustment. We determined that the best available source of physician income data is the mean annual income data for similar RCE physician specialties collected by the BLS OES. As mentioned above, the BLS OES data are collected annually and capture a large and diverse population of physicians. These data are the most current, reliable source of income data by physician specialties. In addition, when comparing salaries, it is important to compare salary amounts that reflect the same number of hours worked per year. Because many physicians do not work E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules a 2,080 hour work year, their salary may seem higher or lower due to the number of hours actually worked. The RCE limits are based on physicians who worked a 2,080 hour work year. The BLS OES data also are based on a 2,080 hour work year; therefore, we believe that comparing the RCE limits to these BLS OES data is appropriate for purposes of our analysis. We performed an analysis comparing RCE limits for 2012, calculated without a location adjustment and solely for purposes of the analysis, to the most recently published (at the time of the analysis) BLS OES physician mean annual income data for the same year, to determine whether RCE limits based on the AMA PSP data, but without a location adjustment, would continue to reasonably reflect mean annual physician income data. For 2012, the BLS OES had income information for 8 of the 10 RCE specialties, which include the ‘‘Total’’ category; the BLS OES data did not capture the ‘‘Radiology’’ and ‘‘Pathology’’ specialties. We searched for another reliable data source for ‘‘Radiology’’ and ‘‘Pathology’’ but we could not find one with sufficient data elements to compare with the RCE limits. We used the MEI to update the 28175 RCE limits for these eight specialties to 2012 without including the location factor. We then compared these 2012 RCE limits to the 2012 BLS OES data for these same eight specialties. As shown in the table below, we found that the RCE limits ranged from 10.41 percent above the BLS OES mean annual income data to 3.58 percent below the BLS OES data. Only three of the eight specialties had RCE limits slightly less than the current BLS OES mean annual wages for their specialty. The remaining five specialties had RCE limits above the current BLS OES mean annual wages for the specialties. ANALYSIS CHART RCE limits updated to 2012* Specialty Total ............................................................................................................................................. General/Family Practice .............................................................................................................. Internal Medicine ......................................................................................................................... Surgery ........................................................................................................................................ Pediatrics ..................................................................................................................................... OB/GYN ....................................................................................................................................... Radiology ..................................................................................................................................... Psychiatry .................................................................................................................................... Anesthesiology ............................................................................................................................. Pathology ..................................................................................................................................... BLS OES mean 2012 annual wage $206,300 174,600 192,700 240,300 165,500 231,200 265,200 176,800 233,500 253,900 $184,820 180,850 191,520 230,540 167,640 216,760 N/A 177,520 232,820 N/A Percent difference 10.41 ¥3.58 0.61 4.06 ¥1.29 6.25 N/A ¥0.41 0.29 N/A mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * These limits were calculated using the proposed methodology only for purposes of this impact analysis. The RCE amounts updated to 2012 and the BLS OES numbers for 2012 varied only slightly, and in most cases, the RCE limit was higher than the BLS OES mean annual wage. Based on this analysis, we believe that RCE limits calculated using the AMA PSP data, and our proposed elimination of the location adjustment for the updated RCE limits, would result in RCE limits that are a reasonable reflection of mean annual physician income and would continue to ensure that providers subject to the RCE limits are paid in a fair and accurate manner. Because there are a relatively small number of providers currently affected by the RCE limits and because, as discussed above, we believe the revised RCE limits without a location adjustment would continue to ensure appropriate payment to such providers, we believe that eliminating the location adjustment would have a minimal overall effect on providers subject to the RCE limits and on the industry as a whole. For the reasons discussed above, we are proposing to eliminate the location adjustment under the RCE limit methodology, and to revise § 415.70(b) of the regulations to remove consideration of the ‘‘type of location’’ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 as part of the methodology used to establish RCE limits. Set forth below are the proposed updated RCE limits on the amount of allowable compensation for services furnished by physicians to providers for cost reporting periods beginning on or after January 1, 2015. To calculate these proposed RCE limits, we used the same methodology that was used to calculate the original and previous updates to the RCE limits, but did not apply an adjustment based on geographical classification. As noted earlier, this methodology was derived from the 1982 working paper. We used the mean physician income by specialty from that working paper to calculate the RCE limits without adjusting for geographical classification. We then updated these data by the CPI–U (from 1982 to 1997) and then by the MEI (from 1998 to 2015) to compute the proposed updated RCE limits. The proposed RCE limits effective for cost reporting periods beginning on or after January 1, 2015 are shown in the chart below. PROPOSED CY 2015 RCE LIMITS— Continued Pediatrics .................................. OB/GYN .................................... Radiology .................................. Psychiatry ................................. Anesthesiology ......................... Pathology .................................. 170,200 237,800 272,700 181,800 240,100 261,100 We are inviting public comments on our proposals to update the RCE limits and to eliminate the location adjustment for the RCE limits for cost reporting periods beginning on or after January 1, 2015. In addition, we are inviting public comments on our proposal to revise § 415.70(b) of the regulations to eliminate consideration of the type of location as part of the methodology to establish RCE limits for cost reporting periods beginning on or after January 1, 2015. C. Critical Access Hospitals (CAHs) 1. Background Sections 1820 and 1861(mm) of the Act, as amended by section 4201 of the Balanced Budget Act (BBA) of 1997, PROPOSED CY 2015 RCE LIMITS replaced the Essential Access Total .......................................... $212,100 Community Hospitals and Rural General/Family Practice ........... 179,500 Primary Care Hospitals (EACH/RPCH) Internal Medicine ...................... 198,100 program with the Medicare Rural Surgery ..................................... 247,100 Hospital Flexibility Program (MRHFP), PO 00000 Frm 00199 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28176 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 under which a qualifying facility can be designated as a CAH. CAHs participating in the MRHFP must meet the conditions for designation by the State and be certified by the Secretary in accordance with section 1820 of the Act. Further, in accordance with section 1820(e)(3) of the Act, a CAH must meet other criteria that the Secretary specifies. The regulations that govern the conditions of participation (CoPs) for CAHs under the statutory requirements of section 1820 are codified at 42 CFR Part 485, Subpart F. 2. Proposed Changes Related to Reclassification as Rural for CAHs Under section 1820(c)(2)(B)(i) of the Act, a facility is eligible for designation as a CAH only if it is located in a county or equivalent unit of local government in a rural area (as defined in section 1886(d)(2)(D) of the Act), or is being treated as being located in a rural area in accordance with section 1886(d)(8)(E) of the Act. The regulations implementing this location requirement are located at § 485.610(b). The regulations governing the process for a facility located in an urban area to apply for reclassification as a rural facility under section 1886(d)(8)(E) of the Act are located at § 412.103. In this proposed rule, we are proposing to implement the most recently published OMB delineations (we refer readers to section III.B. of the preamble of this proposed rule for a discussion of the changes that were announced in OMB Bulletin No. 13–01). As previously stated, a facility must be located in a rural area in order to be eligible for designation as a CAH. Therefore, a new OMB delineation that redesignates an area from rural to urban, affects the status of a facility that is currently a CAH and had met the CAH location requirements prior to the new OMB delineation. A facility that is located in an urban area cannot remain a CAH unless it is reclassified as rural under § 412.103 of the regulations. In both the FY 2005 IPPS final rule (69 FR 49221 and 69 FR 60252) and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43940), we amended the regulations at § 412.103(a) and § 485.610(b) to provide for a transition period during which CAHs that had previously been located in rural areas but, as a result of new OMB delineations, were now located in urban areas, could reclassify as rural under § 412.103. Specifically, in both the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule, we provided for a 2-year period during which a CAH located in an urban area as a result of the new OMB delineations VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 could continue participating without interruption as a CAH, thereby allowing the CAH sufficient time to reclassify as rural under § 412.103. If the facility did not reclassify as a rural facility by the end of that 2-year period, the CAH would not be able to retain its CAH status beyond that 2-year period. However, under the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule, the application of the regulation was limited to October 1, 2004 through September 30, 2006, and October 1, 2009 through September 30, 2011, respectively. As a result, in the absence of a new amendment to the regulations each time there are new OMB delineations, a CAH that becomes located in an urban area as a result of those OMB delineations would not be given 2 years to reclassify as rural under § 412.103 of the regulations. In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43940), we stated that we would consider whether it would be appropriate to propose, in future IPPS rulemaking, to revise § 485.610 and § 412.103 to provide for a transition period any time a CAH that was formerly located in a rural area is designated as being located in an urban area as a result of the redesignation of its county from rural to urban. After further consideration, we believe that it is appropriate to propose to change the regulations to provide for a transition period that is not restricted to a timeframe, but rather can be applied any time a facility that is currently designated as a CAH becomes located in an urban area as a result of a new OMB delineation. Therefore, we are proposing that, effective October 1, 2014, a CAH that was previously located in a rural area but is now located in an urban area as a result of a new OMB labor market area delineation will continue to be treated as rural for 2 years from the date the OMB delineation is implemented. Accordingly, if the OMB delineations announced in OMB Bulletin No. 13–01 on February 28, 2013 discussed in section III.B. of the preamble of this proposed rule are implemented in the FY 2015 IPPS/LTCH PPS final rule, effective October 1, 2014, any CAH affected by the new OMB delineations in OMB Bulletin No. 13–01 would retain its rural status through September 30, 2016. An affected CAH would be required to reclassify as a rural facility under § 412.103 within that 2-year period in order to continue participating in the Medicare program as a CAH after the 2-year transition period ends. Therefore, taking into consideration the example above, any CAH affected by a new OMB delineation that is PO 00000 Frm 00200 Fmt 4701 Sfmt 4702 implemented in the FY 2015 IPPS/ LTCH PPS final rule would be required to reclassify as rural by September 30, 2016, in order to retain its CAH status after September 30, 2016. To implement this proposed change, we are proposing to revise § 412.103 by adding a new paragraph (a)(6), and to revise § 485.610 by making a conforming change to the introductory text of paragraph (b) and adding a new paragraph (b)(5) to provide for a 2-year transition period that will apply any time a new OMB delineation causes a facility that was previously located in a rural area and is designated as a CAH to be located in an urban area. We believe that this proposal to revise the regulations to automatically provide for a 2-year transition period following the implementation of new OMB delineations is more efficient than providing for a regulatory change limited to a timeframe, and, as a result, will be more effective in reducing any disruption caused by new OMB delineations. 3. Proposed Revision of the Requirements for Physician Certification of CAH Inpatient Services For inpatient CAH services to be payable under Medicare Part A, section 1814(a)(8) of the Act requires that a physician certify ‘‘that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the critical access hospital.’’ The regulations implementing this statutory requirement are located at 42 CFR 424.15. Prior to FY 2014, this physician certification was required no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. In the FY 2014 IPPS/LTCH PPS final rule, we revised the CAH regulations concerning the timing requirements for certification of inpatient CAH services. Specifically, we revised § 424.15(b) to state: ‘‘Certification begins with the order for inpatient admission. The certification must be completed, signed, and documented in the medical record prior to discharge’’ (78 FR 50970). This change was effective October 1, 2013. However, in order to provide CAHs with greater flexibility in meeting this certification requirement, we are now proposing to amend the regulations governing the timing of the 96-hour certification requirement at § 424.15(b) such that physician certification is required no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. That is, we are proposing to remove the requirement that certification of the 96- E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hour requirement must be completed prior to discharge and are proposing to reinstate the timing requirement that was in place prior to October 1, 2013. We are proposing to revise § 424.15(b) to remove the phrase ‘‘prior to discharge’’ and replace it with ‘‘no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted’’. In addition, we are proposing to make a conforming amendment to § 424.11(d)(5). Section 424.11(d)(5) states ‘‘[f]or all inpatient hospital or critical access hospital inpatient services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge.’’ Because we are proposing to change the timing requirement for physician certification of CAH inpatient services at § 424.15(b), such that the certification could be completed past discharge, we are proposing to revise § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient’’. We are seeking public comment on these proposed changes to the regulations governing the requirement for physician certification of CAH inpatient services. VII. Proposed Changes to the LongTerm Care Hospital Prospective Payment System (LTCH PPS) for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority Section 123 of the Medicare, Medicaid, and SCHIP (State Children’s Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113) as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554) provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs: specifically, a hospital that first received payment under section 1886(d) of the Act in 1986 and has an average inpatient length of stay (LOS) (as determined by the Secretary of Health VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 and Human Services (the Secretary)) of greater than 20 days and has 80 percent or more of its annual Medicare inpatient discharges with a principal diagnosis that reflects a finding of neoplastic disease in the 12-month cost reporting period ending in FY 1997. Section 123 of the BBRA requires the PPS for LTCHs to be a ‘‘per discharge’’ system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs. Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. In the August 30, 2002 Federal Register, we issued a final rule that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 55954). For the initial implementation of the LTCH PPS (FYs 2003 through FY 2007), the system used information from LTCH patient records to classify patients into distinct long-term care diagnosis-related groups (LTC–DRGs) based on clinical characteristics and expected resource needs. Beginning in FY 2008, we adopted the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) as the patient classification system used under the LTCH PPS. Payments are calculated for each MS–LTC–DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register. The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97–248) for payments for inpatient services provided by a LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable cost-based payment provisions are located at 42 CFR Part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98–21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and were paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospitalspecific ceiling on payments was determined by multiplying the PO 00000 Frm 00201 Fmt 4701 Sfmt 4702 28177 hospital’s updated target amount by the number of total current year Medicare discharges. (Generally, in section VII. of the preamble of this proposed rule, when we refer to discharges, we describe Medicare discharges.) The August 30, 2002 final rule further details the payment policy under the TEFRA system (67 FR 55954). In the August 30, 2002 final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, a LTCH’s total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless a LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs’ cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR Part 412, Subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51733 through 51743) for a chronological summary of the main legislative and regulatory developments affecting the LTCH PPS through the annual update cycles prior to the FY 2014 rulemaking cycle. In addition, in this proposed rule, we discuss the provisions of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, that affect the LTCH PPS. In section VII.I.2. of the preamble of this proposed rule, we discuss the provisions of section 1206(a) of Public Law 113–67, which amended section 1886(m) of the Act by adding paragraph (6) and established, among other things, patient-level criteria for payments under the LTCH PPS for implementation E:\FR\FM\15MYP2.SGM 15MYP2 28178 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules beginning with FY 2016. In section VII.E. of the preamble of this proposed rule, we discuss the provisions of section 1206(b)(1) of Public Law 113– 67, which provide for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25percent threshold payment adjustment policy (except for ‘‘grandfathered’’ hospitals-within-hospitals (HwHs), which are permanently exempt from this policy). In section VII.G. of the preamble of this proposed rule, we discuss the provisions of section 1206(b)(2) of Public Law 113–67 (as amended by section 112(b) of the Protecting Access to Medicare Act (Pub. L. 113–93), which, subject to certain defined exceptions, provide for statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities and a new statutory moratorium on the increase in the number of hospital beds in LTCHs or LTCH satellite facilities for the period beginning April 1, 2014 and ending September 30, 2017. In section IX.C. of the preamble of this proposed rule, we discuss the provisions of section 1206(c) of Public Law 113–67, which amended the LTCH Quality Reporting Program established under section 1886(m)(5) of the Act by requiring the Secretary to establish a functional status quality measure to evaluate the in mobility among inpatients requiring ventilator support no later than October 1, 2015. In section VII.H. of the preamble of this proposed rule, we discuss the findings of a review of payments to certain LTCHs (that is, LTCHs classified under subclause (II) of section 1886(d)(1)(B)(iv) of the Act) that was conducted in accordance with section 1206(d) of Public Law 113–67, and propose to apply a payment adjustment under the LTCH PPS to ‘‘subclause (II)’’ LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling payments under the reasonable cost TEFRA payment system model. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Criteria for Classification as an LTCH a. Classification as an LTCH Under the regulations at § 412.23(e)(1), to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare. Furthermore, § 412.23(e)(2)(i), which implements section 1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an average Medicare inpatient length of stay of greater than 25 days to be paid under the LTCH PPS. Alternatively, § 412.23(e)(2)(ii) states that, for cost reporting periods VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 beginning on or after August 5, 1997, a hospital that was first excluded from the PPS in 1986 and can demonstrate that at least 80 percent of its annual Medicare inpatient discharges in the 12month cost reporting period ending in FY 1997 have a principal diagnosis that reflects a finding of neoplastic disease must have an average inpatient length of stay for all patients, including both Medicare and non-Medicare inpatients, of greater than 20 days. b. Hospitals Excluded From the LTCH PPS The following hospitals are paid under special payment provisions, as described in § 412.22(c) and, therefore, are not subject to the LTCH PPS rules: • Veterans Administration hospitals. • Hospitals that are reimbursed under State cost control systems approved under 42 CFR Part 403. • Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90–248) (42 U.S.C. 1395b–1) or section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92–603) (42 U.S.C. 1395b–1 (note)) (Statewide all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the Act). • Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries. 3. Limitation on Charges to Beneficiaries In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we clarified that the discussion of beneficiary liability in the August 30, 2002 final rule was not meant to establish rates or payments for, or define Medicare-eligible expenses. Under § 412.507, if the Medicare payment to the LTCH is the full LTC–DRG payment amount, consistent with other established hospital prospective payment systems, a LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87 and for items and services specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for days for which the beneficiary has coverage until the shortstay outlier (SSO) threshold is exceeded. Therefore, if the Medicare payment was for a SSO case (§ 412.529) that was less than the full LTC–DRG payment amount because the beneficiary had insufficient remaining Medicare days, the LTCH could also charge the beneficiary for PO 00000 Frm 00202 Fmt 4701 Sfmt 4702 services delivered on those uncovered days (§ 412.507). 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance Claims submitted to Medicare must comply with both the Administrative Simplification Compliance Act (ASCA) (Pub. L. 107–105), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104–191). Section 3 of the ASCA requires that the Medicare Program deny payment under Part A or Part B for any expenses incurred for items or services ‘‘for which a claim is submitted other than in an electronic form specified by the Secretary.’’ Section 1862(h) of the Act (as added by section 3(a) of the ASCA) provides that the Secretary shall waive such denial in two specific types of cases and may also waive such denial ‘‘in such unusual cases as the Secretary finds appropriate’’ (68 FR 48805). Section 3 of the ASCA operates in the context of the HIPAA regulations, which include, among other provisions, the transactions and code sets standards requirements codified under 45 CFR Parts 160 and 162 (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct certain electronic health care transactions according to the applicable transactions and code sets standards. The Department of Health and Human Services has a number of initiatives designed to encourage and support the adoption of health information technology and promote nationwide health information exchange to improve health care. The Office of the National Coordinator for Health Information Technology (ONC) leads these efforts in collaboration with other agencies, including CMS and the Office of the Assistant Secretary for Planning and Evaluation (ASPE). Through a number of activities, including several open government initiatives, HHS is promoting the adoption of electronic health record (EHR) technology certified under the ONC Health Information Technology (HIT) Certification Program developed to support secure, interoperable, health information exchange. While certified EHR technology is not yet available for LTCHs and other types of providers that are not eligible for the Medicare and Medicaid EHR Incentive Programs, ONC has requested the HIT Policy Committee (a Federal Advisory Committee) to explore the expansion of EHR E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules certification under the ONC HIT Certification Program, focusing on EHR certification criteria needed for longterm and postacute care (including LTCHs) and behavioral health care providers. ONC has issued a proposed rule concerning a voluntary 2015 Edition of EHR certification criteria that would more easily accommodate HIT certification for health care settings where individual or institutional health care providers are not typically eligible to qualify for meaningful use incentive payments under Medicare or Medicaid, such as behavioral health or long-term postacute care settings. We believe that the use of certified EHRs by LTCHs (and other types of providers that are ineligible for the Medicare and Medicaid EHR Incentive Programs) can effectively and efficiently help providers improve internal care delivery practices, support the exchange of important information across care partners and during transitions of care, and could enable the reporting of electronically specified clinical quality measures (eCQMs) (as described elsewhere in this rule). More information on the proposed rule concerning a voluntary 2015 Edition of EHR certification criteria, identification of EHR certification criteria and development of standards applicable to LTCHs can be found at: • https://www.healthit.gov/policyresearchers-implementers/standardsand-certification-regulations; • https://www.healthit.gov/facas/ FACAS/health-it-policy-committee/ hitpc-workgroups/certificationadoption; • https://wiki.siframework.org/ LCC+LTPAC+Care+Transition+SWG; and • https://wiki.siframework.org/ Longitudinal+Coordination+of+Care. B. Proposed Medicare Severity LongTerm Care Diagnosis-Related Group (MS–LTC–DRG) Classifications and Relative Weights for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Background Section 123 of the BBRA requires that the Secretary implement a PPS for LTCHs (that is, a per discharge system with a diagnosis-related group (DRG)based patient classification system reflecting the differences in patient resources and costs). Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine ‘‘the feasibility and the impact of basing payment under such a system [the longterm care hospital (LTCH) PPS] on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 LTCH patients, as well as the use of the most recently available hospital discharge data.’’ When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system (that is, the CMS DRGs) that was utilized at that time under the IPPS. As a component of the LTCH PPS, we refer to this patient classification system as the ‘‘long-term care diagnosis-related groups (LTC– DRGs).’’ Although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect ‘‘the differences in patient resource use . . .’’ of LTCH patients (section 123(a)(1) of the BBRA (Pub. L. 106–113)). As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), the MS–DRGs and the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) were adopted under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS–DRGs and MS–LTC– DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy descriptions and payment calculations, all references to LTC– DRGs would be considered a reference to MS–LTC–DRGs. For the remainder of this section, we present the discussion in terms of the current MS–LTC–DRG patient classification system unless specifically referring to the previous LTC–DRG patient classification system that was in effect before October 1, 2007.) The MS–DRGs adopted in FY 2008 represent an increase in the number of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS–DRG classifications are updated annually. There are currently 751 MS–DRG groupings. If we finalize the proposed changes to the MS–DRG groupings described in section II.G. of this preamble, there would be a total of 753 MS–DRG groupings for FY 2015. PO 00000 Frm 00203 Fmt 4701 Sfmt 4702 28179 Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515 of the regulations, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS–LTC–DRGs based on clinical characteristics and estimated resource needs. We then assign an appropriate weight to the MS–LTC–DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs. Below we provide a general summary of our existing methodology for determining the proposed MS–LTC–DRG relative weights. In a departure from the IPPS, and as discussed in greater detail below in section VII.B.3.f. of this preamble, we are proposing to continue to use proposed low-volume MS–LTC–DRGs (that is, proposed MS–LTC–DRGs with less than 25 LTCH cases) in determining the proposed MS–LTC–DRG relative weights because LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. For purposes of determining the proposed relative weights for the large number of proposed low-volume MS–LTC–DRGs, we are proposing to group all of the lowvolume MS–LTC–DRGs into five quintiles based on average charge per discharge. (A detailed discussion of the initial development and application of the quintile methodology appears in the August 30, 2002 LTCH PPS final rule (67 FR 55978).) Under our existing methodology, we are proposing to account for adjustments to payments for short-stay outlier (SSO) cases (that is, cases where the covered length of stay at the LTCH is less than or equal to fivesixths of the geometric average length of stay for the MS–LTC–DRG). Furthermore, we are proposing to make adjustments to account for nonmonotonically increasing weights, when necessary. That is, theoretically, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges such that, in the severity levels within a base MS–LTC–DRG, the proposed relative weights should increase monotonically with severity from the lowest to highest severity level. (We discuss nonmonotonicity in greater detail and our proposed methodology to adjust the proposed MS–LTC–DRG relative weights to account for nonmonotonically increasing proposed relative weights in section VII.B.3.g. (Step 6) of this preamble.) E:\FR\FM\15MYP2.SGM 15MYP2 28180 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Patient Classifications into MS–LTC– DRGs a. Background The MS–DRGs (used under the IPPS) and the MS–LTC–DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted above in this section, we refer to the DRGs under the LTCH PPS as MS–LTC–DRGs although they are structurally identical to the MS–DRGs used under the IPPS. The MS–DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD–9–CM procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKGs), or minor surgical procedures (for example, a biopsy of skin and subcutaneous tissue (procedure code 86.11)) do not affect the MS–LTC–DRG assignment based on their presence on the claim. Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge and that payment varies by the MS–LTC–DRG to which a beneficiary’s stay is assigned. Cases are classified into MS–LTC–DRGs for payment based on the following six data elements: • Principal diagnosis; • Additional or secondary diagnoses; • Surgical procedures; • Age; • Sex; and • Discharge status of the patient. Through FY 2010, the number of diagnosis and procedure codes considered for MS–DRG assignment was limited to nine and six, respectively. However, for claims submitted on the 5010 format beginning January 1, 2011, we increased the capacity to process diagnosis and procedure codes up to 25 diagnoses and 25 procedures. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. We refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for a complete discussion of this change (75 FR 50127). Under HIPAA transactions and code sets regulations at 45 CFR Parts 160 and 162, covered entities must comply with the adopted transaction standards and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 operating rules specified in Subparts I through S of Part 162. Among other requirements, by January 1, 2012, covered entities were required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3— Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102). HIPAA requires covered entities to use the applicable medical data code set requirements when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the patient, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the Internal Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). For additional information on the ICD–9–CM coding system, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47241 through 47243 and 47277 through 47281). We also refer readers to the detailed discussion on correct coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 55981 through 55983). Additional coding instructions and examples are published in the Coding Clinic for ICD–9–CM, a product of the American Hospital Association. (We refer readers to section II.G.13. of the preamble of this proposed rule for additional information on the annual revisions to the ICD–9–CM codes.) Providers use the code sets under the ICD–9–CM coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS–DRG system. We have been discussing the conversion to the ICD–10 coding system for many years. We refer readers to section II.G.1. of the preamble of this proposed rule for additional information on the implementation of the ICD–10 coding system. To create the MS–DRGs (and by extension, the MS–LTC–DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a detailed PO 00000 Frm 00204 Fmt 4701 Sfmt 4702 discussion about the creation of MS– DRGs based on severity of illness levels (72 FR 47141 through 47175). Medicare administrative contractors (MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS–LTC–DRG can be made. During this process, certain cases are selected for further development (74 FR 43949). After screening through the MCE, each claim is classified into the appropriate MS–LTC–DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS–LTC–DRG assignment, the Medicare contractor determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospitalspecific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS–LTC–DRG assignments made by the Medicare contractor and to submit additional information within a specified timeframe as provided in § 412.513(c). The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS–LTC–DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS–DRG and MS–LTC–DRG classification changes and to recalibrate the MS–DRG and MS–LTC–DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively. b. Proposed Changes to the MS–LTC– DRGs for FY 2015 As specified by our regulations at § 412.517(a), which require that the MS– LTC–DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, we are proposing to update the MS–LTC–DRG classifications effective October 1, 2014, through September 30, 2015 (FY 2015) consistent with the proposed changes to E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules specific MS–DRG classifications presented in section II.G. of this preamble (that is, proposed GROUPER Version 32.0). Therefore, the proposed MS–LTC–DRGs for FY 2015 presented in this proposed rule are the same as the proposed MS–DRGs that are being proposed for use under the IPPS for FY 2015. In addition, because the proposed MS–LTC–DRGs for FY 2015 are the same as the proposed MS–DRGs for FY 2015, the other proposed changes that affect MS–DRG (and by extension MS– LTC–DRG) assignments under proposed GROUPER Version 32.0 as discussed in section II.G. of the preamble of this proposed rule, including the proposed changes to the MCE software and the ICD–9–CM coding system, also are applicable under the LTCH PPS for FY 2015. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Development of the Proposed FY 2015 MS–LTC–DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights One of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH’s case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment system rate by the applicable relative weight in determining payment to LTCHs for each case. The basic methodology used to develop the MS–LTC–DRG relative weights generally continues to be consistent with the general methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), with the exception of some modifications of our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity resulting from the adoption of the MS–LTC–DRGs. (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550).) Under the LTCH PPS, relative weights for each MS–LTC–DRG are a primary element used to account for the variations in cost per discharge and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS–LTC–DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS–LTC–DRG that represents the resources needed by an average inpatient LTCH case in that MS–LTC–DRG. For example, cases in a MS–LTC–DRG with a relative weight of 2 will, on average, cost twice as much to treat as cases in a MS–LTC–DRG with a relative weight of 1. b. Proposed Development of the MS– LTC–DRG Relative Weights for FY 2015 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755 through 50760), we presented our policies for the development of the MS–LTC–DRG relative weights for FY 2014. The basic methodology we used to develop the FY 2014 MS–LTC–DRG relative weights was the same as the methodology we used to develop the FY 2013 MS–LTC– DRG relative weights in the FY 2013 IPPS/LTCH PPS final rule and was consistent with the general methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In this FY 2015 IPPS/ LTCH PPS proposed rule, we are proposing to continue to apply our established methodology to develop the FY 2015 MS–LTC–DRG relative weights for FY 2015, which includes application of established policies related to the data, the hospital-specific relative value (HSRV) methodology, the treatment of severity levels in the MS–LTC–DRGs, low-volume and no-volume MS–LTC– DRGs, adjustment for nonmonotonicity, and the steps for calculating the MS– LTC–DRG relative weights with a budget neutrality factor. Below we present the methodology that we are proposing to continue to use to determine the MS–LTC–DRG relative weights for FY 2015, which is consistent with the methodology presented in the FY 2014 IPPS/LTCH PPS final rule. Beginning with the FY 2008 update, we established a budget neutrality requirement for the annual update to the MS–LTC–DRG classifications and relative weights at § 412.517(b) (in conjunction with § 412.503), such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the classification and relative weight changes (72 FR 26882 through 26884). Consistent with § 412.517(b), we are proposing to continue to apply our established two-step budget neutrality PO 00000 Frm 00205 Fmt 4701 Sfmt 4702 28181 methodology, which is based on the current year MS–LTC–DRG classifications and relative weights. We are proposing to continue to apply our established two-step budget neutrality methodology such that the annual update to the MS–LTC–DRG classifications and relative weights for FY 2015 are based on the FY 2014 MS– LTC–DRG classifications and relative weights established in Table 11 listed in section VI. of the Addendum to the FY 2014 IPPS/LTCH PPS final rule (78 FR 51002). (For additional information on the established two-step budget neutrality methodology, we refer readers to the FY 2008 IPPS final rule (72 FR 47295 through 47296).) c. Data For the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755), to calculate the MS– LTC–DRG relative weights for FY 2014, we obtained total charges from FY 2012 Medicare LTCH bill data from the December 2012 update of the FY 2012 MedPAR file, which were the best available data at that time, and used the finalized Version 31.0 of the GROUPER to classify LTCH cases. Consistent with our historical practice, to calculate the proposed MS–LTC–DRG relative weights for FY 2015 in this proposed rule, we are proposing to obtain total charges from the FY 2013 Medicare LTCH bill data from the December 2013 update of the FY 2013 MedPAR file, which are the best available data at this time, and to use Version 32.0 of the GROUPER to classify LTCH cases. In this FY 2015 IPPS/LTCH PPS proposed rule and consistent with our historical methodology, we are proposing to exclude the data from LTCHs that are all-inclusive rate providers and LTCHs that are reimbursed in accordance with demonstration projects authorized under section 402(a) of Public Law 90– 248 or section 222(a) of Public Law 92– 603. Furthermore, consistent with our historical practice, we are proposing to exclude Medicare Advantage (Part C) claims, which are now included in the MedPAR files, in the calculations for the proposed relative weights under the LTCH PPS that are used to determine payments for Medicare fee-for-service claims. Specifically, we are proposing not to use any claims from the MedPAR files that have a GHO Paid indicator value of ‘‘1,’’ which effectively removes Medicare Advantage claims from the proposed relative weight calculations. Accordingly, in the development of the proposed FY 2015 MS–LTC–DRG relative weights in this proposed rule, we excluded the data of 12 all-inclusive rate providers and one LTCH that is E:\FR\FM\15MYP2.SGM 15MYP2 28182 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 paid in accordance with demonstration projects that had claims in the December 2013 update of the FY 2013 MedPAR file, as well as any Medicare Advantage claims. d. Hospital-Specific Relative Value (HSRV) Methodology By nature, LTCHs often specialize in certain areas, such as ventilatordependent patients and treatment of infections and wound care. Some case types (MS–DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS–LTC– DRGs has the potential to inappropriately distort the measure of average charges. In this proposed rule, to account for the fact that cases may not be randomly distributed across LTCHs, consistent with the methodology we have used since the implementation of the LTCH PPS, we are proposing to continue to use a hospital-specific relative value (HSRV) methodology to calculate the proposed MS–LTC–DRG relative weights for FY 2015. We believe this method removes this hospital-specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, under this methodology, we reduce the impact of the variation in charges across providers on any particular proposed MS–LTC– DRG relative weight by converting each LTCH’s charge for a case to a relative value based on that LTCH’s average charge. Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjusting those values for the LTCH’s case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for a LTCH is its case-mix, so it is reasonable to scale each LTCH’s average relative charge value by its case-mix. In this way, each LTCH’s relative charge value is adjusted by its case-mix to an average that reflects the complexity of the cases it treats relative to the complexity of the cases treated by all other LTCHs (the average case-mix of all LTCHs). In accordance with our established methodology, we are proposing to continue to standardize charges for each case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in section VII.B.3.g. (Step 3) of this preamble) by the average adjusted charge for all cases VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 at the LTCH in which the case was treated. SSO cases are cases with a length of stay that is less than or equal to five-sixths the average length of stay of the MS–LTC–DRG (§ 412.529 and § 412.503). The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio is multiplied by that LTCH’s case-mix index to determine the standardized charge for the case (67 FR 55989). Multiplying the resulting ratio by the LTCH’s case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH’s relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same casemix, but an average adjusted charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account. e. Treatment of Severity Levels in Developing the Proposed MS–LTC–DRG Relative Weights For purposes of determining the proposed MS–LTC–DRG relative weights, under our historical methodology, there are three different categories of MS–DRGs based on volume of cases within specific MS– LTC–DRGs. Proposed MS–LTC–DRGs with at least 25 cases are each assigned a unique proposed relative weight; proposed low-volume MS–LTC–DRGs (that is, proposed MS–LTC–DRGs that contain between 1 and 24 cases based on a given year’s claims data) are grouped into quintiles (as described below) and assigned the proposed relative weight of the quintile. Proposed no-volume MS–LTC–DRGs (that is, no cases in the given year’s claims data are assigned to those proposed MS–LTC– DRGs) are cross-walked to other proposed MS–LTC–DRGs based on the clinical similarities and assigned the proposed relative weight of the crosswalked MS–LTC–DRG (as described in PO 00000 Frm 00206 Fmt 4701 Sfmt 4702 greater detail below). In this proposed rule, we are proposing to continue to utilize these same three categories of MS–LTC–DRGs for purposes of the treatment of severity levels in determining the proposed MS–LTC– DRG relative weights for FY 2015. (We provide in-depth discussions of our policy regarding weight-setting for proposed low-volume MS–LTC–DRGs in section VII.B.3.f. of the preamble of this proposed rule and for proposed novolume MS–LTC–DRGs, under Step 5 in section VII.B.3.g. of the preamble of this proposed rule.) Furthermore, in determining the proposed FY 2015 MS–LTC–DRG relative weights, when necessary, we are proposing to make adjustments to account for nonmonotonicity, as discussed in greater detail below in Step 6 of section VII.B.3.g. of this preamble. We refer readers to the discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule for our rationale for including an adjustment for nonmonotonicity (74 FR 43953 through 43954). f. Proposed Low-Volume MS–LTC– DRGs In order to account for proposed MS– LTC–DRGs with low volume (that is, with fewer than 25 LTCH cases), consistent with our existing methodology for purposes of determining the proposed FY 2015 MS– LTC–DRG relative weights, we are proposing to continue to employ the quintile methodology for proposed lowvolume MS–LTC–DRGs, such that we group the proposed ‘‘low-volume MS– LTC–DRGs’’ (that is, proposed MS– LTC–DRGs that contained between 1 and 24 cases annually) into one of five categories (quintiles) based on average charges (67 FR 55984 through 55995 and 72 FR 47283 through 47288). In determining the proposed FY 2015 MS– LTC–DRG relative weights in this proposed rule, in cases where the initial assignment of a proposed low-volume MS–LTC–DRG to a quintile results in nonmonotonicity within a base-DRG, in order to ensure appropriate Medicare payments, consistent with our historical methodology, we are proposing to make adjustments to the treatment of proposed low-volume MS–LTC–DRGs to preserve monotonicity, as discussed in detail below in section VII.B.3.g. (Step 6) of the preamble of this proposed rule. In this proposed rule, using LTCH cases from the December 2013 update of the FY 2013 MedPAR file (which is currently the best available data), we identified 297 proposed MS–LTC–DRGs that contained between 1 and 24 cases. This list of proposed MS–LTC–DRGs was then divided into one of the 5 low- E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules volume quintiles, each containing 59 proposed MS–LTC–DRGs (297/5 = 59 with two proposed MS–LTC–DRGs as the remainder). We are proposing to assign a proposed low-volume MS– LTC–DRG to a specific low-volume quintile by sorting the proposed lowvolume MS–LTC–DRGs in ascending order by average charge in accordance with our established methodology. Based on the data available for this proposed rule, the number of proposed MS–LTC–DRGs with less than 25 cases is not evenly divisible by 5. Therefore, consistent with our historical approach, we are proposing to use the average charge of the low-volume quintile to determine which of the low-volume quintiles contain the additional proposed low-volume MS–LTC–DRG. Specifically for this proposed rule, after organizing the proposed MS–LTC–DRGs by ascending order by average charge, we are proposing to assign the first fifth (1st through 59th) of proposed lowvolume MS–LTC–DRGs (with the lowest average charge) into proposed Quintile 1. The proposed MS–LTC–DRGs with the highest average charge cases were assigned into proposed Quintile 5. Because the average charge of the 119th proposed low-volume MS–LTC–DRG in the sorted list was closer to the average charge of the 118th proposed lowvolume MS–LTC–DRG (assigned to proposed Quintile 2) than to the average charge of the 120th proposed lowvolume MS–LTC–DRG (assigned to proposed Quintile 2), we are proposing to assign it to proposed Quintile 2 (such that proposed Quintile 2 contains 60 proposed low-volume MS– LTC–DRGs before any adjustments for nonmonotonicity, as discussed below). This resulted in 3 of the 5 proposed low-volume quintiles containing 59 proposed MS–LTC–DRGs (proposed Quintiles 1, 3, and 4) and two proposed low-volume quintiles containing 60 proposed MS–LTC–DRGs (Quintiles 2 and 5). Table 13A, which is listed in section VI. of the Addendum to this proposed rule and is available via the Internet, lists the proposed composition of the low-volume quintiles for proposed MS–LTC–DRGs for FY 2015. Accordingly, in order to determine the proposed FY 2015 relative weights for the proposed MS–LTC–DRGs with low volume, we are proposing to use the five proposed low-volume quintiles described above. We determined a proposed relative weight and (geometric) average length of stay for each of the five proposed low-volume quintiles using the methodology that we are proposing to apply to the proposed MS–LTC–DRGs (25 or more cases), as VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 described below in section VII.B.3.g. of the preamble of this proposed rule. We are proposing to assign the same proposed relative weight and average length of stay to each of the proposed low-volume MS–LTC–DRGs that make up an individual proposed low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of proposed MS–LTC– DRGs with a low volume of LTCH cases will vary in the future. Furthermore, we note that we will continue to monitor the volume (that is, the number of LTCH cases) in the proposed low-volume quintiles to ensure that our proposed quintile assignments used in determining the proposed MS–LTC–DRG relative weights result in appropriate payment for such cases and do not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases. g. Steps for Determining the Proposed FY 2015 MS–LTC–DRG Relative Weights In this proposed rule, we are proposing to determine the proposed FY 2015 MS–LTC–DRG relative weights based on our existing methodology. (For additional information on the original development of this methodology, and modifications to it since the adoption of the MS–LTC–DRGs, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43951 through 43966).) In summary, to determine the proposed FY 2015 MS–LTC–DRG relative weights, we are proposing to group LTCH cases to the appropriate proposed MS–LTC– DRG, while taking into account the proposed low-volume quintile (as described above). After grouping the cases to the appropriate proposed MS– LTC–DRG (or proposed low-volume quintile), we are proposing to calculate the FY 2015 relative weights by first removing statistical outliers and cases with a length of stay of 7 days or less (Steps 1 and 2 below). Next, we are proposing to adjust the number of cases in each proposed MS–LTC–DRG (or proposed low-volume quintile) for the effect of SSO cases (Step 3 below). After removing statistical outliers (Step 1 below) and cases with a length of stay of 7 days or less (Step 2 below), the SSO adjusted discharges and corresponding charges were then used to calculate ‘‘relative adjusted weights’’ for each proposed MS–LTC–DRG (or proposed low-volume quintile) using the HSRV method. Below we discuss in detail the steps for calculating the proposed FY 2015 PO 00000 Frm 00207 Fmt 4701 Sfmt 4702 28183 MS–LTC–DRG relative weights. We note that, as we discussed in section VII.B.3.c. of the preamble of this proposed rule, we excluded the data of all-inclusive rate LTCHs, LTCHs that are paid in accordance with demonstration projects, and any Medicare Advantage claims in the December 2013 update of the FY 2013 MedPAR file. Step 1—Remove statistical outliers. The first step in the calculation of the proposed FY 2015 MS–LTC–DRG relative weights is to remove statistical outlier cases. Consistent with our historical relative weight methodology, we are proposing to continue to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each proposed MS–LTC–DRG. These statistical outliers are removed prior to calculating the proposed relative weights because we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the proposed relative weights could result in an inaccurate proposed relative weight that does not truly reflect relative resource use among the proposed MS–LTC– DRGs. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 2—Remove cases with a length of stay of 7 days or less. The proposed MS–LTC–DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in a LTCH because these stays do not fully receive or benefit from treatment that is typical in a LTCH stay, and full resources are often not used in the earlier stages of admission to a LTCH. If we were to include stays of 7 days or less in the computation of the proposed FY 2015 MS–LTC–DRG relative weights, the value of many proposed relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at a LTCH by including data from these very short stays. Therefore, consistent with our historical relative weight methodology, in determining the proposed FY 2015 MS–LTC–DRG relative weights, we are proposing to remove LTCH cases with a length of stay of 7 days or less. (For additional E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28184 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 3—Adjust charges for the effects of SSOs. After removing cases with a length of stay of 7 days or less, we were left with cases that have a length of stay of greater than or equal to 8 days. As the next step in the calculation of the proposed FY 2015 MS–LTC–DRG relative weights, consistent with our historical relative weight methodology, we are proposing to adjust each LTCH’s charges per discharge for those remaining cases for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). In this proposed rule, we are proposing to make this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the proposed MS– LTC–DRG for non-SSO cases. This has the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the proposed MS–LTC–DRG. This process produces the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient’s length of stay been equal to the average length of stay of the MS–LTC–DRG. Counting SSO cases as full discharges with no adjustment in determining the proposed FY 2015 MS–LTC–DRG relative weights would lower the proposed FY 2015 MS–LTC–DRG relative weight for affected proposed MS–LTC–DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within a proposed MS–LTC–DRG. This would result in an ‘‘underpayment’’ for non-SSO cases and an ‘‘overpayment’’ for SSO cases. Therefore, we are proposing to adjust for SSO cases under § 412.529 in this manner because it results in more appropriate payments for all LTCH cases. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 4—Calculate the proposed FY 2015 MS–LTC–DRG relative weights on an iterative basis. Consistent with our historical relative weight methodology, we are proposing to calculate the proposed FY 2015 MS– LTC–DRG relative weights using the HSRV methodology, which is an iterative process. First, for each LTCH case, we are proposing to calculate a hospital-specific relative charge value by dividing the SSO adjusted charge per discharge (see Step 3) of the LTCH case VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (after removing the statistical outliers (see Step 1) and LTCH cases with a length of stay of 7 days or less (see Step 2)) by the average charge per discharge for the LTCH in which the case occurred. The resulting ratio was then multiplied by the LTCH’s case-mix index to produce an adjusted hospitalspecific relative charge value for the case. An initial case-mix index value of 1.0 was used for each LTCH. For each proposed MS–LTC–DRG, we calculated the proposed FY 2015 relative weight by dividing the average of the adjusted hospital-specific relative charge values (from above) for the proposed MS–LTC–DRG by the overall average hospital-specific relative charge value across all cases for all LTCHs. Using these recalculated proposed MS– LTC–DRG relative weights, each LTCH’s average relative weight for all of its cases (that is, its case-mix) was calculated by dividing the sum of all the LTCH’s proposed MS–LTC–DRG relative weights by its total number of cases. The LTCHs’ hospital-specific relative charge values (from above) were then multiplied by the hospital-specific case-mix indexes. The hospital-specific case-mix adjusted relative charge values were then used to calculate a new set of proposed MS–LTC–DRG relative weights across all LTCHs. This iterative process was continued until there was convergence between the relative weights produced at adjacent steps, for example, when the maximum difference was less than 0.0001. Step 5—Determine a proposed FY 2015 relative weight for proposed MS– LTC–DRGs with no LTCH cases. As we stated above, we determined the proposed FY 2015 relative weight for each proposed MS–LTC–DRG using total Medicare allowable total charges reported in the best available LTCH claims data (that is, the December 2013 update of the FY 2013 MedPAR file for this proposed rule). Using these data, we identified the proposed MS–LTC– DRGs for which there were no LTCH cases in the database, such that no patients who would have been classified to those MS–LTC–DRGs were treated in LTCHs during FY 2013 and, therefore, no charge data were available for these proposed MS–LTC–DRGs. Therefore, in the process of determining the proposed MS–LTC–DRG relative weights, we were unable to calculate proposed relative weights for the proposed MS–LTC– DRGs with no LTCH cases using the methodology described in Steps 1 through 4 above. However, because patients with a number of the diagnoses under these proposed MS–LTC–DRGs may be treated at LTCHs, consistent with our historical methodology, we are PO 00000 Frm 00208 Fmt 4701 Sfmt 4702 proposing to assign a proposed relative weight to each of the proposed novolume MS–LTC–DRGs based on clinical similarity and relative costliness (with the exception of proposed ‘‘transplant’’ MS–LTC–DRGs and proposed ‘‘error’’ MS–LTC–DRGs, as discussed below). (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through 43960.) In general, we determined proposed FY 2015 relative weights for the proposed MS–LTC–DRGs with no LTCH cases in the December 2013 update of the FY 2013 MedPAR file used in this proposed rule (that is, proposed ‘‘novolume’’ MS–LTC–DRGs) by crosswalking each proposed no-volume MS– LTC–DRG to another proposed MS– LTC–DRG with a calculated proposed relative weight (determined in accordance with the methodology described above). Then, the proposed ‘‘no-volume’’ MS–LTC–DRG was assigned the same proposed relative weight (and average length of stay) of the proposed MS–LTC–DRG to which it was cross-walked (as described in greater detail below). Of the 753 proposed MS–LTC–DRGs for FY 2015, we identified 237 proposed MS–LTC–DRGs for which there are no LTCH cases in the database (including the 8 proposed ‘‘transplant’’ MS–LTC– DRGs and 2 proposed ‘‘error’’ MS–LTC– DRGs). As stated above, we are proposing to assign proposed relative weights for each of the 237 proposed novolume MS–LTC–DRGs (with the exception of the 8 proposed ‘‘transplant’’ MS–LTC–DRGs and the 2 proposed ‘‘error’’ MS–LTC–DRGs, which are discussed below) based on clinical similarity and relative costliness to one of the remaining 516 (753 ¥ 237 = 516) proposed MS–LTC–DRGs for which we were able to determine proposed relative weights based on FY 2013 LTCH claims data using the steps described above. (For the remainder of this discussion, we refer to the proposed ‘‘cross-walked’’ MS–LTC–DRGs as the proposed MS–LTC–DRGs to which we cross-walked one of the 237 proposed ‘‘no volume’’ MS–LTC–DRGs, with the exception of the 8 proposed ‘‘transplant’’ MS–LTC–DRGs and the 2 proposed ‘‘error’’ MS–LTC–DRGs, for purposes of determining a proposed relative weight.) Then, we are proposing to assign the proposed no-volume MS– LTC–DRG the proposed relative weight of the proposed cross-walked MS–LTC– DRG. (As explained below in Step 6, when necessary, we are proposing to make adjustments to account for nonmonotonicity.) E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules For this proposed rule, we crosswalked the proposed no-volume MS– LTC–DRG to a proposed MS–LTC–DRG for which there were LTCH cases in the December 2013 update of the FY 2013 MedPAR file, and to which it was similar clinically in intensity of use of resources and relative costliness as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. We evaluated the relative costliness in determining the applicable proposed MS–LTC–DRG to which a proposed no-volume MS–LTC–DRG was cross-walked in order to assign an appropriate proposed relative weight for the proposed no-volume MS–LTC–DRGs in FY 2015. (For more details on our process for evaluating relative costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in the rare event that there would be a few LTCH cases grouped to one of the proposed no-volume MS–LTC–DRGs in FY 2015, the proposed relative weights assigned based on the proposed cross-walked MS–LTC–DRGs would result in an appropriate LTCH PPS payment because the crosswalks, which are based on similar clinical similarity and relative costliness, generally require equivalent relative resource use. We then assigned the proposed relative weight of the proposed crosswalked MS–LTC–DRG as the proposed relative weight for the proposed novolume MS–LTC–DRG such that both of these proposed MS–LTC–DRGs (that is, the proposed no-volume MS–LTC–DRG and the proposed cross-walked MS– LTC–DRG) have the same proposed relative weight for FY 2015. We note that if the proposed cross-walked MS– LTC–DRG had 25 cases or more, its proposed relative weight, which was calculated using the methodology described in Steps 1 through 4 above, was assigned to the proposed no-volume MS–LTC–DRG as well. Similarly, if the proposed MS–LTC–DRG to which the proposed no-volume MS–LTC–DRG was cross-walked had 24 or less cases and, therefore, was designated to one of the proposed low-volume quintiles for purposes of determining the proposed relative weights, we assigned the proposed relative weight of the applicable proposed low-volume quintile to the proposed no-volume MS– LTC–DRG such that both of these proposed MS–LTC–DRGs (that is, the proposed no-volume MS–LTC–DRG and the proposed cross-walked MS–LTC– DRG) have the same proposed relative VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 weight for FY 2015. (As we noted above, in the infrequent case where nonmonotonicity involving a proposed no-volume MS–LTC–DRG resulted, additional adjustments as described in Step 6 were required in order to maintain monotonically increasing proposed relative weights.) For this proposed rule, a list of the proposed no-volume MS–LTC–DRGs and the proposed MS–LTC–DRGs to which each was cross-walked (that is, the proposed cross-walked MS–LTC– DRGs) for FY 2015 is shown in Table 13B, which is listed in section VI. of the Addendum to this proposed rule and is available via the Internet. To illustrate this methodology for determining the proposed relative weights for the proposed FY 2015 MS– LTC–DRGs with no LTCH cases, we are providing the following example, which refers to the proposed no-volume MS– LTC–DRGs crosswalk information for FY 2015 provided in Table 13B. Example: There were no cases in the FY 2013 MedPAR file used for this proposed rule for proposed MS–LTC– DRG 61 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We determined that proposed MS–LTC– DRG 70 (Nonspecific Cerebrovascular Disorders with MCC) was similar clinically and based on resource use to proposed MS–LTC–DRG 61. Therefore, we assigned the same proposed relative weight of proposed MS–LTC–DRG 70 of 0.8657 for FY 2015 to proposed MS– LTC–DRG 61 (obtained from Table 11, which is listed in section VI. of the Addendum to this proposed rule and is available via the Internet). Again, we note that, as this system is dynamic, it is entirely possible that the number of proposed MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify proposed no-volume MS–LTC–DRGs and to determine the proposed relative weights in this proposed rule. Furthermore, for FY 2015, consistent with our historical relative weight methodology, we are proposing to establish a relative weight of 0.0000 for the following proposed transplant MS– LTC–DRGs: Heart Transplant or Implant of Heart Assist System with MCC (proposed MS–LTC–DRG 1); Heart Transplant or Implant of Heart Assist System without MCC (proposed MS– LTC–DRG 2); Liver Transplant with MCC or Intestinal Transplant (proposed MS–LTC–DRG 5); Liver Transplant without MCC (proposed MS–LTC–DRG 6); Lung Transplant (proposed MS– LTC–DRG 7); Simultaneous Pancreas/ Kidney Transplant (proposed MS–LTC– PO 00000 Frm 00209 Fmt 4701 Sfmt 4702 28185 DRG 8); Pancreas Transplant (proposed MS–LTC–DRG 10); and Kidney Transplant (proposed MS–LTC–DRG 652). This is because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. At the present time, we include these eight proposed transplant MS–LTC–DRGs in the proposed GROUPER program for administrative purposes only. Because we use the same proposed GROUPER program for LTCHs as is used under the IPPS, removing these proposed MS– LTC–DRGs would be administratively burdensome. (For additional information regarding our treatment of transplant MS–LTC–DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) Step 6—Adjust the proposed FY 2015 MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights. As discussed earlier in this section, the MS–DRGs contain base DRGs that have been subdivided into one, two, or three severity of illness levels. Where there are three severity levels, the most severe level has at least one secondary diagnosis code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one secondary diagnosis code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as ‘‘without CC/MCC.’’ When data do not support the creation of three severity levels, the base MS–DRG is subdivided into either two levels or the base MS–DRG is not subdivided. The two-level subdivisions could consist of the MS–DRG with CC/MCC and the MS–DRG without CC/MCC. Alternatively, the other type of twolevel subdivision may consist of the MS–DRG with MCC and the MS–DRG without MCC. In those base MS–LTC–DRGs that are split into either two or three severity levels, cases classified into the ‘‘without CC/MCC’’ MS–LTC–DRG are expected to have a lower resource use (and lower costs) than the ‘‘with CC/MCC’’ MS– LTC–DRG (in the case of a two-level split) or both the ‘‘with CC’’ and the ‘‘with MCC’’ MS–LTC–DRGs (in the case of a three-level split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, proposed relative weights should increase by severity, from lowest to highest. If the proposed relative weights decrease as severity E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28186 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules increases (that is, if within a base proposed MS–LTC–DRG, a proposed MS–LTC–DRG with CC has a higher proposed relative weight than one with MCC, or the proposed MS–LTC–DRG ‘‘without CC/MCC’’ has a higher proposed relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic proposed relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base proposed MS–LTC–DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base proposed MS–LTC–DRG (which are generally expected to have lower resource use and costs). Consequently, in determining the proposed FY 2015 MS–LTC–DRG relative weights in this proposed rule, consistent with our historical methodology, we are proposing to combine MS–LTC–DRG severity levels within a base proposed MS–LTC–DRG for the purpose of computing a proposed relative weight when necessary to ensure that monotonicity was maintained. For a comprehensive description of our existing methodology to adjust for nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any adjustments for nonmonotonicity that were made in determining the proposed FY 2015 MS– LTC–DRG relative weights in this proposed rule by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this proposed rule and is available via the Internet. Step 7— Calculate the proposed FY 2015 budget neutrality factor. In accordance with the regulations at § 412.517(b) (in conjunction with § 412.503), the annual update to the MS–LTC–DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS– LTC–DRG classification and relative weight changes. (For a detailed discussion on the establishment of the budget neutrality requirement for the annual update of the MS–LTC–DRG classifications and relative weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 26881 and 26882).) The MS–LTC–DRG classifications and relative weights are updated annually based on the most recent available VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 LTCH claims data to reflect changes in relative LTCH resource use (§ 412.517(a) in conjunction with § 412.503). Under the budget neutrality requirement at § 412.517(b), for each annual update, the MS–LTC–DRG relative weights are uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, we are proposing to update the MS–LTC–DRG classifications and relative weights for FY 2015 based on the most recent available LTCH data, and apply a budget neutrality adjustment in determining the proposed FY 2015 MS–LTC–DRG relative weights. To ensure budget neutrality in the update to the MS–LTC–DRG classifications and relative weights under § 412.517(b), we are proposing to continue to use our established two-step budget neutrality methodology. In this proposed rule, in the first step of our proposed MS–LTC–DRG budget neutrality methodology, for FY 2015, we are proposing to calculate and apply a normalization factor to the recalibrated proposed relative weights (the result of Steps 1 through 6 above) to ensure that estimated payments were not affected by changes in the composition of case types or the changes to the classification system. That is, the proposed normalization adjustment is intended to ensure that the recalibration of the proposed MS–LTC–DRG relative weights (that is, the process itself) neither increases nor decreases the average CMI. To calculate the proposed normalization factor for FY 2015 (the first step of our proposed budget neutrality methodology), we are proposing to use the following three steps: (1.a.) we use the most recent available LTCH claims data (FY 2013) and group them using the proposed FY 2015 GROUPER (Version 32.0) and the recalibrated proposed FY 2015 MS– LTC–DRG relative weights (determined in Steps 1 through 6 of the Steps for Determining the Proposed FY 2015 MS– LTC–DRG Relative Weights above) to calculate the average CMI; (1.b.) we group the same LTCH claims data (FY 2013) using the FY 2014 GROUPER (Version 31.0) and FY 2014 MS–LTC– DRG relative weights and calculated the average CMI; and (1.c.) we compute the ratio of these average CMIs by dividing the average CMI for FY 2014 (determined in Step 1.b.) by the average CMI for FY 2015 (determined in Step 1.a.). In determining the proposed MS– LTC–DRG relative weights for FY 2015, each recalibrated proposed MS–LTC– DRG relative weight was multiplied by 1.12619 (determined in Step 1.c.) in the PO 00000 Frm 00210 Fmt 4701 Sfmt 4702 first step of the proposed budget neutrality methodology, which produced proposed ‘‘normalized relative weights.’’ In the second step of our proposed MS–LTC–DRG budget neutrality methodology, we are proposing to determine a budget neutrality factor to ensure that estimated aggregate LTCH PPS payments (based on the most recent available LTCH claims data) after reclassification and recalibration (that is, the proposed FY 2015 MS–LTC–DRG classifications and relative weights) are equal to estimated aggregate LTCH PPS payments before reclassification and recalibration (that is, the FY 2014 MS– LTC–DRG classifications and relative weights). Accordingly, consistent with our existing methodology, we are proposing to use FY 2013 discharge data to simulate payments and compared estimated aggregate LTCH PPS payments using the FY 2014 MS–LTC– DRGs and relative weights to estimate aggregate LTCH PPS payments using the proposed FY 2015 MS–LTC–DRGs and relative weights. Specifically, for this proposed rule, as discussed previously in section VII.B.3.c. of this preamble, we are proposing to use LTCH claims data from the December 2013 update of the FY 2013 MedPAR file, as these are the best available data at this time. For this proposed rule, we are proposing to determine the proposed FY 2015 budget neutrality adjustment factor using the following three steps: (2.a.) we simulate estimated total LTCH PPS payments using the proposed normalized relative weights for FY 2015 and proposed GROUPER Version 32.0 (as described above); (2.b.) we simulate estimated total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY 2014 MS–LTC–DRG relative weights in Table 11 of the Addendum to the FY 2014 IPPS/LTCH PPS final rule available on the Internet (78 FR 51002); and (2.c.) we calculate the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY 2014 MS–LTC–DRG relative weights (determined in Step 2.b.) by the estimated total LTCH PPS payments using the proposed FY 2015 GROUPER (Version 32.0) and the proposed normalized MS–LTC–DRG relative weights for FY 2015 (determined in Step 2.a.). In determining the proposed FY 2015 MS–LTC–DRG relative weights, each proposed normalized relative weight was multiplied by a proposed budget neutrality factor of 0.995275 (determined in Step 2.c.) in the second step of the proposed budget neutrality methodology to determine the proposed E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules budget neutral FY 2015 relative weight for each proposed MS–LTC–DRG. Accordingly, in determining the proposed FY 2015 MS–LTC–DRG relative weights in this proposed rule, consistent with our existing methodology, we are proposing to apply a proposed normalization factor of 1.12619 and a proposed budget neutrality factor of 0.995275 (computed as described above). Table 11, which is listed in section VI. of the Addendum to this proposed rule and is available via the Internet, lists the proposed MS– LTC–DRGs and their respective proposed relative weights, geometric mean length of stay, five-sixths of the geometric mean length of stay (used to identify SSO cases under § 412.529(a)), and the ‘‘IPPS Comparable Thresholds’’ (used in determining SSO payments under § 412.529(c)(3)), for FY 2015 (and reflect both the proposed normalization factor of 1.12619 and the proposed budget neutrality factor of 0.995275). C. Proposed LTCH PPS Payment Rates for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Overview of Development of the LTCH Payment Rates The basic methodology for determining LTCH PPS Federal prospective payment rates is set forth at § 412.515 through § 412.536. In this section, we discuss the factors that we are proposing to use to update the LTCH PPS standard Federal rate for FY 2015, that is, effective for LTCH discharges occurring on or after October 1, 2014 through September 30, 2015. For further details on the development of the FY 2003 standard Federal rate when the LTCH PPS was initially implemented, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent updates to the LTCH PPS standard Federal rate as implemented under § 412.523(c)(3), we refer readers to the following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY 2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72 FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800 through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021 through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through 50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773); FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481); and FY 2014 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 IPPS/LTCH PPS final rule (78 FR 50760 through 50765). The proposed update to the LTCH PPS standard Federal rate for FY 2015 is presented in section V.A. of the Addendum to this proposed rule. The components of the proposed annual market basket update to the LTCH PPS standard Federal rate for FY 2015 are discussed below, including the reduction to the annual update for LTCHs that fail to submit quality reporting data for fiscal year FY 2015 as required by the statute (as discussed below in section VII.C.2.c. of the preamble of this proposed rule). Furthermore, as discussed below in section VII.C.3. of the preamble of this proposed rule, for FY 2015, in addition to the proposed update factor, under the final year of the 3-year phase-in under the current regulations at § 412.523(d)(3), we are proposing to make a one-time prospective adjustment to the standard Federal rate for FY 2015 so that the effect of any significant difference between the data used in the original computations of budget neutrality for FY 2003 and more recent data to determine budget neutrality for FY 2003 is not perpetuated in the prospective payment rates for future years. In addition, as discussed in section V.A. of the Addendum of this proposed rule, we are proposing to make an adjustment to the standard Federal rate to account for the estimated effect of the changes to the area wage level adjustment for FY 2015 on estimated aggregate LTCH PPS payments, in accordance with § 412.523(d)(4). (We refer readers to the discussion of the reduction to the annual update for LTCHs that fail to submit quality reporting data under section VII.C.2.c. of the preamble of this proposed rule, the proposed application of the one-time prospective adjustment under the final year of the 3-year phasein under section VII.C.3. of this preamble, and the proposed budget neutrality adjustment for changes in the area wage levels under section V.A. of the Addendum of this proposed rule.) 2. Proposed FY 2015 LTCH PPS Annual Market Basket Update a. Overview Historically, the Medicare program has used a market basket to account for price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. As discussed in the FY 2013 IPPS/LTCH PPS final PO 00000 Frm 00211 Fmt 4701 Sfmt 4702 28187 rule (77 FR 53468 through 53476), we adopted the newly created FY 2009based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. For additional details on the historical development of the market basket used under the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53468) and this preamble. Section 3401(c) of the Affordable Care Act provides for certain adjustments to any annual update to the standard Federal rate and refers to the timeframes associated with such adjustments as a ‘‘rate year’’ (which are discussed in more detail in section VII.C.2.b. of the preamble of this proposed rule.) We note that because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010, to conform with the standard definition of the Federal fiscal year (October 1 through September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the language of sections 3004(a) 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years. b. Proposed Revision of Certain Market Basket Updates as Required by the Affordable Care Act Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year through 2019, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the ‘‘other adjustment’’ specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate E:\FR\FM\15MYP2.SGM 15MYP2 28188 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules year being less than such payment rates for the preceding rate year. Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). Under our methodology, the end of the 10-year moving average of changes in the MFP coincides with the end of the appropriate FY update period. In addition, the MFP adjustment that is applied in determining any annual update to the LTCH PPS standard Federal rate is the same adjustment that is required to be applied in determining the applicable percentage increase under the IPPS under section 1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year. The MFP adjustment is derived using a projection of MFP that is currently produced by IHS Global Insight, Inc. (For additional details on the development of the MFP adjustment and its application under the LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51691 through 51692 and 51770 through 51771).) For FY 2015, we are proposing to continue to use our methodology for calculating and applying the proposed MFP adjustment to determine the annual update to the LTCH PPS standard Federal rate for FY 2015. (For details on the development of the proposed MFP adjustment, including our finalized methodology for calculating and applying the MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692).) c. Proposed Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate Under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Background In accordance with section 1886(m)(5) of the Act, as added by section 3004(a) of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As noted above, although the language of section 3004(a) of the Affordable Care Act refers to years 2011 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) Under the LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for FY 2014 and each subsequent year, in the case of an LTCH that does not submit quality reporting data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a year, any annual update to a standard Federal rate for discharges for the hospital during the year, and after application of section 1886(m)(3) of the Act, shall be reduced by 2.0 percentage points. Section 1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 percentage points reduction may result in an annual update that is less than 0.0 for a year, and may result in LTCH PPS payment rates for a year being less than such LTCH PPS payment rates for the preceding year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the 2.0 percentage points reduction is applied in a noncumulative manner, such that any reduction made under section 1886(m)(5)(A) of the Act shall apply only with respect to the year involved, and shall not be taken into account in computing the LTCH PPS payment amount for a subsequent year. For additional information on the history of the LTCHQR Program, including the statutory authority and the selected measures, we refer readers to section IX.C. of the preamble of this proposed rule. 2. Proposed Reduction to the Annual Update to the LTCH PPS Standard Federal Rate Under the LTCHQR Program Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014 and subsequent fiscal years, for LTCHs that do not submit quality reporting data under the LTCHQR Program with respect to such a fiscal year, any annual update to a standard Federal rate for discharges for the LTCH during the fiscal year and after application of the market basket update adjustments required by section 1886(m)(3) of the Act, is further reduced by 2.0 percentage points. That is, in establishing an update to the LTCH PPS standard Federal rate for FY 2014 and subsequent fiscal years, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is further reduced PO 00000 Frm 00212 Fmt 4701 Sfmt 4702 by 2.0 percentage points for LTCHs that fail to submit quality reporting data under the LTCHQR Program. The reduction in the annual update to the LTCH PPS standard Federal rate for failure to report quality data under the LTCHQR Program for FY 2014 and subsequent fiscal years is codified under § 412.523(c)(4) of the regulations. Specifically, consistent with section 1886(m)(5)(A)(i) of the Act, under § 412.523(c)(4)(i), for an LTCH that does not submit quality reporting data in the form and manner and at the time specified by the Secretary under the LTCHQR Program, the annual update to the standard Federal rate under § 412.523(c)(3) is further reduced by 2.0 percentage points. In addition, consistent with section 1886(m)(5)(A)(ii) of the Act, § 412.523(c)(4)(ii) specifies that any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) will apply only to the fiscal year involved and will not be taken into account in computing the annual update to the standard Federal rate for a subsequent fiscal year. Lastly, consistent with section 1886(m)(5)(B) of the Act, under § 412.523(c)(4)(iii), the application of any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) may result in an annual update that is less than 0.0 percent for a fiscal year, and may result in payment rates for a fiscal year that would be less than such payment rates for the preceding rate year. We discuss the application of the 2.0 percentage point reduction under § 412.523(c)(4)(i) in our discussion of the proposed annual market basket update to the LTCH PPS standard Federal rate for FY 2015 below in section VII.C.2.e. of the preamble of this proposed rule. d. Proposed Market Basket Under the LTCH PPS for FY 2015 Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468), we adopted a newly created FY 2009-based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. The FY 2009-based LTCH-specific market basket is based solely on the Medicare cost report data submitted by LTCHs and, therefore, specifically reflects the cost structures of only LTCHs. For additional details on the development of the FY 2009-based LTCH-specific market basket, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). For FY 2015, we are proposing to continue to use the FY 2009-based LTCH-specific market basket to update E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 the LTCH PPS for FY 2015. We continue to believe that the FY 2009-based LTCHspecific market basket appropriately reflects the cost structure of LTCHs for the reasons discussed when we adopted the FY 2009-based LTCH-specific market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). e. Proposed Annual Market Basket Update for LTCHs for FY 2015 Consistent with our historical practice, we are proposing to estimate the market basket update and the proposed MFP adjustment based on IGI’s forecast using the most recent available data. Based on IGI’s first quarter 2014 forecast, the proposed FY 2015 full market basket estimate for the LTCH PPS using the FY 2009-based LTCH-specific market basket is 2.7 percent. Using our established methodology for determining the MFP adjustment, the current estimate of the proposed MFP adjustment for FY 2015 based on IGI’s first quarter 2014 forecast is 0.4 percent, as discussed in section IV.B. of the preamble of this proposed rule. In addition, consistent with our historical practice of using the best available data, we are proposing that if more recent data is available, we would use such data to estimate the market basket update and the MFP adjustment for FY 2015 in the final rule. For FY 2015, section 1886(m)(3)(A)(i) of the Act requires that any annual update to the standard Federal rate be reduced by the productivity adjustment (‘‘the MFP adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are proposing to reduce the full FY 2015 market basket update by the proposed FY 2015 MFP adjustment. To determine the market basket update for LTCHs for FY 2015, as reduced by the MFP adjustment, consistent with our established methodology, we are proposing to subtract the proposed FY 2015 MFP adjustment from the proposed FY 2015 market basket update. Furthermore, sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act requires that any annual update to the standard Federal rate for FY 2015 be reduced by the ‘‘other adjustment’’ described in paragraph (4), which is 0.2 percentage point for FY 2015. Therefore, following application of the proposed productivity adjustment, we are proposing to reduce the adjusted market basket update (that is, the proposed full market basket increase less the proposed MFP adjustment) by the ‘‘other adjustment’’ specified by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on our VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 established methodology for adjusting the market basket increase by the MFP and the ‘‘other adjustment’’ required by the statute, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).) As discussed previously in section VII.C.2.c. of the preamble of this proposed rule, for FY 2015, section 1886(m)(5) of the Act requires that for LTCHs that do not submit quality reporting data under the LTCHQR Program, any annual update to a standard Federal rate, after application of the adjustments required by section 1886(m)(3) of the Act, is further reduced by 2.0 percentage points. Therefore, the proposed update to the LTCH PPS standard Federal rate for FY 2015 for LTCHs that fail to submit quality reporting data under the LTCHQR Program, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) as required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, would also be further reduced by 2.0 percentage points. In this proposed rule, in accordance with the statute, we are proposing to reduce the proposed FY 2015 full market basket estimate of 2.7 percent (based on IGI’s first quarter 2014 forecast of the FY 2009-based LTCHspecific market basket) by the proposed FY 2015 MFP adjustment (that is, the 10-year moving average of MFP for the period ending FY 2015, as described in section IV.B. of the preamble of this proposed rule) of 0.4 percentage point (based on IGI’s first quarter 2014 forecast). Following application of the proposed productivity adjustment, the adjusted market basket update of 2.3 percent (2.7 percent minus 0.4 percentage point) would then be reduced by 0.2 percentage point, as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act. Therefore, in this proposed rule, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we are proposing to establish an annual market basket update under the LTCH PPS for FY 2015 of 2.1 percent (that is, the most recent estimate of the LTCH PPS proposed market basket update at this time of 2.7 percent, less the proposed MFP adjustment of 0.4 percentage point, and less the 0.2 percentage point required under section 1886(m)(4)(E) of the Act), provided the LTCH submits quality reporting data in accordance with section 1886(m)(5) of the Act. Accordingly, we are proposing PO 00000 Frm 00213 Fmt 4701 Sfmt 4702 28189 to revise § 412.523(c)(3) by adding a new paragraph (xi), which specifies that the standard Federal rate for FY 2015 would be the standard Federal rate for the previous LTCH PPS year updated by 2.7 percent, and as further adjusted, as appropriate, as described in § 412.523(d). For LTCHs that fail to submit quality reporting data under the LTCHQR Program, under proposed § 412.523(c)(3)(xi) in conjunction with § 412.523(c)(4), we are proposing to further reduce the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points in accordance with section 1886(m)(5) of the Act. Accordingly, we are proposing to establish an annual update to the LTCH PPS standard Federal rate of 0.1 percent (that is, 2.1 percent minus 2.0 percentage points) for FY 2015 for LTCHs that fail to submit quality reporting data under the LTCHQR Program. As stated above, consistent with our historical practice of using the best available data, we are proposing that if more recent data is available, we would use such data to establish an annual update to the LTCH PPS standard Federal rate for FY 2015 under § 412.523(c)(3)(xi) in the final rule. (We note that, we also are proposing to adjust the proposed FY 2015 standard Federal rate by applying a one-time prospective adjustment under the final year of the 3-year phase-in under § 412.523(d)(3) (discussed in section VII.C.3. of the preamble of this proposed rule) and by a proposed area wage level budget neutrality factor in accordance with § 412.523(d)(4) (as discussed in section V.B.5. of the Addendum of this proposed rule).) 3. Proposed Adjustment for the Final Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate Under § 412.523(d)(3) We set forth regulations implementing the LTCH PPS, based upon the broad authority granted to the Secretary, under section 123 of the BBRA (as amended by section 307(b) of the BIPA). Section 123(a)(1) of the BBRA required that the system ‘‘maintain budget neutrality’’ in the August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget neutrality requirement means that estimated aggregate payments under the LTCH PPS for FY 2003 would be equal to the estimated aggregate payments that would have been made if the LTCH PPS were not implemented for FY 2003. The methodology for determining the LTCH PPS standard Federal rate for FY 2003 that would ‘‘maintain budget neutrality’’ is described in considerable detail in the August 30, 2002 final rule (67 FR 56027 through 56037). Our methodology for E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28190 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules estimating payments for the purposes of budget neutrality calculations used the best available data, and necessarily reflected several assumptions (for example, costs, inflation factors, and intensity of services provided) in estimating aggregate payments that would have been made if the LTCH PPS had not been implemented (without accounting for certain statutory provisions that affect the level of payments to LTCHs in years prior to the implementation of the LTCH PPS, as required by the statute). In the August 30, 2002 final rule, we also stated our intentions to monitor LTCH PPS payment data to evaluate whether later data varied significantly from the data available at the time of the original budget neutrality calculations (for example, data related to inflation factors, intensity of services provided, or behavioral response to the implementation of the LTCH PPS). To the extent the later data significantly differed from the data employed in the original calculations, the aggregate amount of payments during FY 2003 based on later data may be higher or lower than the estimates upon which the budget neutrality calculations were based. Therefore, in that same final rule, under the broad authority conferred upon the Secretary in developing the LTCH PPS, including the authority for establishing appropriate adjustments, under section 123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, we provided in § 412.523(d)(3) of the regulations for the possibility of making a one-time prospective adjustment to the LTCH PPS rates, so that the effect of any significant difference between actual payments and estimated payments for the first year of the LTCH PPS would not be perpetuated in the LTCH PPS rates for future years. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53488) for a complete discussion of the history of the development of the onetime prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized our policy to make a one-time prospective adjustment to the standard Federal rate so that it will be permanently reduced by approximately 3.75 percent to account for the estimated difference between projected aggregate FY 2003 LTCH PPS payments and the projected aggregate payments that would have been made in FY 2003 under the TEFRA payment system if the LTCH PPS had not been implemented. Specifically, using the methodology we adopted in that same final rule, we determined that VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 permanently applying a factor of 0.9625 (that is, a permanent reduction of approximately 3.75 percent) to the standard Federal rate is necessary to ensure estimated total FY 2003 LTCH PPS payments equal estimated total FY 2003 TEFRA payments consistent with our stated policy goal of the one-time prospective adjustment under § 412.523(d)(3) (that is, to ensure that the difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates in future years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53502) for a complete discussion of the evaluation approach, methodology, and determination of the one-time prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3).) Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53501 through 53502), under § 412.523(d)(3), we established a policy to phase-in the permanent adjustment of 0.9625 to the standard Federal rate over a 3-year period. To achieve a permanent adjustment of 0.9625, under the phasein of this adjustment, in that same final rule, we explained that we will apply a factor of 0.98734 to the standard Federal rate in each year of the 3-year phase-in, that is, in FY 2013 (which does not apply to payments for discharges occurring on or after October 1, 2012, and on or before December 28, 2012, consistent with current law), FY 2014, and FY 2015. By applying a permanent factor of 0.98734 to the standard Federal rate in each year for FYs 2013, 2014, and 2015, we will completely account for the entire adjustment by having applied a cumulative factor of 0.9625 (calculated as 0.98734 × 0.98734 × 0.98734 = 0.9625) to the standard Federal rate. Accordingly, under § 412.523(d)(3), we applied a permanent factor of 0.98734 to the standard Federal rate in both FY 2013 and FY 2014 under the established 3-year phase-in of the one-time prospective adjustment. In this proposed rule, for FY 2015, we are proposing to apply a permanent onetime prospective adjustment factor of 0.98734 to the standard Federal rate for FY 2015 under the last year of the 3-year phase-in of the one-time prospective adjustment, in accordance with the existing regulations under § 412.523(d)(3). PO 00000 Frm 00214 Fmt 4701 Sfmt 4702 D. Proposed Revision of LTCH PPS Geographic Classifications 1. Background As discussed in the August 30, 2002 LTCH PPS final rule, which implemented the LTCH PPS (67 FR 56015 through 56019), in establishing an adjustment for area wage levels, the labor-related portion of an LTCH’s standard Federal payment rate is adjusted by using an appropriate wage index based on the labor market area in which the LTCH is located. Specifically, the application of the LTCH PPS area wage-level adjustment, which is codified under existing § 412.525(c) of the regulations, is based on the location of the LTCH—either in an ‘‘urban’’ area or a ‘‘rural’’ area. Currently, under the LTCH PPS, as codified under § 412.503 of the regulations, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area (which includes a Metropolitan division, where applicable) as defined by the Executive OMB, and a ‘‘rural area’’ is defined as any area outside of an urban area. In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), we revised § 412.525(c) to update the labor market area definitions used under the LTCH PPS, effective for discharges occurring on or after July 1, 2005, based on the Executive OMB’s Core-Based Statistical Area (CBSA) designations (‘‘CBSA designations’’), which are based on 2000 Census data. We made this revision because we believed that the CBSA designations (geographic classifications) would ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We noted that these were the same CBSA designations implemented for acute care hospitals under the IPPS, which were codified under § 412.64(b) of the regulations, beginning in FY 2005. (For a further discussion of the CBSA-based labor market area designations currently used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182 through 24191).) We have generally updated the LTCH PPS CBSA designations annually since they were adopted for RY 2006 when updates from OMB were available (73 FR 26812 through 26814, 74 FR 44023 through 44204, and 75 FR 50444 through 50445). In OMB Bulletin No. 10–2, issued on December 1, 2009, OMB announced that the CBSA changes in that bulletin would be the final update prior to the 2010 Census of Population and Housing. We adopted those changes under the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444 through 50445), effective October 1, 2010. We continued to use these CBSA designations for FYs 2012 and 2013 (76 FR 51808 and 77 FR 53710, respectively). New OMB labor market area delineations (which we refer to in this section as ‘‘new OMB delineations’’) based on 2010 standards and the 2010 Decennial Census data were announced by OMB on February 28, 2013. OMB issued Bulletin No. 13– 01, which announced revisions to the delineation of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the uses of the delineation of these labor market areas. (For a copy of this bulletin, we refer readers to the following Web site: https:// www.whitehouse.gov/sites/default/files/ omb/bulletins/2013/b-13-01.pdf. This bulletin specifically provides the delineations of all Metropolitan Statistical Areas (MSAs), Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published in the Federal Register on June 28, 2010 (75 FR 37246 through 37252) and 2010 Census data. (We note that, as discussed in section III.B. of the preamble of this proposed rule, consistent with the terminology used in the OMB Bulletin No. 13–01 and the standards published in the Federal Register on June 28, 2010, when referencing the new OMB geographic boundaries of Metropolitan Statistical Areas (MSAs) based on 2010 standards, we are using the term ‘‘new OMB delineations’’ rather than the term ‘‘CBSA-based labor market area definitions’’ that we have used in the past to refer to OMB geographic boundaries of statistical areas (75 FR 37249).) As discussed in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50994 through 50995), in order to implement these changes for the LTCH PPS (as in the case of the IPPS), it is necessary to identify the new OMB delineations for each county and hospital in the country. While the revisions OMB published on February 28, 2013, are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, under the new OMB delineations, there are new CBSAs, urban counties that have become rural, rural counties that have become urban, and existing CBSAs that have been split apart and moved to other CBSAs. Because the update was not issued until VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 February 28, 2013, and it was necessary for the changes made by the update and their ramifications to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 rulemaking cycle. That is, by the time the update was issued, the FY 2014 IPPS/LTCH PPS proposed rule was in the advanced stages of development, and the proposed FY 2014 LTCH PPS wage indexes based on the CBSA designations that are currently used under the LTCH PPS had been developed. Therefore, we did not propose to use the changes to the LTCH PPS CBSA designations for FY 2014 based on the new OMB delineations. Rather, to allow for sufficient time to assess the new changes and their ramifications, we stated that we intended to propose the adoption of the new OMB delineations and the corresponding changes to the wage index based on those delineations under the LTCH PPS for FY 2015 through notice and comment rulemaking, consistent with the approach used under the IPPS (78 FR 50994 through 50995). As discussed below, in this proposed rule, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are proposing to adopt the new OMB delineations announced in the February 28, 2013 OMB Bulletin No. 13–01, effective for FY 2015 under the LTCH PPS, consistent with the approach proposed for the IPPS as discussed in section III.B. of the preamble of this proposed rule. 2. Proposed Use of the New OMB Labor Market Area Delineations (‘‘New OMB Delineations’’) Historically, Medicare prospective payment systems have utilized labor market area definitions developed by the OMB. As discussed above, the CBSA designations currently used under the LTCH PPS are based on the most recent market area definitions issued by the OMB. The OMB reviews its market area definitions/delineations based on data from the preceding decennial census to reflect more recent population changes. As discussed above and in section III.B. of the preamble of this proposed rule, the new OMB delineations are based on the OMB’s latest market area delineations based on the 2010 Decennial Census data. Because we believe that the OMB’s latest labor market area delineations are the best available data that reflect the local economies and wage levels of the areas in which hospitals are currently located, we are proposing to adopt the new OMB delineations based on the 2010 PO 00000 Frm 00215 Fmt 4701 Sfmt 4702 28191 Decennial Census data under the LTCH PPS, beginning in FY 2015, for the reasons discussed below (which are consistent with the IPPS proposal discussed in section III.B. of the preamble of this proposed rule). When we implemented the wage index adjustment under § 412.525(c) for the LTCH PPS, and updated the LTCH PPS labor market area definitions based on the CBSA designations beginning in RY 2006, we explained that the LTCH PPS wage index adjustment was intended to reflect the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56016) and the RY 2006 LTCH PPS final rule (70 FR 24184).) Because we believe that the new OMB delineations based on 2010 Decennial Census data reflect the most recent available geographic classifications (market area delineations), we are proposing to revise the geographic classifications used under the LTCH PPS based on these new OMB delineations to ensure that the LTCH PPS wage index adjustment continues to most appropriately account for and reflect the relative hospital wage and wage-related costs in the geographic area of the hospital as compared to the national average hospital wage and wage-related costs. Specifically, we are proposing to adopt the new OMB delineations (as discussed in greater detail below), effective for LTCH PPS discharges occurring on or after October 1, 2014 (that is, effective for FY 2015). We note that, because the application of the LTCH PPS area wage-level adjustment under existing § 412.525(c) is made on the basis of the location of the LTCH—either in an ‘‘urban’’ area or a ‘‘rural’’ area as those terms are defined under existing § 412.503. Under § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area as defined by the Executive OMB. A ‘‘rural area’’ is defined as any area outside of an urban area. Therefore, we are not proposing any changes to the existing regulations under this proposal. As discussed in section III.B. of this preamble, while CMS and other stakeholders have explored potential alternatives to the current CBSA-based labor market system, no consensus has been achieved regarding how best to implement a replacement system. While we recognize that MSAs are not designed specifically to define labor market areas, we believe that they do represent a useful proxy for this purpose. Consistent with the approach taken for the IPPS, we have used MSAs to define labor market areas for E:\FR\FM\15MYP2.SGM 15MYP2 28192 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 purposes of Medicare wage indices under the LTCH PPS since its implementation in FY 2003. MSAs also are used to define labor market areas for purposes of the wage index for many of the other Medicare payment systems (for example, the IRF PPS, the SNF PPS, the HHA PPS, the OPPS, and the IPF PPS). (We refer readers to the RY 2006 LTCH PPS final rule (70 FR 24184).) Therefore, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are proposing to adopt the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective under the LTCH PPS for FY 2015. In addition, we are proposing to use these new OMB delineations to calculate area wage indexes in a manner that is consistent with the CBSA-based methodologies finalized in the RY 2006 LTCH PPS final rule, as refined in subsequent rulemaking. We also are proposing a wage index transition policy (as discussed in more detail below) for LTCHs that would experience a negative payment impact due to the proposed use of the new OMB delineations. This proposal, including the proposed wage index transition policy, is consistent with the proposal under the IPPS presented in section III.B. of the preamble of this proposed rule. The discussion below is focused on issues related to the proposed use of the new OMB delineations to define labor market areas for purposes of the wage index adjustment under the LTCH PPS, and is consistent with what is being proposed for the IPPS. a. Micropolitan Statistical Areas When we adopted the CBSA designations under the LTCH PPS in RY 2006, we discussed CMS’ consideration of whether to use Micropolitan Statistical Areas to define the labor market areas for the purpose of the LTCH PPS wage index. OMB defines a ‘‘Micropolitan Statistical Area’’ as a Consolidated Metropolitan Statistical Area (CMSA) ‘‘associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000’’ (70 FR 24183). We refer to these areas as ‘‘Micropolitan Areas.’’ After conducting an extensive impact analysis, we determined that the best course of action would be to treat all hospitals located in ‘‘Micropolitan Areas’’ as ‘‘rural,’’ and to include these hospitals in the calculation of each State’s rural wage index. Because Micropolitian Areas tend to encompass smaller population centers and contain fewer hospitals than MSAs, we determined that if Micropolitan Areas were to be treated as separate labor VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 market areas, the IPPS wage index would include drastically more singleprovider labor market areas. This larger number of labor market areas with fewer providers could create instability in year-to-year wage index values for a large number of hospitals; could reduce the averaging effect of the wage index, lessening some of the efficiency incentive inherent in a system based on the average hourly wages for a large number of hospitals; and could arguably create an inequitable system when so many hospitals would have wage indexes based solely on their own wage data while other hospitals’ wage indexes would be based on an average hourly wage across many hospitals. For these reasons, we adopted a policy to include Micropolitan Areas in the State’s rural wage area, and have continued this policy through the present. (We refer reader to the RY 2006 LTCH PPS final rule (70 FR 24187).) Based upon the 2010 Decennial Census data, a number of rural and urban counties have joined or have become Micropolitan Areas, while other counties that once were part of a Micropolitan Area under previous OMB CBSA designations, have become either urban or rural under the new OMB delineations. Overall, there are fewer Micropolitan Areas (541) under the new OMB delineations based on 2010 Decennial Census data than existed under the data from the 2000 Census (581). We believe that it is appropriate to continue the policy established in the RY 2006 LTCH PPS final rule, and we are proposing to treat Micropolitan Areas as rural labor market areas under the LTCH PPS. These areas continue to be defined as having relatively small urban cores (populations of 10,000– 49,999). We do not believe that it would be appropriate to calculate a separate wage index for areas that typically may include only a few hospitals for the reasons set forth in the RY 2006 LTCH PPS final rule, as discussed above. Therefore, in conjunction with our proposal to use the new OMB labor market area delineations, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, for FY 2015, we are proposing to continue to treat Micropolitan Areas as ‘‘rural,’’ and to assign the Micropolitan Area the statewide rural wage index for the State in which the LTCH is located. We also are proposing that, beginning in FY 2015, the wage data for any IPPS hospitals located in the Micropolitan Areas would be included in the calculation of each State’s LTCH PPS rural area wage index. (As discussed in section V.B.2. of the Addendum to this PO 00000 Frm 00216 Fmt 4701 Sfmt 4702 proposed rule, the LTCH PPS area wage index values are calculated using the wage data of IPPS hospitals.) We note that this proposal is consistent with the proposal for the IPPS discussed in section III.B.2.a. of the preamble of this proposed rule. We refer readers to section VII.D.2.e. of this preamble for a discussion of our proposals to moderate the impact of our proposed use of the new OMB delineations under the LTCH PPS. b. Urban Counties That Became Rural Under the New OMB Labor Market Area Delineations In proposing to use the new OMB delineations, which are based upon 2010 Decennial Census data, for FY 2015, we found that there are a number of counties (or county equivalents) that are defined as ‘‘urban’’ under the previous CBSA designations that are now defined as ‘‘rural’’ under the new OMB delineations. As discussed in section III.B. of this preamble, an analysis of the new OMB delineations shows that a total of 37 counties (and county equivalents) that were considered to be part of an ‘‘urban’’ CBSA are now considered to be located in a ‘‘rural’’ area, beginning in FY 2015, based on the new OMB delineations. We refer readers to a table presented in section III.B.2.b. of the preamble of this proposed rule that lists the 37 urban counties that would be defined as rural if we finalize our proposal to use the new OMB delineations. Under our proposal to use the new OMB delineations for the LTCH PPS, we are proposing that LTCHs located in any of the 37 counties listed in the table under section III.B.2.b. of the preamble of this proposed rule would be considered ‘‘rural,’’ and would receive their respective State’s rural area wage index for FY 2015 under the LTCH PPS. We note that, currently, there are no LTCHs located in any of the 37 counties listed in the table that are currently considered to be part of an ‘‘urban’’ CBSA and that would be considered to be located in a ‘‘rural’’ area, beginning in FY 2015, if the proposed adoption of the new OMB delineations is finalized. We also proposing that, if finalized, the wage data for any IPPS hospitals located in those 37 counties listed in the table now would be considered ‘‘rural’’ when calculating the respective State’s LTCH PPS rural area wage index beginning in FY 2015. (As discussed in section V.B.2. of the Addendum to this proposed rule, the LTCH PPS area wage index values are calculated using the area wage data of IPPS hospitals.) We note that this proposal is consistent with the proposal under the IPPS discussed in section E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules III.B.2.b. of the preamble of this proposed rule. We refer readers to section VII.D.2.e. of the preamble of this proposed rule for a discussion of our proposals to moderate the impact of our proposal to implement the new OMB delineations under the LTCH PPS. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 c. Rural Counties That Became Urban Under the New OMB Labor Market Area Delineations In proposing to use the new OMB labor market area delineations (which are based upon 2010 Decennial Census data) for FY 2015, we found that there are a number of counties (or county equivalents) that are defined as ‘‘rural’’ under the previous OMB definitions (that is, CBSA designations) that would be considered ‘‘urban’’ if the proposed adoption of the new OMB delineations is finalized. As discussed in section III.B.2.c. of the preamble of this proposed rule, an analysis of the new OMB labor market area delineations shows that a total of 105 counties (and county equivalents) that were previously located in ‘‘rural’’ areas now are located in an ‘‘urban’’ area under the new OMB delineations. We refer readers to a table in section III.B.2.c. of the preamble of this proposed rule that lists the 105 ‘‘rural’’ counties that would be located in an ‘‘urban’’ area, if we finalize our proposal to adopt the new OMB delineations presented in section III.B.2.c. of the preamble of this proposed rule. There are currently no LTCHs located in the 105 ‘‘rural’’ counties listed in that table. Under our proposal to adopt the new OMB labor market area delineations, we are proposing that LTCHs located in any of those 105 counties now would be included in their new respective ‘‘urban’’ CBSAs and would receive the respective ‘‘urban’’ CBSA’s area wage index. We also are proposing that, beginning in FY 2015, the wage data for any IPPS hospitals located within those 105 counties now would be included in the calculation of the LTCH PPS area wage index for those hospitals’ respective ‘‘urban’’ CBSAs. (As discussed in section V.B.2. of the Addendum to this proposed rule, the LTCH PPS area wage index values are calculated using the area wage data of IPPS hospitals.) We note that this proposal is consistent with the proposal for the IPPS discussed in section III.B.2.c. of the preamble of this proposed rule. We refer readers to section VII.D.2.e. of the preamble of this proposed rule for a discussion of our proposals to moderate the impact of our proposal to implement the new OMB delineations under the LTCH PPS. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 d. Urban Counties Moved to a Different Urban CBSA Under the New OMB Labor Market Area Delineations In addition to ‘‘rural’’ counties that would become ‘‘urban’’ and ‘‘urban’’ counties that would become ‘‘rural’’ under the new OMB delineations, we found that several urban counties shifted from one urban CBSA to another urban CBSA. In certain cases, the new OMB delineations involved a change only in the CBSA name or code, while the CBSA continued to encompass the same constituent counties. However, in other cases, under the new OMB delineations, some counties are shifted between existing urban CBSAs and new urban CBSAs, changing the constituent makeup of those CBSAs. For example, in some cases, entire CBSA are subsumed by another CBSA. In other cases, some CBSAs have counties that are split off as part of a different urban CBSA, or to form entirely new labor market areas. We refer readers to section III.B.2.d. of the preamble of this proposed rule for additional information, including examples, on urban counties that are moved from one urban CBSA to a different urban CBSA under the new OMB delineations. LTCHs located in these affected counties that would move from one urban CBSA to a different urban CBSA under our proposal to adopt the new OMB delineations would experience both negative and positive impacts in regard to the LTCH’s specific area wage index values. We refer readers to section VII.D.2.e. of the preamble of this proposed rule for a discussion of our proposals to moderate the impact imposed upon hospitals because of our proposal to adopt the new OMB labor market area delineations under the LTCH PPS. e. Proposed Transition Period As indicated above, overall, we believe that our proposal to adopt the new OMB delineations would result in LTCH PPS wage index values being more representative of the actual costs of labor in a given area. However, we also recognize that some LTCHs would experience decreases in their area wage index values as a result of our proposal. We also realize that many LTCHs would have higher area wage index values under our proposal. To mitigate the impact imposed upon hospitals, we have in the past provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. While we believe that using the new OMB delineations would create a more accurate payment adjustment for PO 00000 Frm 00217 Fmt 4701 Sfmt 4702 28193 differences in area wage levels, we also recognize that adopting such changes may cause some short-term instability in LTCH PPS payments. Therefore, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are proposing a transition policy for LTCHs that would experience a decrease in their area wage index values due to our proposal to adopt the new OMB delineations under the LTCH PPS. Specifically, for FY 2015, we are proposing to compute a blended area wage index value for any LTCH that would experience a decrease in its area wage index value solely due to the proposed adoption of the new OMB delineations beginning in FY 2015. That is, for purposes of determining an LTCH’s area wage index for FY 2015, we are proposing to compute LTCH PPS wage index values using the proposed area wage data discussed above and in section V.B.4. of the Addendum to this proposed rule under both the current (FY 2014) CBSA designations and the proposed (FY 2015) new OMB delineations based on the 2010 OMB Decennial Census data. For each LTCH, we are proposing to compare these two proposed wage indexes. If an LTCH’s proposed wage index under the proposed adoption for FY 2015 of the new OMB delineations is lower than the LTCH’s proposed wage index under the FY 2014 CBSA designations, we are proposing that, for FY 2015, the LTCH would be paid based on a blended wage index that would be computed as the sum of 50 percent of each of the two proposed wage index values described above (referred to as the proposed 50/50 blended wage index). If an LTCH’s proposed wage index under the proposed adoption for FY 2015 of the new OMB delineations is higher than the LTCH’s proposed wage index under the FY 2014 CBSA designations, we are proposing that, for FY 2015, the LTCH would be paid based on 100 percent of the proposed wage index under the proposed FY 2015 new OMB delineations (and would not receive the proposed 50/50 blended wage index). Furthermore, we are proposing that the proposed transitional area wage index policy be used in a budget neutral manner. Under § 412.525(c)(2), any changes to the adjustment for differences in area wage levels are made in a budget neutral manner such that estimated aggregate FY 2015 LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage-level adjustment. Under this policy, we determine an area wage-level E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28194 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules adjustment budget neutrality factor that is applied to the standard Federal rate (under § 412.523(d)(4)) to ensure that any changes to the area wage-level adjustments are budget neutral such that any changes to the wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Because our proposed transition policy for LTCHs that would experience a decrease in their area wage index values solely as a result of our finalized policy to adopt the new OMB delineations under the LTCH PPS would result in an increase in estimated aggregate LTCH PPS payments without such changes, we are proposing to include the proposed 50/50 blended wage index in our calculations for the proposed area wage-level adjustment budget neutrality factor that would be applied to the proposed standard Federal rate to ensure that any changes to the area wage-level adjustment are budget neutral. Specifically, consistent with our established methodology, we are proposing to use the following methodology to determine a proposed area wage-level adjustment budget neutrality factor for FY 2015: • Proposed Step 1—We are proposing to simulate estimated aggregate LTCH PPS payments using the FY 2014 wage index values as established in Tables 12A and 12B for the FY 2014 IPPS/ LTCH PPS final rule (which is available via the Internet on the CMS Web site) and the FY 2014 labor-related share of 62.537 percent as established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50996). • Proposed Step 2—We are proposing to simulate estimated aggregate LTCH PPS payments using the proposed FY 2015 wage index values as shown in Tables 12A through 12D for this proposed rule (which are available via the Internet on the CMS Web site), including the proposed transitional 50/ 50 blended wage index values, if applicable (as discussed in section V.B.4. of the Addendum of this proposed rule), and the proposed FY 2015 labor-related share of 62.571 percent (as discussed in section V.B.3. of the Addendum to this proposed rule). • Proposed Step 3—We are proposing to determine the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2014 area wage-level adjustments (calculated in proposed Step 1) by the estimated total LTCH PPS payments using the proposed FY 2015 area wage-level adjustments (calculated in proposed Step 2) to determine the proposed FY 2015 area wage-level adjustment budget neutrality factor. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • Proposed Step 4—We are proposing to then apply the proposed FY 2015 area wage-level adjustment budget neutrality factor from proposed Step 3 to the proposed FY 2015 LTCH PPS standard Federal rate after the application of the proposed FY 2015 annual update as discussed in section V.A.2. of the Addendum to this proposed rule. As explained above, we are proposing to apply this factor in determining the proposed FY 2015 standard Federal rate to ensure that the proposed updates to the area wage-level adjustment for FY 2015 would be implemented in a budget neutral manner. For this proposed rule, using the steps in the methodology described above, we determined a FY 2015 area wage-level adjustment budget neutrality factor of 1.0002034. We note that this proposed transitional area wage index policy under our proposal to adopt the new OMB delineations for FY 2015 under the LTCH PPS is consistent with the proposals under the IPPS presented in sections III.B.2.e.(5) and (6) of the preamble of this proposed rule. As noted previously in section VII.D.2.b. of the preamble of this proposed rule, there are currently no LTCHs located in an ‘‘urban’’ county that would become ‘‘rural’’ under the proposal to adopt the new OMB delineations. Therefore, we are not proposing a transitional area wage index policy that is consistent with the IPPS proposal presented in section III.B.2.e.(2). of the preamble of this proposed rule for hospitals that are currently located in an ‘‘urban’’ county that would become ‘‘rural’’ under the proposed adoption of the new OMB delineations. We also note that we are not proposing any transitional policies under the LTCH PPS that would be consistent with those presented under the IPPS for hospitals with a reclassification or redesignation as discussed in section III.B.2.e.(3). of the preamble of this proposed rule, or for hospitals deemed urban under section 1886(d)(8)(B) of the Act as discussed in section III.B.2.e.(4) of the preamble of this proposed rule, as those reclassifications, redesignations, and statutory deems are not applicable to LTCHs. E. Reinstatement and Extension of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment 1. Background Section 1206(b)(1)(A) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, provides for the retroactive reinstatement and extension, for an PO 00000 Frm 00218 Fmt 4701 Sfmt 4702 additional 4 years, of the moratorium on the full implementation of the 25percent threshold payment adjustment (hereinafter referred to as ‘‘the 25percent policy’’) under the LTCH PPS established under section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act. In addition, section 1206(b)(1)(B) of Public Law 113–67 provides for a permanent exemption from the application of the 25-percent policy for certain grandfathered co-located LTCHs and LTCH satellite facilities. Section 1206(b)(1)(C) of Public Law 113–67 also requires that ‘‘. . . [n]ot later than 1 year before the end of the 9-year period referred to in section 114(c)(1) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 U.S.C. 1395ww note), as amended by subparagraph (B) [of section 1206 of Pub. L. 113–67], the Secretary of Health and Human Services shall submit to Congress a report on the need for any further extensions (or modifications of the extensions) of the 25 percent rule described in sections 412.534 and 412.536 of title 42, Code of Federal Regulations, particularly taking into account the application of section 1886(m)(6) of the Social Security Act, as added by subsection (a)(1) [of section 1206 of Pub. L. 113–67].’’ We refer readers to section VII.I.2. of the preamble of this proposed rule for further discussion of this report. The 25-percent policy is a payment adjustment under the LTCH PPS, originally established in our regulations at 42 CFR 412.534 for LTCHs and LTCH satellite facilities and their co-located referring hospitals in the FY 2005 IPPS final rule (69 FR 49191), and at 42 CFR 412.536 for all other LTCHs and referring hospitals in the RY 2007 LTCH PPS final rule (72 FR 26870), based on analyses of Medicare discharge data that indicated that patterns of patient shifting appeared to be occurring more for provider financial advantage than for patient benefit. In order to discourage such activity, a payment adjustment was applied for LTCH discharges of patients who were admitted to the LTCH from the same referring hospital in excess of an applicable percentage threshold, which was to transition to a 25-percent threshold after specified phase-in periods. (For rural and single-urban LTCHs and those with MSA-dominant referring hospitals, a 50-percent threshold was applied.). Under this policy, discharges in excess of the threshold are paid at an ‘‘IPPS equivalent’’ rate, instead of the much higher LTCH PPS rate. (We refer readers to detailed discussions of the 25-percent E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules policy for LTCH HwHs and LTCH satellite facilities in the FY 2005 IPPS final rule (69 FR 49191 through 49214) and its application to all other LTCHs in the RY 2008 LTCH PPS final rule (72 FR 26919 through 26944).) The results of the different rulemaking schedules in effect when §§ 412.534 and 412.536 were implemented (FY 2005 (October 1, 2004) and RY 2007 (July 1, 2006), respectively) are as follows: for colocated LTCHs and LTCH satellite facilities governed under § 412.534, the 25-percent policy was effective for cost reporting periods beginning on or after October 1, 2005 (‘‘October’’ LTCHs); for LTCHs and LTCH satellite facilities governed under § 412.536, the 25percent policy was effective for cost reporting periods beginning on or after July 1, 2007 (‘‘July’’ LTCHs). In addition, even though grandfathered LTCH HwHs and LTCH satellite facilities are governed under § 412.534(h), they are ‘‘July’’ LTCHs because the 25-percent policy was applied to these facilities in the RY 2008 LTCH PPS final rule. Section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, provided for a 5-year moratorium on the full application of the 25-percent policy that expired for some LTCHs and LTCH satellite facilities for cost reporting periods beginning on or after October 1, 2012 (‘‘October’’ LTCHs) and for other LTCHs and LTCH satellite facilities for cost reporting periods beginning on or after July 1, 2012 (‘‘July’’ LTCHs). (For a detailed description of the moratorium on the application of the 25-percent policy, we refer readers to the May 22, 2008 Interim Final Rule with Comment Period (73 FR 29699 through 29704) and the August 27, 2009 Interim Final Rule with Comment Period for the ARRA, which was published in the FY 2010 IPPS final rule and Changes to the LTCH PPS and Rate Years 2010 and 2009 Rates final rule (74 FR 43990 through 43992). The expiration of the statutory moratorium for both ‘‘July’’ and ‘‘October’’ LTCHs was delayed because CMS established regulatory extensions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484), as amended by the FY 2013 IPPS/LTCH PPS correcting amendment (77 FR 63751 through 63753). Specifically, we established a 1-year extension (that is, for cost reporting periods beginning on or after October 1, 2012, and before October 1, 2013) on the full application of the 25-percent policy for ‘‘October’’ LTCHs. For those ‘‘July’’ LTCHs that would have been affected by the ‘‘gap’’ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 between the expiration of the statutory moratorium (for cost reporting periods beginning on or after July 1, 2012) and our prospective regulatory relief (for cost reporting periods beginning on or after October 1, 2012), we also provided for an additional moratorium based on LTCH discharges occurring on or after October 1, 2012 and ending at the start of the LTCHs’ next cost reporting period. For those ‘‘July’’ LTCHs with cost reporting periods beginning on or after October 1, 2012, the regulatory extension of the statutory moratorium, described above, effective for the hospital’s first cost reporting period beginning on or after October 1, 2012, resulted in seamless coverage for that group. However, for those ‘‘July’’ LTCHs with cost reporting periods beginning on or after July 1, 2012, and before October 1, 2012, that would have otherwise been subject to the ‘‘gap’’ between the expiration of the statutory moratorium and the effective date of the regulatory moratoria, we established a second regulatory moratorium effective with discharges occurring beginning October 1, 2012, through the end of the LTCH’s cost reporting period (that is, the end of the cost reporting period that began on or after July 1, 2012, and before October 1, 2012). Therefore, by providing for the above described regulatory extension for ‘‘July’’ LTCHs, we eliminated the distinction between ‘‘July’’ and ‘‘October’’ LTCHs, which resulted in the 25-percent policy being applied for all cost reporting periods beginning on or after October 1, 2012, following the expiration of the moratorium. For more details about these moratoria, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484). Because we did not extend the regulatory moratorium on the 25percent policy in the FY 2014 IPPS/ LTCH PPS final rule, the full application of the payment adjustment policy was effective for all LTCHs (both ‘‘October’’ and ‘‘July’’ LTCHs) for cost reporting periods beginning on or after October 1, 2013 (78 FR 50772). 2. Proposed Implementation of Section 1206(b)(1) of Public Law 113–67 As stated earlier, section 1206(b)(1)(A) of Public Law 113–67 provides an additional amendment to section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, that extends the ‘‘original’’ statutory moratorium on the full implementation of the 25-percent policy to a total of 9 years from the original effective dates established by the MMSEA (July 1 or October 1, 2007, as PO 00000 Frm 00219 Fmt 4701 Sfmt 4702 28195 applicable). As a result, the lapse of the regulatory moratorium on the full implementation of the 25-percent policy is moot. This ‘‘seamless’’ statutory moratorium provides relief until cost reporting periods beginning on or after July 1, or October 1, 2016, as applicable. Section 1206(b)(1)(B) provides a permanent exemption from the 25percent policy for certain grandfathered co-located LTCHs and LTCH satellite facilities. In this proposed rule, based on the statutory changes made by sections 1206(b)(1)(A) and (b)(1)(B) of Public Law 113–67, we are proposing to make conforming amendments to the regulations governing application of the 25-percent policy. Specifically, we are proposing to revise §§ 412.534(c)(1)(i) and (c)(1)(ii), (c)(2), (c)(3), (d)(1) and (d)(1)(i), (d)(2), (d)(3), (e)(1) and (e)(1)(i), (e)(2), (e)(3), the introductory text of paragraph (h), (h)(4), and (h)(5) and to remove paragraph (h)(6); and removing paragraphs (a)(1)(iii) and (a)(2)(ii), revising (a)(2), and removing paragraph (a)(3) of § 412.536 to reflect the statutory changes. F. Proposed Changes to the Fixed-Day Thresholds Under the ‘‘Greater Than 3-Day Interruption of Stay’’ Policy Under the LTCH PPS 1. Background The interrupted stay policy is a payment adjustment that was included under the LTCH PPS from the inception; that is, for cost reporting periods beginning on or after October 1, 2002 (FY 2003). In this discussion, we use the terms ‘‘interrupted stay’’ and ‘‘interruption of stay’’ interchangeably. An ‘‘interruption of stay’’ occurs when during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by a readmittance to the same LTCH. We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56002). When we established this policy, we believed that the readmission to the LTCH represented a continuation of the initial treatment, a stay in which an ‘‘interruption’’ occurred, rather than a new admission if the length of stay at the intervening facility was within a specified number of days. If an ‘‘interruption of stay’’ occurred, payment for both ‘‘halves’’ of the LTCH discharge were then ‘‘bundled,’’ and Medicare would make one payment based on the second date of discharge. Specifically, under this policy, we established a fixed-day threshold, which applied to the specified number of days E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28196 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules a Medicare beneficiary spends as an inpatient at an acute care hospital, an IRF, or a SNF. In the RY 2003 LTCH PPS final rule, we explained that we were implementing this policy because we wanted ‘‘. . .to reduce the incentives inherent in a discharged-based prospective payment system of ‘‘shifting’’ patients between Medicarecovered sites of care in order to maximize Medicare payments. This policy is particularly appropriate for LTCHs because, as a group, these hospitals differ considerably in the range of services offered such that where some LTCHs may be able to handle certain acute conditions, others will need to transfer their patients to acute care hospitals. ‘‘For instance, some LTCHs are equipped with operating rooms and intensive care units and are capable of performing minor surgeries. However, other LTCHs are unable to provide those services and will need to transfer the beneficiary to an acute care hospital. We believed that our policy also provided for a patient . . . ‘‘who no longer requires hospital-level care, but is not ready to return to the community,’’ and who ‘‘. . . could be transferred to a SNF.’’ (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56002).) Therefore, in the regulations under 42 CFR 412.531, we defined two types of interruptions of stays. Under § 412.531(a)(1), ‘‘[a] 3-day or less interruption of stay’’ means a stay at a LTCH during which a Medicare inpatient is discharged from the LTCH to an acute care hospital, IRF, SNF, or the patient’s home and readmitted to the same LTCH within 3 days of the discharge from the LTCH. Whereas under the ‘‘3 day or less interruption of stay policy,’’ the fixed-day threshold period begins with the calendar date of discharge from the LTCH and ends not later than midnight of the third day, if an LTCH patient’s ‘‘interruption’’ exceeds this threshold, payment is governed by the ‘‘greater than 3-day interruption of stay’’ policy. (We refer readers to the RY 2005 LTCH PPS final rule (69 FR 25690 through 25700), the RY 2006 LTCH PPS final rule (70 FR 24206), and the RY 2007 LTCH PPS final rule (71 FR 27872 through 27875) for detailed discussions of the 3-day or less interruption of stay policy.) We are not proposing to revise the 3-day or less category of interrupted stays, but we make mention of the policy for clarity in making a distinction between the 3day or less interruption of stay policy and the greater than 3-day interruption of stay policy that we are proposing to revise. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The ‘‘greater than 3-day interruption of stay policy,’’ is defined under § 412.531(a)(2) as a stay ‘‘. . . during which a Medicare inpatient is transferred upon discharge to an acute care hospital, an IRF, or a SNF for treatment or services that are not available in the long-term care hospital and returns to the same long-term care hospital within the applicable fixed-day period specified in regulations under § 412.531(a)(2)(i) through (a)(2)(iii).’’ For a discharge to an acute care hospital, the applicable fixed-day period is between 4 and 9 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 9th day when the patient is readmitted to the LTCH. For a discharge to an IRF, the applicable fixed-day period is between 4 and 27 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 27th day. For a discharge to a SNF, the applicable fixedday period is between 4 and 45 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 45th day. These timeframes reflect our policy of only paying for more than one discharge if the patient’s length of stay exceeds one standard deviation from the average length of stay. As we stated in the RY 2003 LTCH PPS final rule, this policy was established with the intent of ‘‘balanc[ing] the payment incentives of both the LTCH and the acute care hospital, IRF, or SNF to which the LTCH patient is discharged before being readmitted to the LTCH,’’ and is intended to ensure ‘‘that discharges from LTCHs are based on clinical considerations and not financial incentives’’ (67 FR 56002). As we stated at that time, we believed that a threshold of one standard deviation from the average length of stay would address the cost-based disincentives inherent in cases that significantly exceed the average length of stay. Furthermore, the threshold would ‘‘capture the majority of the discharges that are similar to the average length of stay for the respective DRG, combination CMG and comorbidity tier, or for all Medicare SNF cases.’’ Specifically, in establishing this policy, we calculated the average length of stay plus one standard deviation for each inpatient setting in which an ‘‘interruption’’ could occur in order to determine a fixed-day threshold. This use of a standard deviation as the justification for additional payment is consistent with our use of a standard deviation measure as the measure for PO 00000 Frm 00220 Fmt 4701 Sfmt 4702 paying additional amounts for new technologies under the acute care hospital inpatient prospective payment system. Under that system, ‘‘the cost of a new technology must exceed one standard deviation beyond the mean standardized charge for all cases in the DRG to which the new technology is assigned in order to receive additional payments’’ (67 FR 56002). Therefore, if an LTCH readmission occurs within the fixed-day period both halves of the LTCH discharge are treated as a single discharge for the purposes of payment under the LTCH PPS. In such instances, the beneficiary’s readmittance to the LTCH is paid for with a single LTC–DRG payment that covers the initial admission to the LTCH, and the subsequent readmission. That is, a single Medicare payment is made for the entire two-part discharge. Payment to the acute care hospital, the IRF, or the SNF is then made in accordance with the applicable payment policies for those providers when the interruption of stay exceeds 3 days. Therefore, we balanced the payment incentives of both the LTCH and the acute care hospital, IRF, or SNF to which the LTCH patient might be discharged before being readmitted to the LTCH. As we discussed in the RY 2003 LTCH PPS final rule (67 FR 56007), our concerns about patient shifting were significantly increased in the context of transfers between co-located LTCHS and LTCH satellite facilities, or for LTCH hospital-within-hospital transfers. Collectively, we refer to these arrangements as transfers to ‘‘onsite’’ providers. In the regulations under § 412.532(b), we define a facility that is ‘‘co-located or ‘‘on-site’’ as ‘‘a hospital, satellite facility, unit, or SNF that occupies space in a building also used by another hospital or unit or in one or more buildings on the same campus, as defined in § 413.65(a)(2) of this subchapter, as buildings used by another hospital or unit.’’ Under this LTCH PPS policy, if more than 5 percent of the Medicare patients discharged from an LTCH during a cost reporting period were discharged to an ‘‘onsite’’ SNF, IRF, or psychiatric facility, or to an ‘‘onsite’’ acute care hospital, and directly readmitted to the same LTCH, the LTCH would be paid one MS–LTC–DRG payment to cover both LTCH discharges, regardless of the length of the interrupted stay. As is the case in regard to the greater than 3-day interruption of stay policy, payment to an acute care hospital, an IRF, or a SNF would not be affected under the 5percent policy. We refer readers to the RY 2003 LTCH PPS final rule for a E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 detailed description of the 5-percent policy (67 FR 56007 through 56014). Our concern about patient shifting among ‘‘onsite’’ providers did not originate with the implementation of the LTCH PPS. The LTCH 5-percent policy under § 412.532 was recodified from an earlier regulation under § 413.40(a)(3), which applied a payment adjustment to hospitals paid under the TEFRA payment system, including LTCHs, to address inappropriate discharges of patients to a host hospital paid under the inpatient prospective payment system from an excluded hospitalwithin-a-hospital (such as a LTCH), that culminated in a readmission to the hospital-within-a-hospital. (We refer readers to the RY 1999 LTCH PPS final rule (64 FR 41353) and the RY 2003 LTCH PPS final rule (67 FR 56007).) In the RY 2003 LTCH PPS final rule, we adopted this payment adjustment under the LTCH PPS to ‘‘address inappropriate shifting of patients among these providers without clinical justification to maximize Medicare payment’’ due to inappropriate incentives to prematurely discharge patients to one of these other onsite providers once their lengths of stay at the LTCH exceeded the thresholds established by the short-stay outlier policies.’’ Therefore, we sought to ensure that discharges would not be based on ‘‘payment considerations rather than on a clinical basis as an extension of the normal progression of appropriate patient care.’’ 2. Thresholds Used in Recent Statutory Programs Two previously implemented Medicare initiatives, the Hospital IQR Program, established by section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, and the Readmission Reduction Program, established by section 3025 of the Affordable Care Act, include measures that focus, among other things, on the implied relationships between quality patient care and payment consequences for the Medicare program resulting from patient readmissions. The Hospital IQR Program, which we discuss in detail in section IX.A. of the preamble of this proposed rule, publicly reports, among other things, inpatient outcome measures, including 30-day readmissions for specific medical conditions (acute myocardial infarction, heart failure, pneumonia, total hip/knee arthroplasty, hospital-wide all-cause unplanned, stroke, and COPD). The Hospital Readmissions Reduction Program, which we discuss in section IV.H. of the preamble of this proposed rule, requires CMS to reduce payments VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to IPPS hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. Under that program, we define a ‘‘readmission’’ as an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital. As noted in our response to a public comment in the FY 2012 IPPS/LTCH PPS final rule, the ‘‘timeframe of 30 days from the date of the initial discharge from the index hospitalization is the timeframe that has been NQF[National Quality Forum]endorsed as part of the three readmission measures. The timeframe of 30 days is considered an acceptable standard [for quality measurement] in both the research and measurement communities, as this time period is long enough to capture a substantial proportion of readmissions attributable to an index hospitalization . . . and yet it is short enough that outcomes can be attributed to and influenced by hospital care and the early transition to the outpatient setting. The use of the 30-day timeframe is also a clinically meaningful period for hospitals to collaborate with their communities in an effort to reduce readmissions.’’ (We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51669 through 51670).) In light of the 30-day threshold established for the Hospital IQR Program and the Hospital Readmissions Reduction Program, we conducted an evaluation of our greater than 3-day interruption of stay policy. A review of claims data indicates that interrupted stays at acute care hospitals constitute the vast majority of the intervening stays under the interruption of stay policy. When implementing policies under the Hospital IQR Program and the Hospital Readmissions Reduction Program, we have, in effect, asserted that a second inpatient episode of care that occurs within 30 days of an initial (index) hospitalization is likely linked to the first stay. Under the LTCH PPS, the application of the payment adjustment specified in the ‘‘greater than 3-day interruption of stay’’ policy is based on the number of days that elapsed between the initial LTCH discharge and the beneficiary’s readmission to the same LTCH. An interruption of stay that does not exceed the fixed-day threshold would result in one ‘‘bundled’’ discharge-based payment to cover both LTCH discharges. An interruption of stay that exceeds the fixed-day threshold would currently result in two separate Medicare payments under the LTCH PPS. However, we believe that it would be more appropriate to use a 30- PO 00000 Frm 00221 Fmt 4701 Sfmt 4702 28197 day interval as the fixed-day threshold under the greater than 3-day interruption of stay policy under the LTCH PPS because that is consistent with the intervals used in the Hospital Readmissions Reductions Program and the Hospital Inpatient Quality Reporting Program. As such, we are proposing to revise the fixed-day thresholds under the greater than 3-day interruption of stay policy to provide for a 30-day fixed threshold as an ‘‘acceptable standard’’ for determining a linkage between an index discharge and a readmission from an inpatient facility as specified under this policy, that is, an IPPS hospital, an IRF, or a SNF. 3. Proposed Changes to the Greater Than 3-Day Interruption of Stay Policy We are proposing to adopt a 30-day standard as the fixed-day threshold under the LTCH PPS ‘‘greater than 3-day interruption of stay’’ policy. To do so, we are proposing to amend our regulations by revising §§ 412.531(a)(2) and (b)(4) and adding new paragraphs (a)(3) and (b)(5) to reflect this proposed policy change. Under our proposed policy revision, Medicare payments to LTCHs for patients discharged on or after October 1, 2014, who are treated in an acute care hospital, IRF, or SNF and readmitted to the same LTCH within 30 days of the index LTCH discharge, both discharges from the LTCH would be treated as one episode of care and a single discharge payment would be made to the LTCH. In addition, because we believe that this 30-day fixed-day threshold policy would address ‘‘onsite’’ concerns, we are proposing to remove § 412.532, that currently governs discharges from LTCHs to ‘‘onsite’’ providers that subsequently readmit the patient to the same LTCH. If we finalize our proposal to adopt the 30-day fixed-day threshold under the LTCH PPS greater than 3-day interruption of stay policy, we no longer believe that the regulatory requirements under § 412.532 are necessary and, therefore, we are proposing to remove that section in its entirety. Furthermore, a determination as to whether an LTCH has exceeded its 5-percent threshold under the LTCH PPS 5-percent policy occurs only upon cost report settlement, and as such, reflects an ‘‘after the fact’’ payment adjustment rather than an ‘‘up front’’ payment adjustment, such as the payment adjustments that would be applied under our proposed greater than 3-day interruption of stay policy. As such, we believe that the 5-percent policy has a limited impact on provider behavior, and we do not believe that retaining it has significant value to the Medicare program. E:\FR\FM\15MYP2.SGM 15MYP2 28198 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules moratorium on increases in the number of hospital beds in existing LTCHs and LTCH satellite facilities. (For a detailed description of the ‘‘expired’’ moratoria provisions (including the applicable exceptions) that were in effect from December 29, 2007 through December 28, 2012, we refer readers to the May 22, 2008 Interim Final Rule with Comment Period (73 FR 29705 through 29708). In light of the expiration date of the ‘‘expired’’ moratoria on December 28, G. Moratoria on the Establishment of 2012, and the effective date of the LTCHs and LTCH Satellite Facilities and ‘‘new’’ moratoria on April 1, 2014, there on the Increase in the Number of Beds has been a period of time in which new in Existing LTCHs or LTCH Satellite LTCHs and LTCH satellite facilities Facilities have been allowed to be established, As previously noted, Public Law 113– and during which time there may have 67 was enacted on December 26, 2013. been increases in the number of hospital Section 1206(b)(2) of Public Law 113–67 beds in LTCHs and LTCH satellite amended section 114(d) of the MMSEA facilities. In accordance with section of 2007, as previously amended by 114(d)(1) of the MMSEA, as amended by section 4302 of the American Recovery section 112(b) of Public Law 113–93, for and Reinvestment Act (ARRA) of 2009 the period beginning April 1, 2014 (Pub. L. 111–5) and sections 3106(b) and through September 30, 2017, CMS will 10312(b) of the Affordable Care Act be unable to designate any hospital as (Pub. L. 111–148). As further amended an LTCH, unless one of the exceptions by section 112(b) of the Protecting (described below) is met. Access to Medicare Act of 2014 (Pub. L. Additionally, as of April 1, 2014, in 113–93), section 114(d) of the MMSEA accordance with sections 114(d)(6) and includes a ‘‘new’’ statutory moratoria on (d)(7) of the MMSEA, as amended by the establishment of new LTCHs and section 112(b) of Public Law 113–93, an LTCH satellite facilities, and on the existing LTCH may not increase the increase in the number of hospital beds number of its hospital beds. This in existing LTCHs and LTCH satellite moratorium will extend through facilities, ‘‘for the period beginning September 30, 2017, and is not subject April 1, 2014 and ending September 30, to any exceptions. 2017,’’ which mirrors nearly identical To qualify for an exception under the provisions of the ‘‘expired’’ moratoria ‘‘new’’ moratorium to establish a new under section 114(d)(1) of the MMSEA, LTCH or LTCH satellite facility during as amended by sections 4302 of the the timeframe between April 1, 2014, ARRA and sections 3106(b) and and September 30, 2017, a hospital or 10312(b) of the Affordable Care Act. entity must meet the following criteria: These prior, yet nearly identical, • The hospital or entity must have provisions of section 114(d)(1) of the begun its qualifying period for payment MMSEA, as amended by the ARRA and as an LTCH under 42 CFR 412.23(e). • The hospital or entity must have a the Affordable Care Act, expired on binding written agreement with an December 28, 2012. For clarity and brevity, we will refer to the ‘‘expired’’ outside, unrelated party for the actual moratoria or moratorium to reference construction, renovation, lease, or those that expired on December 28, demolition for an LTCH, and must have 2012, and the ‘‘new’’ moratoria or expended before April 1, 2014, at least moratorium to reference those that 10 percent of the estimated cost of the began on April 1, 2014, as applicable, project or, if less, $2,500,000. • The hospital or entity must have throughout this discussion. The primary difference between the obtained an approved certificate of need ‘‘expired’’ moratoria and the ‘‘new’’ in a State where one is required. While this exception only applies to moratoria is that, while the ‘‘expired the ‘‘new’’ moratorium on the moratoria’’ provided for specific establishment of new LTCHs and LTCH exceptions to both the moratorium on satellite facilities under section the establishment of new LTCHs and 114(d)(7) of the MMSEA, as amended by LTCH satellite facilities and on section 112(b) of Public Law 113–93, the increases in the number of beds in mechanics of the exception are existing LTCHs and LTCH satellite analogous to those established under the facilities, the ‘‘new’’ moratoria only ‘‘expired’’ moratorium, which ended in provides exceptions to the moratorium on the establishment of new LTCHs and 2012. The ‘‘expired’’ moratoria were implemented in a May 22, 2008 Interim LTCH satellite facilities. No exceptions Final Rule with Comment Period (73 FR are provided under the ‘‘new’’ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 In summary, we are proposing to revise the regulations under §§ 412.531(a)(2) and (b)(4) and to add new §§ 412.531(a)(3) and (b)(5) to reflect this proposed payment policy revision. In addition, we are proposing to remove § 412.532 in its entirety and make a conforming change to § 412.525 by removing and reserving paragraph (d)(3), which references payments under § 412.532. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00222 Fmt 4701 Sfmt 4702 29704 through 29707). As discussed in that rule, some of the terminology in the statutory provision was internally inconsistent. A strictly literal reading of the statutory language under section 114(d)(2) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, presented practical challenges for implementation in light of the established LTCH classification criteria under § 412.23(e) of the regulations. Therefore, we adopted interpretations that we believed would reasonably reconcile seemingly inconsistent provisions and that would result in a logical and workable mandate. Specifically, as drafted, the exception only applies to a hospital or entity when it is already classified as an ‘‘LTCH.’’ Such entities would not need an exception to the moratorium on becoming an ‘‘LTCH’’ because they would already be an LTCH. As such, we are proposing to interpret this provision under the new exception as we interpreted the exceptions to the ‘‘expired’’ moratorium. We discuss our interpretations below. At the outset of this discussion, we want to clarify which provisions of section 114(d) of the MMSEA, as amended, were subject to the ‘‘expired’’ moratoria, and which are subject to the ‘‘new’’ moratoria. Sections 114(d)(2) and (3) of the MMSEA, as amended, only address exceptions under the ‘‘expired’’ moratoria. Section (d)(6) of the MMSEA, as amended, defines when the exceptions addressed in sections 114(d)(2) and (3) expired. Section (d)(7) of the MMSEA addresses the exception under the ‘‘new’’ moratorium on the establishment of new LTCHs and LTCH satellite facilities. There are no exceptions to the ‘‘new’’ moratorium on the increases in the number of beds in existing LTCHs and LTCH satellite facilities, as noted above. Section 114(d)(7)(A) of the MMSEA, as amended, mirrors the expired provisions of section 114(d)(2)(A). Both provisions refer to an LTCH that began its qualifying period for payment as a ‘‘long-term care hospital’’ on or before a given date. However, a hospital would not be classified as an LTCH during that qualifying period; the facility or entity would typically be classified as an IPPS hospital. For a full discussion of our rationale for interpreting section 114(d)(2)(A) of the MMSEA to refer to an IPPS hospital meeting the stated requirements, we refer readers to our May 22, 2008 Interim Final Rule with Comment Period (73 FR 20704 through 29707) regarding the implementation of the ‘‘expired’’ moratorium. We are proposing to apply the same rationale in E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules regard to the interpretation of section 114(d)(7)(A), that is, we are proposing to interpret the provision to refer to an acute care hospital meeting the stated requirements as the hospital or entity seeks classification as an LTCH. As we did when interpreting the same language under the ‘‘expired’’ moratorium exception under section 114(d)(2)(A) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, we note that the exception under section 114(d)(7)(A) of the MMSEA cannot provide any relief to LTCH satellite facilities because there is no ‘‘qualifying period’’ for the establishment of a LTCH satellite facility for payment as a LTCH under § 412.23(e). Therefore, an LTCH satellite facility cannot meet the stated requirements for an exception under section 114(d)(7)(A) of the MMSEA. Section 114(d)(7)(B) of the MMSEA specifies the conditions for an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities having: (1) A binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for an LTCH; and (2) expended, before the date of enactment of Public Law 113–93, April 1, 2014, ‘‘at least 10 percent of the estimated cost of the project (or, if less, $2,500,000).’’ As drafted, this provision is also problematic. In cases in which a hospital has not yet been built, but there is a binding written agreement for the actual construction of a hospital that intends to be classified as an LTCH, the entity hiring those who would complete the construction would not be classified as an LTCH. Prior to the designation or classification of a hospital or an entity as an LTCH, a hospital must first be established and certified and must then complete the procedures specified under § 412.23(e) in order to qualify as an LTCH, at which point the hospital would be reclassified as an LTCH. In accordance with our interpretation of section 114(d)(2)(B) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, we are proposing to interpret the contracting and expenditure provisions under section 114(d)(7)(B) of the MMSEA, as added by section 112(b) of Public Law 113–93, to apply to the hospital/entity requesting an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities between April 1, 2014, and September 30, 2017—the entity that would be classified as an LTCH if it meets the stated requirements. That entity must have a binding written VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 agreement with an outside unrelated party for the actual construction, renovation, lease, or demolition for converting the hospital to an LTCH, and it must have expended at least 10 percent of the estimated cost of the project (or, if less, $2,500,000) by the date of enactment of Public Law 113– 93—April 1, 2014. Furthermore, with regard to the first prong, as when we implemented the ‘‘expired’’ moratoria, we continue to believe that the use of the term ‘‘actual’’ in the context of the ‘‘actual construction, renovation, lease, or demolition’’ indicates that the provision focuses only on the specific actions cited in the statute, and does not include those actions that are being contemplated or are not yet substantially underway. Although we are aware that a hospital or some other type of entity may enter into binding written agreements regarding services and items (for example, feasibility studies or land purchase) and incur costs for those services and items prior to actual construction, renovation, lease or demolition, we believe that those services or items are not included in what we are permitted to consider under the statutory language of the exception requirements. With respect to the second prong, the statute specifies that the hospital or entity must have ‘‘expended’’ at least 10 percent of the estimated cost of the project (or, if less, $2,500,000) by April 1, 2014. As we did in regard to the interpretation of section 114(d)(2)(B) of the MMSEA, as amended by section 4302 of the ARRA and section 3106(b) and 10312(b) of the Affordable Care Act, we are proposing to interpret the phrase ‘‘cost of the project’’ to mean the activities enumerated in the first prong: ‘‘The actual construction, renovation, lease, or demolition for a long-term care hospital.’’ That is, the statute requires the hospital or entity to have spent the amount specified in the statute on the actual construction, renovation, lease, or demolition for the contemplated LTCH. Furthermore, as we did previously in regard to the interpretation of section 114(d)(2)(B) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, because the statute uses the phrase ‘‘has expended’’ (that is, a past tense phrase), we are proposing to limit funds counting toward the 10 percent or $2,500,000 minimum to those funds that have actually been transferred as payment for the stated aspects of the project prior to April 1, 2014, as opposed to merely obligating capital and posting the cost of the project on its books. We believe that the PO 00000 Frm 00223 Fmt 4701 Sfmt 4702 28199 provision addressed the concept of ‘‘obligate’’ in the first prong of the test where the statute specifies ‘‘a binding written agreement . . . for the actual construction, renovation, lease, or demolition of the long-term care hospital . . .’’ and there is no reason to believe that the second prong of the test, which requires the ‘‘expenditure’’ of 10 percent of the project or, if less, $2,500,000, was intended as a redundancy. The ability to post the expense on the hospital’s or entity’s books could be satisfied by merely having a binding written agreement under the first prong of section 114(d)(7)(B) of the MMSEA. The fact that a second requirement is included that involves an expenditure indicates that an additional threshold must be met. Finally, section 114(d)(7)(C) of the MMSEA includes an exception to the moratorium if an LTCH, as of April 1, 2014, has ‘‘obtained an approved certificate of need in a State where one is required.’’ As discussed above, we are proposing to apply this exception requirement to the entity that is requesting approval for an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities between April 1, 2014, and September 30, 2017—the entity that would be classified as an ‘‘LTCH’’ if the stated requirements are met. However, with that said, we are clarifying what kind of certificate of need we are proposing to accept under the provisions of section 114(d)(7) of the MMSEA. We believe that the certificate of need exception applies to a ‘‘hospital’’ or entity that was actively engaged in developing an LTCH, as evidenced by the fact that either an entity that wanted to create a LTCH but did not exist as a hospital as of April 1, 2014, had obtained a certificate of need for a hospital by the date of enactment, or an existing hospital had obtained a certificate of need to convert the hospital into a new LTCH by that date. We are proposing not to apply this exception requirement to a hospital that was already in existence prior to the date of enactment of Public Law 113–93, and that had previously obtained an approved certificate of need for a hospital (other than a LTCH) on or before April 1, 2014. We believe that Congress intended the exception to the moratorium to save those entities that were already actively engaged in becoming an LTCH. The fact that a hospital may have had a certificate of need issued to it years before April 1, 2014, to operate a hospital (other than a LTCH) is not indicative of such active engagement, and, we believe, is outside E:\FR\FM\15MYP2.SGM 15MYP2 28200 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 of what is contemplated in these LTCHspecific statutory provisions. We are proposing to only apply this exception requirement where the certificate of need was specifically for an LTCH. Because the certificate of need process is controlled at the State level, in determining whether the hospital or entity has obtained an approved certificate of need on or before April 1, 2014, we would consult the applicable State on a case-by-case basis for that determination. Decisions regarding the application of these moratoria and exceptions provided within the provisions of section 114(d) of the MMSEA will be handled on a case-by-case basis by the applicant’s MAC and the CMS Regional Office. In accordance with these proposals, we also are proposing to revise our regulations under § 412.23(e)(6) and (e)(7) to include a description of the ‘‘new’’ moratoria, which is in effect from April 1, 2014, through September 30, 2017, on the establishment of new LTCHs and LTCH satellite facilities (with specific exceptions), and on increasing the number of beds in existing LTCHs and existing LTCH satellite facilities. H. Evaluation and Proposed Treatment of LTCHs Classified Under Section 1886(d)(1)(B)(iv)(II) of the Act Section 1206(d) of the Pathway for SGR Reform Act (Pub. L. 113–67) instructs the Secretary to evaluate payments and regulations governing ‘‘hospitals which are classified under subclause (II) of subsection (d)(1)(B)(iv) . . .’’ as part of the annual rulemaking for payment rates under subsection (d) of section 1886 of the Act for FY 2015 or FY 2016. (We refer to hospitals ‘‘classified under subclause (II) of subsection (d)(1)(B)(iv) . . .’’ as ‘‘subclause (II) LTCHs.’’) Based on the results of this evaluation, the Secretary is authorized to adjust the payment rates under section 1886(b)(3) of the Act for this type of hospital (such as by applying a payment adjustment such that the payments resemble those under a ‘‘TEFRA-payment model’’). To implement such a payment adjustment, the Secretary would have to propose changes to the existing regulations governing subclause (II) LTCHs. For this proposed rule, under the requirements of section 1206(d)(1) of Public Law 113–67 to evaluate the payment rates and regulations governing subclause (II) LTCHs, we have reviewed Medicare data from the only hospital meeting the statutory definition of a subclause (II) LTCH. As a result of these analyses, we are proposing to apply a VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 payment adjustment to subclause (II) LTCHs beginning in FY 2015, which would result in payments for this category of LTCHs that resemble a payment based upon a TEFRA payment model (that is, a reasonable cost payment, subject to a ceiling). Section 4417(b) of the BBA established the meaning of ‘‘subsection (d) hospitals,’’ which are paid under the IPPS, and in doing so, excluded two categories of hospitals that experience extended average inpatient length of stays. It also authorized the Secretary to define how an average inpatient length of stay would be calculated for these excluded hospitals. These provisions are included under sections 1886(d)(1)(B)(iv)(I) and (d)(1)(B)(iv)(II) of the Act, and the two categories of hospitals are generally referred to as subclause (I) and subclause (II) LTCHs. Subclause (I) LTCHs are required to have an average inpatient length of stay that is greater than 25 days. Subclause (II) LTCHs are only required to have an average inpatient length of stay of greater than 20 days. The subclause (II) LTCH definition further limited the classification of a subclause (II) LTCH by including the requirement that the LTCH must have been first excluded from the IPPS in CY 1986, and treated a Medicare inpatient population in which 80 percent of the discharges in the 12-month reporting period ending in Federal FY 1997 had a principal diagnosis that reflected a finding of neoplastic disease. This statutory requirement is implemented under 42 CFR 412.23(e)(2)(ii). In establishing the category of subclause (II) LTCHs, Congress essentially authorized special treatment of a hospital that, since 1986, had focused on the provision of palliative care to Medicare beneficiaries diagnosed with end-stage cancer. In consideration of the distinction between hospitals qualifying as LTCHs, either as a subclause (I) LTCH or a subclause (II) LTCH, we established different standards for counting the average inpatient length of stay values for these two categories of LTCHs. We calculate the greater than 25-day average length of stay criteria using only Medicare claims data for subclause (I) LTCHs. However, for subclause (II) LTCHs, we calculate the average length of stay based on its entire patient population. We refer readers to the RY 2003 LTCH PPS final rule (67 FR 55974) for a full discussion of our rationale for implementing these average length of stay calculation methodologies. The theoretical foundations of any PPS are based on a system of averages, where the costs of some cases may PO 00000 Frm 00224 Fmt 4701 Sfmt 4702 exceed the payment, while other cases’ costs will be less than the payment, creating an adequate balance in payments. Therefore, it is assumed that a hospital paid under a PPS would be able to maintain a balance of patients that will allow the hospital to achieve fiscal stability. With that said, in developing the LTCH PPS we were aware that a per discharge PPS system that pays the same amount for every case in a specific MS–LTC–DRG could encourage hospitals to make decisions based on financial considerations (such as prematurely discharging patients to reduce the cost of such cases). As per discharge payments under the LTCH PPS are based on the extended lengths of stay that characterize LTCHs, at the outset of the LTCH PPS, we established a short-stay outlier (SSO) policy under which we apply a payment adjustment for LTCH discharges with lengths of stay that do not exceed 5⁄6 of the geometric average length of stay of the MS–LTC– DRG. Equally, we were aware that there would be exceptionally expensive cases that could create financial disincentives to treat such patients and, therefore, we adopted a high-cost outlier (HCO) policy as well. However, given the nature of a subclause (II) LTCH’s patient population, it may not be reasonable to expect a balancing of more and less costly cases, as these LTCHs are generally only treating a subset of very sick patients. As such, we modified our original SSO payment policy for subclause (II) LTCHs, and we exempted this category of LTCHs from additional changes to the SSO policy to account for the extremely high percentage of cases that our data analysis revealed would have been subject to our SSO policy if that policy were to be applied to subclause (II) LTCHs. In accordance with the requirements of section 1206(d)(1) of Public Law 113– 67, we conducted an evaluation of the payment rates and regulations governing subclause (II) LTCHs. We analyzed MedPAR claims data for FY 2010 and estimated Medicare costs incurred by the one LTCH currently classified as a subclause (II) LTCH, a 225-bed LTCH located in New York. We also evaluated the same metrics for two comparison groups of LTCHs, that is, approximately 40 LTCHs located in the same census region (that is, the Northeast Census Region, which includes Connecticut, Maine, New Jersey, and Pennsylvania), and approximately 25 LTCHs with the same bed size category (that is, between 150 and 250 beds) in order to assess the distinctions between a subclause (I) LTCH and a subclause (II) LTCH. For purposes of this analysis, LTCH PPS E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payments were calculated from the payment field in the MedPAR claims data, and the estimated costs for those claims were calculated using the covered charges and CCRs in the Provider-Specific File (PSF) that correlate to the discharge date on each claim. We calculated the aggregate average margins (ratio of payment to costs) for the subclause (II) LTCH and for the two sets of comparison groups of LTCHs using the calculated FY 2010 costs and payments. Our analysis found that, under current LTCH PPS payment policy, the subclause (II) LTCH has much lower margins than comparable LTCHs located in the Northeast Census Region or LTCHs with 150–250 beds. Specifically, the subclause (II) LTCH had a negative margin for its Medicare patients paid under LTCH PPS in FY 2010, while both the Northeast Census Region LTCHs and LTCHs with 150–250 beds had positive aggregate margins for its Medicare patients paid under LTCH PPS for the same period. In our evaluation of subclause (II) LTCHs under the LTCH PPS, in accordance with the requirements of section 1206(d) of Public Law 113–67, we also compared the types of patients treated at subclause (I) and subclause (II) LTCHs. The top five MS–LTC–DRGs for patients treated at the subclause (II) LTCH in FY 2010 account for almost one-third of all of its Medicare discharges. Four of the top five MS– LTC–DRGs for the subclause (II) LTCH involve a neoplastic disease, and its case-mix differs significantly from the subclause (I) LTCHs, which had large proportions of ventilator and respiratory patients. The five most common MS– LTC–DRGs for the subclause (I) LTCHs were: Respiratory system diagnosis with ventilator support 96+ hours (MS–LTC– DRG 207); Pulmonary edema and respiratory failure (MS–LTC–DRG 189); Septicemia or severe sepsis without ventilator support 96+ hours with MCC (MS–LTC–DRG 870); Skin ulcers with MCC (MS–LTC–DRG 592); and Respiratory system diagnosis with ventilator support < 96 hours (MS–LTC– DRG 208). In comparison, for the subclause (II) LTCH, the five most common MS–LTC–DRGs were: Respiratory neoplasms with CC (MS– LTC–DRG 181); Digestive malignancy with CC (MS–LTC–DRG 375); Respiratory neoplasms with MCC (MS– LTC–DRG 180); Organic disturbances & mental retardation (MS–LTC–DRG 884); and Malignancy, female reproductive system w CC (MS–LTC–DRG 755). These data highlight significant differences between a subclause (I) LTCH and a subclause (II) LTCH based VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 on patient-mix and Medicare margins, notwithstanding the considerations that have been made in structuring the current LTCH regulations to acknowledge the uniqueness of an LTCH meeting the statutory definition of a subclause (II) LTCH. In evaluating ‘‘both the payment rates and regulations governing hospitals which are classified under subclause (II) . . .,’’ as required by section 1206(d) of Public Law 113–67, we also analyzed the impacts of upcoming changes to the LTCH PPS under section 1206(a) of Public Law 113–67. In discussing these analyses, we note that, as discussed in section VII.I.2. of the preamble of this proposed rule, we are not proposing any specific policy and payment changes in this proposed rule to implement the provisions of section 1206(a) of Public Law 113–67. We intend to establish policies related to the types of LTCH cases expected to meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ and cases expected to meet the criteria for the ‘‘site neutral’’ payments under the LTCH PPS in the FY 2016 rulemaking cycle. Although we are not making any proposals in this proposed rule related to the provisions of section 1206(a) of Public Law 113–67 at this time, we discuss these provisions in this section because they relate to our analysis of the LTCH PPS payment rates and regulations governing subclause (II) LTCHs. Absent policy proposals for the implementation of section 1206(d) of Public Law 113–67, the payment changes required by section 1206(a) of Public Law 113–67 would apply to subclause (II) LTCHs beginning with discharges occurring in cost reporting periods beginning on or after October 1, 2015 (that is, FY 2016 and beyond). Due to the changes required by the provisions of section 1206(a) of Public Law 113–67 (discussed at greater length under section VII.I. of the preamble of this proposed rule), beginning in FY 2016, only those LTCH discharges meeting specified patient-level clinical criteria will be paid a ‘‘standard LTCH PPS payment amount.’’ Discharges not meeting those criteria will be paid based on a ‘‘site neutral’’ payment amount (the lesser of the ‘‘IPPS comparable’’ amount, as applied under our SSO policy at § 412.529, or 100 percent of the estimated costs of the case). The statutory requirements to be paid the ‘‘standard LTCH PPS payment amount’’ are that the LTCH discharge does not have a principal diagnosis relating to a psychiatric diagnosis or to rehabilitation, and: PO 00000 Frm 00225 Fmt 4701 Sfmt 4702 28201 • The stay in the LTCH was immediately preceded by a discharge from an acute care hospital that included at least 3 days in an intensive care unit (ICU); or • The stay in the LTCH was immediately preceded by a discharge from an acute care hospital and the patient’s LTCH stay is assigned to an MS–LTC–DRG based on the receipt of ventilator services of at least 96 hours. Furthermore, section 1206(a)(1)(C)(ii)(II) of Public Law 113– 67 specifies that, effective with cost reporting periods beginning on or after FY 2020, any LTCH with an ‘‘LTCH discharge payment percentage’’ that demonstrates that more than 50 percent of that LTCH’s discharges were paid for based on the ‘‘site neutral’’ payment rate will subsequently be paid for all discharges at the rate ‘‘. . . that would apply under subsection (d) for the discharge if the hospital were a subsection (d) hospital.’’ We refer readers to section VII.I. of the preamble of this proposed rule for a further discussion of the provisions of section 1206(a) of Public Law 113–67. In light of these forthcoming statutory changes, we evaluated MedPAR claims data from the only hospital meeting the statutory definition of a subclause (II) LTCH for FY 2010 to project the impact of the revisions to the LTCH PPS made by section 1206(a) of Public Law 113– 67. Our simulations included analyses of the potential financial impact of applying the patient-level criteria and ‘‘site neutral’’ payment policies to a subclause (II) LTCH, and the financial impact on payments if that LTCH were to be paid for more than 50 percent of its discharges at the ‘‘site neutral’’ payment rate. In conducting this analysis in the absence of rules implementing the changes mandated by section 1206(a) of Public Law 113–67, we assumed that there would be no changes in LTCH admission patterns in response to the LTCH PPS payment changes required by section 1206(a) of Public Law 113–67. Furthermore, we used the FY 2010 claims data for the subclause (II) LTCH and the two LTCH comparison groups described above in order to compare the potential effects of the payment changes under the LTCH PPS required by section 1206(a) of Public Law 113–67 between subclause (I) LTCHs and subclause (II) LTCHs. We simulated payments for those discharges that would be expected to meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ and for discharges that would be expected to receive ‘‘site neutral’’ payments under the LTCH PPS. Our analysis found that the subclause (II) LTCH would be E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28202 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules expected to have significantly fewer (approximately 5 times fewer) discharges that would be expected meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ than the comparison groups of subclause (I) LTCHs (that is, Northeast Census Region LTCHs and LTCHs with 150–250 beds). Additionally, we analyzed the potential effects of the ‘‘LTCH discharge payment percentage’’ provision under the requirements of section 1206(a)(1)(C)(ii)(II) of Public Law 113– 67, as noted above. We evaluated FY 2010 claims data from the subclause (II) LTCH to project the potential impact of this provision. Based on our simulations in which we projected which FY 2010 LTCH claims would be expected to receive ‘‘site neutral’’ payments under the LTCH PPS (as described above), and having found a significant number, we project that a significant negative financial impact would be imposed upon the subclause (II) LTCH’s payments. Without considerable behavioral changes, the subclause (II) LTCH would be expected to have more than 50 percent of its discharges paid based on a ‘‘site neutral’’ payment and, therefore, would receive a payment adjustment under the provisions of section 1206(a)(1)(C)(ii)(II) of Public Law 113–67 for all of its discharges. Furthermore, our analysis revealed that, given the particular medical profile of their patient population, that the ‘‘subsection (d)’’ comparable payment amount under the payment adjustment required by section 1206(a)(1)(C)(ii)(II) of Public Law 113–67 would not likely cover the costs for a significant number of their discharges. Consequently, our analysis shows that the subclause (II) LTCH is projected to experience a large negative aggregate average margin for its Medicare discharges under the payment changes required by section 1206(a) of Public Law 113–67. Based on our findings under our evaluation of payments to subclause (II) LTCHs under the LTCH PPS and consistent with the provisions of section 1206(d) of Public Law 113–67, we evaluated adjustments that could be applied to ensure appropriate payments under the LTCH PPS for a subclause (II) LTCH under the LTCH PPS. This analysis included consideration of a reasonable-cost based model, such as the TEFRA payment system under which certain PPS-excluded hospitals (such as children’s and cancer hospitals) are currently paid. The TEFRA payment system, which was established under the provisions of Public Law 97–248, is implemented under the regulations at 42 CFR 413.40. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 In addition to governing the current payment of certain PPS-excluded hospitals, the TEFRA payment system was also previously used to pay LTCHs prior to the implementation of the LTCH PPS. As described in the RY 2003 LTCH PPS final rule (67 FR 55957), the TEFRA payment system was ‘‘. . . established [to make] payments based on hospitalspecific limits for inpatient operating costs. A ceiling on payments to such hospitals is determined by calculating the product of a facility’s base year costs (the year on which its target reimbursement limit is based) per discharge, updated to the current year by a rate-of-increase percentage, and multiplied by the number of total current year discharges.’’ (A detailed discussion of target amount payment limits under Public Law 97–248 can be found in the September 1, 1983 final rule published in the Federal Register (48 FR 39746).)’’ Under the TEFRA payment system, in accordance with section 1886(g) of the Act, Medicare allowable capital costs are paid on a reasonable cost basis. To evaluate reasonable cost-based payments under a TEFRA-payment model for subclause (II) LTCHs, we estimated operating and capital payments under the TEFRA payment system principles using FY 2010 cost report data for the one LTCH currently classified as a subclause (II) LTCH (the 225-bed LTCH located in New York noted previously). As described above, payments for operating costs under the TEFRA payment system are based on hospital-specific limits (that is, a ceiling). The ceiling on payments is determined as the product of a hospital’s base year costs (the year on which its target reimbursement limit is based) per discharge (‘‘target amount per discharge’’), updated to the current year by a rate-of-increase percentage, and multiplied by the number of its Medicare discharges for the year. For purposes of this analysis, we determined the subclause (II) LTCH’s TEFRA-based target amount per discharge by updating its FY 2000 target amount per discharge (prior to the implementation of the LTCH PPS) using the annual update factors as established under § 413.40(c)(3). We used the FY 2000 target amount per discharge in order to calculate a target amount per discharge that does not include the increased target amounts and caps on the target amounts provided to LTCHs under section 307(a) of the BIPA. Specifically, section 307(a) of the BIPA provided a 2-percent increase to the wage-adjusted 75th percentile cap on the TEFRA target amounts for existing PO 00000 Frm 00226 Fmt 4701 Sfmt 4702 LTCHs for cost reporting periods beginning in FY 2001, and a 25-percent increase to the hospital-specific TEFRA target amounts for LTCHs, subject to the increased 75th percentile cap. These provisions were promulgated prior to the implementation of the LTCH PPS. However, as required by section 307(a)(2) of the BIPA, the 2-percent increase to the 75th percentile cap and the 25-percent increase to the TEFRA target amounts were not to be taken into account in the development and implementation of the LTCH PPS. To ensure that these increases would not be included in the LTCH PPS payments to subclause (II) LTCHs, consistent with the statutory requirement under section 307(a)(2) of the BIPA, for purposes of our analysis, we determined the subclause (II) LTCH’s updated target amount by starting with its target amount from the FY 2000 cost report, the year prior to when these increases were effective. Then we updated its FY 2000 target amount per discharge using the annual update factors established under § 413.40. This approach is consistent with the methodology we used to estimate each LTCH’s FY 2003 payment per discharge for inpatient operating costs under the TEFRA payment system in determining the onetime prospective adjustment under § 412.523(d)(3) in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53498). For payments for capital-related costs, we used the hospital’s capital cost data from Worksheets D, Parts I and II, as reported on their FY 2000 cost report. As described previously, Medicare allowable capital costs are paid on a reasonable cost basis under the TEFRA payment system, in accordance with the regulations under§ 413.40. This approach is also consistent with the methodology we used to estimate each LTCH’s FY 2003 payment per discharge for inpatient capital-related costs under the TEFRA payment system in determining the one-time prospective adjustment at § 412.523(d)(3), in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53499). Our analysis of the subclause (II) LTCH’s projected payments under a TEFRA-payment model indicated that such payments would reasonably cover the costs for most of their discharges, and consequently, the subclause (II) LTCH is not projected to experience a negative aggregate margin for its Medicare discharges, unlike our projections under both the current LTCH PPS and the forthcoming payment changes to the LTCH PPS required by section 1206(a) of Public Law 113–67. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules In the above analyses, we evaluated the current regulations as well as anticipated payment rates under various statutorily mandated policies for FY 2016 on a subclause (II) LTCH under the LTCH PPS based on FY 2010 discharge data, including payments, costs and case-mix. As discussed above, our evaluation indicates that, given the required patient-mix for a subclause (II) LTCH, the forthcoming changes to the LTCH PPS are likely to result in a financial situation that is not sustainable for the subclause (II) LTCH evaluated above. Furthermore, our analysis also shows that current LTCH PPS payments for a subclause (II) LTCH, even with taking into account the considerations that have been made in structuring current LTCH PPS policies to acknowledge the uniqueness of a subclause (II) LTCH, may not be sufficient to cover the costs incurred for the treatment of patients of the particular medical profile of the subclause (II) patient population prescribed by the statute. Furthermore, we believe that in establishing subclause (II) LTCHs, Congress endorsed the support of the unique mission of this particular category of hospital. In fact, while mandating a significant revision to the LTCH PPS under section 1206(a) of Public Law 113–67, under section 1206(d) of the same statute, Congress directed the Secretary to evaluate the impact of the LTCH PPS on subclause (II) LTCHs, and, based on those findings, authorized the Secretary to adjust payment rates and other regulations, as appropriate, for this category of LTCHs. Accordingly, in recognition of the subclause (II) LTCH’s current estimated payment-to-cost ratio under the LTCH PPS and further anticipated losses that would likely otherwise occur under the forthcoming statutory changes to the LTCH PPS, which would render this type of specially recognized facility fiscally untenable, we believe that it is appropriate to exercise the authority under section 1206(d)(2) of Public Law 113–67. Therefore, in this proposed rule, for cost reporting periods beginning on or after October 1, 2014 (FY 2015 and beyond), we are proposing to apply a payment adjustment to subclause (II) LTCH payments under the LTCH PPS such that these LTCH PPS payments would resemble payments made under the reasonable cost-based TEFRA payment system. We believe that it would be appropriate to apply this proposed payment adjustment for a subclause (II) LTCH’s first cost reporting period beginning on or after October 1, 2014, rather than discharges occurring VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 on or after October 1, 2014, because it is consistent with the annual update of the hospital-specific limits (ceiling) for inpatient operating costs under the TEFRA payment system (as described below). We are proposing to implement this proposed payment adjustment for subclause (II) LTCHs in the regulations by adding new § 412.526 under 42 CFR Part 412, Subpart O. Specifically, we are proposing to establish new regulations under § 412.526 that would provide that, for cost reporting periods beginning on or after October 1, 2014, payments to a ‘‘subclause (II)’’ LTCH that are made under the LTCH PPS and under Subpart O of Part 412, as adjusted. This adjusted payment amount would generally be equivalent to an amount determined under the reasonable cost-based reimbursement rules for both operating and capital-related costs under 42 CFR Part 413. As described above, Medicare payments for inpatient operating costs under the reasonable-cost based TEFRA payment system are subject to a hospital-specific ceiling on payments that is determined as the product of a hospital’s base year costs per discharge (‘‘target amount per discharge’’), updated to the current year by a rate-ofincrease percentage, and multiplied by the number of its Medicare discharges for the year. Medicare allowable inpatient capital-related costs are paid on a reasonable cost basis, in accordance with section 1886(g) of the Act. Under this proposed payment adjustment under new § 412.526 for inpatient operating costs, the adjusted payment amount would generally be determined in accordance with the cited provisions of § 413.40. Accordingly, we are proposing to establish a ‘‘target amount’’ for a subclause (II) LTCH for purposes of calculating a hospitalspecific ceiling on payments for inpatient operating costs under this proposed payment adjustment. We are proposing to determine such a target amount based on the subclause (II) LTCH’s target amount that was used to determine its payments for inpatient operating costs under the TEFRA payment system prior to the implementation of the LTCH PPS, updated by the TEFRA payment system rate-of-increase percentages under § 413.40(c)(3). Furthermore, in determining a subclause (II) LTCH’s target amount for purposes of this proposed payment adjustment, consistent with the statute (as explained below), we are proposing not to include the increases to LTCHs’ TEFRA target amounts and caps provided for by section 307(a) of the BIPA. As discussed PO 00000 Frm 00227 Fmt 4701 Sfmt 4702 28203 previously, prior to the implementation of the LTCH PPS, section 307(a) of the BIPA provided a 2-percent increase to the wage-adjusted 75th percentile cap on the TEFRA target amounts for existing LTCHs for cost reporting periods beginning in FY 2001 and a 25percent increase to the hospital-specific TEFRA target amounts for LTCHs, subject to the increased 75th percentile cap. Section 307(a)(2) of the BIPA also specifies that the 2-percent increase to the 75th percentile cap and the 25percent increase to the TEFRA target amounts were not to be taken into account in the development and implementation of the LTCH PPS. Therefore, consistent with the statutory requirement under section 307(a)(2) of the BIPA, under new § 412.526, we are proposing to determine a subclause (II) LTCH’s updated target amount based on its FY 2000 TEFRA payment system target amount, the year prior to when the increases under section 307(a) of the BIPA were effective. Using its FY 2000 TEFRA payment system target amount would ensure that the increases provided for by section 307(a) of the BIPA would not be included in the LTCH PPS payments to subclause (II) LTCHs under this proposed LTCH PPS payment adjustment. This approach for excluding those increases to the TEFRA payment system target amounts is consistent with the methodology that was used to develop the one-time prospective adjustment to the standard Federal rate in which we calculated what amount would have been paid under the TEFRA payment system had the LTCH PPS not been implemented (77 FR 53497 through 53500). Therefore, under the proposed payment adjustment for subclause (II) LTCHs under new § 412.526, we are proposing to determine a FY 2015 TEFRA-based target amount by updating the subclause (II) LTCH’s FY 2000 TEFRA target amount using the applicable rate-ofincrease percentages for FYs 2001 through 2015 established under § 413.40(c)(3). In addition to payment for inpatient operating costs, the proposed adjusted payment amount for subclause (II) LTCHs that would be equivalent to an amount determined under the reasonable cost-based reimbursement rules under 42 CFR Part 413 would also include payment for inpatient capitalrelated costs. Under the TEFRA payment system, in accordance with the regulations under 42 CFR Part 413, Medicare allowable capital costs are paid on a reasonable cost basis, consistent with section 1886(g) of the Act. Therefore, we are proposing that E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28204 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the payment adjustment to subclause (II) LTCHs under new § 412.526 would include reasonable cost-based payments for capital-related costs. Payments under the LTCH PPS encompass both inpatient operating and capital-related costs of furnishing covered inpatient LTCH services, including routine and ancillary costs (67 FR 55983). Accordingly, under new § 412.526, the proposed adjusted payment amount that would be equivalent to an amount determined under the reasonable costbased reimbursement rules is based only on inpatient operating and capitalrelated costs incurred by the subclause (II) LTCH for furnishing covered inpatient LTCH services, and does not include any other TEFRA system payment amounts, such as bonus and relief payments, continuous improvement bonus payments, or adjustments to the rate-of-increase limits. In summary, for cost reporting periods beginning on or after October 1, 2014, we are proposing that payment to a ‘‘subclause (II)’’ LTCH be made under the LTCH PPS, as adjusted. The adjusted payment amount would be equivalent to an amount determined under the reasonable cost-based reimbursement rules for both operating and capital-related costs in accordance with the cited portions of Part 413. Under this proposed payment adjustment, Medicare inpatient operating costs would be reimbursed on a reasonable cost basis, subject to a ceiling; that is, an aggregate upper limit on the amount of a hospital’s net Medicare inpatient operating costs that would be recognized for payment purposes. For each cost reporting period, the ceiling on payments for Medicare inpatient operating costs would be determined by multiplying the updated target amount for that period by the number of LTCH PPS discharges during that period. For cost reporting periods beginning during FY 2015, the target amount would be equal to the hospital’s target amount determined under § 413.40(c)(4) for its cost reporting period beginning during FY 2000, updated by the applicable annual rate-of-increase percentages specified in § 413.40(c)(3) to the subject period (that is, for FYs 2001 through 2015). For subsequent cost reporting periods, the target amount would equal the hospital’s target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period. Payment for Medicare allowable inpatient capital-related costs under this VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 proposed payment adjustment would be paid on a reasonable cost basis, in accordance with the cited portions of 42 CFR Part 413. We are proposing to codify the provisions of this proposed payment adjustment to subclause (II) LTCHs under new § 412.526 of the regulations. In addition, we are proposing to make conforming changes to § 412.521(a)(2) to refer to this proposed payment adjustment under new § 412.526. I. Description of Statutory Framework for Patient-Level Criteria-Based Payment Adjustment Under the LTCH PPS Under Public Law 113–67 1. Overview In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through 27676), we presented a description of our research on the development of patient-level and facility-level criteria for LTCHs and a potential framework for developing changes to the LTCH PPS. The framework was based on the preliminary findings of two projects conducted by Kennell and Associates (Kennell) and its subcontractor, RTI, under the guidance of CMS’ Center for Medicare and Medicaid Innovation (the Innovation Center). We stated that we believed that the findings from these projects, in large part, could be used to identify the subpopulation of Medicare beneficiaries that should form the core group of patients under the LTCH PPS (that is, a chronically critical ill/ medically ill (CCI/MC) framework for the LTCH PPS). Although this research was not completed at the time of issuance of the FY 2014 IPPS/LTCH PPS proposed rule, we solicited feedback from LTCH stakeholders in the FY 2014 IPPS/LTCH PPS proposed rule on the description of the interim framework, and indicated that any public comments submitted would be evaluated and considered by our contractors with the expectation of formulating a proposal for FY 2015 based on this research (78 FR 27668 through 27676). Section 1206(a) of Public Law 113–67 amended section 1886(m) of the Act by adding paragraph (6), which establishes patient-level criteria for payments under the LTCH PPS for implementation beginning in FY 2016. Therefore, our prior intention to present a proposal for a CCI/MC framework for the LTCH PPS (as discussed in the FY 2014 IPPS/LTCH PPS proposed and final rules) in this FY 2015 IPPS/LTCH PPS proposed rule has been superseded. Accordingly, we are not proposing revisions to the LTCH PPS based upon the Kennell/RTI framework for FY 2015. Rather, we intend to propose to implement the PO 00000 Frm 00228 Fmt 4701 Sfmt 4702 requirements established by section 1206(a) of Public Law 113–67 in the FY 2016 LTCH PPS rulemaking cycle. (We note that the final report on the CCI/MC framework developed by Kennell/RTI under our research contract is expected to be available later this year and will be made available to the public through a Web site.) In section VII.I.2. of the preamble of this proposed rule, we summarize the statutory provisions of section 1206(a) of Public Law 113–67, and in section VII.I.3. of the preamble of this proposed rule, we discuss several significant issues arising from these statutory changes to the LTCH PPS, on which we are interested in receiving stakeholder feedback prior to developing our proposals for FY 2016 implementation. 2. Provisions of Section 1206(a) of Public Law 113–67 Section 1206(a) of Public Law 113–67 added a new section 1886(m)(6), which establishes patient-level clinical criteria that must be met in order for a standard LTCH PPS payment to be made and provides that patients stays that do not meet those criteria that will be paid based on an adjusted or ‘‘site neutral’’ payment rate. The provisions of section 1206(a) are effective for LTCH discharges occurring during cost reporting periods beginning on or after October 1, 2015 (FY 2016). Specifically, the patient-level clinical criteria that must be met in order for a standard LTCH PPS payment to be made under section 1886(m)(6) of the Act, as added by section 1206(a) of Public Law 113–67, are that: • The stay in the LTCH is immediately preceded by a discharge from an acute care hospital that included at least 3 days in an intensive care unit (ICU); or the stay in the LTCH is immediately preceded by a discharge from an acute care hospital and the patient’s LTCH stay was assigned to an MS–LTC–DRG based on the receipt of ventilator services of at least 96 hours; and • The LTCH discharge does not have a principal diagnosis relating to a psychiatric diagnosis or to rehabilitation. Section 1886(m)(6)(A) of the Act, as added by section 1206(a) of Public Law 113–67, specifies that payments for LTCH discharges that do not meet the clinical criteria will be made at the applicable ‘‘site neutral payment rate.’’ The statute defines ‘‘site neutral payment rate’’ as the lower of the ‘‘IPPS comparable’’ amount or 100 percent of the ‘‘estimated cost’’ of the case. The ‘‘IPPS comparable’’ amount, which the statute specifies is calculated based on E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the methodology applied under the short stay outlier (SSO) policy at 42 CFR 412.529(d)(4), is an amount comparable to the hospital inpatient prospective payment system per diem capped at an amount comparable to the full MS–DRG payment rate, including any applicable outlier payments under § 412.525. We expect to propose calculating the ‘‘cost of the case,’’ as specified in the regulations at § 412.529(d)(2), by multiplying the applicable hospitalspecific CCR by the Medicare allowable charges for a case, consistent with how we currently estimate the cost of the case under both the SSO and high-cost outlier policies. Section 1886(m)(6)(B) of the Act also requires a phase-in of this payment policy change under the LTCH PPS over 2 years. Therefore, for LTCH discharges occurring in cost reporting periods during FYs 2016 and 2017 that do not meet the patient level clinical criteria, the total payment amount for LTCH services will be based on one-half of the calculated ‘‘site neutral’’ payment rate and one-half of the standard LTCH PPS payment rate. The full payment adjustment based on the requirements of Public Law 113–67 will begin to effect payments to LTCHs and LTCH satellite facilities for discharges beginning with LTCHs’ and LTCH satellite facilities’ FY 2018 cost reporting period. Therefore, for cost reporting periods beginning during FY 2018, LTCHs will be paid the standard LTCH PPS payment amount only for LTCH discharges that meet the statutory clinical criteria under section 1886(m)(6) of the Act. LTCH discharges that do not meet the clinical criteria will be paid based on the ‘‘site neutral’’ payment rate. Section 1886(m)(6)(C) of the Act, as added by section 1206(a)(1) of Public Law 113–67, also includes a limit on payments for all hospital discharges occurring in cost reporting periods during or after FY 2021 if a hospital fails to meet the applicable LTCH discharge threshold. In anticipation of this limit on payments, section 1886(m)(6)(C)(i) of the Act specifies that, for cost reporting periods beginning on or after October 1, 2015 (FY 2016), the Secretary is required to notify each LTCH of its ‘‘discharge payment percentage,’’ which is defined under section 1886(m)(6)(C)(iv) of the Act as the percentage resulting from the ratio of the LTCH’s discharges paid based on the standard LTCH PPS payment amount to the LTCH’s total discharges for each cost reporting period. Section 1886(m)(6)(C)(ii) of the Act specifies that, for cost reporting periods during or after FY 2020, the Secretary is required to provide notice to LTCHs VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 with a ‘‘discharge payment percentage’’ that indicates that the LTCH does not meet the ‘‘at least 50 percent’’ threshold. An LTCH that does not meet the required threshold for a cost reporting period in FY 2020 will be paid for services as if the hospital were an acute care hospital until such time as that facility is reinstated under section 1886(m)(6)(C)(iii) of the Act. Specifically, section 1886(m)(6)(C)(ii) of the Act provides that LTCHs that are determined to be treating a Medicare population with less than 50 percent of patients for whom a standard LTCH PPS payment is made, that is, LTCHs for whom 50 percent or more Medicare beneficiary discharges are paid at the ‘‘site neutral’’ payment rate will receive ‘‘. . . the payment amount that would apply under subsection (d) for all discharges as if the hospital were a subsection (d) hospital.’’ In other words, LTCHs failing to meet the applicable discharge threshold will be paid an IPPS equivalent payment rate. Section 1886(m)(6)(C)(iii) of the Act provides that the Secretary is authorized to establish a ‘‘reinstatement’’ process through which an LTCH that fails to meet the required discharge threshold percentage can be ‘‘reinstated’’ and resume receiving payments under the new payment policy for LTCH services established by section 1206(a)(1) of Public Law 113–67, that is, standard LTCH PPS payments or ‘‘site neutral’’ payments, as applicable. Section 1886(m)(6)(D) of the Act, as added by section 1206(a)(1) of Public Law 113–67, specifies that subsection (d) hospitals in Puerto Rico are deemed to be included in any reference in section 1886(m) of the Act to a subsection (d) hospital. Section 1206(a)(3) of Public Law 113– 67 revised the existing policy for calculating whether an LTCH or LTCH satellite facility meets the greater than 25-day average length of stay requirement in sections 1886(d)(1)(B)(iv)(I) and 1861(ccc)(2) of the Act, which is implemented in the regulations at § 412.23(e)(2) and (e)(3). Specifically, section 1206(a)(3) provides that cases for which Medicare paid the provider under the ‘‘site neutral’’ rate, as well as any paid under a Medicare Advantage plan (that is, Medicare Part C) shall be excluded from the calculations of the average length of stay of an LTCH or an LTCH satellite facility. LTCHs that had not attained their LTCH designation by December 10, 2013, are exempt from this statutorily mandated change. As previously stated, section 1206(a)(1) of Pub. L 113–67 provides for ‘‘site neutral’’ payments to an LTCH for PO 00000 Frm 00229 Fmt 4701 Sfmt 4702 28205 certain specified patient discharges effective for discharges occurring in cost reporting periods beginning on or after October 1, 2015. We intend to propose the specific policy and payment changes that will be necessary to implement the Public Law 113–67 provisions for cost reporting periods beginning on or after October 1, 2015, during the FY 2016 rulemaking cycle. Although we are not proposing the changes mandated by section 1206(a)(1) of Public Law 113–67 in this proposed rule, in light of the degree of forthcoming changes, in section VII.I.3. we discuss some of the changes in this proposed rule, and request public feedback to inform our proposals for FY 2016. 3. Additional LTCH PPS Issues The LTCH PPS was originally established for cost reporting periods beginning on or after October 1, 2002, by section 123(a) of the BBRA (Pub. L. 106–113) and section 307(b) of the BIPA (Pub. L. 106–554). (We also refer readers to section 1886(m) of the Act, as added by section 114(e) of the MMSEA.) Section 307(b) of the BIPA granted the Secretary considerable authority in developing the LTCH PPS, specifying that the Secretary shall ‘‘. . . examine and may provide for appropriate adjustments to the long-term hospital payment system, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. . . .’’ Accordingly, as we evaluate the revisions to the LTCH PPS required by section 1206(a)(1) of Public Law 113–67, we believe that the broad authority permitted by the original statutory mandates continues to grant us the authority to modify, if appropriate, methodologies for our payment determinations under the LTCH PPS. (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 55954), which describes the development and implementation of the LTCH PPS for FY 2003.) Specifically, section 1206(a) of Public Law 113–67 establishes two distinct payment groups for LTCH discharges under the revised system: discharges meeting specified patientlevel criteria that will be paid under the ‘‘standard LTCH PPS payment amount’’ and all other patient discharges that will be paid under the ‘‘site neutral’’ payment rate and methodology (discussed above). In setting the payment rates and factors under the LTCH PPS as required by section 1206(a) of Public Law 113–67 for certain LTCH PPS payment adjustments, such as the MS–LTC–DRG relative weights and high-cost outlier payments, we plan E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28206 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules to evaluate whether it would be appropriate to modify our historical methodology to account for the establishment of the two distinct payment methodologies for LTCHs. For example, we intend to examine whether, beginning in FY 2016, it is still appropriate to include data for all LTCH PPS cases, including ‘‘site neutral’’ payment cases, in our methodology for setting relative payment weights for MS–LTC–DRGs. We also intend to explore the need for changes to the LTCH PPS high-cost outlier payment policies. Given the fact that, for a number of LTCH patients, payment will be made based on the lower of the ‘‘IPPS comparable’’ per diem payment and the estimated cost of the case, we will need to decide whether to maintain a single high-cost outlier ‘‘target’’ for all LTCH PPS cases (including ‘‘site neutral’’ payment cases) or whether it may be more appropriate to establish separate high-cost outlier ‘‘targets’’ for each of the two payment groups under the revised LTCH PPS. Our existing methodology for calculating the MS– LTC–DRG relative weights is discussed during the annual rulemaking cycle and was, most recently, included in the FY 2014 IPPS/LTCH final rule (78 FR 50753 through 50760). Our detailed description of our existing high-cost outlier payment policy, which has remained the same since being implemented, can be found in the RY 2003 LTCH PPS final rule (67 FR 56022 through 56027). (We note that our proposed methodology for calculating the MS–LTC–DRG relative payment weights for FY 2015 can be found in section VII.B.3. of the preamble of this proposed rule, and our proposals under the high-cost outlier payment policy for FY 2015 can be found in section V.D. of the Addendum to this proposed rule.) We are interested in receiving feedback from LTCH stakeholders on our plans to evaluate whether it would be appropriate to modify any of our historical methodologies as we implement the payment changes to the LTCH PPS under section 1206(a) of Public Law 113–67. In particular, we are interested in public feedback on the issues mentioned earlier (that is, policies relating to establishing the relative payment weights and high-cost outliers) so that we may evaluate various options in preparation for developing proposals to implement the statutory changes beginning in FY 2016. J. Proposed Technical Change In this proposed rule, we are proposing to update the legislative basis for the regulations governing the LTCH PPS under Subpart O of Part 412. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Specifically, we are proposing to add references under new paragraphs (a)(4), (a)(5), and (a)(6) of § 412.500 of the regulations to the revisions to the Act made by section 4302(a) of Public Law 111–5, sections 3106(a) and 10312(a) of Public Law 111–148, and section 1206 of Public Law 113–67, respectively. VIII. Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review In this proposed rule, we are proposing to revise the cost reporting regulations in 42 CFR Part 413, Subpart B by requiring a provider to include an appropriate claim for a specific item in its Medicare cost report in order to receive or potentially qualify for Medicare payment for the specific item. If the provider’s cost report does not include an appropriate claim for a specific item, payment for the item will not be included in the notice of program reimbursement (NPR) issued by the Medicare Administrative Contractor (MAC) (formerly known as fiscal intermediary and herein referred to as ‘‘contractor’’) or in any decision or order issued by a reviewing entity (as defined in 42 CFR 405.1801(a) of the regulations) in an administrative appeal filed by the provider. In addition, we are proposing to revise the appeals regulations in 42 CFR Part 405, Subpart R, by eliminating the requirement that a provider must include an appropriate claim for a specific item in its cost report in order to meet the dissatisfaction requirement for jurisdiction before the Provider Reimbursement Review Board (Board), and by specifying the procedures for Board review of whether the provider’s cost report meets the proposed substantive reimbursement requirement of an appropriate cost report claim for a specific item. We also are proposing technical revisions to other Board appeal regulations to conform those regulations to the main revisions (described above) to the cost reporting regulations and the provider appeal regulations, in addition to proposing similar revisions to the Part 405, Subpart R regulations for appeals before the contractor hearing officers. In addition, we are proposing to conform the terminology in Part 405, Subpart R and all subparts of Part 413 from ‘‘intermediary’’ or ‘‘fiscal intermediary’’ to ‘‘contractor’’ pursuant to sections 1816, 1874A and 1878 of the Act. All of these proposed revisions to the cost reporting regulations and the provider appeals regulations would apply to provider cost reporting periods beginning on or after the effective date of the final IPPS annual update rule. PO 00000 Frm 00230 Fmt 4701 Sfmt 4702 A. Background 1. Payments and Cost Reporting Requirements For cost reporting years beginning before October 1, 1983, all providers were reimbursed on a reasonable cost basis for Part A (hospital insurance) covered items and services that were furnished to Medicare beneficiaries. Reasonable cost is defined at section 1861(v)(1)(A) of the Act and implementing regulations at 42 CFR Part 413. In the Social Security Amendments of 1983 (Pub. L. 98–21), Congress added section 1886(d) to the Act, which, effective with cost reporting periods beginning on or after October 1, 1983, changed the payment method for inpatient hospital services furnished by short-term acute care hospitals to a prospective payment system (PPS). In accordance with section 1886(d) of the Act and implementing regulations at 42 CFR Part 412, a PPS payment is made at a predetermined specific rate for each hospital discharge (classified according to a list of diagnosis-related groups (DRGs)), excluding certain costs that are paid on a reasonable cost basis. Later statutory amendments expanded the types of providers and services that are subject to a PPS. The various prospective payment systems for inpatient hospital services are summarized in § 412.1 of the regulations. Other prospective payment systems for different types of providers and services are summarized in §§ 413.170, 413.300, 413.330, and 419.1 of the regulations. As explained in § 413.1(b) of the regulations, if a service is not subject to a PPS when it is furnished, the provider is paid on the basis of reasonable cost. (For ease of reference, we will use the terms ‘‘reimbursement’’ and ‘‘payment’’ interchangeably unless a particular context calls for the use of one of these terms instead of the other.) Before October 1, 2005, payments to providers were ordinarily made through private organizations known as fiscal intermediaries, under contracts with the Secretary. After a 6-year transition period (§ 421.400(a)), the claims processing and payment functions of the fiscal intermediaries are now performed by MACs, under contracts with the Secretary. For covered items and services paid on a reasonable cost basis, the contractor pays a provider during its cost reporting period interim payments that approximate the provider’s actual costs. Under a PPS, providers are generally paid for each patient discharge after a bill is submitted. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Sections 1815(a) and 1833(e) of the Act provide that no payments will be made to a provider unless it has furnished the information, requested by the Secretary, needed to determine the amount of payments due the provider under the Medicare program. In general, providers submit this information through annual cost reports that cover a 12-month period of time. All providers participating in the Medicare program are required under § 413.20(a) to ‘‘maintain sufficient financial records and statistical data for proper determination of costs.’’ Moreover, providers must use standardized definitions and follow accounting, statistical, and reporting practices that are widely accepted in the hospital and related fields. Under the provisions of §§ 413.20(b) and 413.24(f), providers are required to submit cost reports annually, with the reporting period based on the provider’s accounting year. For cost years beginning on or after October 1, 1989, section 1886(f)(1) of the Act and § 413.24(f)(4) of the regulations require hospitals to submit cost reports in a standardized electronic format, and the same requirement was later imposed for other types of providers. In addition, § 412.52 of the regulations requires all PPS hospitals to meet the recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, which include submitting a cost report for each 12month period. 2. Administrative Appeals by Providers and Judicial Review Upon receipt of a provider’s cost report, the contractor reviews or audits the cost report, makes any necessary adjustments to the provider’s Medicare reimbursement for the cost reporting period, and finally determines the total amount of payment due the provider. This year-end reconciliation of Medicare payment for the provider’s cost reporting period constitutes a contractor determination, as defined in § 405.1801(a). Under §§ 405.1801(a)(1), (2) and 405.1803, the contractor must give the provider written notice of the final contractor determination for the cost period in a notice of the total amount of program reimbursement (NPR). The NPR is an appealable determination, and the contractor determination is final and binding unless it is revised on appeal or reopening (§ 405.1807). Under section 1878(a) of the Act, a provider that has submitted a timely cost report may appeal to the Provider Reimbursement Review Board (the Board) a final determination of program reimbursement made by a contractor, as VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 well as certain final determinations by the Secretary involving payment under the IPPS. The Secretary’s delegate, the Administrator of CMS, may review certain Board decisions under section 1878(f)(1) of the Act and § 405.1875 of the regulations. The final decision of the Board or the Administrator is subject to judicial review under section 1878(f)(1) of the Act and § 405.1877 of the regulations. In addition, by regulation, providers are given the right to appeal to the Board or to contractor hearing officers certain other determinations. A CMS reviewing official may review some contractor hearing officer decisions under § 405.1834 of the regulations, but there is no judicial review of decisions by contractor hearing officers or a CMS reviewing official. Under sections 1878(a)(1)(A), (a)(2), and (a)(3) of the Act, and § 405.1835(a)(1), (a)(2), and (a)(3)(i) of the regulations, a provider may obtain a Board hearing if: (1) the provider is ‘‘dissatisfied’’ with a final determination of the contractor [formerly intermediary] or the Secretary; (2) the amount in controversy is at least $10,000; and (3) the provider files a request for a hearing to the Board within 180 days of notice of the final determination of the contractor or the Secretary. The same jurisdictional requirements govern provider appeals to contractor hearing officers under § 405.1811(a)(1), (a)(2), and (a)(3)(i) of the regulations, except that the amount in controversy requirement is at least $1,000 but less than $10,000. However, the statutory requirements for Board jurisdiction are somewhat different if the provider does not receive a final determination of the contractor on a timely basis. Under sections 1878(a)(1)(B), (a)(2), and (a)(3) of the Act, a provider may obtain a Board hearing if: (1) The provider does not receive a final determination of the contractor on a timely basis, after the provider filed a cost report that complied with the cost reporting regulations; (2) the amount in controversy is at least $10,000; and (3) the provider files a request for a hearing to the Board within 180 days after notice of the contractor’s final determination would have been received if such contractor determination had been issued on a timely basis. Moreover, § 405.1835(a)(3)(ii) of the regulations provides that a contractor determination is not timely if it is not issued, through no fault of the provider, within 12 months of the contractor’s receipt of the provider’s perfected cost report or amended cost report (as specified in PO 00000 Frm 00231 Fmt 4701 Sfmt 4702 28207 § 413.24(f) of the regulations). The same jurisdictional requirements govern provider appeals to contractor hearing officers, based on an untimely contractor determination, under § 405.1811(a), except that the amount in controversy requirement is at least $1,000 but less than $10,000. 3. Appropriate Claims in Provider Cost Reports Under longstanding Medicare policy as set forth in § 413.24 of the regulations and section 115 of the Provider Reimbursement Manual (PRM), Part 2 (CMS Pub. 15–2), a provider must make an appropriate cost report claim for a specific item in order to be reimbursed for the item, whether through the NPR issued by the contractor or as the result of an administrative appeal or judicial review. For example, as set forth in § 413.24, providers receiving payment on the basis of reimbursable cost are required to provide adequate cost data to the contractor to support payments made for services furnished to beneficiaries. In addition, as set forth in section 115 of the PRM, Part 2, we also require that providers make a specific claim for an item in its cost report, in order to meet the dissatisfaction requirement for Board jurisdiction. The Medicare cost report has always included particular ‘‘lines’’ for specific allowable costs such as interest expense and depreciation. If a provider makes a cost report claim for a cost that is allowable, and reimbursement is claimed in accordance with Medicare payment policy, the NPR will include appropriate reimbursement for the cost. (For ease of reference, we will use the terms ‘‘specific item’’ or ‘‘item’’ to refer to a particular aspect of reasonable costbased payment or a specific aspect of payment under a prospective payment system unless a particular context calls for the use of more specific terms (for example, the term ‘‘allowable cost’’ as used in determining reasonable costbased payment).) If the NPR does not include reimbursement for a specific item or if the provider believes it should have received more reimbursement for the item, the provider can request a hearing before the Board or the contractor hearing officers (if the amount in controversy is at least $1,000 but less than $10,000). However, our longstanding policy is that an appropriate cost report claim is a jurisdictional requirement for an appeal to the Board or the contractor hearing officers. As explained above, section 1878(a)(1)(A) of the Act provides for a hearing before the Board if the provider has filed a timely cost report with the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28208 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules contractor, and the provider is ‘‘dissatisfied’’ with a final determination of the contractor or the Secretary. Our view has been that, in order for a provider to be dissatisfied with a specific aspect of the contractor determination, the provider must include an appropriate cost report claim for the specific item so that the contractor can respond to the provider’s claim in the NPR and thereby potentially produce a specific reimbursement result about which the provider is dissatisfied. Under our policy for Board jurisdiction, we required a provider to make a specific claim for an item in its cost report, in order to meet the dissatisfaction requirement for Board jurisdiction. We did not permit a provider to ‘‘self-disallow’’ a specific item, even if the Medicare contractor had no discretion to award payment for the item. (In self-disallowing an item, the provider submits a cost report that complies with Medicare policy for the item and then appeals the item to the Board; the contractor’s NPR then would not include any disallowance of the item, and therefore the provider would effectively self-disallow the item.) However, the Supreme Court rejected our longstanding policy in Bethesda Hospital Association v. Bowen, 485 U.S. 399 (1988). The Court held that, despite the providers’ failure to claim all the reimbursement they believed should have been made, the plain language of the dissatisfaction requirement in section 1878(a)(1)(A) of the Act supported Board jurisdiction because the contractor had no authority to award reimbursement in excess of a regulation by which it was bound, and thus it would have been futile for the providers to try to persuade the contractor otherwise. The Court also stated in dicta, however, that the dissatisfaction requirement might not be met if providers were to ‘‘bypass a clearly prescribed exhaustion requirement or . . . fail to request from the intermediary reimbursement for all costs to which they are entitled under applicable rules’’ (Bethesda Hosp., 485 U.S. at 404–05). Following the Bethesda decision, we no longer required providers to make a cost report claim for reimbursement of items for which the contractor did not have the discretion to award payment due to a regulation or manual provision but, consistent with the dicta in Bethesda, we continued to require providers to include cost report claims for allowable costs. However, our policy, as revised in response to Bethesda, was also challenged in the courts, and a ‘‘circuit split’’ resulted. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Compare Little Co. of Mary Hosp. v. Shalala, 165 F.3d 1162 (7th Cir. 1999) (sustaining our interpretation of the statutory dissatisfaction requirement for Board jurisdiction) with Loma Linda Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065 (9th Cir. 2007) (rejecting our interpretation of the dissatisfaction requirement); Maine General Med. Ctr. v. Shalala, 205 F.3d 493 (1st Cir. 2000) (same). In response to the Supreme Court’s Bethesda decision and the ensuing circuit split, we then addressed the dissatisfaction requirement in notice and comment rulemaking. In a 2008 final rule, we revised § 405.1811(a)(1) and § 405.1835(a)(1) for contractor and Board hearings, respectively (73 FR 30190, 30195 through 30200, 30244 through 30245, 30249 through 30250 (May 23, 2008)). Under the revised regulations, in order to preserve its appeal rights, a provider must either claim an item in its cost report where it is seeking reimbursement that it believes to be in accordance with Medicare policy, or self-disallow the item if it is seeking reimbursement that it believes may not comport with Medicare policy (for example, where the contractor does not have the discretion to award the reimbursement sought by the provider). In order to self-disallow an item, the provider must follow the applicable procedures for filing a cost report under protest, which are contained currently in section 115 of the PRM, Part 2. As explained in the preamble to the 2008 final rule, we believe the revised dissatisfaction policy set forth in § 405.1835(a)(1) is a reasonable interpretation of the dissatisfaction requirement for Board jurisdiction in section 1878(a)(1)(A) of the Act (73 FR 30195 through 30200). The dissatisfaction requirement in § 405.1835(a)(1) comports with the Supreme Court’s statement (discussed above) that the statutory dissatisfaction requirement might not be met if a provider bypassed a clearly prescribed exhaustion requirement or failed to ask the contractor for reimbursement of all costs to which it is entitled under applicable rules. (Bethesda Hosp., 485 U.S. at 404–05; Little Co. of Mary, 165 F.3d 1162 (sustaining our interpretation of the statutory dissatisfaction requirement for Board jurisdiction on the basis of the forgoing statements by the Supreme Court); Little Co. of Mary Hosp. v. Shalala, 24 F.3d 984 (7th Cir. 1994) (same). Upon further reflection, however, we believe that the requirement that a provider either claim reimbursement for a specific cost, or expressly self- PO 00000 Frm 00232 Fmt 4701 Sfmt 4702 disallow the cost, in its cost report is more appropriately treated as a cost reporting requirement under sections 1815(a) and 1833(e) of the Act, as the agency cannot make payments to a provider without sufficient information on all claims for which the provider believes it should be paid. Indeed, it is eminently reasonable for the Secretary to require a provider to make an appropriate cost report claim for a specific item if the provider wants to be paid for the item. As we explain in detail in the next section, requiring a cost report claim for full reimbursement or an express self-disallowance of the cost enables the contractor to review and audit the claim, make any adjustments that seem appropriate, and include final payment for the cost as part of the NPR. Accordingly, we are proposing to revise the cost reporting regulations in Part 413, Subpart B by adding the substantive reimbursement requirement that a provider must include an appropriate claim for an item in its cost report. The failure to account appropriately for the item in its cost report will foreclose payment for the item in the NPR issued by the contractor and in any decision, order, or other action by a reviewing entity (as defined in § 405.1801(a) of the regulations) in an administrative appeal filed by the provider. However, we recognize that the proposed addition to the cost reporting regulations of the substantive reimbursement requirement of an appropriate cost report claim for a specific item would be potentially duplicative of the existing jurisdictional requirement in the Board appeals regulations of an appropriate cost report claim. In order to avoid such duplication, we also are proposing to revise the appeals regulations in Part 405, Subpart R by eliminating the requirement that a provider must include an appropriate claim for an item in its cost report in order to meet the dissatisfaction requirement for Board jurisdiction. Our longstanding requirement of an appropriate cost report claim would be made a substantive reimbursement requirement in the cost reporting regulations and the existing Board jurisdiction requirement of an appropriate cost report claim would be eliminated. These proposed revisions to the cost reporting regulations and the provider appeals regulations would apply on a prospective-only basis, to provider cost reporting periods beginning on or after the effective date of the final IPPS annual update rule. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules B. Proposed Changes Regarding the Claims Required in Provider Cost Reports, and for Provider Administrative Appeals mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Proposed Addition to the Cost Reporting Regulations of the Substantive Reimbursement Requirement of an Appropriate Cost Report Claim a. Specific Provisions of Proposed Paragraph (j) of § 413.24 We are proposing to add a new paragraph (j) to § 413.24 of the regulations. Proposed paragraph (j)(1) of § 413.24 provides that in order to receive or potentially qualify for payment for a specific item, the provider must include in its cost report an appropriate claim for the specific item. In order to make an appropriate claim for an item in its cost report, the provider must either claim payment for the item in its cost report where it is seeking payment that it believes is consistent with Medicare policy, or selfdisallow the item if the provider is seeking payment that it believes may not comport with Medicare policy (for example, where the contractor does not have the authority or discretion to award the payment sought by the provider). In order to self-disallow a specific item, the provider would have to follow the applicable procedures for filing a cost report under protest, which are now contained in section 115 of the PRM, Part 2 and are included in proposed paragraph (j)(2) of § 413.24. Specifically, the provider would have to include an estimated payment amount for each self-disallowed item in the ‘‘protested amount’’ line of the cost report, and attach a worksheet explaining why a self-disallowance is necessary (instead of claiming payment for the item in its cost report) and describing how it determined the estimated payment amount for each selfdisallowed item. Proposed paragraph (j)(3) of § 413.24 specifies the procedures for determining whether there is an appropriate cost report claim for a specific item. The default rule is that the question of whether the provider’s cost report includes an appropriate claim for the specific item must be determined by reference to the cost report that the provider submits originally to, and is accepted by, the contractor, unless one of three exceptions applies. The first exception is that if the provider submits an amended cost report that is accepted by the contractor, the question of whether there is an appropriate cost report claim for the specific item must be determined by reference to such VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 amended cost report, unless one of the two remaining exceptions applies. The second exception is that if the contractor adjusts the provider’s cost report, as submitted originally by the provider and accepted by the contractor or as amended by the provider and accepted by the contractor, whichever is applicable, with respect to the specific item, the question of whether there is an appropriate cost report claim for the specific item must be determined by reference to the provider’s cost report, as such cost report is adjusted for the specific item in the contractor’s initial determination (as defined in § 405.1801(a)), unless the remaining exception applies. The third exception is that if the contractor reopens either the initial contractor determination for the provider’s cost reporting period (pursuant to § 405.1885) or a revised contractor determination for such period (issued pursuant to § 405.1889) and adjusts the provider’s cost report with respect to the specific item, the question of whether there is an appropriate cost report claim for the specific item must be determined by reference to the provider’s cost report, as such cost report is adjusted for the specific item in the contractor’s most recent revised contractor determination for such period. Providers should make every effort to comply with the default rule set forth in proposed paragraph (j)(3) of § 413.24, even though one of the exceptions to the default rule might come into play later. In order to ensure compliance with the substantive requirement of an appropriate cost report claim for a specific item, the provider should either claim full payment for, or properly selfdisallow, the item in the cost report that the provider submits originally to the contractor. However, failure to include an appropriate claim for the specific item in the provider’s original ‘‘as submitted’’ cost report does not necessarily foreclose any further opportunity to meet the requirement of an appropriate cost report claim for the specific item. Under the first exception to the default rule under proposed paragraph (j)(3), the provider could include an appropriate cost report claim for the specific item in an amended cost report, but the contractor has discretion whether to accept an amended cost report by the provider. Under the second and third exceptions to the default rule under proposed paragraph (j)(3), the requirement of an appropriate cost report claim could be met through the contractor’s adjustment of the provider’s cost report, either in the contractor’s initial determination for the PO 00000 Frm 00233 Fmt 4701 Sfmt 4702 28209 provider’s cost reporting period (as defined in § 405.1801(a)) or, if the initial contractor determination is reopened, in the contractor’s revised determination. However, in preparing the initial contractor determination for a provider’s cost reporting period, the contractor has discretion whether to adjust the provider’s cost report with respect to the specific item and, if so, how to adjust the cost report for such item. Similarly, after the initial contractor determination is issued, the contractor has discretion whether to reopen the initial contractor determination and, if the specific item is reopened, whether to adjust the cost report for such item and how to make any such adjustment. In order to exemplify the workings of proposed paragraph (j)(3) of § 413.24, consider a hospital that seeks a Medicare DSH payment adjustment that, on the provider’s view, should be calculated on the basis of 2,000 Medicaid eligible patient days in the numerator of the DSH Medicaid fraction (42 CFR 412.106(b)(4)). If the hospital’s as submitted cost report claimed only 1,000 Medicaid eligible patient days for the numerator of the DSH Medicaid fraction, and the number of Medicaid eligible patient days was not changed in an amended cost report by the provider or through adjustments to the cost report by the contractor, the hospital would have made an appropriate cost report claim for only 1,000 Medicaid eligible patient days (instead of 2,000 such days). However, if the provider submitted, and the contractor accepted, an amended cost report that claimed a total of 1,500 Medicaid eligible patient days, the provider would have made a valid cost report claim for 1,500 Medicaid eligible patient days (instead of 2,000 such days). However, if the hospital asked the contractor, during the contractor’s review and settlement of the provider’s cost report, to count 250 more Medicaid eligible patient days, and the contractor agreed to consider those days in the contractor’s initial intermediary determination, the provider would have made a valid cost report claim of 1,750 Medicaid eligible patient days (instead of 2,000 such days). Finally, if the provider next requested, or the contractor initiated on its own motion, the reopening of the initial contractor determination on the specific issue of the number of Medicaid eligible patient days for the DSH Medicaid fraction’s numerator, and the contractor did reopen for that specific issue, the provider would have a valid cost report claim of 2,000 Medicaid eligible patient days. At that juncture, E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28210 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the hospital would have met the requirement of an appropriate cost report claim for all of the 2,000 Medicaid eligible patient days, which is the number of such days that the provider believed from the outset should be used in determining the numerator of the DSH Medicaid fraction. We believe proposed paragraph (j)(3) of § 413.24 appropriately reflects the usual process in which a cost report claim that is first made in the cost report that is submitted originally to, and accepted by, the contractor, might be altered through an amended cost report by the provider (if the amended cost report is accepted by the contractor) or through adjustments of the provider’s cost report claim that are made in the contractor’s initial determination or, in the event of a reopening, in the contractor’s revised determination. This process enables a provider to ensure compliance with the substantive requirement of an appropriate cost report claim for a specific item, by including in the cost report that the provider submits originally to, and is accepted by, the contractor, either a full claim for payment for a specific item or a proper self-disallowance of the item. In addition, this process gives a provider additional opportunities to meet the requirement of an appropriate cost report claim through an amended cost report by the provider (if the amended cost report is accepted by the contractor) and adjustments to the provider’s cost report claim that are included in the contractor’s initial contractor determination or, if there is a reopening, in the revised contractor determination. Unlike with the provider’s original as submitted cost report, however, the contractor has discretion whether to accept an amended cost report; whether to include particular cost report claim adjustments in the initial contractor determination and, if so, how to determine such adjustments; and whether to reopen a contractor determination and, if there is a reopening, how to determine any cost report claim adjustments that may be included in the revised contractor determination. This ‘‘back and forth’’ process between the provider and the contractor, which is reflected in proposed paragraph (j)(3) of § 413.24, facilitates appropriate determinations of program payment and enhances administrative efficiency. Each of the Medicare contractors has substantial experience in reviewing and auditing cost reports and in properly determining payment amounts. The back and forth process between the provider and the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 contractor eliminates, or minimizes and sharpens, potential disagreements, which obviates the need to file some administrative appeals or narrows the issues in many cases. In addition, proposed paragraph (j)(4) of § 413.24 provides that, to the extent a provider fails to claim a specific item appropriately in its cost report, the final contractor determination (as defined in § 405.1801(a)) may not include payment for the item. However, if the contractor determines that the provider made an appropriate cost report claim for a specific item but the contractor disagrees with material aspects of the provider’s claim for the item, the contractor must make appropriate adjustments to the provider’s cost report and include payment for the specific item in the final contractor determination in accordance with the contractor’s adjustments to the cost report and to the extent permitted by program policy. Proposed paragraph (j)(5) of § 413.24 provides that if a party to an administrative appeal questions whether the provider’s cost report included an appropriate claim for the specific item under appeal, the reviewing entity (as defined in § 405.1801(a)) must follow the procedures (which we discuss in detail below) that are set forth in proposed § 405.1873 (if the appeal was filed originally with the Board), or the procedures in § 405.1832 (if the appeal was filed initially with the contractor), for review of whether the substantive reimbursement requirement of an appropriate cost report claim for the specific item is satisfied. Those regulations require the reviewing entity to follow the procedures (discussed above) that are set forth in paragraph (j)(3) of this section for determining whether the provider’s cost report included an appropriate claim for the specific item under appeal. Also, the reviewing entity may permit payment for the specific item under appeal solely to the extent authorized by § 405.1873(f) (if the appeal was filed originally with the Board) or by § 405.1832(f) (if the appeal was filed initially with the contractor). b. Statutory and Policy Bases for Proposed Paragraph (j) of § 413.24 We believe the Medicare statute provides ample authority for the abovedescribed proposal to add a new paragraph (j) to § 413.24 of the regulations. This proposal is well within the Secretary’s general rulemaking authority under sections 1102 and 1871 of the Act. Moreover, proposed § 413.24(j) is an appropriate exercise of PO 00000 Frm 00234 Fmt 4701 Sfmt 4702 the Secretary’s broad authority under sections 1815(a), 1833(e), and 1886(f)(1) of the Act to require providers to furnish the information needed to determine the amount of payment due a provider under the Medicare program. As described above, we have relied on these particular statutory provisions in adopting regulations that require providers to submit annual cost reports; specify the requisite contents of cost reports; and impose various procedural requirements for cost reports (such as time periods for timely submission of cost reports and certification requirements for cost reports). Moreover, we have invoked the same statutory provisions in requiring providers to report other specific information as a condition for Medicare payment (we refer readers to, for example, Community Hosp. of Monterey Peninsula v. Thompson, 323 F.3d 782, 790, 795–800 (9th Cir. 2003) (sustaining Medicare’s policy that providers must bill ‘‘crossover bad debts’’ to the State Medicaid agency because 42 U.S.C. 1395g(a) (that is, section 1815(a) of the Act) ‘‘specifically granted the Secretary broad discretion as to what information to require as a condition of payment to providers under the Medicare program’’). Indeed, as explained above, the Secretary’s broad discretion with respect to cost reporting requirements is also reflected in the Board appeals provisions of section 1878(a) of the Act, which makes provider compliance with cost reporting requirements a prerequisite of Board jurisdiction. In addition to the plainly sufficient statutory authority for proposed § 413.24(j), we believe there are sound policy reasons for requiring a provider to include an appropriate claim for an item in its cost report by either claiming payment for the item (where the provider believes such claim would comport with Medicare policy), or by self-disallowing the item (if the provider is seeking payment that it believes may not be consistent with Medicare policy). This proposal has three main parts, each of which we address separately. First, we believe that if a cost is allowable and the provider does not disagree with how Medicare determines payment for the cost, the provider’s cost report should include a claim for full payment of the cost in accordance with the program’s payment policy. In such cases, a cost report claim for full payment of the cost enables the contractor to review the claim, make any adjustments that seem appropriate, and include final payment for the cost as part of the NPR. Requiring a cost report claim for full payment of allowable costs (where the provider E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules does not disagree with how Medicare determines payment for the cost) facilitates the contractor’s discharge of some of its principal responsibilities, which include using the contractor’s expertise and experience to review and audit payment claims, make any necessary adjustments, and include final payment for the cost in the NPR. Absent some misstep by the contractor in reviewing such a cost report claim and determining final payment for the item, there would be no need for the provider to later request reopening or to file an administrative appeal regarding the item. Even if the provider disagreed with some aspect of the contractor’s payment determination for the specific item, any such disagreement would be narrowed and delineated more precisely because our proposal, to require a full cost report claim for payment of allowable costs, will give the contractor an opportunity to review and audit the claim and determine the extent to which (if at all) to include payment for the claim in the NPR. Therefore, the interests of administrative finality and efficiency will be advanced if providers are required to include a cost report claim for full payment of allowable costs. Proposed § 413.24(j)’s requirement of a cost report claim for full payment of allowable cost also comports with the division of responsibilities between the contractors and the Board and the other reviewing entities (as defined in § 405.1801(a)). At present, there are 12 contractors, each of which has a fairly large staff with substantial experience and expertise in reviewing and auditing cost reports and determining final payment in accordance with Medicare policy. By contrast, the Board has only five members and a relatively small staff. We believe it is a waste of scarce resources and very inefficient for a provider to first raise a clearly allowable cost in an appeal to the Board when the contractor could have reviewed and finally determined payment for such an allowable cost in the NPR, if the provider had simply made a timely cost report claim for full payment of the allowable cost. As indicated by the very name of the Provider Reimbursement Review Board, it is a ‘‘Review Board’’ or administrative appeals tribunal, not the Medicare program’s front line auditors charged with making the initial determination of program reimbursement for such allowable costs. Second, there are also sound policy reasons for proposing, under a new paragraph (j) in § 413.24, that a provider must self-disallow a specific item if it is seeking payment that it believes may not comport with Medicare policy (for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 example, because the provider believes the contractor does not have the discretion to make the payment sought by the provider), by following the applicable procedures for filing a cost report under protest (procedures that, as explained above, are now contained in section 115 of the PRM, Part 2 and would be set forth in proposed paragraph (j)(2) of § 413.24). When a provider self-disallows an item by accounting for it appropriately in the ‘‘protested amount’’ line of the cost report (instead of claiming payment for the item), the contractor has an opportunity to correct any misconceptions that the provider may have had about the item. For example, the contractor could determine, contrary to the provider’s apparent understanding in self-disallowing a specific item, that the item in question is actually an allowable cost that is reimbursable in accordance with program policy. Another example: the contractor might determine, despite the provider’s understanding of Medicare policy and its concomitant selfdisallowance, that program policy has changed and the item is now an allowable cost or a new payment policy now applies that permits the payment methodology used by the provider in support of its self-disallowance of the item (for example, 75 FR 50042; 50275 through 50286 (August 16, 2010) (discussing CMS Ruling 1498–R, which revised Medicare disproportionate share hospital (DSH) payment policy in response to adverse judicial precedent, and made such revisions applicable to open cost reports and certain pending administrative appeals). In such cases, the contractor’s deep expertise and experience and its resources can be brought to bear in reviewing selfdisallowed items, making any necessary corrections, and finally allowing payment for corrected items in the NPR. Indeed, these kinds of contractor actions comport with section 1874A(a)(4) of the Act and § 413.20(b) of the regulations, which require the contractors to furnish providers with consultative services, education, training, information and instructions, and technical assistance regarding the interpretation and application of payment principles and other program policies; be available to address provider questions and problems on a daily basis; and facilitate communication between the agency and providers. Accordingly, we believe our proposed addition of a self-disallowance requirement to the cost reporting regulations will facilitate exhaustion of administrative remedies through the contractor’s review and final settlement PO 00000 Frm 00235 Fmt 4701 Sfmt 4702 28211 of the provider’s cost report, and when the contractor corrects errors in a provider’s self-disallowance, the erstwhile need to appeal to the Board or request reopening could be obviated (we refer readers to Little Co. of Mary Hosp. v. Shalala, 165 F.3d 1162, 1165 (7th Cir. 1999) (the Secretary’s requirement of an appropriate cost report claim for an item ensures that the contractor will have the ‘‘first shot’’ at determining any reimbursement for the item, before any appeal to the Board need be filed). By requiring the self-disallowance of items that providers believe may not comport with Medicare policy, proposed § 413.24(j) would also contribute importantly to other aspects of program administration. For example, this proposal would facilitate provider compliance with the existing requirements in § 413.24(f) that each provider submit a complete, accurate, and timely cost report, and that the provider’s administrator or chief financial officer certify that the submitted cost report is complete and accurate. Our proposed selfdisallowance requirement would also enhance CMS’ ability to accurately estimate the program’s potential liabilities (for example, for purposes of the agency’s preparation of required financial statements). Similarly, this proposal would improve the contractors’ ability to establish audit and other workload priorities. The proposed addition of a self-disallowance requirement (for items that providers believe may not comport with Medicare policy) to the cost reporting regulations would also enable us to better monitor Medicare policy and potentially adjust our policies in response to a pattern of provider self-disallowances of a given item. Indeed, the importance of requiring complete and accurate cost report information is highlighted by the fact that we use cost report data for a wide variety of purposes such as setting and refining prospective payment rates; establishing hospital market basket weights; calculating Medicare and total facility margins; determining payment for graduate medical education (GME) and indirect medical education (IME); creating projections for the President’s annual budget and for the annual Medicare Trustees Report; for various research projects; and for responding to requests from the public, the Congress, the Executive Office of Management and Budget (EOMB), and other parts of the Administration. Third, we believe there also are sound reasons for our proposal that, under a new § 413.24(j), if a provider fails to account appropriately for an item in its cost report (by making a full claim for E:\FR\FM\15MYP2.SGM 15MYP2 28212 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 payment for the item or self-disallowing the item if the provider believes a payment claim would not comport with Medicare policy), the NPR issued by the contractor may not include payment for the item and payment also may not be permitted in any decision, order, or other action by a reviewing entity (as defined in § 405.1801(a)) in an administrative appeal filed by the provider. Under existing §§ 405.1835(a)(1) and 405.1840(b)(3), the consequence of not making an appropriate cost report claim for an item is that the Board would not have jurisdiction over the provider’s appeal of the item. (Similarly, under §§ 405.1811(a)(1) and 405.1814(b)(3), the contractor hearing officers would lack jurisdiction for an item if the provider did not make an appropriate cost report claim for the item.) As explained below, however, we are proposing to eliminate the jurisdictional requirement of an appropriate cost report claim in existing §§ 405.1835(a)(1) and 405.1840(b)(3) for Board appeals (and the corresponding jurisdictional requirement in §§ 405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer appeals), because we believe it is a requirement more appropriately placed in the cost reporting regulations. Given that our longstanding policy of requiring an appropriate cost report claim for an item would be added to the cost reporting regulations, in proposed paragraph (j) of § 413.24, this provision is a natural place to spell out the consequences of not abiding by this cost reporting requirement. In this regard, we note that the proposed addition of a new paragraph (j) to § 413.24 is like the existing paragraph (e) in § 413.20, which provides for the suspension of Medicare payments if a provider fails to maintain the records necessary for proper determination of Medicare reimbursement. Similarly, if a provider fails to include an appropriate claim for an item in its cost report, the NPR issued by the contractor will not include payment for the item and payment also will not be permitted in any decision, order, or other action by a reviewing entity (as defined in § 405.1801(a)) in an administrative appeal filed by the provider. 2. Proposed Revisions to the Provider Reimbursement Appeal Regulations a. Elimination of the Jurisdictional Requirement of an Appropriate Cost Report Claim In this proposed rule, we are proposing to eliminate the requirement in existing §§ 405.1835(a)(1) and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 405.1840(b)(3) of the regulations that a provider must include an appropriate claim for an item in its cost report in order to meet the dissatisfaction requirement for Board jurisdiction. We believe there is a sound basis in law and policy for this proposal. Our proposal to eliminate an appropriate cost report claim as a requirement for Board jurisdiction is well within the Secretary’s general rulemaking authority under sections 1102 and 1871 of the Act. Moreover, this specific proposal is a reasonable interpretation of the ‘‘dissatisfied’’ provision in section 1878(a)(1)(A) of the Act. In our view, this statutory provision is ambiguous and the interpretation in the existing appeal regulations, which requires providers to make appropriate cost report claims in order to meet the dissatisfaction prerequisite of Board jurisdiction with respect to a specific item, is a permissible interpretation of the statute. As described above, however, providers have challenged our interpretation of the statutory dissatisfaction provision in litigation spanning more than 30 years, and in public comments on current §§ 405.1835(a)(1) and 405.1840(b)(3) of the regulations which were adopted in the FY 2008 IPPS final rule (73 FR 30195 through 30200; CMS’ response to public comments on the current Board appeals regulations that are based on our interpretation of the statutory dissatisfaction provision). Providers have maintained throughout this litigation and in the referenced public comments that the statutory dissatisfaction provision does not support our policy of requiring an appropriate cost report claim as a prerequisite of Board jurisdiction. We continue to disagree with this view of the statute, and still believe that the existing Board appeals regulations are based on a permissible interpretation of the statutory dissatisfaction provision. As explained above, existing § 405.1835(a)(1) comports with the Supreme Court’s statement that the statutory dissatisfaction requirement might not be met if a provider bypassed a clearly prescribed exhaustion requirement or failed to ask the contractor for payment of all costs to which it is entitled under applicable rules (Bethesda Hosp., 485 U.S. at 404– 05). Furthermore, the U.S. Court of Appeals for the Seventh Circuit has twice sustained our interpretation of the statutory dissatisfaction provision, on the basis of the forgoing statements by the Supreme Court (Little Co. of Mary, 165 F.3d 1162; Little Co. of Mary, 24 F.3d 984). Nonetheless, we believe our PO 00000 Frm 00236 Fmt 4701 Sfmt 4702 proposal, to eliminate § 405.1835(a)(1)’s jurisdictional requirement of an appropriate cost report claim certainly does not conflict with the ‘‘dissatisfied’’ provision in section 1878(a)(1)(A) of the Act. This particular proposal is supported by section 1878(a)(1)(B) of the Act, which authorizes certain Board appeals if the provider does not receive a final contractor determination on a timely basis. (Section 405.1835(a)(3)(ii) of the regulations specifies the time period and other conditions for Board appeals where the provider does not receive a final contractor determination on a timely basis.) Section 1878(a)(1)(B) of the Act does not include an express dissatisfaction provision. Thus, our proposal, to eliminate existing § 405.1835(a)(1)’s dissatisfaction jurisdictional requirement of an appropriate cost report claim, would result in Board appeals regulations that more closely track the express terms of section 1878(a)(1)(B) of the Act. In addition to the sufficient statutory authority for our proposed elimination of an appropriate cost report claim as a requirement for Board jurisdiction, there are sound policy reasons for this proposal. As explained above, we believe that, by requiring appropriate cost report claims in proposed § 413.24(j), complete and accurate determinations of provider reimbursement will be facilitated as will the many other important aspects of program administration. Thus, because we would require an appropriate cost report claim in proposed § 413.24(j), it is reasonable to eliminate the Board jurisdiction requirement in existing §§ 405.1835(a)(1) and 405.1840(b)(3) of an appropriate cost report claim. We note that once this amendment to the Board appeals regulations becomes effective, this proposal will facilitate an orderly end to any litigation regarding the Board jurisdiction requirement of an appropriate cost report claim. As explained above, our proposed revisions to the cost reporting regulations and the provider appeals regulations would apply on a prospective-only basis, to provider cost reporting periods beginning on or after the effective date of the final IPPS annual update rule. Until these proposed regulations take effect, however, the requirement of an appropriate cost report claim in §§ 405.1835(a)(1) and 405.1840(b)(3) of the regulations will continue to be a requirement for Board jurisdiction. Thus, until these proposed regulations become effective, the Board and the Administrator of CMS will continue to determine Board jurisdiction by E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 reference to the appropriate cost report claim requirements of §§ 405.1835(a)(1) and 405.1840(b)(3), along with other applicable jurisdictional provisions of section 1878 of the Act and §§ 405.1835 and 405.1840 of the regulations. We believe that, because it is essential to require appropriate cost report claims for the various reasons that we discussed above, it is necessary and proper to continue to require an appropriate cost report claim as a prerequisite of Board jurisdiction under §§ 405.1835(a)(1) and 405.1840(b)(3) until the proposed addition to the cost reporting regulations, of the substantive reimbursement requirement of an appropriate cost report claim, takes effect. b. Proposed Addition of § 405.1873 Regarding Board Review of Compliance with Cost Report Claim Requirements in Proposed § 413.24(j) We are proposing to add a new § 405.1873 to the Board appeal regulations, which will address how the Board should proceed when any party to an appeal questions whether a provider made an appropriate cost report claim (as required by proposed § 413.24(j)) for a specific item under appeal. We believe this new regulation is necessary to forestall potential confusion about how the substantive reimbursement requirement in proposed § 413.24(j) of an appropriate cost report claim for a specific item will pertain to Board appeals of the same item. Under paragraph (b)(1) of proposed new § 405.1873, the Board will consider timely submitted factual evidence and legal argument on, and then prepare written specific findings of fact and conclusions of law regarding, the question of whether the provider’s cost report complied with proposed § 413.24(j). The Board will give these written specific factual findings and legal conclusions to each party to the appeal, and they must be included in the record of administrative proceedings for the appeal. Paragraph (b)(2) of proposed § 405.1873 provides that, upon giving the parties to the appeal the Board’s written factual findings and legal conclusions on the question of whether the provider’s cost report included an appropriate cost claim for the specific item under appeal, the Board then must proceed to issue one of four types of overall decisions with respect to such item. As discussed below, paragraph (d) of proposed § 405.1873 provides that, if the Board issues either of two types of overall Board decisions regarding the specific item under appeal (that is, a hearing decision or an expedited judicial review VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (EJR) decision where EJR is granted), the Board’s written specific factual findings and legal conclusions (reached under proposed § 405.1873(b)) about whether there was an appropriate cost report claim for the item, must be included in such overall Board decision regarding the specific item, along with the other matters that are already required for a Board hearing decision or a Board EJR decision where EJR is granted. However, under paragraph (e) of proposed § 405.1873, if the Board issues either of two other types of overall Board decisions regarding the specific item under appeal (that is, a jurisdictional dismissal decision or an EJR decision where EJR is denied), the Board’s written specific factual findings and legal conclusions (pursuant to proposed § 405.1873(b)) must not be included in the overall Board decision regarding the specific item. In any event, the Board’s factual findings and legal conclusions about whether there was an appropriate cost report claim for the item must be included in the record of administrative proceedings for the appeal in accordance with § 405.1865 of the regulations. We believe that, in order to ensure full and appropriate implementation of both the addition of the substantive reimbursement requirement of an appropriate cost report claim (in proposed § 413.24(j)) and the elimination of the Board jurisdiction requirement of an appropriate cost report claim (in existing §§ 405.1835(a)(1) and 405.1840(b)(3)), it is necessary to foreclose certain types of Board decisions, orders, and other actions. Accordingly, in order to give full force and effect to our proposed elimination of the Board jurisdiction requirement of an appropriate cost report claim, paragraph (c)(1) of new § 405.1873 would prohibit a denial of jurisdiction, a declination to exercise jurisdiction, the imposition of a sanction, and various other actions by the Board, if any such jurisdictional decision, order, sanction, or other specified action is based on (in whole or in part) the Board’s determination that the provider’s cost report did not meet proposed § 413.24(j)’s substantive reimbursement requirement of an appropriate cost report claim for the specific item. In some cases, the Board jurisdiction requirement of an appropriate cost report claim has been addressed in different but related terms. For example, Board jurisdiction has been denied based on the absence, in the final contractor determination or Secretary determination under appeal, of an adjustment, revision, correction, or PO 00000 Frm 00237 Fmt 4701 Sfmt 4702 28213 other change to the specific item under appeal. Another example: Board jurisdiction has also been denied due to the lack of a particular determination by the contractor or the Secretary regarding the specific item under appeal, in the final contractor determination or Secretary determination under appeal. We believe that, in order to give full force and effect to the proposed elimination of the Board jurisdiction requirement of an appropriate cost report claim, it is also necessary to address related terms such as the absence of specific adjustments and the lack of particular determinations regarding the specific item under appeal. Accordingly, paragraph (c)(2) of proposed new § 405.1873 would prohibit a denial of jurisdiction, a declination to exercise jurisdiction, the imposition of a sanction, and various other actions by the Board, if any such jurisdictional decision, sanction, or other specified action is based on (in whole or in part) the absence, in the final contractor determination or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item in the final contractor determination or Secretary determination under appeal. However, paragraph (c)(2)(i)(A) of proposed new § 405.1873 would provide for an important exception: if the provider’s appeal of the specific item is based on the reopening of such item (pursuant to § 405.1885 of the regulations) where the specific item is not revised, adjusted, corrected, or otherwise changed in a revised final contractor determination or Secretary determination, the Board must deny jurisdiction over the specific item under appeal (as prescribed in §§ 405.1887(d) and 405.1889(b) of the regulations). The reopening regulations are an exercise of the Secretary’s general rulemaking authority under sections 1102 and 1872 of the Act, and this exception (in proposed § 405.1873(c)(2)(i)(A)) is necessary to ensure consistency with the above-referenced reopening regulations, our longstanding ‘‘issue specific’’ interpretation of the reopening regulations, and the interests of administrative finality and efficiency (we refer readers, for example, to HCA Health Servs. of Okla. v. Shalala, 27 F.3d 614 (D.C. Cir. 1994) (the reopening regulations are based on the Secretary’s general rulemaking authority, and the issue specific interpretation of the reopening rules is reasonable and supportive of administrative finality). E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28214 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Under paragraph (d) of proposed § 405.1873, there are two types of Board decisions that must include any specific findings of fact and conclusions of law by the Board (reached under paragraph (b) of proposed § 405.1873), on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal. First, paragraph (d)(1) of proposed § 405.1873 provides that, if the Board issues a hearing decision on the specific item under appeal (pursuant to § 405.1871 of the regulations), the Board’s specific findings of fact and conclusions of law about whether there was an appropriate cost report claim for the specific item, must be included in such a hearing decision along with the other matters prescribed in existing § 405.1871(a). A Board hearing decision addresses whether the provider has established that it should receive relief on the matter at issue (as specified in § 405.1871(a)(3)). Under proposed § 413.24(j), the requirement of an appropriate cost report claim is a substantive prerequisite of any payment for the specific item, which applies in addition to other payment requirements for the particular item (for example, the specific requirements for payment of interest expense under § 413.153 of the regulations). We believe that, because a Board hearing decision addresses whether the provider has established that it meets the substantive requirements for payment of the item under appeal whereas an appropriate cost report claim is a substantive prerequisite of any payment for the specific item (under proposed § 413.24(j)), any factual findings and legal conclusions about whether there was an appropriate cost report claim should be included in any hearing decision that might be issued by the Board regarding the specific item. In addition, we note that if the Board elects to issue a hearing decision that also includes factual findings and legal conclusions about whether the other payment requirements for the specific item were satisfied (in addition to the Board’s findings and conclusions about whether there was an appropriate cost report claim for the item), such a hearing decision (addressing all the substantive reimbursement requirements for the specific item) will safeguard against piecemeal proceedings before the Board and potentially before the Administrator of CMS and a Federal court. However, paragraph (d)(1)(ii) of proposed § 405.1873 provides that, if the Board determines that the provider’s cost report did not include an appropriate claim for the specific item VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 under appeal, the Board has discretion whether or not to address in its hearing decision whether the other substantive reimbursement requirements for the specific item are also satisfied. Second, paragraph (d)(2) of proposed § 405.1873 provides that, if the Board issues an expedited judicial review (EJR) decision where EJR is granted regarding the specific item under appeal (pursuant to § 405.1842(f)(1) of the regulations), any specific findings of fact and conclusions of law by the Board (reached under paragraph (b) of proposed § 405.1873) about whether there was an appropriate cost report claim for the specific item, must be included in such an EJR decision. Section 1878(f)(1) of the Act and § 405.1842 of the regulations authorize EJR if the requirements for Board jurisdiction over a specific item are satisfied, and the Board determines that it lacks the authority to decide a legal question that is relevant to the specific item under appeal. The Administrator of CMS may review the Board’s determination as to whether there is Board jurisdiction over the specific item, but the Administrator may not review the Board’s determination as to whether it has the authority to decide a relevant legal question. We believe that paragraph (d)(2) of proposed § 405.1873 will also safeguard against piecemeal proceedings before the Board, the Administrator of CMS, and a Federal court. By requiring a Board EJR decision that grants EJR to include any factual findings and legal conclusions (reached under proposed § 405.1873(b)) about whether there was an appropriate cost report claim for the specific item under appeal, along with the Board’s determinations that the two requirements for EJR were satisfied (that is, a finding of Board jurisdiction plus the Board’s determination that it lacks the authority to decide a legal question relevant to the specific item under appeal), piecemeal proceedings would be minimized or eliminated because the Board EJR decision will encompass both the question of whether there was an appropriate cost report claim for the specific item and the relevant legal question for which EJR was granted (and for which the Board determined that it has no authority to decide such legal question). Piecemeal proceedings before the Administrator of CMS would also be minimized or eliminated because, under proposed § 405.1875(a)(2)(v) (which we discuss separately below), if the Administrator reviews and issues an EJR decision on the question of whether there is Board jurisdiction over the specific item under appeal, the PO 00000 Frm 00238 Fmt 4701 Sfmt 4702 Administrator will also review, and any decision will address, the Board’s specific findings of fact and conclusions of law about whether there was an appropriate cost report claim for the specific item. In turn, our proposal to require an EJR decision that grants EJR to include any specific factual findings and legal conclusions under proposed § 405.1873(b) would ensure that when a Federal court exercises its EJR authority under section 1878(f)(1) of the Act and § 405.1842 of the regulations by reviewing a relevant legal question (for which the Board determined it has no decisional authority), the court’s review can also potentially encompass the final specific findings of fact and conclusions of law by the Board or the Administrator, as applicable, about whether there was an appropriate cost report claim for the specific item. If it is determined, in a final EJR decision that grants EJR, that there was an appropriate cost report claim for the specific item under appeal, the court may have no occasion to review the final specific findings of fact and conclusions of law on the question of whether there was an appropriate cost report claim for the specific item. However, if it is instead determined, in a final EJR decision that grants EJR, that the provider’s cost report did not include an appropriate claim for the specific item under appeal, the court can potentially review in one proceeding the final specific findings of fact and conclusions of law about whether there was an appropriate cost report claim for the specific item, along with the relevant legal question for which EJR was granted (and for which the Board determined that it has no authority to decide such legal question). However, paragraph (e) of proposed new § 405.1873 would provide that there are two other types of Board decisions that must not include any specific findings of fact and conclusions of law by the Board (reached under proposed § 405.1873(b)), on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal. On the one hand, paragraph (e)(1) of proposed new § 405.1873 would provide that if the Board issues a jurisdictional dismissal decision on the specific item under appeal (pursuant to § 405.1840(c)), the Board’s specific findings of fact and conclusions of law about whether there was an appropriate cost report claim for the specific item must not be included in such a jurisdictional dismissal decision. When the Board issues a jurisdictional dismissal decision on a specific item under appeal, the Board’s E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules denial of jurisdiction obviates any need to address the question of whether the substantive reimbursement requirements that are specific to the particular item (for example, the specific requirements for payment for certain depreciation under § 413.134) are satisfied. Because the requirement of an appropriate cost report claim for each specific item is also a substantive prerequisite of any payment for the specific item (as prescribed in proposed § 413.24(j)), a denial of jurisdiction over the specific item also obviates any need to address the substantive reimbursement requirement of an appropriate cost report claim in the Board’s jurisdictional dismissal decision. Similarly, under paragraph (e)(2) of proposed new § 405.1873, if the Board issues an EJR decision where EJR is denied on the specific item under appeal (pursuant to § 405.1842(f)(2)), the Board’s specific findings of fact and conclusions of law (reached under paragraph (b) of proposed new § 405.1873) about whether there was an appropriate cost report claim for the specific item, must not be included in such an EJR decision. If EJR is denied solely because the Board determines that it does have the authority to decide the legal question relevant to the specific item under appeal, the Board would conduct further proceedings and issue another decision (as specified in § 405.1842(h)(2)(i)). If such further decision is a hearing decision, under proposed § 405.1873(d)(1), the Board’s factual findings and legal conclusions (under proposed § 405.1873(b)) about whether there was an appropriate cost report claim must be included in the Board’s hearing decision; if the Board elects to also include in the hearing decision its factual findings and legal conclusions about whether the other reimbursement requirements for the specific item are satisfied, piecemeal proceedings before the Board and potentially before the Administrator of CMS and a Federal court would be minimized or eliminated. However, if EJR is denied because the Board lacked jurisdiction over the specific item under appeal, the Board’s factual findings and legal conclusions about whether there was an appropriate cost report claim must not be included in such an EJR decision; as explained above regarding Board jurisdictional dismissal decisions, the denial of Board jurisdiction in such an EJR decision obviates the need to address the substantive reimbursement requirement of an appropriate cost report claim, just as there is no need to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 consider other payment requirements for the particular item under appeal. Paragraph (f) of proposed new § 405.1873 addresses the various effects of the Board’s factual findings and legal conclusions (reached under paragraph (b) of proposed § 405.1873) regarding whether there was an appropriate cost report claim in the two types of Board decisions where such factual findings and legal conclusions must be included: Board hearing decisions, and Board EJR decisions where EJR is granted. An appropriate cost report claim for a specific item is a necessary, but not sufficient, condition for Medicare payment for the specific item. This is because the requirement of an appropriate cost report claim for each specific item is a substantive prerequisite of any payment for the specific item (as prescribed in proposed § 413.24(j)), but all other payment requirements (for example, the particular requirements for payment for certain bad debts under § 413.89) also must be satisfied. Accordingly, under paragraph (f)(1) of proposed new § 405.1873, if the Board determines, as part of a final hearing decision, that the provider’s cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j)), payment for the specific item is made in accordance with Medicare policy, but only if the Board further determines in such hearing decision that all the other substantive reimbursement requirements for the specific item are also satisfied. Conversely, if the Board determines, in a final hearing decision, that the cost report lacked an appropriate claim for the specific item under appeal, payment for the specific item is not made, regardless of whether the Board further determines in such hearing decision that the other substantive reimbursement requirements for the specific item are satisfied. Similarly, paragraph (f)(2) of proposed new § 405.1873 provides that, if the Board or the Administrator of CMS (as applicable) determines, as part of a final EJR decision where EJR is granted, the provider’s cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j)), payment for the specific item is made in accordance with Medicare policy, but only to the extent permitted by the final decision of a Federal court pursuant to the EJR provisions of section 1878(f)(1) of the Act (see also §§ 405.1842 and 405.1877) regarding the legal question that is relevant to the specific item (but for which the Board determined it has no decisional authority). By contrast, if the PO 00000 Frm 00239 Fmt 4701 Sfmt 4702 28215 Board or the Administrator of CMS (as applicable) determines, in a final EJR decision where EJR is granted, that the cost report lacked an appropriate claim for the specific item under appeal, payment for the specific item is not made unless: (i) The specific factual findings and legal conclusions by the Board or the Administrator of CMS, as applicable, about whether there was an appropriate cost report claim for the specific item are reversed or modified by the final decision of a Federal court (pursuant to section 1878(f)(1) of the Act and § 405.1877 of the regulations)); and (ii) only to the extent permitted by the final decision of a Federal court pursuant to the EJR provisions of section 1878(f)(1) of the Act (see also §§ 405.1842 and 405.1877 of the regulations) regarding the legal question that is relevant to the specific item (but for which the Board determined it has no decisional authority). c. Related Proposed Revisions to § 405.1875 Regarding Administrator Review We are proposing two revisions to § 405.1875 of the regulations, which provides for review by the Administrator of CMS of certain Board decisions, orders, and other actions. We believe these revisions will facilitate the full and appropriate implementation of our proposals (discussed above) to add the substantive reimbursement requirement of an appropriate cost report claim (in proposed § 413.24(j)), eliminate the Board jurisdiction requirement of an appropriate cost report claim (in existing §§ 405.1835(a)(1) and 405.1840(b)(3)), and to add specific procedures for Board review of questions about compliance with the substantive reimbursement requirement of an appropriate cost report claim (in proposed new § 405.1873). First, under existing § 405.1875(a)(2) of the regulations, the Administrator may review a Board hearing decision, a Board dismissal decision, the Board’s jurisdictional determination in an EJR decision (but not the Board’s determination, in an EJR decision, of whether it has the authority to decide a relevant legal question), and any other Board decision or action deemed to be final by the Administrator. We are proposing to add a new paragraph (a)(2)(v) to § 405.1875, which would provide that if the Administrator reviews a Board hearing decision, or the jurisdictional component of a Board EJR decision where EJR is granted, regarding a specific item, the Administrator’s review of such a hearing decision or such an EJR decision, as applicable, will E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28216 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules include, and any decision issued by the Administrator under § 405.1875(e) of the regulations will address, the Board’s specific findings of fact and conclusions of law in such hearing decision or EJR decision (as prescribed in proposed § 405.1873(b) and (d)) on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j)). We believe this proposed revision to § 405.1875(a)(2) is an important additional safeguard against piecemeal administrative appeal proceedings and potentially before a Federal court. As explained above with respect to proposed § 405.1873(d)(1), if the Board elects to issue a hearing decision that also includes factual findings and legal conclusions about whether the other payment requirements for the specific item were satisfied (in addition to the Board’s findings and conclusions about whether there was an appropriate cost report claim for the item), all of the payment requirements for the specific item will be presented in one Board hearing decision for purposes of any review by the Administrator under proposed § 405.1875(a)(2)(v) and a Federal court. Moreover, for the specific reasons set forth above regarding proposed § 405.1873(d)(2), our proposal to require that the Board’s factual findings and legal conclusions about whether there was an appropriate cost report claim for the item be included in an EJR decision where EJR is granted will also minimize or eliminate piecemeal proceedings before the Board and, given the proposed addition of § 405.1875(a)(2)(v), before the Administrator of CMS and a Federal court. Second, existing § 405.1875(a) requires the Board to promptly send copies of hearing decisions and EJR decisions to the Office of the Attorney Advisor. Although the Board often (perhaps typically) sends copies of dismissal decisions to the Office of the Attorney Advisor, the Board is not required to so. We are proposing to amend the last sentence of paragraph (a) of § 405.1875 by requiring the Board to promptly send copies of dismissal decisions to the Office of the Attorney Advisor. This revision will facilitate the Administrator’s exercise of her discretion under § 405.1875(a)(2)(ii) as to whether to review specific Board dismissal decisions. Also, given our proposals to eliminate the Board jurisdiction requirement of an appropriate cost report claim (in existing §§ 405.1835(a)(1) and 405.1840(b)(3)) and to add procedures VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 for Board review of compliance with the substantive reimbursement requirement of an appropriate cost report claim (in proposed § 405.1873)), our further proposal to require the Board to promptly send copies of dismissal decisions to the Office of the Attorney Advisor will enhance the Administrator’s ability to ensure full and appropriate implementation of our proposed revisions to the Board appeal regulations. C. Proposed Conforming Changes to the Board Appeal Regulations and Corresponding Revisions to the Contractor Hearing Regulations We are proposing technical revisions to several other Board appeal regulations. We believe these other technical revisions are necessary and appropriate to maintain consistency with our principal proposals (discussed above) to add the substantive reimbursement requirement of an appropriate cost report claim (in proposed § 413.24(j)); eliminate the Board jurisdiction requirement of an appropriate cost report claim (in existing §§ 405.1835(a)(1) and 405.1840(b)(3)); and add procedures for Board review of compliance with the substantive reimbursement requirement of an appropriate cost report claim (in proposed § 405.1873)). Finally, we are proposing similar revisions to the existing regulations for appeals to the contractor hearing officers. Specifically, we are proposing to eliminate an appropriate cost report claim as a jurisdictional requirement for contractor hearing officer appeals (in existing §§ 405.1811(a)(1) and 405.1814(b)(3)); add a new § 405.1832 that (like new § 405.1873 for Board appeals) will detail the procedures for contractor hearing officer review of compliance with the substantive reimbursement requirement of an appropriate cost report claim (as prescribed in proposed § 413.24(j)). These proposed revisions to the existing regulations for appeals to the contractor hearing officers comport with our usual practice of adopting similar regulations for both Board appeals and for contractor hearing officer appeals unless there is a sufficient reason to do otherwise. 1. Technical Corrections and Conforming Changes to §§ 405.1801 and 405.1803 We are proposing to revise the definition of ‘‘intermediary determination’’ in § 405.1801(a) to clarify that the determination is final as set forth in 1878(a) of the Act and to reflect the conforming technical correction to ‘‘contractor PO 00000 Frm 00240 Fmt 4701 Sfmt 4702 determination’’. We are proposing to revise § 405.1801(b) to more appropriately refer to § 413.24 generally (following the proposed addition of paragraph (j) to § 413.24). We are proposing to revise § 405.1803 to refer to the final contractor (instead of intermediary) determination as set forth in § 405.1801 and to appropriately cross-reference the proposed newly revised § 405.1835(a). 2. Technical Corrections and Conforming Changes to §§ 405.1811, 405.1813, and 405.1814 As we are proposing to eliminate the jurisdictional requirement of an appropriate cost report claim in existing §§ 405.1835(a)(1) and 405.1840(b)(3) for Board appeals, we are similarly proposing to eliminate the corresponding jurisdictional requirement in §§ 405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer appeals. Specifically, we are proposing to eliminate an appropriate cost report claim as a jurisdictional requirement for contractor hearing officer appeals. In addition, we are proposing to revise § 405.1813 to add an appropriate cross-reference to § 405.1811, pursuant to the proposed technical correction in § 405.1811. We are proposing technical corrections to §§ 405.1836 and 405.1837 in conformance with the proposed revision to § 405.1835(a)(1) to eliminate the reference to the jurisdictional requirement of an appropriate cost report claim. 3. Proposed New § 405.1832 We are proposing to add new § 405.1832 which will detail the procedures for contractor hearing officer review of compliance with the substantive reimbursement requirement of an appropriate cost report claim (as prescribed in proposed § 413.24(j)) in appeals first filed with contractor hearing officers. 4. Proposed Revisions to § 405.1834 We are proposing to amend § 405.1834, which provides for review of contractor hearing officer decisions by the CMS reviewing official, by adding a new paragraph (b)(2)(iii). Under proposed § 405.1834(b)(2)(iii), the CMS reviewing official will review, and address in any decision, the specific factual findings and legal conclusions of contractor hearing officers regarding compliance with the substantive requirement of an appropriate cost report claim (as prescribed in proposed § 413.24(j)), as part of the CMS reviewing official’s review of a contractor hearing decision. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 5. Technical Corrections and Conforming Changes to §§ 405.1836, 405.1837, and 405.1839 We are proposing technical and conforming changes to §§ 405.1836, 405.1837, and 405.1839 to comport and maintain consistency with the principal proposed regulation changes discussed above. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 6. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts of 42 CFR part 413 We are proposing to conform the terminology in 42 CFR part 405 Subpart R and all subparts of 42 CFR part 413 by replacing the term ‘‘intermediary’’ and its various deviations to ‘‘contractor’’, and its various deviations, pursuant to sections 1816, 1874A, and 1878 of the Act. IX. Proposed Quality Data Reporting Requirements for Specific Providers and Suppliers We seek to promote higher quality and more efficient health care for Medicare beneficiaries. This effort is supported by the adoption of widely agreed-upon quality measures. We have worked with relevant stakeholders to define quality measures for most settings and to measure various aspects of care for most Medicare beneficiaries. These measures assess structural aspects of care, clinical processes, patient experiences with care, and, increasingly, outcomes. We have implemented quality reporting programs for multiple care settings, including: • Hospital inpatient services under the Hospital Inpatient Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program); • Hospital outpatient services under the Hospital Outpatient Quality Reporting (OQR) Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)); • Care furnished by physicians and other eligible professionals under the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI)); • Inpatient rehabilitation facilities under the Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP); • Long-term care hospitals under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program; • PPS-exempt cancer hospitals under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program; VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 • Ambulatory surgical centers under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program; • Inpatient psychiatric facilities under the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program; • Home health agencies under the home health quality reporting program (HH QRP); and, • Hospice facilities under the Hospice Quality Reporting Program. We have also implemented the EndStage Renal Disease Quality Incentive Program and Hospital Value-Based Purchasing Program (described further below) that link payment to performance. In implementing the Hospital IQR Program and other quality reporting programs, we have focused on measures that have high impact and support CMS and HHS priorities for improved quality and efficiency of care for Medicare beneficiaries. Our goal for the future is to align the clinical quality measure requirements of the Hospital IQR Program with various other Medicare and Medicaid programs, including those authorized by the Health Information Technology for Economic and Clinical Health (HITECH) Act, so that the reporting burden on providers will be reduced. As appropriate, we will consider the adoption of clinical quality measures with electronic specifications so that the electronic collection of performance information is part of care delivery. Establishing such a system will require interoperability between EHRs and CMS data collection systems, additional infrastructural development on the part of hospitals and CMS, and adoption of standards for capturing, formatting, and transmitting the data elements that make up the measures. However, once these activities are accomplished, adoption of many measures that rely on data obtained directly from EHRs will enable us to expand the Hospital IQR Program measure set with less cost and reporting burden to hospitals. We believe that in the near future, collection and reporting of data elements for many measures through EHRs will greatly simplify and streamline reporting for various CMS quality reporting programs, and that hospitals will be able to switch primarily to EHR-based data reporting for many measures that are currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. We also have implemented a Hospital Value-Based Purchasing (VBP) Program under section 1886(o) of the Act. In 2011, we issued the Hospital Inpatient VBP Program final rule (76 FR 26490 PO 00000 Frm 00241 Fmt 4701 Sfmt 4702 28217 through 26547). We most recently adopted additional policies for the Hospital VBP Program in section XIV. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121). We are proposing additional policies for this program in section IV.I. of the preamble of this proposed rule. Under the Hospital VBP Program, hospitals will receive value-based incentive payments based on their quality performance with respect to performance standards for a performance period for the fiscal year involved. The measures under the Hospital VBP Program must be selected from the measures (other than readmission measures) specified under the Hospital IQR Program as required by section 1886(o)(2)(A) of the Act. In selecting measures for the Hospital IQR Program, we are mindful of the conceptual framework we have described for the Hospital VBP Program. The Hospital IQR Program is linked with the Hospital VBP Program because many of the measures and the reporting infrastructure for the programs overlap. We view the Hospital VBP Program as the next step in promoting higher quality care for Medicare beneficiaries by transforming Medicare from a passive payer of claims into an active purchaser of quality healthcare for its beneficiaries. Value-based purchasing is an important step to revamping how care and services are paid for, moving increasingly toward rewarding better value, outcomes, and innovations instead of merely volume. We also view the Hospital-Acquired Condition (HAC) payment adjustment program authorized by section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, and the Hospital VBP Program, as related but separate efforts to reduce HACs. The Hospital VBP Program is an incentive program that awards payments to hospitals based on quality performance on a wide variety of measures, while the HAC Reduction Program creates a payment adjustment resulting in payment reductions for the lowest performing hospitals based on their rates of HACs. Proposed policies for the Hospital VBP Program are included in section IV.I. of the preamble of this proposed rule. Proposed policies for the HAC Reduction Program are included in section IV.J. of the preamble of this proposed rule. Although we intend to monitor the various interactions of programs authorized by the Affordable Care Act and their overall impact on providers and suppliers, we also view programs that could potentially affect a hospital’s Medicaid payment as separate from E:\FR\FM\15MYP2.SGM 15MYP2 28218 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules HCAHPS technical specifications by updating the HCAHPS Quality Assurance Guidelines manual annually, and include detailed instructions on survey implementation, data collection, data submission and other relevant topics. As necessary, HCAHPS Bulletins are issued to provide notice of changes and updates to technical specifications in HCAHPS data collection systems. Many of the quality measures used in different Medicare and Medicaid reporting programs are endorsed by the National Quality Forum (NQF). As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards to A. Hospital Inpatient Quality Reporting submit annual measure maintenance (IQR) Program updates and undergo maintenance of 1. Background endorsement review every 3 years. In the measure maintenance process, the a. History of the Hospital IQR Program We refer readers to the FY 2010 IPPS/ measure steward (owner/developer) is responsible for updating and RY 2010 LTCH PPS final rule (74 FR maintaining the currency and relevance 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 of the measure and will confirm existing or minor specification changes with through 50181) for detailed discussions NQF on an annual basis. NQF solicits of the history of the Hospital IQR Program, including the statutory history, information from measure stewards for annual reviews, and it reviews measures and to the FY 2014 IPPS/LTCH PPS for continued endorsement in a specific final rule (78 FR 50789 through 50807) 3-year cycle. for the measures we have adopted for The NQF regularly maintains its the Hospital IQR measure set through the FY 2016 payment determination and endorsed measures through annual and triennial reviews, which may result in subsequent years. the NQF making updates to the b. Maintenance of Technical measures. We believe that it is Specifications for Quality Measures important to have in place a subregulatory process to incorporate The technical specifications for the Hospital IQR Program measures, or links nonsubstantive updates made by the NQF into the measure specifications we to Web sites hosting technical have adopted for the Hospital IQR specifications, are contained in the Program so that these measures remain CMS/The Joint Commission (TJC) up-to-date. We also recognize that some Specifications Manual for National changes the NQF might make to its Hospital Quality Measures endorsed measures are substantive in (specifications manual). This nature and might not be appropriate for Specifications Manual is posted on the adoption using a subregulatory process. QualityNet Web site at https:// Therefore, in the FY 2013 IPPS/LTCH www.qualitynet.org/. We generally PPS final rule (77 FR 53504 through update the Specifications Manual on a 53505), we finalized a policy under semiannual basis and include in the which we use a subregulatory process to updates detailed instructions and make nonsubstantive updates to calculation algorithms for hospitals to use when collecting and submitting data measures used for the Hospital IQR Program. With respect to what on required measures. These semiannual updates are accompanied by constitutes substantive versus nonsubstantive changes, we expect to notifications to users, providing make this determination on a case-bysufficient time between the change and the effective date in order to allow users case basis. Examples of nonsubstantive changes to measures might include to incorporate changes and updates to updated diagnosis or procedure codes, the specifications into data collection medication updates for categories of systems. medications, broadening of age ranges, The technical specifications for the and exclusions for a measure (such as HCAHPS patient experience of care the addition of a hospice exclusion to survey are contained in the current HCAHPS Quality Assurance Guidelines the 30-day mortality measures). We believe that nonsubstantive changes manual, which is available at the may include updates to NQF-endorsed HCAHPS On-Line Web site, https:// www.hcahpsonline.org. We maintain the measures based upon changes to mstockstill on DSK4VPTVN1PROD with PROPOSALS2 programs that could potentially affect a hospital’s Medicare payment. In the preamble of this proposed rule, we are proposing changes to the following Medicare quality reporting systems: • In section IX.A., the Hospital IQR Program. • In section IX.B., the PCHQR Program. • In section IX.C., the LTCHQR Program. In addition, in section IX.D. of the preamble of this proposed rule, we are proposing changes to the Medicare EHR Incentive Program. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00242 Fmt 4701 Sfmt 4702 guidelines upon which the measures are based. We will continue to use rulemaking to adopt substantive updates made to measures we have adopted for the Hospital IQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example: Changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. These policies regarding what is considered substantive versus nonsubstantive would apply to all measures in the Hospital IQR Program. We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. We believe this policy adequately balances our need to incorporate updates to Hospital IQR Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. c. Public Display of Quality Measures Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section 3001(a)(2) of the Affordable Care Act, requires that the Secretary establish procedures for making information regarding measures submitted available to the public after ensuring that a hospital has the opportunity to review its data before they are made public. In this proposed rule, we are not proposing to change our current policy of reporting data from the Hospital IQR Program as soon as it is feasible on CMS Web sites such as the Hospital Compare Web site (https:// www.medicare.gov/hospitalcompare) and/or the interactive https:// data.medicare.gov Web site, after a preview period. The Hospital Compare Web site is an interactive Web tool that assists beneficiaries by providing information on hospital quality of care to those who need to select a hospital. For more information on measures reported to Hospital Compare, please see https:// www.medicare.gov/hospitalcompare. Other information not reported to Hospital Compare may be made E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules available on other CMS Web sites such as https://www.cms.hhs.gov/Hospital QualityInits/ or https:// data.medicare.gov. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50777 through 50778) we responded to public comments on what additional quality measures and information featured on Hospital Compare may be highly relevant to patients and other consumers of health care, and how we may better display this information on the Hospital Compare Web site. 2. Removal and Suspension of Hospital IQR Program Measures mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Considerations in Removing Quality Measures From the Hospital IQR Program As discussed further below, we generally retain measures from the previous year’s Hospital IQR Program measure set for subsequent years’ measure sets except when we specifically propose to remove or replace them. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), the criteria that we consider when determining whether to remove Hospital IQR Program measures are the following: (1) Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (‘‘topped out’’ measures); (2) availability of alternative measures with a stronger relationship to patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broadly applicable (across settings, populations, or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic; (6) the availability of a measure that is more strongly associated with desired patient outcomes for the particular topic; and (7) collection or public reporting of a measure leads to negative unintended consequences other than patient harm. We also take into account the views of the Measure Applications Partnership (MAP) when determining when a measure should be removed, and we strive to eliminate redundancy of similar measures (77 FR 53505 through 53506). In this proposed rule, we are proposing to change the criteria for determining when a measure is ‘‘topped-out.’’ A measure is ‘‘toppedout’’ when measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (‘‘topped out’’ measures) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (77 FR 53505 through 53506). We do not believe that measuring hospital performance on ‘‘topped-out’’ measures provides meaningful information on the quality of care provided by hospitals. We further believe that quality measures, once ‘‘topped out,’’ represent care standards that have been widely adopted by hospitals. We believe such measures should be considered for removal from the Hospital IQR Program because their associated reporting burden may outweigh the value of the quality information they provide. In order to determine ‘‘topped out’’ status, we are proposing to apply the following two criteria, the first of which was previously adopted by the HVBP Program in the Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497), to Hospital IQR measures. The second criterion is a modified version of what was previously adopted by the Hospital VBP Program in the above mentioned final rule, with the change from the ‘‘less than’’ operator (<) to the ‘‘less than or equal to’’ operator (≤): • Statistically indistinguishable performance at the 75th and 90th percentiles; and • Truncated coefficient of variation ≤ 0.10. The coefficient of variation (CV) is a common statistic that expresses the standard deviation as a percentage of the sample mean in a way that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad distribution of individual hospital scores, with large and presumably meaningful differences between hospitals in relative performance. A small CV would indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not useful to draw distinctions among individual hospitals’ measure performance. By adopting ‘‘less than or equal to’’ in our ‘‘topped out’’ test, we are clarifying the interpretation of the CV when a tie at 0.1 occurs due to rounding. We believe that the proposed criteria distinguish measures with significant variation in performance among hospitals. In the Hospital VBP Program context, we used a modified version of the CV, namely a truncated CV, for each measure, in which the 5 percent of hospitals with the lowest scores, and the 5 percent of hospitals with highest scores were first truncated (set aside) before calculating the CV. This was done to avoid undue effects of the highest and lowest outlier hospitals, which if included, would tend to greatly widen the dispersion of the distribution PO 00000 Frm 00243 Fmt 4701 Sfmt 4702 28219 and make the measure appear to be more reliable or discerning. We welcome public comments on this proposal. b. Proposed Removal of Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years As we continue moving towards including more clinical outcomes measures as opposed to process-of-care measures in the Hospital IQR Program measure set, we have considered removing additional measures using our previously-adopted removal criteria. We are proposing to remove five measures from the Hospital IQR Program for the FY 2017 payment determination and subsequent years, which begins in the CY 2015 reporting period: (1) AMI–1 Aspirin at arrival (NQF #0132); (2) AMI–3 ACEI/ARB for left ventricular systolic dysfunction (NQF #0137); (3) AMI–5 Beta-blocker prescribed at discharge (NQF #0160); (4) SCIP INF–6 Appropriate Hair Removal; and (5) Participation in a systematic database for cardiac surgery (NQF #0113). We are proposing to remove the first four process measures because they were previously determined to be ‘‘topped out’’ and suspended (77 FR 53509). We are proposing to remove the fifth measure because the MAP recommended the measure’s removal in its MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs, which is available at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_Report_ _2014_Recommendations_on_ Measures_for_More_than_20_Federal_ Programs.aspx. The MAP report states that the measure’s NQF endorsement has been placed on reserve status because the measure is ‘‘topped-out.’’ The purpose of reserve status is to retain endorsement of reliable and valid quality performance measures that have overall high levels of performance with little variability so that performance could be monitored in the future if necessary to ensure that performance does not decline. This status would apply only to highly credible, reliable, and valid measures that have high levels of performance due to quality improvement actions (often facilitated or motivated through public reporting and other accountability programs). More information about NQF reserve status is available at: https:// www.qualityforum.org/docs/Reserve_ Endorsement_Status.aspx. By removing these measures, we would alleviate the maintenance costs and administrative burden to hospitals E:\FR\FM\15MYP2.SGM 15MYP2 28220 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules associated with retaining them. Should we determine that hospital adherence to these practices has unacceptably declined, we would propose to resume data collection in future rulemaking. In addition, we would comply with any requirements imposed by the Paperwork Reduction Act before re-proposing these measures. We also analyzed the remainder of the Hospital IQR measure set for other potential ‘‘topped out’’ measures using the previously adopted criteria. The analysis was based on the most recent two quarters of clinical process of care data available in the CMS Clinical Data Warehouse for IPPS eligible hospitals, which covers a measurement period from 01/01/2013 to 06/30/2013 (Q1 2013–Q2 2013). Based on this analysis and using the previously adopted criteria, we believe that an additional 15 chart-abstracted measures are ‘‘topped out,’’ and we are proposing to remove them from the measure set for the FY 2017 payment determination and subsequent years. However, we are proposing to retain the electronic clinical quality measure version of 10 of these chart-abstracted measures for Hospital IQR Program reporting as discussed further in section IX.A.7.f. of the preamble of this proposed rule. We believe that retaining ‘‘topped out’’ measures under certain circumstances enables us to continue monitoring the clinical topic covered by the measure to ensure that hospitals continue to maintain high levels of performance. Further, we believe the additional reporting burden associated with retaining these measures is mitigated by retaining electronic versions of those measures, which are more easily reported by hospitals. These 10 measures are denoted in the chart below by an asterisk. ‘‘TOPPED OUT’’ CHART-ABSTRACTED MEASURES PROPOSED FOR REMOVAL FOR THE FY 2017 PAYMENT DETERMINATION • • • • • • • • • • • • • • • • • • • • AMI–1: Aspirin at Arrival (previously suspended). AMI–3: ACEI or ARB for left ventricular systolic dysfunction—Acute Myocardial Infarction (AMI) Patients (previously suspended) (NQF #0137). AMI–5: Beta-Blocker Prescribed at Discharge for AMI (previously suspended) (NQF #0160). AMI–8a: Primary PCI received within 90 minutes of hospital arrival * (NQF #0163). HF–2: Evaluation of left ventricular systolic function (NQF #0135). PN–6: Initial antibiotic selection for community-acquired pneumonia (CAP) in immunocompetent patients* (NQF #0147). SCIP–Inf–1: Prophylactic antibiotic received within one hour prior to surgical incision* (NQF #0527). SCIP–Inf–2: Prophylactic antibiotic selection for surgical patients* (NQF #0528). SCIP–Inf–3: Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery) (NQF #0529). SCIP–Inf–4: Cardiac surgery patients with controlled postoperative blood glucose (NQF #0300). SCIP–Inf–6: Surgery patients with appropriate hair removal (previously suspended) (NQF #0301). SCIP–Inf–9: Urinary catheter removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with day of surgery being day zero.* (NQF #0453). SCIP–Card–2: Surgery patients on beta blocker therapy prior to arrival who received a beta blocker during the perioperative period (NQF #0284). SCIP–VTE–2: Surgery Patients Who Received Appropriate Venous Thromboembolism (VTE) Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery (NQF #0218). STK–2: Discharged on antithrombotic therapy * (NQF #0435). STK–3: Anticoagulation therapy for atrial fibrillation/flutter* (NQF #0436). STK–5: Antithrombotic therapy by the end of hospital day two* (NQF #0438). STK–10: Assessed for rehabilitation* (NQF #0441). VTE–4: Patients receiving un-fractionated Heparin with doses/labs monitored by protocol*. Participation in a systematic database for cardiac surgery (NQF #0113). * Proposed to be retained as an electronic clinical quality measure. We welcome public comments on our proposal to remove these measures. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53512 through 53513), for our finalized measure retention policy. When we adopt measures for the Hospital IQR Program beginning with a particular payment determination, these measures are automatically adopted for all subsequent payment determinations unless we propose to remove, suspend, or replace the measures. We are not proposing any changes to our policy for retaining previously adopted measures for subsequent payment determinations. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53510 through 53512) for a discussion of the considerations we use to expand and update quality measures under the Hospital IQR Program. We are not proposing any changes to the considerations in expanding or updating quality measures. 5. Previously Adopted Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years For currently adopted and future condition-specific, claims-based measures, beginning with the FY 2017 payment determination and subsequent years, we would like to propose to use 3 years of data to calculate measures unless otherwise specified. In other PO 00000 Frm 00244 Fmt 4701 Sfmt 4702 words, this reporting period would apply to all future calculations of condition specific measures already adopted in the Hospital IQR Program and any condition-specific measures that may be subsequently adopted in future years. The currently adopted, applicable measures are: • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older (NQF #0230) • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older (NQF #0229) • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following pneumonia hospitalization (NQF #0468) • Stroke 30-day mortality rate • Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules • • • • • • • following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893) 30-day all-cause, Acute Myocardial Infarction (AMI) 30-day risk standardized readmission rate (RSMR) following Acute Myocardial Infarction (AMI) hospitalization (NQF #0505) 30-day all-cause, risk standardized readmission rate (RSMR) following Heart Failure (HF) hospitalization (NQF #0330) 30-day all-cause, risk standardized readmission rate (RSMR) following Pneumonia (PN) hospitalization (NQF #0506) 30-day risk standardized readmission rate (RSMR) following Total Hip/Total Knee Arthroplasty (NQF #1551) 30-day risk standardized readmission rate (RSMR) following Stroke hospitalization 30-day risk standardized readmission rate (RSMR) following COPD hospitalization (NQF #1891) Hip/Knee Complication: Hospitallevel Risk-Standardized Complication Rate (RSCR) following Elective Topic Primary Total Hip Arthroplasty (NQF #1550) We welcome public comments on our proposal to use 3 years of data to calculate current and future conditionspecific, claims-based measures. The Influenza Vaccination Coverage Among Healthcare Personnel (HCP) (NQF #0431) was finalized for the Hospital IQR program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51633) and the Hospital Outpatient Quality Reporting (HOQR) in the CY 2014 OPPS/ASC final rule (78 FR 75099). We received public comments regarding the burden of separately collecting and reporting HCP influenza vaccination statuses for both the inpatient and outpatient settings. In response to these concerns, we clarified that beginning with the 2014–2015 influenza season (CY 2014 reporting period and FY 2016 payment determination), facilities should collect and report a single vaccination count for each healthcare facility by CMS Certification Number (CCN), instead of separately by inpatient or outpatient setting, in order to reduce burden. We announced this clarification 28221 regarding how to designate HCP for this measure in an Operational Guidance document which can be found on our on our Web page at: https:// origin.glb.cdc.gov/nhsn/PDFs/HCP/ Operational-Guidance-ACH–HCPFlu.pdf. Using the CCN will allow healthcare facilities with multiple care settings to simplify data collection and submit a single count applicable across the inpatient and outpatient settings. We will then publicly report the percentage of HCP who received an influenza vaccination per CCN. This single count per CCN will inform the public of the percentage of vaccinated HCP at a particular healthcare facility, which would still provide meaningful data and help to improve the quality of care. Specific details on data submission for this measure can be found at: https:// www.cdc.gov/nhsn/acute-care-hospital/ hcp-vaccination/ and at https:// www.cdc.gov/nhsn/acute-care-hospital/ index.html. The following table shows measures currently adopted for the Hospital IQR Program, including suspended measures. Hospital IQR program measures previously adopted for the FY 2016 payment determination and subsequent years Acute Myocardial Infarction (AMI) Measures • AMI–1: Aspirin at Arrival (previously suspended). • AMI–3: ACEI or ARB for left ventricular systolic dysfunction—Acute Myocardial Infarction (AMI) Patients (previously suspended) (NQF #0137). • AMI–5: Beta-Blocker Prescribed at Discharge for AMI (previously suspended) (NQF #0160). • AMI–7a Fibrinolytic therapy received within 30 minutes of hospital arrival (NQF #0164). • AMI–8a: Primary PCI received within 90 minutes of hospital arrival (NQF #0163) *. Heart Failure (HF) Measure • HF–2 Evaluation of left ventricular systolic function (NQF #0135) *. Stroke (STK) Measure Set • • • • • • • • STK–1 Venous thromboembolism (VTE) prophylaxis (NQF #0434). STK–2 Discharged on antithrombotic therapy (NQF #0435) *. STK–3 Anticoagulation therapy for atrial fibrillation/flutter (NQF #0436) *. STK–4 Thrombolytic therapy (NQF #0437). STK–5 Antithrombotic therapy by the end of hospital day two (NQF #0438). STK–6 Discharged on statin medication (NQF #0439). STK–8 Stroke education. STK–10 Assessed for rehabilitation (NQF #0441). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Venous Thromboembolism (VTE) Measure Set • • • • • • VTE–1 VTE–2 VTE–3 VTE–4 VTE–5 VTE–6 Venous thromboembolism prophylaxis (NQF #0371). Intensive care unit venous thromboembolism prophylaxis (NQF #0372). Venous thromboembolism patients with anticoagulation overlap therapy (NQF #0373). Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. VTE discharge instructions. Incidence of potentially preventable VTE. Pneumonia (PN) Measure • PN–6 Initial antibiotic selection for community-acquired pneumonia (CAP) in immunocompetent patients (NQF #0147). Surgical Care Improvement Project (SCIP) Measures • SCIP INF–1 Prophylactic antibiotic received within one hour prior to surgical incision (NQF #0527) *. • SCIP INF–2 Prophylactic antibiotic selection for surgical patients (NQF #0528). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00245 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28222 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Topic Hospital IQR program measures previously adopted for the FY 2016 payment determination and subsequent years • SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery) (NQF #0529). • SCIP INF–4 Cardiac surgery patients with controlled postoperative blood glucose (NQF #0300). • SCIP INF–9 Urinary catheter removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with day of surgery being day zero (NQF #0453). • SCIP Card-2 Surgery patients on beta blocker therapy prior to arrival who received a beta blocker during the perioperative period (NQF #0284). • SCIP–VTE-2 Surgery Patients Who Received Appropriate Venous Thromboembolism (VTE) Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery (NQF #0218). Mortality Measures • Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older (NQF #0230). • Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older (NQF #0229). • Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following pneumonia hospitalization (NQF #0468). • Stroke 30-day mortality rate. • Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893). Patient Experience of Care Measure • HCAHPS survey (NQF #0166) (expanded to include two new ‘‘About You’’ items and the 3-item Care Transition Measure) (NQF #0228). Readmission Measures • Hospital 30-day all-cause risk-standardized readmission rate (RSRR) following acute myocardial infarction (AMI) hospitalization (NQF #0505). • Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following heart failure hospitalization (NQF #0330). • Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following pneumonia hospitalization (NQF #0506). • Hospital-level 30-day, all-cause risk-standardized readmission rate (RSRR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551). • Hospital-Wide All-Cause Unplanned Readmission (HWR) (NQF #1789). • 30-day risk standardized readmission rate (RSMR) following Stroke hospitalization. • Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1891). AHRQ Patient Safety Indicators (PSIs) Composite Measure • PSI–90 Patient safety for selected indicators (composite) (NQF #0531). AHRQ PSI and Nursing Sensitive Care Measure • PSI–4 Death among surgical inpatients with serious treatable complications (NQF #0351). Structural Measures • • • • Participation in a Systematic Database for Cardiac Surgery (NQF #0113). Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. Participation in a Systematic Clinical Database Registry for General Surgery. Safe Surgery Checklist Use. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Healthcare-Associated Infections (HAI) Measures • National Healthcare Safety Network (NHSN) Central line-associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). • American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753). —SSI following Colon Surgery. —SSI following Abdominal Hysterectomy. • National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138). • National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716). • National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). • Influenza vaccination coverage among healthcare personnel (HCP) (NQF #0431). Surgical Complications Measures VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00246 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Topic 28223 Hospital IQR program measures previously adopted for the FY 2016 payment determination and subsequent years • Hospital-level risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550). Emergency Department (ED) Throughput Measures • ED–1 Median time from ED arrival to ED departure for admitted ED patients (NQF #0495). • ED–2 Admit Decision Time to ED Departure Time for Admitted Patients (NQF #0497). Prevention: Global Immunization (IMM) Measures • IMM–1 Pneumococcal Immunization (previously suspended) (NQF #1653). • IMM–2 Influenza Immunization (NQF #1659). Cost Efficiency Measures • Payment-Standardized Medicare Spending Per Beneficiary (MSPB) (NQF #2158). • AMI Payment per Episode of Care. Perinatal Care (PC) Measure • PC–01 Elective delivery (NQF #0469) * Measures proposed for removal for the FY 2016 payment determination and subsequent years. 6. Proposed Refinements to Existing Measures in the Hospital IQR Program We are proposing to incorporate refinements for several measures that were previously adopted in the Hospital IQR Program. These refinements have either arisen out of the NQF endorsement maintenance process, or during our internal efforts to harmonize measure approaches. The measure refinements include the following: (1) Refining the planned readmission algorithm for all seven readmission measures included in the Hospital IQR Program; (2) modifying the hip/knee readmission and complication measure cohorts to exclude index admissions with a secondary fracture diagnosis; and (3) modifying the hip/knee complication measure to not count as complications coded as ‘‘present on admission’’ (POA) during the index admission. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Proposed Refinement of Planned Readmission Algorithm for 30-Day Readmission Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787) we adopted the CMS Planned Readmission Algorithm Version 2.1 (the Algorithm) for the Hospital IQR Program. In the same final rule (78 FR 50785 through 50787, 50790 through 50792, and 50794 through 50798), we also finalized the use of the CMS Planned Readmission Algorithm Version 2.1 in the AMI, HF, PN, THA/TKA, HWR, and COPD measures. This algorithm identifies readmissions that are planned and occur within 30 days of discharge from the hospital. A complete description of the Algorithm, which includes lists of planned diagnoses and procedures, is available at: https://www.cms.gov/ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/Measure-Methodology.html in the ‘‘Planned Readmission’’ folder. NQF has endorsed the use of the Algorithm for these measures. In that final rule (78 FR 50652), in response to comments, we agreed to continually review the Algorithm and make updates as needed. Since its development, we have identified and made improvements. As a result, we are now proposing to use an updated, revised version, the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/TKA, HWR, COPD, and Stroke readmission measures for the FY 2015 payment determination and subsequent years. As discussed further below, we are also proposing to use Version 3.0 of this algorithm for the CABG readmission measure that we are proposing to include in the Hospital IQR Program starting in FY 2017, proposed in section IX.A.7.a. of the preamble of this proposed rule. Version 3.0 incorporates improvements made based on a validation study of the algorithm. Researchers reviewed 634 patients’ charts at 7 hospitals, classified readmission as planned or unplanned based on the chart review, and compared the results to the claimsbased algorithm’s classification of the readmissions. The findings suggested the algorithm was working well but could be improved. Specifically, the study suggested the need to make small changes to the tables of procedures and conditions used in the algorithm to classify readmission as planned or unplanned. The algorithm uses the Agency for Healthcare Research PO 00000 Frm 00247 Fmt 4701 Sfmt 4702 and Quality’s (AHRQ’s) Clinical Classification Software (CCS) to group thousands of procedure and diagnosis codes into fewer categories of related procedures or diagnoses. The algorithm then uses four tables of procedures and diagnoses categories and a flow diagram to classify tables as planned or unplanned. Additional information on this software is available at: https:// www.hcup-us.ahrq.gov/toolssoftware/ ccs/ccs.jsp. For all measures, the first table identifies procedures that, if present in a readmission, classify the readmission as planned. The second table identifies primary discharge diagnoses that always classify readmissions as planned. Because almost all planned admissions are for procedures or surgeries, a third table identifies procedures for which patients are typically admitted; if any of these procedures is coded in the readmission, we classify a readmission as planned as long as that readmission does not have an acute (unplanned) primary discharge diagnosis. The fourth table lists the acute (unplanned) primary discharge diagnoses that disqualify readmissions that include one or more of the potentially planned procedure in the third table as planned. These tables are structured the same across all measures but the specific procedure and conditions they contain vary slightly for certain measures based on clinical considerations for each cohort. The current tables for each measure can be found in the measure methodology reports at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/Measure-Methodology. html. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28224 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Version 3.0 modifies two of these tables by removing or adding procedures or conditions to improve the accuracy of the algorithm. First, the validation study revealed that the algorithm could be improved by removing two procedure CCS categories from the third table, the potentially planned procedure table: CCS 211— Therapeutic Radiation and CCS 224— Cancer Chemotherapy. Typically, patients do not require admission for scheduled Therapeutic Radiation treatments (CCS 211). The study found that readmissions that were classified as planned because they included Therapeutic Radiation were largely unplanned. The algorithm was also more accurate when CCS 224—Cancer Chemotherapy was removed from the potentially planned procedure table. The second table of the algorithm classifies all readmissions with a principal diagnosis of Maintenance Chemotherapy as planned. Most patients who receive cancer chemotherapy have both a code for Cancer Chemotherapy (CCS 224) and a principal discharge diagnosis of Maintenance Chemotherapy (CCS 45). In the validation study, the readmissions for patients who received Cancer Chemotherapy (CCS 224) but who did not have a principal diagnosis of Maintenance Chemotherapy were largely unplanned, therefore removing CCS 224 from the potentially planned procedure table improved the algorithm’s accuracy. Therefore, Version 3.0 removes CCS 211 and CCS 224 from the list of potentially planned procedures to improve the accuracy of algorithm. As noted above, the algorithm uses a table of acute principal discharge diagnoses to help identify unplanned readmissions. Readmissions that have a principal diagnosis listed in the table are classified as unplanned, regardless of whether they include a procedure in the potentially planned procedure table. The validation study identified one diagnosis CCS that should be added to the table of acute diagnoses to more accurately identify truly unplanned admissions as unplanned: Hypertension with Complications (CCS 99). Hypertension with complications is a diagnosis that is rarely associated with planned readmissions. In addition, the validation study identified a subset of ICD–9 diagnosis codes within two CCS diagnosis categories that should be added to the acute diagnosis table to improve the algorithm. CCS 149, Pancreatic Disorders, includes the code for acute pancreatitis; clinically there is no situation in which a patient with this VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 acute condition would be admitted for a planned procedure. Therefore, Version 3.0 adds the ICD–9 code for acute pancreatitis, 577.0, to the acute primary diagnosis table to better identify unplanned readmissions. Finally, CCS 149, Biliary Tract Disease, is a mix of acute and non-acute diagnoses. Adding the subset of ICD–9 codes within this CCS group that are for acute diagnoses to the list of acute conditions improves the accuracy of the algorithm for these acute conditions while still ensuring that readmissions for planned procedures, like cholecystectomies, are counted accurately as planned. For more detailed information on how the algorithm is structured and the use of tables to identify planned procedures and diagnoses, we refer readers to CMS’s Planned Readmission Algorithm Version 2.1: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. As noted above, readers can find the specific Version 3.0 tables for each measure in the measure updates and specifications reports at the above link. We invite public comment on our proposal to use the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/TKA, HWR, COPD, and Stroke readmission measures for the FY 2015 payment determination and subsequent years. b. Proposed Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures In this proposed rule, for the FY 2015 payment determination and subsequent years, we are proposing to refine: (1) The measure outcome and cohort for the Elective Primary THA/TKA All-Cause 30-Day Risk-Standardized Complication Measure (NQF #1550); and (2) the measure cohort for the Elective Primary THA/TKA All-Cause Unplanned 30-Day Risk-Standardized Readmission Measure (NQF #1551). As part of measure implementation, CMS conducted a dry run for both the THA/TKA readmission and complication measures in September/ October of 2012. More information on the dry run is available at: https:// www.qualitynet.org/dcs/BlobServer? blobkey=id&blobnocache=true& blobwhere=1228889945763& blobheader=multipart%2Foctet-stream& blobheadername1=ContentDisposition&blobheadervalue 1=attachment%3Bfilename%3 DDryRun_HWR-HK_SummRept_122112. PO 00000 Frm 00248 Fmt 4701 Sfmt 4702 pdf&blobcol=urldata&blobtable=Mungo Blobs. During the dry run, several commenters suggested CMS evaluate the use of Present on Admission (POA) codes for both the hip/knee readmission and complication measures. We agreed with the suggestion and have been monitoring POA data collection and testing its readiness for use in claimsbased measures. We also noted our intent to evaluate the use of POA codes in Hospital IQR Program measures, such as the stroke mortality rate measure, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50801). We have since tested the use of the POA codes and propose to incorporate POA codes into the hip/ knee complication measure for FY 2015 payment determination and subsequent years in order to prevent identifying a condition as a complication of care if it was present during admission. In addition, currently, the THA/TKA Readmission Measure (NQF #1551) adopted for the Hospital IQR Program is intended to only include patients who have an elective THA or TKA. Currently, this measure excludes patients who have a principal discharge diagnosis of femur, hip, or pelvic fracture on their index admission since hip replacement for hip fracture is not an elective procedure. However, after hospitals reviewed their hospitalspecific THA/TKA Readmission Measure data during the national dryrun, CMS learned that hospitals code hip fractures that occur during the same admission as a THA as not only a principal diagnosis, but also alternatively, a secondary diagnosis, instead of just a principal diagnosis as currently specified by the measure. According to feedback received from hospitals participating in the dry-run, the measure methodology failed to identify, and, appropriately exclude, a small number of patients (that is, 0.42 percent of patients in 2009–2010 data) with a hip fracture that had non-elective total hip arthroplasty as captured by these secondary diagnoses. Therefore, to ensure that all such nonelective hip fracture patients are excluded from the measure, we are proposing to refine the measure to exclude patients with hip fractures coded as either a principal or secondary diagnosis during the index admission beginning with the FY 2015 payment determination and subsequent years. We believe this refinement is responsive to comments from hospitals (78 FR 50709) and will allow us to accurately exclude patients who were initially admitted for a hip fracture and who then subsequently underwent total hip E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules arthroplasty, making their procedure non-elective. We invite public comment on these proposed refinements. c. Anticipated Effect of Proposed Refinements to Existing Measures mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Based on our analyses of discharges between July 2009 and June 2012, our proposal to use the Planned Readmission Algorithm Version 3.0 would have the following effects on measures had these changes been applied for the FY 2014 payment determination as an example. We are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 sharing this information to provide the public with a sense of the extent to which these refinements to the measures will change the measure scores. As the results show, while the refinements improve the accuracy of the measures, the changes in actual scores are very slight. The proposed 30-day readmission rate (excluding the planned readmissions) would increase by 0.1 percentage points for AMI; 0.2 percentage points for HF; 0.1 percentage points for PN; 0.1 percentage points for COPD; 0.0 percentage points for hip/knee; 0.1 PO 00000 Frm 00249 Fmt 4701 Sfmt 4702 28225 percentage points for HWR; and 0.0 percentage points for stroke. The new national measure (unplanned) rate for each condition would have been 18.4 percent for AMI; 23.2 percent for HF; 17.7 percent for PN; 21.1 percent for COPD; 5.4 percent for hip/knee; 16.1 percent for HWR; and 13.8 percent for stroke. The number of readmissions considered planned (and, therefore, not counted as a readmission) would decrease by 334 for AMI; 1,375 for HF; 981 for PN, 574 for COPD; 309 for hip/ knee; 7,417 for HWR; and 242 for stroke. E:\FR\FM\15MYP2.SGM 15MYP2 VerDate Mar<15>2010 Number of Discharges .... Number of Unplanned Readmissions .............. Readmission Rate .......... Number of Planned Readmissions .................. Planned Readmission Rate ............................. % of Readmissions that are Planned ................. V 2.1 513,331 AMI 93,940 18.3% 12,281 2.4% 11.6% 513,331 V 3.0 94,453 18.4% 11,947 2.3% 11.2% HF 20:20 May 14, 2014 5.3% 1.3% 16,230 292,976 23.2% 1,262,826 V 3.0 5.7% 1.4% 17,605 290,450 23.0% 1,262,826 V 2.1 PN 3.3% 0.6% 6,545 192,887 17.7% 1,089,758 V 3.0 3.8% 0.7% 7,526 191,797 17.6% 1,089,758 V 2.1 COPD 3.0% 0.7% 6,447 208,759 21.1% 989,381 V 3.0 3.3% 0.7% 7,021 207,770 21.0% 989,381 V 2.1 4.7% 0.3% 2,326 47,236 5.4% 879,641 V 3.0 5.3% 0.3% 2,635 47,236 5.4% 879,641 V 2.1 Hip/Knee HWR 7.1% 1.2% 85,673 1,112,885 16.1% 6,918,467 V 3.0 7.8% 1.3% 93,180 1,105,378 16.0% 6,918,467 V 2.1 Stroke 7.7% 1.1% 5,750 69,323 13.8% 502,376 V 3.0 8.0% 1.2% 5,992 69,081 13.8% 502,376 V 2.1 COMPARISON OF PLANNED READMISSION ALGORITHMS V 2.1 AND 3.0 FOR AMI/HF/PN/COPD/HK/HWR/STROKE READMISSION MEASURES (BASED ON 2009– 2012 DISCHARGES) mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28226 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Jkt 232001 PO 00000 Frm 00250 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 7. Proposed Additional Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years For purposes of the Hospital IQR Program, section 1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act. However, the statutory requirements under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We are proposing to add a total of eleven measures to measure set for the FY 2017 payment determination and subsequent years. The first nine new measures are: (1) Hospital 30-day, allcause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery (claims-based); (2) Hospital 30day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery (claims-based); (3) Hospitallevel, risk-standardized 30-day episodeof-care payment measure for pneumonia (claims-based); (4) Hospital-level, riskstandardized 30-day episode-of-care payment measure for heart failure (claims-based); (5) Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) (chart-abstracted); (6) EHDI–1a Hearing Screening Prior to Hospital Discharge (NQF #1354) (electronic health record-based); (7) PC– 05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (NQF #0480) (electronic health record-based); (8) CAC–3 Home Management Plan of Care (HMPC) Document Given to Patient/ Caregiver (electronic health recordbased); and, (9) Healthy Term Newborn (NQF #0716) (electronic health recordbased). In addition, to align the Hospital IQR Program with the Medicare EHR Incentive Program for Eligible Hospitals and Critical Access Hospitals and allow hospitals as many measure options as possible that overlap both programs, we are proposing to readopt two measures previously removed from the Hospital VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 IQR Program as voluntary electronic clinical quality measures: (10) AMI–2 Aspirin Prescribed at Discharge for AMI (NQF #0142) (electronic clinical quality measure); and (11) AMI–10 Statin Prescribed at Discharge (NQF #0639) (electronic clinical quality measure). These two measures are part of the Stage 2 Medicare EHR Incentive Program measure set for eligible hospitals and CAHs. The four proposed claims-based measures (1–4, above) were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2013’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP 2014 Recommendations on Measures for More Than 20 Federal Programs final report, available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. The proposed chart-abstracted measure (5 above) Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) was included in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS final report, available at: https://www.qualityforum. org/WorkArea/linkit.aspx?LinkIdentifier =id&ItemID=72738. The proposed measures 6–9 above were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS final report, available at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. Measures 10 and 11 were included on a publicly available document entitled ‘‘Measures Under Consideration for Calendar Year 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its Pre-Rulemaking Report: Input on Measures Under Consideration by HHS for 2012 Rulemaking available at https://www.qualityforum.org/ Publications/2012/02/MAP_PreRulemaking_Report__Input_on_ Measures_Under_Consideration_by_ HHS_for_2012_Rulemaking.aspx. PO 00000 Frm 00251 Fmt 4701 Sfmt 4702 28227 a. Proposed Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery (1) Background CABG is a priority area for outcomes measure development, because it is a common procedure associated with considerable morbidity, mortality, and health care spending. In 2007, there were 114,028 hospitalizations for CABG surgery and 137,721 hospitalizations for combined surgeries for CABG and valve procedures (‘‘CABG plus valve’’ surgeries) in the U.S.44 Readmission rates following CABG surgery are high and vary across hospitals. For example, in 2009 Medicare fee-for-service (FFS) data, the median hospital-level risk-standardized readmission rate after CABG was 17.2 percent and ranged from 13.9 percent to 22.1 percent.45 This is consistent with published data as the average 30-day allcause, hospital-level readmission rate in New York state was 16.5 percent and ranged from 8.3 percent to 21.1 percent among all patients who underwent CABG surgery between January 1, 2005 and November 30, 2007.46 Among patients readmitted within 30 days, 87.3 percent of readmissions were for reasons related to CABG surgery, with a 30-day rate of readmissions due to complications of CABG surgery of 14.4 percent. Patients readmitted within 30 days also experienced a 2.8 percent inhospital mortality rate during their readmission(s), three-fold higher than the 30-day mortality rate for patients without readmissions.47 Hence, addressing the causes of readmission will improve outcomes for patients. Readmissions after CABG also impose significant health care costs. In 2007, the Medicare Payment Advisory Committee (MedPAC) published a report to Congress in which it identified the seven conditions associated with the most costly potentially preventable 44 Drye E, Krumholz H, Vellanky S, Wang Y. Probing New Conditions and Procedures for New Measure Development: Yale New Haven Health Systems Corporation; Center for Outcomes Research and Evaluation.; 2009:1–7. 45 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 46 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. 47 Ibid. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28228 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules readmissions in the U.S.48 Among these seven, CABG ranked as having the highest potentially preventable readmission rate within 15 days following discharge (13.5 percent) and the second highest average Medicare payment per readmission ($8,136).49 The annual cost to Medicare for potentially preventable CABG readmissions was estimated at $151 million. High readmission rates and wide variation in these rates suggest that there is room for improvement. Reducing readmissions after CABG surgery has been identified as a target for quality measurement. An all-cause readmission measure for patients who undergo CABG surgery will provide hospitals with an incentive to reduce readmissions through prevention and/or early recognition and treatment of postoperative complications, and improved coordination of peri-operative care and discharge planning. The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. We are proposing to include this nonNQF-endorsed measure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this proposed rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF. We also are not aware of any other 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The measure has been reviewed by the MAP and was conditionally supported pending NQF endorsement as detailed in its Pre-Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/ Setting_Priorities/Partnership/MAP_ Final_Reports.aspx. This measure was submitted to NQF on February 5, 2014 and is currently under review. 48 Medicare Payment Advisory Committee. Report to the Congress: Promoting Greater Efficiency in Medicare, 2007. 49 Ibid. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (2) Overview of Measure The CABG readmission measure assesses hospitals’ 30-day, all-cause risk-standardized rate of unplanned readmission following admission for a CABG procedure. In general, the measure uses the same approach to risk adjustment and hierarchical logistic modeling (HLM) methodology that is specified for CMS’s other readmission measures previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (3) Data Sources The proposed measure is claimsbased. It uses Medicare administrative data from hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG procedure. (4) Outcome The outcome for this measure is 30day, all-cause readmission, defined as an unplanned subsequent inpatient admission to any applicable acute care facility for any cause within 30 days of the date of discharge from the index hospitalization. This outcome period is consistent with other NQF-endorsed publicly reported readmission measures (AMI, HF, PN, COPD, HWR and, THA/ TKA). The measure assesses all-cause unplanned readmissions (excluding planned readmissions) rather than readmissions for CABG only for several reasons. First, from the patient perspective, a readmission for any reason is likely to be an undesirable outcome of care, even though not all readmissions are preventable. Second, limiting the measure to CABG-related readmissions may limit the effort focus too narrowly rather than encouraging broader initiatives aimed at improving the overall care within the hospital and transitions from the hospital setting. Moreover, it is often hard to exclude quality issues and accountability based on the documented cause of readmission. For example, a patient who underwent a CABG surgery and develops a hospital-acquired infection may ultimately be readmitted for sepsis. It would be inappropriate to consider such a readmission to be unrelated to the care the patient received for their CABG surgery. Finally, while the measure does not presume that each readmission is preventable, interventions generally have shown PO 00000 Frm 00252 Fmt 4701 Sfmt 4702 reductions in all types of readmissions.50 51 The measure does not count planned readmissions as readmissions. Planned readmissions would be identified in claims data using the CMS Planned Readmission Algorithm Version 3.0 that detects planned readmissions that may occur within 30 days of discharge from the hospital. Version 2.1 of the algorithm was finalized for use in the current Hospital IQR Program readmission measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787, 50790 through 50792 and 50794 through 50798). However, we are proposing to update the algorithm to version 3.0, and details on the updates to this algorithm can be found in section IX.A.6.a. of the preamble of this proposed rule. The proposed CABG readmission measure uses the planned readmission algorithm tailored for CABG patients. We adapted the algorithm for this group of patients with input from CABG surgeons and other experts, narrowing the types of readmissions considered planned since planned readmissions following CABG are less common and less varied than among patients discharged from the hospital following a medical admission. More detailed information on how the CABG measure incorporates the Planned Readmission Algorithm Version 3.0 can be found on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. Once at the Web site go to the Coronary Artery Bypass Graft (CABG) Readmission zip file. Open the file labeled, ‘‘Version10_Readmission_ CABG_Measure_Methodology_Report_3 19 2014’’ and refer to Section 2.3.3. For the CABG measure, unplanned readmissions that fall within the 30-day post-discharge timeframe from the index admission would not be counted as readmissions for the index admission if they were preceded by a planned readmission. (5) Cohort The cohort includes patients aged 65 years and older who received a qualifying CABG procedure at an acute care facility. Patients are eligible for 50 Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency Department Visit and Readmission in Patients Hospitalized for Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct. 2010;170:1664– 1670. 51 Nelson EA, Maruish ME, Axler JL.: Effects of Discharge Planning and Compliance with Outpatient Appointments on Readmission Rates. Psychiatr Serv. July 1 2000;51(7):885–889. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules inclusion if they had a qualifying CABG procedure and continuous enrollment in Medicare FFS one year prior to the first day of the index hospital stay and through 30 days post-discharge. The index stay is the stay that triggers the 30-day measurement period. In order to include a clinicallycoherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and non-cardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures, that is, CABG procedures performed without concomitant high-risk cardiac and non-cardiac procedures.52 Limiting the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes; 9 therefore, the measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort for quality measurement. For detailed information on the cohort definition, we refer readers to the 2012 CABG Readmission Measure Methodology Report on the CMS Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who are discharged against medical advice (excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); (2) admissions for patients who die during the initial hospitalization (these patients are not eligible for readmission); (3) admissions for patients with subsequent qualifying CABG procedures during the measurement 52 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery, therefore we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort); and (4) admissions for patients without at least 30 days post-discharge enrollment in Medicare FFS (excluded because the 30day readmission outcome cannot be assessed in this group). (7) Risk-Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for readmission relative to patients cared for by other hospitals. The measure uses claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. The model does not adjust for socioeconomic status or race because risk adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk adjustment would obscure. (8) Calculating the Risk-Standardized Readmission Ratio (RSRR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the CABG hospitalization, as well as those present in the claims for care at admission. The methodology, however, specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSRR is calculated as the ratio of the number of predicted readmissions to the number of expected readmissions PO 00000 Frm 00253 Fmt 4701 Sfmt 4702 28229 and then the ratio is multiplied by the national unadjusted readmission rate. The ratio is greater than one for hospitals that have more readmissions that would be expected for an average hospital with similar cases and less than one if the hospital has fewer readmissions than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSRR is a point estimate—the best estimate of a hospital’s readmission rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/QualityInitiatives PatientAssessmentInstruments/Hospital QualityInits/Measure-Methodology. html. We invite public comment on this proposal. b. Proposed Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery 53 (1) Background CABG is a priority area for outcomes measure development because it is a common procedure associated with considerable morbidity, mortality, and health care spending. In 2007, there were 114,028 hospitalizations for CABG surgery and 137,721 hospitalizations for combined surgeries for CABG and valve procedures (‘‘CABG plus valve’’ surgeries) among Medicare FFS patients in the U.S.54 CABG surgeries are costly procedures that account for the majority of major cardiac surgeries performed nationally. In FY 2009, isolated CABG surgeries accounted for almost half (47.6 percent) of all cardiac surgery hospital 53 Krumholz H. CABG Mortality Measure Methodology Report Section 1, Subtask 3.1, Deliverable #49a: Yale New Haven Systems Corporation; Center for Outcomes Research and Evaluation; 2012. 54 Drye E, Krumholz H, Vellanky S, Wang Y. Probing New Conditions and Procedures for New Measure Development: Yale New Haven Systems Corporation; Center for Outcomes Research and Evaluation; 2009:7. E:\FR\FM\15MYP2.SGM 15MYP2 28230 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 admissions in Massachusetts.55 This provides an example of the frequency in which a CABG Is performed for a patient admitted for cardiac surgery. In 2008, the average Medicare payment was $30,546 for CABG without valve and $47,669 for CABG plus valve surgeries.56 Mortality rates following CABG surgery are not insignificant and vary across hospitals. For example, in 2009 Medicare FFS data indicated that the median hospital-level, risk-standardized mortality rate after CABG was 3.0 percent and ranged from 1.5 percent to 7.9 percent.57 Even within a single state, the observed in-hospital, 30-day allcause, hospital-level mortality rate was 1.81 percent and ranged from 0.0 percent to 5.6 percent among patients who were discharged after CABG surgery (without any other major heart surgery earlier in the hospital stay) in New York in 2008. The risk-adjusted mortality rate ranged from 0.0 percent to 8.2 percent.58 Variation in these rates suggests that there is room for improvement. An allcause mortality measure for patients who undergo CABG surgery will provide hospitals with an incentive to reduce mortality through improved coordination of perioperative care and discharge planning. This is further supported by the success of registrybased mortality measures in reducing CABG mortality rates. For example, California reports that CABG mortality in that state has steadily declined from 2.9 percent in 2003, the first year of mandatory reporting of their state registry measure, to 2.2 percent in 2008.59 The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. We are proposing to include this nonNQF-endorsed measure in the Hospital 55 Massachusetts Data Analysis Center. Adult Coronary Artery Bypass Graft Surgery in the Commonwealth of Massachusetts: Hospital and Surgeons Risk-Standardized 30-Day Mortality Rates. In: Health MDoP, ed. Boston; 2009:77. 56 Pennsylvania Health Care Cost Containment Council. Cardiac Surgery in Pennsylvania 2008– 2009. Harrisburg; 2011:60. 57 Ibid. 58 New York State Department of Health. Adult Cardiac Surgery in New York State 2006–2008; 2010:54. 59 California CABG Outcomes Reporting Program. The California Report on Coronary Artery Bypass Graft Surgery: 2007–2008 Hospital and Surgeon Data. 2011:119. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this proposed rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery. We also are not aware of any other 30-day, allcause, RSMR measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The measure has been reviewed by the MAP and was conditionally supported pending NQF endorsement as detailed in its Pre-Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. This measure was submitted to NQF on March 17, 2014 and is currently under review. (2) Overview of Measure The CABG mortality measure assesses hospitals’ 30-day, all-cause riskstandardized rate of mortality following admission for a CABG procedure. In general, the measure uses the same approach to risk adjustment and hierarchical logistic modeling (HLM) methodology that is specified for CMS’s other mortality measures previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Mortality Measure Methodology Report (available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (3) Data Sources The proposed measure is claimsbased. It uses Medicare administrative data from hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG procedure. (4) Outcome The outcome for this measure is 30day, all-cause mortality, defined as death for any cause within 30 days of the date of the index procedure date. We use a standard period of assessment so that the outcome for each patient is measured consistently. Without a standard period, variation in length of stay would have an undue influence on PO 00000 Frm 00254 Fmt 4701 Sfmt 4702 mortality rates, and institutions would have an incentive to adopt strategies to shift deaths out of the hospital without improving quality. The measure differs from the timeframe used in the other 30day mortality measures in the Hospital IQR Program by starting the outcome window from the procedure date rather than the admission date. Data from 2009 Medicare FFS patients demonstrates that 25 percent of CABG procedures occurred more than 3 days after the admission date. Therefore, dating the measurement period from admission would potentially underestimate the period of risk for a substantial number of hospitals. We chose 30-day mortality because it is an outcome that can be strongly influenced by hospital care and the early transition to the outpatient setting. Clinical experts concur that a 30-day timeframe is clinically sensible for measuring outcomes following CABG surgery. The measure assesses all-cause mortality rather than CABG-specific mortality for several reasons. First, limiting the measure to CABG-related mortalities may limit the focus of efforts to improve care to a narrow set of approaches as opposed to encouraging broader initiatives aimed at improving the overall in-hospital care. Second, cause of death may be unreliably recorded and it is often not possible to exclude quality issues and accountability based on the documented cause of mortality. Finally, from a patient perspective, death due to any cause is the outcome that matters. (5) Cohort The cohort includes patients aged 65 years and older who received a qualifying CABG procedure at an acute care facility. Patients are eligible for inclusion if they had a qualifying CABG procedure and continuous enrollment in Medicare FFS one year prior to the first day of the index hospital stay and through 30 days post-procedure. In order to include a clinicallycoherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and non-cardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures, that is, CABG procedures performed without concomitant high-risk cardiac and non-cardiac procedures.60 Limiting 60 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes; 61 therefore, the measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort for quality measurement. For detailed information on the cohort definition, we refer readers to the 2012 CABG Mortality Measure Methodology Report on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who leave hospital against medical advice excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); and (2) admissions for patients with subsequent qualifying CABG procedures during the measurement period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery, therefore we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort). (7) Risk-Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for death relative to patients cared for by other hospitals. The measure uses claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race because risk adjusting for these characteristics would hold hospitals with a large proportion of minority or low 61 Ibid. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 28231 socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk adjustment would obscure. Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We invite public comment on this proposal. (8) Calculating the Risk-Standardized Mortality Ratio (RSMR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the CABG hospitalization, as well as those present in the claims for care at admission. The methodology, however, specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSMR is calculated as the ratio of the number of predicted deaths to the number of expected deaths and then the ratio is multiplied by the national unadjusted mortality rate. The ratio is greater than one for hospitals that have more deaths than would be expected for an average hospital with similar cases and less than one if the hospital has fewer deaths than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSMR is a point estimate—the best estimate of a hospital’s mortality rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// www.cms.gov/Medicare/Quality- c. Proposed Hospital-Level, RiskStandardized 30-Day Episode-of-Care Payment Measure for Pneumonia PO 00000 Frm 00255 Fmt 4701 Sfmt 4702 (1) Background Providing high-value care is an essential part of our mission to provide better health care for individuals, better health for populations, and lower costs for health care. In order to incentivize innovation that promotes high-quality care at high value it is critical to examine measures of payment and patient outcomes concurrently. There is evidence of variation in payments at hospitals for pneumonia patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for pneumonia in 2008–2009 was $13,237, and ranged from $8,281 to $27,975 across 4,155 hospitals. However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the value of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Therefore, we are proposing to include this non-NQFendorsed measure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this proposed rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital riskstandardized payment associated with a 30-day episode-of-care for pneumonia. We also are not aware of any other 30day episode-of-care pneumonia measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure but reiterated the need for this measure to be submitted for NQF-endorsement: https://www.qualityforum.org/Setting_ Priorities/Partnership/MAP_Final_ Reports.aspx. This measure was submitted to the NQF for endorsement on April 18, 2014. We believe it is important to adopt this measure as pneumonia is one of the leading causes of hospitalization for E:\FR\FM\15MYP2.SGM 15MYP2 28232 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Americans 65 and over, and pneumonia patients incur roughly $10 billion in aggregate health care costs.62 Furthermore, because 30-day all-cause mortality and readmission measures for pneumonia are already publicly reported, pneumonia serves as a model condition for assessing relative value for an episode of care that begins with an acute hospitalization because including this measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information about a hospital’s quality and cost of care for pneumonia. The measure reflects differences in the management of care for patients with pneumonia both during hospitalization and immediately post-discharge. By focusing on one specific condition, value assessments may provide actionable feedback to hospitals and incentivize targeted improvements in care. (2) Overview of Measure and Rationale for Examining Payments for a 30-Day Episode-of-Care The pneumonia payment measure assesses hospital risk-standardized payment associated with a 30-day episode-of-care for pneumonia for any hospital participating in the Hospital IQR Program. The measure includes Medicare FFS patients aged 65 or older admitted for pneumonia and calculates payments for these patients over a 30day episode-of-care beginning with the index admission. In general, the measure uses the same approach to riskadjustment as our 30-day outcome measures previously adopted for the Hospital IQR Program. We refer readers to our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. When examining variation in payments, consideration of the episodeof-care triggered by admission is meaningful for several reasons. First, hospitalizations represent a brief period of illness that requires ongoing management post-discharge and decisions made at the admitting hospital affect payments for care in the immediate post-discharge period. Second, attributing payments for a continuous episode-of-care to admitting hospitals may reveal practice variations in the full care of the illness that can result in increased payments. Third, a 62 Lindenauer PK, Lagu T, Shieh M, Pekow PS, Rothberg MB. Association of diagnostic coding with trends in hospitalizations and mortality of patients with pneumonia, 2003–2009. JAMA: The Journal of the American Medical Association. 2012;307(13):1405–1413. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 30-day preset window provides a standard observation period by which to compare all hospitals. Lastly, the pneumonia payment measure is intended to be paired with our 30-day pneumonia mortality and readmission measures and capture payments for Medicare patients across care settings, services, and supplies, except for Medicare Part D (that is, inpatient, outpatient, skilled nursing facility, home health, hospice, physician/ clinical laboratory/ambulance services, supplier Part B items, and durable medical equipment, prosthetics/ orthotics, and supplies). We have posted the measure methodology report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We refer readers to the report for further details on the risk adjustment statistical model as well as the model results. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations and payments for Medicare FFS beneficiaries hospitalized with pneumonia. (4) Outcome The primary outcome of the pneumonia payment measure is the hospital-level risk-standardized payment for a pneumonia episode-ofcare. The measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. By risk-standardizing the payment measure, we are able to adjust for case-mix at any given hospital and compare a specific hospital’s pneumonia payment to other hospitals with the same case-mix. The analytic time frame for the pneumonia payment measure begins with the index admission for pneumonia and ends 30 days post-admission. In order to isolate payment variation that reflects practice patterns rather than CMS payment adjustments, the pneumonia payment measure excludes policy and geography payment adjustments unrelated to clinical care decisions. We achieve this by ‘‘stripping’’ or ‘‘standardizing’’ payments for each care setting. Stripping refers to removing geographic differences and policy adjustments in payment rates for individual services from the total payment for that service. Standardizing refers to averaging payments across geographic areas for those services where geographic differences in payment cannot be PO 00000 Frm 00256 Fmt 4701 Sfmt 4702 stripped. Stripping and standardizing the payment amounts allows for a fair comparison across hospitals based solely on payments for decisions related to clinical care of pneumonia. (5) Cohort We created the pneumonia payment measure cohort to be aligned with the publicly reported pneumonia mortality measure cohort. Consistent with these measures, the pneumonia payment measure includes hospitalizations with a principal hospital discharge diagnosis of pneumonia using the International Classification of Diseases, Ninth revision, Clinical Modification (ICD–9– CM). These measures will use data from July 2010–Jun 2013 which does not yet include the period for which ICD–10 codes are mandatory. ICD–10 will officially be implemented on October 1, 2015. A full list of ICD–9–CM codes included in the final cohort can be found in Appendix B of the technical report on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. The measure includes only those hospitalizations from short-stay acute care hospitals in the index cohort and restricts the cohort to patients enrolled in FFS Medicare Parts A and B (with no Medicare Advantage coverage). (6) Inclusion and Exclusion Criteria The pneumonia payment measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk adjustment. An index admission/hospitalization is the initial pneumonia admission that triggers the 30-day episode-of-care for this payment calculation. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients with fewer than 30 days of post-admission enrollment in Medicare because this is necessary in order to identify the outcome (payments) in the sample over the analytic period; (2) admissions for patients having a principal diagnosis of pneumonia during the index hospitalization who were transferred from another acute care facility are excluded, because the hospital where the patient was initially admitted made the critical acute care decisions (including the decision to transfer and where to transfer); (3) admissions for pneumonia patients who were discharged on the same or next day as the index admission and did not die or get transferred are excluded, because it is unlikely these patients E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules suffered a clinically significant pneumonia; (4) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded, because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; (5) admissions for patients who are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (6) admissions for patients transferred to or from federal or Veterans Administration hospitals are excluded, because we do not have claims data for these hospitals; thus, including these patients would systematically underestimate payments; and (7) admissions without a DRG or DRG weight for the index hospitalization are excluded, because we cannot calculate a payment for these patients’ index admission using the IPPS; this would underestimate payments for the entire episode-of-care. There are two portions of the DRG system that determine how much a provider is reimbursed. The first is the DRG itself which indicates the reason a patient was admitted. The second is the DRG weight which determines the severity of the admission. Without either of these, we were unable to calculate the payment for the index admission. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (7) Risk Adjustment The measure adjusts for differences across hospitals in how payments are affected by patient comorbidities relative to patients cared for by other hospitals. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race, because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk-adjustment would obscure. (8) Calculating the Risk-Standardized Payment (RSP) The measure is calculated using a hierarchical generalized linear model with a log link and a Poisson error distribution. This is a widely accepted statistical method that enables fair evaluation of relative hospital performance by taking into account patient risk factors as well as the number of patients that a hospital treats. This statistical model accounts for the structure of the data (patients clustered VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 within hospitals) and calculates: (1) How much variation in hospital payment overall is accounted for by patients’ individual risk factors (such as age and other medical conditions); and (2) how much variation is accounted for by hospital-specific performance. This approach appropriately models a positive, continuous, right-skewed outcome like payment and also accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The hierarchical generalized linear model is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals and sample sizes vary across hospitals. Clustered patients are within the same hospital, and the quality of care of the hospital affects all patients, so the outcomes for each hospital’s patients are not fully independent (that is, completely unrelated) as is assumed by many statistical models. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the pneumonia hospitalization, as well as those present in the claims for care at admission. This methodology specifically does not, however, account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSP is calculated as the ratio of predicted payments to expected payments and then the ratio is multiplied by the national unadjusted average payment for an episode of care. The ratio is greater than one for hospitals that have higher payments than would be expected for an average hospital with similar cases and less than one if the hospital has lower payments than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or ‘‘risk-adjusted’’ rate used in other similar types of statistical analyses. The RSP is a point estimate—the best estimate of a hospital’s payment based on the hospital’s case mix. To calculate the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate, we use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than PO 00000 Frm 00257 Fmt 4701 Sfmt 4702 28233 expected). The interval estimate indicates that the true value of the payment ratio lies between the lower limit and the upper limit of the interval. For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. This measure is meant to be paired with our 30-day pneumonia mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We invite public comment on this proposal. d. Proposed Hospital-Level, RiskStandardized 30-day Episode-of-Care Payment Measure for Heart Failure (1) Background There is evidence of variation in payments at hospitals for heart failure patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for heart failure in 2008–2009 was $13,922, and ranged from $9,630 to $20,646 across 3,714 hospitals. However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the value of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Therefore, we are proposing to include this non-NQFendorsed measure: hospital riskstandardized payment associated with a 30-day episode-of-care for heart failure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this proposed rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital riskstandardized payment associated with a 30-day episode-of-care for heart failure. We also are not aware of any other 30day episode-of-care heart failure measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure but reiterated the need for this measure to be submitted for NQF-endorsement: E:\FR\FM\15MYP2.SGM 15MYP2 28234 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 https://www.qualityforum.org/Setting_ Priorities/Partnership/MAP_Final_ Reports.aspx. The HF measure was submitted to NQF and is currently under review as part of the cost and resource use project. We believe it is important to adopt this measure as heart failure is one of the leading causes of hospitalization for Americans 65 and over and costs roughly $34 billion annually.63 64 Furthermore, because 30-day all-cause mortality and readmission measures for heart failure are already publicly reported, heart failure serves as a model condition for assessing relative value for an episode of care that begins with an acute hospitalization. Including this measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information about a hospital’s quality and cost of care for heart failure. The measure reflects differences in the management of care for patients with heart failure both during hospitalization and immediately post-discharge. By focusing on one specific condition, value assessments may provide actionable feedback to hospitals and incentivize targeted improvements in care. (2) Overview of Measure and Rationale for Examining Payments for a 30-Day Episode-of-Care The heart failure payment measure assesses hospital risk-standardized payment associated with a 30-day episode-of-care for heart failure for any hospital participating in the Hospital IQR Program. The measure includes Medicare FFS patients aged 65 or older admitted for heart failure and calculates payments for these patients over a 30day episode-of-care beginning with the index admission. In general, the measure uses the same approach to riskadjustment as our 30-day outcome measures previously adopted for the Hospital IQR Program. We refer readers to the measure methodology report on our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. When examining variation in payments, consideration of the episodeof-care triggered by admission is meaningful for several reasons. First, 63 Russo CA, Elixhauser, A. Hospitalizations in the Elderly Population, 2003. Agency for Healthcare Research and Quality. 2006. 64 Heidenriech PA, Trogdon JG, Khavjou OA, Butler J, Dracup K, Ezekowitz MD, et al. Forecasting the future of cardiovascular disease in the United States: a policy statement from the American Heart Association. Circulation. 2011;123(8):933–44. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospitalizations represent brief periods of illness that require ongoing management post-discharge; and decisions made at the admitting hospital affect payments for care in the immediate post-discharge period. Second, attributing payments for a continuous episode-of-care to admitting hospitals may reveal practice variations in the full care of the illness that can result in increased payments. Third, a 30-day preset window provides a standard observation period by which to compare all hospitals. The term preset window means that every admission will be tracked 30 days post admission in order to apply a standardized measurement window. In order to compare payments across providers it is important that the comparison window is identical for each admission at each hospital. Lastly, the heart failure payment measure is intended to be paired with our 30-day heart failure mortality and readmission measures and capture payments for Medicare patients across all care settings, services, and supplies, except for Medicare Part D (that is, inpatient, outpatient, skilled nursing facility, home health, hospice, physician/clinical laboratory/ambulance services, supplier Part B items, and durable medical equipment, prosthetics/ orthotics, and supplies). We have posted the measure methodology report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We refer readers to the report for further details on the risk adjustment statistical model as well as the model results. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations and payments for Medicare FFS beneficiaries hospitalized with heart failure. (4) Outcome The primary outcome of the heart failure payment measure is the hospitallevel risk-standardized payment for a heart failure episode-of-care. The measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. By risk-standardizing the payment measure, we are able to adjust for case-mix at any given hospital and compare a specific hospital’s heart failure payment to other hospitals with the same case-mix. The analytic time frame for the heart failure payment measure begins with the index admission for heart failure and ends 30 PO 00000 Frm 00258 Fmt 4701 Sfmt 4702 days post-admission. The index admission is any admission included in the measure calculation that begins the 30-day AMI episode of care. In order to isolate payment variation that reflects practice patterns rather than CMS payment adjustments, the heart failure payment measure excludes policy and geography payment adjustments unrelated to clinical care decisions. We achieve this by ‘‘stripping’’ or ‘‘standardizing’’ payments for each care setting. These concepts were also discussed previously in the proposed hospital-level, riskstandardized 30-day episode-of-care payment measure for pneumonia measure in section IX.A.7.c.(4) of the preamble of this proposed rule. (5) Cohort We created the heart failure payment measure cohort to be aligned with the publicly reported heart failure mortality measure cohort. Consistent with these measures, the heart failure payment measure includes hospitalizations with a principal hospital discharge diagnosis of heart failure using ICD–9–CM codes included in the final cohort can be found in Appendix B of the technical report on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. The measure will be using data from July 2010–Jun 2013 which does not yet include the period where ICD–10 codes are mandatory. ICD–10–CM/PCS will officially be implemented on October 1, 2015; therefore, the measure will not include ICD–10 data for another three reporting periods. An index admission/ hospitalization is the initial heart failure admission that triggers the 30-day episode-of-care for this payment calculation. The measure includes only those hospitalizations from short-stay acute care hospitals in the index cohort and restricts the cohort to patients enrolled in FFS Medicare Parts A and B (with no Medicare Advantage coverage). These hospitalizations are the admissions which were included in the measure after applying all inclusion/ exclusion criteria. (6) Inclusion and Exclusion Criteria The heart failure payment measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients with fewer than 30 days of post-admission enrollment in E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Medicare because this is necessary in order to identify the outcome (payments) in the sample over the analytic period; (2) admissions for patients having a principal diagnosis of heart failure during the index hospitalization who were transferred from another acute care facility are excluded, because the hospital where the patient was initially admitted made the critical acute care decisions (including the decision to transfer and where to transfer); (3) admissions for heart failure patients who were discharged on the same or next day as the index admission and did not die or get transferred are excluded, because it is unlikely these patients suffered a clinically significant heart failure; (4) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded, because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; (5) admissions for patients who are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (6) admissions for patients transferred to or from federal or Veterans Administration hospitals are excluded, because we do not have claims data for these hospitals; thus, including these patients would systematically underestimate payments; (7) admissions without a DRG or DRG weight for the index hospitalization are excluded, because we cannot calculate a payment for these patients’ index admission using the IPPS; this would underestimate payments for the entire episode-of-care; and (8) admissions for patients who receive a heart transplant or LVAD during the index admissions or episode of care because these patients are clinically distinct, generally very high payment cases, and not representative of the typical heart failure patient that this measure aims to capture. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (7) Risk Adjustment The measure adjusts for differences across hospitals in how payments are affected by patient comorbidities relative to patients cared for by other hospitals. The model does not adjust for socioeconomic status or race, because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 illuminate quality differences that such risk-adjustment would obscure. (8) Calculating the Risk-Standardized Payment (RSP) The measure is calculated using hierarchical generalized linear statistical models with a log link and a Gamma error distribution. This approach appropriately models a positive, continuous, right-skewed outcome like payment and also accounts for the types of patients a hospital treats (that is, hospital case-mix), the number of patients it treats, and the quality of care it provides. The hierarchical generalized linear model is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the heart failure hospitalization, as well as those present in the claims for care at admission. This methodology specifically does not, however, account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSP is calculated as the ratio of predicted payments to expected payments and then the ratio is multiplied by the national unadjusted average payment for an episode of care. The ratio is greater than one for hospitals that have higher payments than would be expected for an average hospital with similar cases and less than one if the hospital has lower payments than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or ‘‘risk-adjusted’’ rate used in other similar types of statistical analyses. The RSP is a point estimate—the best estimate of a hospital’s payment based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate, we use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https://cms.gov/Medicare/ PO 00000 Frm 00259 Fmt 4701 Sfmt 4702 28235 Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. This measure is meant to be paired with our 30-day heart failure mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We invite public comment on this proposal. e. Proposed Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500) (1) Background Sepsis, severe sepsis, and septic shock can arise from a simple infection, such as pneumonia or urinary tract infection. Although it can affect anyone at any age, it is more common in infants, the elderly, and patients with chronic health conditions such as diabetes and immunosuppressive disorders seen in transplant patients. Information for this measure comes from the NQF Measure Information-Composite for the severe sepsis and septic shock: management bundle (NQF #0500).65 More information on this issue is available from the Surviving Sepsis Campaign: International Guidelines for Management of Severe Sepsis and Septic Shock: 2012.66 Sepsis is associated with mortality rates of over 16 to 49 percent, which is more than 8 times higher than the rate for inpatient stays for other hospital admissions. Findings from the National Hospital Discharge Survey indicate that the number of hospital stays for septicemia more than doubled between the years of 2000 and 2008, and patients with this condition were more severely ill than patients hospitalized for other conditions. Severe sepsis and septic shock are frequent causes of rehospitalizations, especially during the first year after the initial hospitalization. Based on national discharge data reported by the Agency for Healthcare Research and Quality (AHRQ), sepsis was the sixth most common principal reason for hospitalization in the United States in 2009, accounting for 836,000 hospital stays. There were an additional 829,500 stays with a secondary diagnosis of sepsis for a total of 1,665,400 inpatient stays and 258,000 65 National Quality Forum (NQF). Measure Information-Composite. #500 Severe Sepsis and Septic Shock: Management Bundle. Updated 2014 Jan 2. NQF: Washington, DC https://www.quality forum.org/Home.aspx. 66 Dellinger RP, Levy MM, Rhodes A, Annane D, et al. Surviving Sepsis Campaign: international guidelines for management of severe sepsis and septic shock: 2012. Crit Care Med. 2013 Feb; 41(2):580–637. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28236 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules deaths. From 1993 to 2009, sepsisrelated hospital stays increased by 153 percent, with an average annual increase of 6 percent. Medicare was the predominant payer for sepsis-related hospital stays, covering 58.1 percent of patients. Sepsis cases and sepsis-related deaths are expected to continue to increase with the aging of the population. In a landmark study by Rivers et al.,67 it has been shown that an absolute and relative reduction in mortality from sepsis can be reduced 16 percent and 30 percent, respectively, when aggressive care is provided within 6 hours of hospital arrival. Furthermore, a recent study of the 2008 Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample 68 determined that patients admitted through the Emergency Department had a 17 percent lower likelihood of dying from sepsis than when directly admitted. The severe sepsis and septic shock: management bundle measure (NQF #0500) is NQF endorsed and is conditionally supported by the MAP in its Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier= id&ItemID=72738. The MAP noted the measure addresses an NQS priority not adequately addressed in the program measure set, but conditionally supported this measure stating, ‘‘Not ready for implementation; measure concept is promising but requires modification or further development.’’ In addition, ‘‘MAP noted the need for continued development of electronic specifications for NQF #0500 Severe Sepsis and Septic Shock: Management Bundle. We are recommending this measure because we believe severe sepsis and septic shock are important conditions to monitor. While some workgroup members challenged the feasibility and evidence behind this measure, MAP deferred to the recent endorsement review of this measure and conditionally supported it for the Meaningful Use Program. Public comment from Edwards Lifesciences supports MAP’s conclusion.’’ 67 Rivers E, Nguyen B, Havstad S et al. Early goaldirected therapy in the treatment of severe sepsis and septic shock. N Engl J Med. 2001; 345: 1368– 77. 68 HCUP Nationwide Inpatient Sample (NIS). Healthcare Cost and Utilization Project (HCUP). 2007–2009. Agency for Healthcare Research and Quality, Rockville, MD. https://www.hcup-us. ahrq.gov/nisoverview.jsp. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (2) Overview of Measure The purpose of the proposed severe sepsis and septic shock: management bundle measure is to support the efficient, effective, and timely delivery of high quality sepsis care in support of the Institute of Medicine’s (IOM) aims for quality improvement. This is consistent with the Department of Health and Human Service National Quality Strategy’s priorities directed at one of the leading causes of mortality. By providing timely, patient-centered care, and making sepsis care more affordable through early intervention, reduced resource use and complication rates can result. The severe sepsis and septic shock early management bundle provides a standard operating procedure for the early risk stratification and management of a patient with severe infection. Through applying this standard operating procedure, a clinically and statistically significant decrease in organ failure, mortality, and the utilization of health care resources has been demonstrated for over 10 years. Additional information about this measure is available on the NQF’s Web site at https://www.qualityforum.org/ QPS/0500. (3) Data Sources The proposed measure is chartabstracted data of patients presenting with septic shock who received treatment detailed in the Calculations section below. (4) Outcome The outcome criteria for this measure consists of: measure lactate; blood cultures; timely antibiotics; fluid resuscitation; lactate clearance; vasopressors, central venous pressure (CVP), central venous oxygen saturation (ScvO2); and overall bundle compliance. These are discussed in more detail below: • Measure Lactate Measurement of lactate levels is specifically associated with improved outcomes in sepsis, and an elevated lactate value identifies patients at higher risk for poor outcomes. Up to 10 percent of in-hospital cardiac arrest in the United States per year is secondary to sepsis (pneumonia). These patients are often misdiagnosed and sent to the medical floors only to suffer acute hemodynamic deterioration. These outcomes could be potentially avoided with lactate measurement upon admission providing risk stratification triggering alternative dispositions. Levy et al. (2010) conducted an international, multisite ‘‘Surviving Sepsis Campaign’’ (SSC) initiative (Levy PO 00000 Frm 00260 Fmt 4701 Sfmt 4702 et al. SSC initiative) to determine the rate of change at which the sites reached the SSC guideline targets. In the first quarter of this initiative, only 61.0 percent of patients had lactate values measured consistent with guidelines. In addition, prior studies have shown that care prompted by measurement of lactate levels in sepsis patients reduced resource utilization and cost. This leads to lower likelihood of hospital-acquired conditions. This performance measure has been previously used as a core component of multicenter and national quality improvement initiatives. Formalizing it as a national performance measure will provide direct targets for intervention that are closely linked with improvements in mortality and cost. • Blood Cultures In the first quarter of the Levy et al. SSC initiative, only 64.5 percent of patients had blood cultures collected prior to antibiotic administration. Collecting blood cultures prior to antibiotic administration is specifically associated with improved outcomes in sepsis, and pathogens identified by blood cultures allow for customized therapy. As a result, blood cultures continue as a recommendation of the current Surviving Sepsis Guidelines. By obtaining blood cultures, antibiotic regimens can be customized to treat the specific infecting organism. This will result in less unnecessary exposure to antibiotics, reducing complications associated with antibiotic use, including drug reactions, allergies and adverse events, the development of drugresistant organisms, and the occurrence of Clostridium difficile colitis. The performance measure for collecting blood cultures for suspected sepsis has been previously used and continues as a core component of the SSC guidelines. • Timely Antibiotics Kumar et al.69 found the median time to appropriate antibiotics was 6 hours after shock. In the first quarter of the Levy et al.70 SSC initiative, only 60.4 percent of patients received timely antibiotics. Multiple studies, for example, have demonstrated that delays in administration of appropriate antibiotics in patients with sepsis and other severe infections are associated with longer lengths of stay, higher costs, 69 Kumar A, Roberts D, Wood K, Light B, et al. Duration of Hypotension before Initiation of Effective Antimicrobial Therapy is the Critical Determinant of Survival in Human Septic Shock. Crit Care Med. 2006;34 (6):1589–96. 70 Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign. The Surviving Sepsis Campaign: results of an international guideline based performance improvement program targeting severe sepsis. Crit Care Med. 2010 Feb;38(2):367–74. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules and higher mortality. In septic shock, the Kumar et al. study demonstrated that every hour in delay of appropriate antibiotics was associated with a 7.6 percent higher mortality. The timely administration of broad-spectrum antibiotics was associated with significantly higher risk adjusted survival. Based on a preponderance of data, the current recommendations in the international guidelines for the management of severe sepsis and septic shock includes the administration of broad-spectrum antibiotic therapy within 1 hour of diagnosis of septic shock and severe sepsis. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 • Fluid Resuscitation A common finding in patients with septic shock, manifested by low blood pressure and/or other signs of organ hypoperfusion, such as elevated serum lactate levels, is intravascular volume depletion. The degree of the intravascular volume deficit in sepsis varies, yet nearly all patients require initial volume resuscitation and many patients require continuing fluid resuscitation over the first 24 hours. Early fluid resuscitation is associated with improved outcomes for patients with acute lung injury due to septic shock. International guidelines recommend that patients with suspected hypovolemia be initially treated with at least 30 mL/kg of crystalloid (for example, Ringer’s solution) to determine clinical response. In the first quarter of the Levy et al.71 SSC initiative, only 59.8 percent of patients received fluid resuscitation consistent with guidelines. Timely fluid resuscitation avoids an error of omission in which indicated therapy is delayed or omitted. By improving outcomes, length of stay is reduced. This leads to lower likelihood of hospital-acquired conditions. This performance measure has been previously used as a core component and continues as a core component of the SSC guidelines. Formalizing it as a national performance measure will provide direct targets for intervention that are closely linked with improvements in mortality and cost. • Lactate Clearance Elevated lactate levels prompt the consideration of specific care practices toward hemodynamic optimization guided by either central venous oxygen saturation or lactate clearance. International guidelines recommend that patients with sepsis and continued elevated lactate values have additional therapies until lactate levels are normalized. However, normal lactate 71 Ibid. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 levels can be seen in septic shock, especially in children. • Vasopressors, Central Venous Pressure (CVP), and Central Venous Oxygen Saturation (ScvO2) Performance gaps in individual bundle elements can range from 79 percent (Confidence Interval (CI) (69–89 percent) for vasopressors, to 27 percent (CI 18–36 percent) for Central Venous Pressure (CVP) measurement, and as low as 15 percent (CI 7–23 percent) for Central Venous Oxygen Saturation (ScvO2) in some community emergency departments. These numbers increase (50–75 percent) in larger hospital settings. CVP has been shown to have a significant association with mortality 72 and multiple studies and meta-analysis have shown a significant association with reaching an ScvO2 of 70 percent and improved mortality. • Overall Bundle Compliance Multiple initiatives promoting bundles of care for severe sepsis and septic shock were associated with improved guideline compliance and lower hospital mortality. Even with compliance rates of less than 30 percent, absolute reductions in mortality of 4–6 percent have been noted. Coba et al.73 found that when all bundle elements were completed within 18 hours and compared with patients who did not have bundle completion, the mortality difference was 10.2 percent. Thus, there is a direct association between bundle compliance and improved mortality. Additionally, a continuous quality improvement (CQI) initiative, can improve compliance rates. CQI is a quality management process that encourages continually assessing performance and whether improvements can be made.74 Multiple studies have shown that standardized order sets, enhanced bedside monitor display, telemedicine and comprehensive CQI feedback is feasible, modifies clinician behavior and is associated with decreased hospital mortality. (5) Cohort This measure will focus on patients aged 18 years and older who present with symptoms of severe sepsis or 72 Varpula M, Tallgren M, Saukkonen K, VoipioPulkki LM, Pettila V. Hemodynamic variables related to outcome in septic shock. Intensive Care Med. Jun 23 2005;31:1066–1071. 73 Coba V, Whitmill M, Mooney R, et al. Resuscitation Bundle Compliance in Severe Sepsis and Septic Shock: Improves Survival, Is Better Late than Never. J Intensive Care Med. Jan 10 2011. 74 Edwards PJ, et al. Maximizing your investment in EHR: Utilizing EHRs to inform continuous quality improvement. JHIM 2008;22(1):32–7. PO 00000 Frm 00261 Fmt 4701 Sfmt 4702 28237 septic shock. These patients will be eligible for the 3 hour (severe sepsis) and/or 6 hour (septic shock) early management measures. (6) Inclusion and Exclusion Criteria Numerator Statement: the numerator is: Patients from the denominator who received all the following: Step 1, Step 2, and Step 3 within 3 hours of time of presentation, and if septic shock is present (as either defined as hypotension or lactate >=4 mmol/L), who also received Step 4, Step 5, Step 6, and Step 7 within 6 hours of time of presentation. The steps are described in detail below. Step 1: Measure lactate level Step 2: Obtain blood cultures prior to antibiotics Step 3: Administer broad spectrum antibiotics Step 4: Administer 30 ml/kg crystalloid for hypotension or lactate >= 4 mmol/ L Step 5: Apply vasopressors (for hypotension that does not respond to initial fluid resuscitation to maintain a mean arterial pressure >= 65) Step 6: In the event of persistent arterial hypotension despite volume resuscitation (septic shock) or initial lactate >= 4 mmol/L (36 mg/dl), measure central venous pressure and central venous oxygen saturation Step 7: Re-measure lactate if initial lactate is elevated Denominator: The denominator is the number of patients presenting with severe sepsis or septic shock. The following patients presenting with severe sepsis or septic shock will be excluded from the denominator: • Patients with advanced directives for comfort care; • Patients with clinical conditions that preclude total measure completion; • Patients for whom a central line is clinically contraindicated; • Patients for whom a central line was attempted but could not be successfully inserted; • A patient or a surrogate decision maker declines or is unwilling to consent to such therapies or central line placement; and • Patients who are transferred to an acute care facility from another acute care facility. (7) Calculations In calculating this measure, the denominator is the number of patients presenting with severe sepsis or septic shock. The numerator in this measure is patients from the denominator who had their lactate levels measured, had blood cultures obtained prior to receiving E:\FR\FM\15MYP2.SGM 15MYP2 28238 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules antibiotics, and who received broad spectrum antibiotics within 3 hours of presentation. If septic shock is present, the patients also must receive 30 ml/kg crystalloid for hypotension or lactate >=4 mmol/L, apply vasopressors (for hypotension that does not respond to initial fluid resuscitation to maintain a mean arterial pressure >= 65), in the event of persistent arterial hypotension despite volume resuscitation (septic shock) or initial lactate >=4 mmol/L (36mg/dl) measure central venous pressure and central venous oxygen saturation, and the patient’s lactate level must be re-measured if the initial lactate level is elevated. We invite public comment on this proposal. f. Electronic Health Record-Based Voluntary Measures mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (1) Overview of New Electronic Health Record-Based Voluntary Measures We are proposing four new voluntary electronic health record-based measures to be submitted as electronically specified measures: (1) Hearing Screening Prior to Hospital Discharge (NQF #1354); (2) PC–05 Exclusive Breast Milk Feeding and the Subset Measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (Collectively Referred to as NQF #0480); (3) Home Management Plan of Care (HMPC) Document Given to Patient/ Caregiver (measure de-endorsed therefore not appropriate to associate with an NQF #); (4) and Healthy Term Newborn (NQF #0716). The four proposed electronic health record-based measures were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP Pre Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS. The final MAP report is available at: https://www. qualityforum.org/WorkArea/linkit.aspx? LinkIdentifier=id&ItemID=72746. We considered the input and recommendations provided by the MAP in selecting measures to propose for the Hospital IQR Program. The specifications for the electronic clinical quality measures for eligible hospitals are found at: https://cms.gov/ Regulations-and-Guidance/Legislation/ EHRIncentivePrograms/eCQM_ Library.html. VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 (2) Proposed Voluntary Electronically Specified Measure: Hearing Screening Prior to Hospital Discharge (NQF #1354) The Hearing Screening Prior to Hospital Discharge (NQF #1354) measure assesses the proportion of all live births born at a hospital that have been screened for hearing loss before hospital discharge. The Joint Committee on Infant Hearing encourages early screening and intervention in infants with hearing loss to maximize linguistic competence and literacy development in children with hearing loss or who are hard of hearing. Early intervention improves developmental and social outcomes for children. The States and CDC have collected this measure as a population-based measure for more than 10 years. This measure is NQF-endorsed and was supported by the MAP in their Pre Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id& ItemID=72738. The MAP noted that the measure addresses a high-impact condition not adequately addressed in the program measure set. The numerator is all live births during the measurement period born at a facility and screened for hearing loss prior to discharge, or screened but still not discharged, or not screened due to medical reasons or a medical exclusion. The denominator includes all live births during the measurement period born at a facility and discharged without being screened, or screened prior to discharge, or screened but still not discharged. The measure excludes any patient deceased prior to discharge and has not received hearing screening. (3) Proposed Voluntary Measure: PC–05 Exclusive Breast Milk Feeding and the Subset Measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (Collectively Referred to as NQF #0480) Exclusive breast milk feeding for the first 6 months of neonatal life has long been the expressed goal of World Health Organization (WHO), HHS, American Academy of Pediatrics (AAP) and American College of Obstetricians and Gynecologists (ACOG). The PC–05 Exclusive Breast Milk Feeding measure and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (NQF #0480) is endorsed by the NQF and supported by the MAP in its Pre Rulemaking Report: 2013 Recommendations on Measures Under PO 00000 Frm 00262 Fmt 4701 Sfmt 4702 Consideration by HHS, available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier= id&ItemID=72738. The MAP noted that the measure addresses a high-impact condition not adequately addressed in the program measure set. This measure assesses the number of newborns exclusively fed breast milk during the newborn’s entire hospitalization; and the subset measure only includes those newborns whose mothers chose to exclusively feed breast milk. The numerator is the same for both the measure and subset measure— newborns that were fed breast milk only since birth. However, the denominators differ. For PC–05, the denominator is defined as single term liveborn newborns discharged alive from the hospital with ICD–9–CM Principal Diagnosis Code for single liveborn newborn. The denominator for the subset measure, PC–05a, is defined as single term newborns discharged alive from the hospital excluding those whose mothers chose not to breast feed with ICD–9–CM Principal Diagnosis Code for single liveborn newborn. The ICD–9– CM Principal Diagnosis Codes for single liveborn newborns are found in Appendix A, Table 11.20.1: Single Live Newborn in the Specifications Manual for Joint Commission National Quality Measures available at: https://manual. jointcommission.org/releases/ TJC2013A/AppendixATJC.html. Excluded populations: • Admitted to the Neonatal Intensive Care Unit (NICU) at this hospital during the hospitalization. • ICD–9–CM Other Diagnosis Codes for galactosemia as defined in Appendix A, Table 11.21 in the Specifications Manual for Joint Commission National Quality Measures found at: https:// manual.jointcommission.org/releases/ TJC2013A/AppendixATJC.html. • ICD–9–CM Principal Procedure Code or ICD–9–CM Other Procedure Codes for parenteral infusion as defined in Appendix A, Table 11.22 in the Specifications Manual for Joint Commission National Quality Measures found at: https://manual.joint commission.org/releases/TJC2013A/ AppendixATJC.html. • Experienced death. • Length of Stay >120 days. • Enrolled in clinical trials. • Patients transferred to another hospital. • ICD–9–CM Other Diagnosis Codes for premature newborns as defined in Appendix A, Table 11.23 in the Specifications Manual for Joint Commission National Quality Measures found at: https://manual.joint E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 commission.org/releases/TJC2013A/ AppendixATJC.html. • Documented Reason for Not Exclusively Feeding Breast Milk. The maternal reasons for not exclusively breastfeeding are limited to the following situations: • HIV infection; • Human t-lymphotrophic virus type I or II; • Substance abuse and/or alcohol abuse; • Active, untreated tuberculosis; • Taking certain medications, that is, prescribed cancer chemotherapy, radioactive isotopes, antimetabolites, antiretroviral medications and other medications where the risk of morbidity outweighs the benefits of breast milk feeding; • Undergoing radiation therapy; • Active, untreated varicella; • Active herpes simplex virus with breast lesions; and • Admission to Intensive Care Unit (ICU) post-partum. We invite public comments on this proposal. (4) Proposed Voluntary Measure CAC–3: Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver Asthma is the most common chronic disease in children and a major cause of morbidity and health care costs nationally. For children, asthma is one of the most frequent reasons for admission to hospitals. There were approximately 157,000 admissions for childhood asthma in the United States in 2009. Under-treatment and/or inappropriate treatment of asthma are recognized as major contributors to asthma morbidity and mortality. Guidelines developed by the National Asthma Education and Prevention Program (NAEPP) of the National Heart, Lung and Blood Institute (NHLBI), as well as by the American Academy of Pediatrics (AAP) for the diagnosis and management of asthma in children, recommend establishing a plan for maintaining control of asthma and for establishing plans for managing exacerbations. The CAC–3: Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver measure is no longer endorsed by the NQF and was not supported by the MAP in its PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier= id&ItemID=72738, because the measure no longer meets the NQF endorsement criteria. However, based on the prevalence of asthma among children, VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 as well as the risks associated with under-treatment or over-treatment described above, we believe the measure is appropriate for voluntary collection. Because asthma is a serious, and potentially life-threatening disease, we believe that it is important to allow hospitals to voluntarily report this data, which may help inform our policy. This measure assesses the proportion of pediatric asthma patients (aged 2–17 years) discharged from an inpatient hospital stay with a HMPC document in place. The numerator is the number of pediatric asthma inpatients with documentation that they or their caregivers were given a written HMPC document that addresses: (1) arrangements for follow-up care, (2) environmental control and control of other triggers, (3) method and timing of rescue actions, (4) use of controllers, and (5) use of relievers. The denominator is the number of pediatric asthma inpatients (age 2 years through 17 years) discharged with a principal diagnosis of asthma. The measure excludes: (1) Patients with an age less than 2 years or 18 years or greater; (2) patients who have a length of stay greater than 120 days; and (3) patients enrolled in clinical trials. We invite public comments on this proposal. (5) Proposed Voluntary Measure: Healthy Term Newborn (NQF #0716) This measure assesses the optimal outcome of pregnancy and childbirth, specifically a healthy term newborn. It evaluates the impact of any changes in the management or intervention on the positive outcome for the newborn. The measure is NQF endorsed. The MAP recommended removal of this measure in its Pre Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id& ItemID=72738, because the measure required modification or further development. However, the MAP strongly supported the measure concept for inclusion once technical issues were resolved. Given its endorsement by NQF, as well as the MAP’s strong support for the measure concept, we believe the measure is appropriate for voluntary reporting. The result of the measure calculation is the percentage of term singleton live births (excluding those with diagnoses originating in the fetal period) that do not have significant complications during birth or the nursery care.75 75 National Quality Forum. National Voluntary Consensus Standards for Patient Outcomes 2009. PO 00000 Frm 00263 Fmt 4701 Sfmt 4702 28239 The numerator of this measure is the absence of conditions or procedures reflecting morbidity that happened during birth and nursery care to an otherwise normal infant. The denominator is composed of singleton, term (>=37 weeks), inborn, live births in their birth admission. The denominator further has eliminated fetal conditions likely to be present before labor. Maternal and obstetrical conditions (for example, hypertension, prior cesarean, malpresentation) are not excluded unless there is evidence of fetal effect prior to labor (for example, Intrauterine Growth Restriction (IUGR)/ Small for Gestational Age (SGA)). This measure excludes: (1) Multiple gestations; (2) preterm, congenital anomalies; and, (3) fetuses affected by selected maternal conditions. We invite public comments on this proposal. g. Proposed Readoption of Measures as Voluntarily Reported Electronic Clinical Quality Measures In order to align with the EHR Incentive Program for eligible hospitals (EHs) and critical access hospitals (CAHs), we are proposing to re-adopt two measures previously removed from the Hospital IQR Program; (a) AMI–2 Aspirin Prescribed at Discharge for AMI (acute myocardial infarction) (NQF #0142) (electronic clinical quality measure); and (b) AMI–10 Statin Prescribed at Discharge (NQF #0639) (electronic clinical quality measure). We are proposing to add these measures to the list of voluntarily reported electronic clinical quality measures as described in section IX.A.7.f. of the preamble of this proposed rule. We believe we should continue aligning the Hospital IQR Program and the EHR Incentive Program in order to minimize reporting burden and continue the transition to reporting of electronic clinical quality measures, and we believe voluntary adoption of these measures will further that aim. Further, allowing hospitals the option to electronically report topped-out measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. We welcome public comments on this proposal. (1) Proposed Readoption of AMI–2 Aspirin Prescribed at Discharge (NQF #0142) The AMI–2 Aspirin Prescribed at Discharge (NQF #0142) assesses the Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id&ItemID= 67546. E:\FR\FM\15MYP2.SGM 15MYP2 28240 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules percentage of acute myocardial infarction (AMI) patients who are prescribed aspirin at hospital discharge. The measure is NQF endorsed, but has been placed in reserve status, as the performance on this measure is topped out. The MAP recommended the measure should be suspended and phased out in its Pre-Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.qualityforum. org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. However, as stated above, we intend to continue aligning the Hospital IQR Program and EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. Further, allowing hospitals the option to electronically report topped-out measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. The numerator includes AMI patients in the denominator who are prescribed aspirin at hospital discharge. The denominator includes patients with the following ICD–9–CM principal diagnosis codes of AMI: 410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81, 410.90, and 410.91. The following patients are excluded from this measure: • Patients less than 18 years of age; • Patients who have a length of stay greater than 120 days; • Patients enrolled in clinical trials; • Patients who were discharged to another hospital; • Patients who expired; • Patients who left the hospital against medical advice; • Patients who were discharged to home for hospice care; Acute Myocardial Infarction (AMI) Measures. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Stroke Measure (STK) Set ............. Venous Thromboembolism (VTE) Measure Set. 20:20 May 14, 2014 (2) Proposed Readoption of AMI–10 AMI-Statin Prescribed at Discharge (NQF #0639) AMI–10 AMI-Statin Prescribed at Discharge (NQF #0639) assesses the percent of acute myocardial infarction (AMI) patients who are prescribed a statin at hospital discharge. The measure is NQF endorsed. The MAP recommended phased removal in its Pre-Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier= id&ItemID=72738 because the performance on this measure is likely topped out. However, as stated above, we intend to continue aligning the Hospital IQR Program and EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. Further, allowing hospitals the option to electronically report topped-out measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. The numerator includes AMI patients in the denominator who are prescribed a statin medication at hospital discharge. The denominator includes patients with the following ICD–9–CM principal diagnosis codes of AMI: 410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81, 410.90, and 410.91. The following patients are excluded from this measure: • Patients less than 18 years of age; • Patients who have a length of stay greater than 120 days; • Patients with comfort measures only documented; • Patients enrolled in clinical trials; • Patients who were discharged to another hospital; • Patients who left the hospital against medical advice; • Patients who expired; • Patients who were discharged to their home for hospice care; • Patients who were discharged to a health care facility for hospice care; • Patients with low-density lipoprotein less than 100 mg/dL within the first 24 hours after hospital arrival or 30 days prior to hospital arrival and not discharged on a statin; and • Patients with a reason for not prescribing statin medication at discharge. We invite public comments on this proposal. In summary, for FY 2017 payment determination and subsequent years, we are proposing to: (1) Adopt 11 total measures—9 new measures (4 of which are voluntary electronic clinical quality measures) and 2 previously removed measures re-adopted as voluntary electronic clinical quality measures, and (2) remove 10 measures (4 of which were previously suspended). If finalized, this would give a total of 62 measures (46 required and 16 voluntary electronic clinical quality measures) in the Hospital IQR Program measure set. Set out below is a table showing both the previously adopted and the proposed quality measures for the FY 2017 payment determination and subsequent years. Please note that this table does not include suspended measures or measures proposed for removal. Previously adopted hospital IQR program measures and measures proposed in this proposed rule for the FY 2017 payment determination and subsequent years Topic VerDate Mar<15>2010 • Patients who were discharged to a health care facility for hospice care; • Patients with comfort measures only documented; and • Patients with a documented reason for no aspirin at discharge. We invite public comments on this proposal. • • • • • • • • • • • • • • • AMI–2 Aspirin Prescribed at Discharge for AMI */b/† (NQF #0142). AMI–7a Fibrinolytic therapy received within 30 minutes of hospital arrival b (NQF #0164). AMI–8a Primary PCI received within 90 minutes of hospital arrival b/† (NQF #0163). AMI–10 Statin Prescribed at Discharge */b/† (NQF #0639). STK–1 Venous thromboembolism (VTE) prophylaxis (NQF #0434). STK–2 Discharged on antithrombotic therapy b/† (NQF #0435). STK–3 Anticoagulation therapy for atrial fibrillation/flutter b/† (NQF #0436). STK–4 Thrombolytic therapy b (NQF #0437). STK–5 Antithrombotic therapy by the end of hospital day two b/† (NQF #0438). STK–6 Discharged on statin medication b (NQF #0439). STK–8 Stroke education b. STK–10 Assessed for rehabilitation b/† (NQF #0441). VTE–1 Venous thromboembolism prophylaxis b (NQF #0371). VTE–2 Intensive care unit venous thromboembolism prophylaxis b (NQF #0372). VTE–3 Venous thromboembolism patients with anticoagulation overlap therapy b (NQF #0373). Jkt 232001 PO 00000 Frm 00264 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Previously adopted hospital IQR program measures and measures proposed in this proposed rule for the FY 2017 payment determination and subsequent years Topic Sepsis Measure .............................. Pneumonia (PN) Measure .............. • • • • • Surgical Care Improvement Project (SCIP) Measures. • • • Mortality Measures .......................... • • • • • • Patient Experience of Care Measure. Readmission Measures .................. • • • • • • • • • AHRQ Patient Safety Indicators (PSIs) Composite Measure. AHRQ PSI and Nursing Sensitive Care. Structural Measures ........................ Healthcare-Associated (HAI) Measures. Infections • • • • • • • • • • • • Payment-Standardized Medicare Spending Per Beneficiary (MSPB) (NQF #2158). AMI Payment per Episode of Care. Hospital-level, risk-standardized 30-day episode-of-care payment measure for heart failure.* Hospital-level, risk-standardized 30-day episode-of-care payment measure for pneumonia.* • • mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Emergency Department (ED) Throughput Measures. Prevention: Global Immunization (IMM) Measure. Cost Efficiency ................................ 20:20 May 14, 2014 Death among surgical inpatients with serious treatable complications (NQF #0351). Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care (NQF #0113). Participation in a Systematic Clinical Database Registry for General Surgery (NQF #0493). Safe Surgery Checklist Use. National Healthcare Safety Network (NHSN) Central line-associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753). —SSI following Colon Surgery. —SSI following Abdominal Hysterectomy. National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138). National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716). National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). Influenza vaccination coverage among healthcare personnel (HCP) (NQF #0431). Hospital-level risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550). ED–1 Median time from ED arrival to ED departure for admitted ED patients (NQF #0495). b ED–2 Admit Decision Time to ED Departure Time for Admitted Patients (NQF #0497). b Influenza Immunization (NQF #1659). • Surgical Complications ................... VTE–4 Patients receiving un-fractionated Heparin with doses/labs monitored by protocol b/†. VTE–5 VTE discharge instructions b. VTE–6 Incidence of potentially preventable VTE b (NQF #0376). Severe sepsis and septic shock: management bundle * (NQF #0500). PN–6 Initial Antibiotic Selection for community-acquired pneumonia (CAP) in Immunocompetent Patients b/† (NQF #0147). SCIP INF–1 Prophylactic antibiotic received within one hour prior to surgical incision b/† (NQF #0527). SCIP INF–2 Prophylactic antibiotic selection for surgical patients b/† (NQF #0528). SCIP INF–9 Urinary catheter removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with day of surgery being day zero b/† (NQF #0453). Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older (NQF #0230). Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older (NQF #0229). Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following pneumonia hospitalization (NQF #0468). Stroke 30-day mortality rate. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893). Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery (NQF #1893).* HCAHPS survey (NQF #0166) (expanded to include two new ‘‘About You’’ items and the 3-item Care Transition Measure) (NQF #0228). Hospital 30-day all-cause risk-standardized readmission rate (RSRR) following acute myocardial infarction (AMI) hospitalization (NQF #0505). Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following heart failure hospitalization (NQF #0330). Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following pneumonia hospitalization (NQF #0506). Hospital-level 30-day, all-cause risk-standardized readmission rate (RSRR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551). Hospital-Wide All-Cause Unplanned Readmission (HWR) (NQF #1789). Stroke 30-day Risk Standardized Readmission. Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1891). Hospital 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery.* PSI–90 Patient safety for selected indicators (composite) (NQF #0531). • PSI–4 • VerDate Mar<15>2010 28241 • • Jkt 232001 PO 00000 Frm 00265 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28242 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Topic Previously adopted hospital IQR program measures and measures proposed in this proposed rule for the FY 2017 payment determination and subsequent years Perinatal Care (PC) ........................ • PC–01 Elective delivery b (NQF #0469). • PC–05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (NQF #0480). */b/† • Children’s Asthma Care-3 Home Management Plan of Care (HMPC) document given to patient/caregiver. */b/† • Healthy Term Newborn (NQF #0716). */b/† • Hearing Screening Prior to Hospital Discharge (NQF #1354). */b/† * New or expanded measures for FY 2017 payment determination and subsequent years. b Electronic clinical quality measure. † Voluntary measure. PREVIOUSLY ADOPTED VOLUNTARY ELECTRONIC CLINICAL QUALITY MEASURES AND PROPOSED VOLUNTARY ELECTRONIC CLINICAL QUALITY MEASURES FOR THE FY 2017 PAYMENT DETERMINATION AND ASSOCIATED NQF DOMAINS Short name Measure name ED–1 ................. Emergency Department Throughput—Median time from ED arrival to ED departure for admitted ED patients. Emergency Department Throughput—admitted patients—Admit decision time to ED departure time for admitted patients. Discharged on antithrombotic therapy ..................................................... Anticoagulation therapy for atrial fibrillation/flutter ................................... Thrombolytic Therapy ............................................................................... Antithrombotic therapy by end of hospital day two .................................. Discharged on Statin Medication ............................................................. Stroke education ...................................................................................... Assessed for rehabilitation ....................................................................... Venous thromboembolism prophylaxis .................................................... Intensive care unit venous thromboembolism prophylaxis ...................... Venous thromboembolism patients with anticoagulation overlap therapy Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. VTE discharge instructions ...................................................................... Incidence of potentially preventable VTE ................................................ Elective Delivery ....................................................................................... Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother´s Choice.* Hearing screening prior to hospital discharge * ....................................... Healthy Term Newborn * .......................................................................... Home Management Plan of Care (HMPC) Document Given to Patient/ Caregiver. Aspirin Prescribed at Discharge for AMI * ................................................ Fibrinolytic Therapy Received Within 30 minutes of Hospital Arrival ...... Primary PCI Received Within 90 Minutes of Hospital Arrival .................. Statin Prescribed at Discharge * .............................................................. Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patients. Prophylactic Antibiotic Received within one Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients ............................ ED–2 ................. STK–2 ............... STK–3 ............... STK–4 ............... STK–5 ............... STK–6 ............... STK–8 ............... STK–10 ............. VTE–1 ............... VTE–2 ............... VTE–3 ............... VTE–4 ............... VTE–5 VTE–6 PC–01 PC–05 ............... ............... ............... ............... EHDI–1a ........... CAC–3 .............. AMI–2 ............... AMI–7a ............. AMI–8a ............. AMI–10 ............. PN–6 ................. SCIP–Inf–1a ..... SCIP–Inf–2a ..... SCIP–Inf–9 ....... Domain as assigned in Stage 2 final rule 76 NQF # Urinary catheter removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with day of surgery being day zero. 0495 Patient and Family Engagement. 0497 Patient and Family Engagement. 0435 0436 0437 0438 0439 N/A 0441 0371 0372 0373 N/A Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Patient and Family Engagement. Care Coordination. Patient Safety. Patient Safety. Clinical Process/Effectiveness. Clinical Process/Effectiveness. N/A 0376 0469 0480 Patient and Family Engagement. Patient Safety. Clinical Process/Effectiveness. Clinical Process/Effectiveness. 1354 0716 N/A Clinical Process/Effectiveness. Patient Safety. Patient and Family Engagement. 0142 0164 0163 0639 0147 Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Efficient Use of Healthcare Resources. Patient Safety. 0527 0528 0453 Efficient Use of Healthcare Resources. Patient Safety. * Measure proposed for adoption or readoption in Hospital IQR Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 h. Electronic Clinical Quality Measures (1) Data Submission Requirements for Quality Measures That May Be Voluntarily Electronically Reported for the FY 2017 Payment Determination We believe that collection and reporting of data through health information technology will greatly 76 Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. As we noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we recognize the need to align and harmonize measures across CMS quality reporting PO 00000 Frm 00266 Fmt 4701 Sfmt 4702 programs to minimize the reporting burden imposed on hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087), we finalized a total of 29 clinical quality measures from which hospitals must select at least 16 measures covering three National Quality Strategy (NQS) domains to report beginning in FY 2014. We anticipate that, as health information technology evolves and infrastructure is E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules expanded, we will have the capacity to accept electronic reporting of many of the chart-abstracted measures that are currently part of the Hospital IQR Program. In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the exception of STK–1), VTE, ED, and PC measure sets, we allowed hospitals to either: (1) electronically report at least one quarter of CY 2014 (Q1, Q2, or Q3) quality measure data for each measure in one or more of those four measure sets; or (2) continue reporting all measures in those four measure sets using chart-abstracted data for all four quarters of CY 2014 (78 FR 50818). For the FY 2017 payment determination, we are proposing to expand this policy, such that providers may select to voluntarily report any 16 of the 28 Hospital IQR Program electronic clinical quality measures that align with the Medicare EHR Incentive Program as long as those 16 measures span three different NQS domains. The 28 measures are listed in the table below. Only 28 of the 29 measures adopted in the Medicare EHR Incentive Program are applicable for the Hospital IQR Program, because the measure ED– 3 Median time from ED arrival to ED departure for discharged ED patients (NQF #0496) is an outpatient setting measure. We expect eligible hospitals to select measures that best apply to their patient mix. 28243 For the FY 2017 payment determination, we also are proposing to expand the reporting requirement of electronic clinical quality measures to require a full year’s data collection and submission instead of a minimum of one quarter. In addition, for the FY 2017 payment determination, we are proposing to require data submission within approximately 60 days after the end of a calendar year quarter. We have listed the proposed submission deadlines in the table below. We also refer readers to section IX.D.2. of the preamble of this proposed rule for a description of the electronic clinical quality measures data reporting periods and proposed submission deadlines. CY 2015/FY 2017 ELECTRONIC CLINICAL QUALITY MEASURES DATA REPORTING PERIODS AND PROPOSED SUBMISSION DEADLINES CY 2015 quarter mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1 2 3 4 ............................................... ............................................... ............................................... ............................................... January 1–March 31 ...................................................................... April 1–June 30 ............................................................................. July 1–September 30 .................................................................... October 1–December 31 ............................................................... As an incentive for hospitals to voluntarily submit electronicallyspecified clinical quality measures, we are proposing that for the FY 2017 payment determination, hospitals successfully submitting electronic clinical quality measures according to our procedures will not have to validate those electronic clinical quality measures by submitting chart-abstracted data to validate the accuracy of the measure data submitted electronically. By proposing these changes, we would further align the Hospital IQR Program and the Medicare EHR Incentive Program and promote greater electronic clinical quality measure data reporting for hospitals. In addition, we believe that these changes would ease hospitals’ administrative burden, as they will be able to report the same clinical quality measures once to partially satisfy both the Hospital IQR and Medicare EHR Incentive Programs’ requirements. (2) Public Reporting of Electronic Clinical Quality Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50818), we adopted a policy under which we would only publicly report electronic clinical quality measure data under the Hospital IQR Program if we determined that the data are accurate enough to be reported. However, we noted that the majority of public commenters had opposed our VerDate Mar<15>2010 20:20 May 14, 2014 Proposed submission deadline (2015) Reporting period (2015) Jkt 232001 proposal to withhold the electronically reported data from publication on Hospital Compare, and instead urged us to publicly display it (78 FR 50815). Therefore, for electronic clinical quality measure data submitted for the FY 2016 payment determination, we will publically report the data as previously finalized. However, for the FY 2017 payment determination, we now propose to provide hospitals that voluntarily report one year of electronic clinical quality measure data (as proposed above) an option to have their data reported on Hospital Compare with a preview period prior to public reporting. We also propose to add a footnote next to that publically reported data indicating that it is a result of electronically-specified measures. We welcome public comments on these proposals. 8. Possible New Quality Measures and Measure Topics for Future Years a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018 Payment Determination We anticipate that, as EHR technology changes and improves, hospitals will electronically report all clinical processof-care and HAI measures, which are currently part of the Hospital IQR Program or which have been proposed for adoption into the Program. As stated PO 00000 Frm 00267 Fmt 4701 Sfmt 4702 May 30. Aug 30. Nov 30. Feb 28. above, we intend for the future direction of electronic quality measure reporting to significantly reduce administrative burden on hospitals under the Hospital IQR Program. We will continue to work with measure stewards and developers to develop new measure concepts, and conduct pilot, reliability, and validity testing. We believe that this voluntary reporting option will provide hospitals and CMS with the ability to test systems in CY 2015 for future quality program proposals that, if finalized, will make electronic reporting a requirement instead of voluntary. We believe this will simplify measure collection and submission for the Hospital IQR Program, and will reduce the burden on hospitals to report chart-abstracted measures. We intend to propose to require reporting of electronic clinical quality measures for the Hospital IQR Program beginning for the CY 2016 reporting period or FY 2018 payment determination. We considered proposing to require hospitals to electronically report some Hospital IQR Program quality measures in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27695). After considering public comments, we made electronic reporting voluntary in CY 2014 in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50814). However, after two years, we believe that hospitals E:\FR\FM\15MYP2.SGM 15MYP2 28244 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules are more prepared and should be required to report Hospital IQR Program measures as electronic clinical quality measures beginning in CY 2016. We intend to propose this policy in future rulemaking, but request comments on this intention here. b. Possible Future Electronic Clinical Quality Measures We intend to continue to support the following measure domains in the Hospital IQR Program measure set: effective clinical care (for example, the AMI, PN, STK, and VTE measures), communication and care coordination (for example, the readmission measures), patient safety (for example, the HAI measures), person and caregiver-centered experience (for example, the HCAHPS measure), community/population health (for example, the global immunization measure), and efficiency and cost reduction (for example, the Medicare Spending per Beneficiary measure). This approach will enhance better patient care while aligning the Hospital IQR Program with our other established quality reporting and pay-forperformance programs, such as the Hospital VBP Program. Based on the above approach, we intend to propose to adopt the following electronic clinical quality measures with data collection beginning with October 1, 2016 discharges (or, as described further above, January 1, 2017, if the proposal to align reporting under the Hospital IQR Program and Medicare EHR Incentive Program is finalized) to coincide with EHR Incentive Program Stage 3 collection: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 • Hepatitis B Vaccine Coverage Among All Live Newborn Infants Prior to Hospital or Birthing Facility Discharge NQF #0475 The Hepatitis B Vaccine Coverage Among All Live Newborn Infants Prior to Hospital or Birthing Facility Discharge NQF #0475 measure is NQFendorsed, supported by the MAP and conditionally supported by the MAP as an electronic clinical quality measure for the EHR Incentive Program by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. However, the MAP recommends a review of the electronic specifications of this measure through the NQF endorsement process. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 This measure requires each hospital/ birthing facility to measure its administration of a dose of hepatitis B vaccine to all infants born in their hospital/birthing facility prior to discharge for a specific time period (for example, one calendar year). Hospitals are required to assess infants whose parents refused vaccination for exclusion from the coverage estimate. • PC–02 Cesarean Section NQF #0471 The PC–02 Cesarean Section NQF #0471 is NQF-endorsed and supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_Pre-Rule making_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. The MAP noted that there is an important public education piece to the reporting of PC–02 and recommended that CMS work with others to ensure consumers understand what the results mean and why the measure is important. This measure assesses the number of nulliparous women with a term, singleton baby in a vertex position delivered by cesarean section. • Adverse Drug Events—Hyperglycemia Adverse Drug Events—Hyperglycemia is conditionally supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. Use of this measure would address a very common condition. The MAP expressed concerns over the feasibility of using this measure in the Hospital IQR Program as it has been tested using electronic data and stated that the NQF endorsement process should resolve this issue. This measure assesses the average percentage of hyperglycemic hospital days for individuals with a diagnosis of diabetes mellitus, anti-diabetic drugs (except metformin) administered, or at least one elevated glucose level during the hospital stay. The measure’s numerator is the sum of the percentage of hospital days in hyperglycemia for all admissions in the denominator. The measure’s denominator is the total number of admissions with a diagnosis of diabetes mellitus, at least one administration of insulin or any oral anti-diabetic medication except PO 00000 Frm 00268 Fmt 4701 Sfmt 4702 metformin, or at least one elevated blood glucose value (>200 mg/dL [11.1 mmol/L]) at any time during the entire hospital stay. Exclusions include: (1) Admissions with a diagnosis of diabetic ketoacidosis (DKA) or hyperglycemic hyperosmolar syndrome (HHS); (2) admissions without any hospital days included in the analysis; (3) admissions with lengths of stay greater than 120 days. • Adverse Drug Events—Hypoglycemia Adverse Drug Events—Hypoglycemia is conditionally supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report, which is available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. Use of this measure would address a common condition that is very dangerous to patients. The MAP expressed concerns over the feasibility of using this measure in the Hospital IQR Program as it has been tested using electronic data and that the NQF endorsement process should resolve this issue. This measure assesses the rate of hypoglycemic events following the administration of an anti-diabetic agent. The measure’s numerator is the total number of hypoglycemic events (<40 mg/dL) that were preceded by administration of a short/rapid-acting insulin within 12 hours or an antidiabetic agent other than a short/rapidacting insulin within 24 hours, were not followed by another glucose value greater than 80 mg/dL within 5 minutes, and were at least 20 hours apart. The measure’s denominator is total number of hospital days with at least one antidiabetic agent administered. Exclusions include admissions with length of stay greater than 120 days. We request comments on these possible future measures. 9. Form, Manner, and Timing of Quality Data Submission a. Background Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the applicable percentage increase for FY 2007 and each subsequent fiscal year shall be reduced by 2.0 percentage points (or beginning with FY 2015, by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act)) for any subsection (d) hospital that does not submit, to the Secretary in accordance with this clause and in a E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules form and manner, and at a time, specified by the Secretary, data required to be submitted on measures selected under this clause with respect to such a fiscal year. We note that, in accordance with this section, the FY 2015 payment determination begins the first year that the Hospital IQR Program will reduce the applicable percentage increase by one-quarter of such applicable percentage increase. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also meet specific data collection, submission, and validation requirements. For each Hospital IQR Program year, we require that hospitals submit data on each measure in accordance with the measure’s specifications for a particular period of time. The data submission requirements, Specifications Manual, and submission deadlines are posted on the QualityNet Web site at: https:// www.QualityNet.org/. Hospitals submit quality data through the secure portion of the QualityNet Web site. This Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements for security of protected health information. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also meet specific data collection, submission, and validation requirements. b. Procedural Requirements for the FY 2017 Payment Determination and Subsequent Years The Hospital IQR Program procedural requirements are codified in regulation at 42 CFR 412.140. We refer readers to the codified regulations for participation requirements, as further explained by the FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811). c. Data Submission Requirements for Chart-Abstracted Measures We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) for details on the Hospital IQR Program data submission requirements for chartabstracted measures. We are not proposing any changes to data submission requirements for chartabstracted measures at this time. d. Alignment of the EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines The Hospital IQR Program and the EHR Incentive Program have different reporting and submission periods for clinical quality measures, with hospitals reporting data to the Hospital IQR Program based on calendar year deadlines while the EHR Incentive Program is based on fiscal year deadlines. In addition, the Hospital IQR Program generally requires quarterly reporting and submission of data for chart-abstracted measures while the EHR Incentive Program requires annual submission of clinical process of care measure data. As a result of the different and incongruent Hospital IQR and Medicare EHR Incentive Programs’ schedules, hospitals reporting and submitting measure data to both programs would have to do so multiple times in a calendar year. This discrepancy may create confusion and additional burden for hospitals attempting to report data to both programs. To alleviate this possible confusion and reduce provider burden, beginning with the CY 2015 reporting period/FY 2017 payment determination, we are proposing to incrementally align the data reporting and submission periods for clinical quality measures for the Medicare EHR Incentive Program and the Hospital IQR Program on a calendar year basis. 28245 This proposed change also would also move us closer to meeting our commitment to align quality measurement and reporting among our programs, as we described in the Electronic Health Record Incentive Program –Stage 2 final rule (77 FR 54049 through 54051), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53502 and 53534), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50811 through 50819 and 78 FR 50903 through 50904). In order to ease the transition and prevent the delay of Medicare EHR Incentive Program payments, we are proposing to incrementally shift the Medicare EHR Incentive Program reporting and submission periods for clinical quality measures to align with that of the Hospital IQR Program. We refer readers to section IX.E.2. of the preamble of this proposed rule for a detailed discussion of this proposal in the EHR Incentive Program. Specifically, for the CYs 2015 and 2016, we are proposing in the EHR Incentive Program to require CY reporting, but only for the first three calendar quarters (that is, January through September). This proposal will allow us to align data reporting and submission periods without shifting the EHR incentive payments. We note that for the Hospital IQR Program, for the FY 2017 payment determination, we are proposing to change the November 30th submission deadline to require data submission within approximately 60 days of the close of a quarter. We refer readers to section IX.A.7.h.(1) of the preamble of this proposed rule where this proposal is made. We are also proposing this change in the Medicare EHR Incentive Program in order to align the two programs. We refer readers to section IX.D.2. of the preamble of this proposed rule where this proposal is made. In summary, we are proposing to align the reporting and submission periods of the Medicare EHR Incentive Program clinical quality measures with that of the Hospital IQR Program for CYs 2015 and 2016. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 PROPOSED REPORTING TIMELINE TO ALIGN THE EHR INCENTIVE PROGRAM WITH PROPOSED HOSPITAL IQR PROGRAM SUBMISSION PERIODS CY 2015 Reporting Period ......................................... EHR incentive program reporting requirements* Hospital IQR program reporting requirements Submission period ** Q1 ... January 1—March 31, 2015. April 1—June 30, 2015 ..... January 1—March 31, 2015. April 1—June 30, 2015 ..... July 1—September 30, 2015. July 1—September 30, 2015. Data must be submitted by May 31, 2015. Data must be submitted by August 31, 2015. Data must be submitted by November 30, 2015. Q2 ... Q3 ... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00269 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28246 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED REPORTING TIMELINE TO ALIGN THE EHR INCENTIVE PROGRAM WITH PROPOSED HOSPITAL IQR PROGRAM SUBMISSION PERIODS—Continued CY Hospital IQR program reporting requirements Submission period ** Q4 ... 2016 Reporting Period ......................................... EHR incentive program reporting requirements* N/A for EHR Incentive Program. October 1—December 31, 2015. Q1 ... January 1—March 31, 2016. April 1—June 30, 2016 ..... January 1—March 31, 2016. April 1—June 30, 2016 ..... July 1—September 30, 2016. N/A for EHR Incentive Program. July 1—September 30, 2016. October 1—December 31, 2016. For Hospital IQR Program, Data must be submitted by February 28, 2016. Data must be submitted by May 31, 2016. Data must be submitted by August 31, 2016. Data must be submitted by November 30, 2016. For Hospital IQR Program, Data must be submitted by February 28, 2017. Q2 ... Q3 ... Q4 ... * Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM data only. ** Proposed EHR Incentive Program and Hospital IQR submission period would allow data submission on an ongoing basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the quarter. The Medicare EHR Incentive Program also clarifies case threshold denominator and reporting zero denominators are included in the Medicare EHR Incentive Program at sections IX.D.5. and IX.D.6. of the preamble of this proposed rule. We invite public comments on these proposals. e. Sampling and Case Thresholds for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819) for details on our sampling and case thresholds for the FY 2016 payment determination and subsequent years. We are not proposing any changes to sampling or case thresholds. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 53538), the FY 2014 IPPS/LTCH PPS final rule and (78 FR 50819 through 50820) for details on HCAHPS requirements. We are not proposing any changes to HCAHPS requirements at this time. Hospitals and HCAHPS survey vendors should, however, regularly check the official HCAHPS Web site at https://www.hcahpsonline.org for new information and program updates regarding the HCAHPS Survey, its VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 administration, oversight and data adjustments. g. Data Submission Requirements for Structural Measures for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51643 through 51644), and the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53538 through 53539) for details on the data submission requirements for structural measures. We are not proposing any changes to data submission requirements for structural measures at this time. h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51631 through 51633; 51644 through 51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50820 through 50822) for details on the data submission and reporting requirements for healthcare-associated infection (HAI) measures reported via the CDC’s National Healthcare Support Network (NHSN) Web site. The data submission deadlines are posted on the QualityNet Web site at: https://www.QualityNet. org/. We are not proposing any changes to data submission and reporting requirements for healthcare-associated infection measures reported via the NHSN. 10. Submission and Access of HAI Measures Data Through the CDC’s NHSN Web site As finalized in the FY 2014 Hospital IPPS/LTCH PPS final rule (78 FR 50805 PO 00000 Frm 00270 Fmt 4701 Sfmt 4702 through 50807), the Hospital IQR Program requires hospitals to report data via the CDC’s NHSN Web site for the following HAI measures: (1) CLABSI (NQF #0139); (2) CAUTI (NQF #0138); (3) SSI following colon surgery; (4) SSI following abdominal hysterectomy; (5) laboratory-identified MRSA bacteremia infection (NQF #1716); (6) laboratoryidentified Clostridium difficile infection (NQF #1717); and, (7) healthcare personnel vaccination (NQF #0413). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644 through 51645), we adopted the data submission and reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of specific HAI measures to NHSN. For the FY 2016 payment determination and subsequent years, for the Hospital IQR program, we are clarifying our data reporting and submission requirements for the above stated HAI measures. By adopting the data reporting and submission procedures set forth by the CDC, we intended that hospitals report, through the existing NHSN process, any and all data elements at the patient-level that are designated as ‘‘required’’ on NHSN forms (such as, the ‘‘primary bloodstream infection’’ or ‘‘annual facility survey’’ forms). Some examples of these ‘‘required’’ patient-level data elements include: patient identifier, date of birth, and gender; detailed event data, such as specific symptoms identified to meet case definitions and laboratory results; and risk factor data used to calculate the hospital-level measures. Hospitals may find a comprehensive list of required forms and data elements on the NHSN Web site (https://www.cdc.gov/nhsn/acutecare-hospital/). E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules We further wish to clarify that the NHSN required data collected by the CDC will be shared with CMS for Hospital IQR Program and Hospital VBP Program administration, monitoring and evaluation activities, including validation, appeals review, program impact evaluation, and development of quality measure specifications. CMS routinely uses submitted quality measure data for these types of program administration, monitoring and evaluation activities. In addition, we are proposing that we will also receive access from the CDC to voluntarily submitted name and race identifying information with respect to Hospital IQR Program required measures. These data will also be used for Hospital IQR Program and Hospital VBP Program administration, monitoring and evaluation activities, including validation, appeals review, program impact evaluation, and development of quality measure specifications. More specifically, for Hospital IQR Program validation, we propose to use these data to ensure accurate matching between patient charts submitted for HAI validation that cannot be matched to NHSN using Medicare beneficiary identification numbers. We also propose to use these data as appropriate for program evaluation. We invite public comment on this proposal. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 11. Proposed Modifications to the Existing Processes for Validation of Chart-Abstracted Hospital IQR Program Data In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 53553), we finalized the processes and procedures for validation of chart-abstracted measures in the Hospital IQR Program for the FY 2015 payment determination and subsequent years; this rule also contained a comprehensive summary of all procedures finalized in previous years and still in effect. Several modifications to these processes were finalized for the FY 2016 and FY 2017 payment determinations in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50835). For the FY 2017 payment determination and subsequent years, we are proposing additional modifications to these processes. Proposed changes fall into the following categories: (a) Eligibility criteria for hospitals selected for validation; (b) number of charts to be submitted per hospital for validation; (c) combining scores for HAI and clinical process-ofcare measures; (d) processes to submit medical records for chart-abstracted VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 measures; and (e) plans to validate electronic clinical quality measure data. a. Eligibility Criteria for Hospitals Selected for Validation In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50833 through 50834), for the FY 2016 payment determination and subsequent years, we finalized our process to draw a random sample of 400 hospitals and an additional sample of up to 200 hospitals meeting specific targeting criteria for purposes of validation. For the FY 2017 payment determination and subsequent years, we are proposing one minor change to this process. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227), we defined hospitals eligible for validation as the subset of subsection (d) hospitals that successfully submitted ‘‘at least one case for the third calendar quarter of the year two years prior to the year to which validation applies.’’ For the FY 2017 payment determination and subsequent years, we are proposing to change the definition of validation-eligible hospitals to be the subset of subsection (d) hospitals that successfully submitted at least one case to the Hospital IQR Clinical Data Warehouse during the quarter containing the most recently available data. The quarter containing the most recently available data will be defined based on when the random sample is drawn. For example, for the FY 2017 payment determination, we intend to draw this sample in November or December of 2014. The second quarter (Q2) of 2014 ends in June 2014, but hospitals participating in the Hospital IQR Program may submit quality data from this quarter until November 15, 2014 (see www.qualitynet.org for submission deadlines). If CMS draws its sample early in November 2014, before all the second quarter hospital data are submitted and processed by the Clinical Data Warehouse, the ‘‘quarter containing the most recently available data’’ will be first quarter (Q1) of 2014. On the other hand, if CMS draws its sample late November or early December 2014 after the second quarter 2014 hospital data are processed, the second quarter of 2014 will contain the most recently available data. We are proposing this change because, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50825), for the FY 2017 annual payment determination and subsequent years, we changed the timing of quarters for validation of HAI measures, as illustrated in the three graphs (78 FR 50824). To align with this change for HAI measures and to give hospitals more time to complete HAI validation PO 00000 Frm 00271 Fmt 4701 Sfmt 4702 28247 template requirements once selected, we intend to draw the validation sample several months sooner than we have historically drawn it. Historically, we drew the sample early in each calendar year. This proposal provides us with greater flexibility for when we can sample hospital data and allows CMS to use the most recent data available to select hospitals. We invite public comment on this proposal. b. Number of Charts To Be Submitted per Hospital for Validation (1) Background In the sections that follow, we are proposing to: (1) Change the number of charts hospitals must submit for validation; (2) change the measurespecific sample sizes for HAI validation; and (3) change the topic areas and sample design for clinical process-ofcare measures. We are proposing these changes because Section 1886(o) of the Act requires the Hospital VBP Program to use a subset of Hospital IQR Program measures and there is a declining number of measures and chartabstracted measure topic areas available to the Hospital VBP Program. Our proposals also will direct more resources to measures and topic areas that also overlap with the Hospital VBP Program. Finally, our proposals will ensure that all chart-abstracted measure topic areas containing required measures within the Hospital IQR Program are included in validation. A more detailed rationale accompanies each proposal. As described in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53539 through 53553), the Hospital IQR Program validates chart-abstracted data submitted to two different systems: clinical process-of-care data submitted to the Hospital IQR Program Clinical Data Warehouse and HAI data submitted to the NHSN. Different validation approaches are used for the data submitted to each of the systems. The process for selecting and validating HAI data was first introduced in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51646 through 51648) and has evolved annually in each successive IPPS/LTCH PPS rule. In contrast, validation of the clinical process of care measures, which involves separate samples for each topic area, has not substantively changed since it was first finalized for the FY 2012 payment determination in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43884 through 43889). E:\FR\FM\15MYP2.SGM 15MYP2 28248 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (2) Proposed Number of Charts to be Submitted for Validation (A) Total Number of Charts Required for Validation mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Our current policy requires hospitals to submit 96 charts for validation (60 charts for clinical process-of-care measures and 36 charts for HAIs) (78 FR 50825 through 50834). For the FY 2017 payment determination and subsequent years, we are proposing to require hospitals selected for Hospital IQR Program validation to submit 18 patient charts per quarter for a total of 72 charts per year. A sample size of 72 charts is statistically estimated to be the number of charts needed to determine whether an individual hospital clearly passed validation and to assess hospital performance across both types of measures (HAIs and clinical process-ofcare) combined. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53551), hospitals may fall into three validation categories: (1) Hospitals pass validation with a lower bound of the confidence interval greater than or equal to 75 percent; (2) hospitals fail validation with an upper bound for a hospital’s confidence interval lower than 75 percent; and (3) hospitals neither pass nor fail validation with a 90 percent confidence interval that includes values above and below 75 percent. Hospitals in the third category that neither pass nor fail validation receive their annual payment update, but may be randomly sampled for inclusion in the targeted validation in the following year. We estimate that a sample of 72 charts will be sufficient to estimate a reliability of 75 percent +/- 10 percent with 90 percent confidence, assuming a design effect no greater than 1.4. Historical data suggests that most hospitals in the Hospital IQR Program pass validation and validated data have a high level of accuracy. For example, for the FY 2013 payment determination, approximately 95 percent of hospitals validated had data reliability of 85 percent or higher. With a sample of 72 charts and an expected mean data reliability well above 85 percent, we should be able to identify most hospitals that pass validation. Of the remaining hospitals, we will use the same conservative approach to identify hospitals failing validation that we have used since the inception of the Hospital IQR Program. (B) Number of Charts Required for HAI and Clinical Process-of-Care Measures As finalized in the FY 2014 IPPS/ LTCH PPS final rule for the FY 2017 payment determination and future years, we require hospitals to submit 9 charts for HAI measures per quarter (78 FR 50831) and for the FY 2016 payment determination and future years, we require hospitals to submit 15 charts for clinical process-of-care measures per quarter for validation (78 FR 50830). For the FY 2017 payment determination and subsequent years, we are proposing that of the 18 charts proposed to be submitted per quarter (above), 10 charts would be submitted to validate HAI measures and 8 charts would be submitted to validate clinical processof-care measures. This would equal 72 charts per year with a mix of 40 HAI and 32 clinical process-of-care measure charts. We are proposing to require more HAI charts than clinical processof-care measure charts because HAI measures now, as proposed, have a greater impact on the Hospital VBP and the Hospital-Acquired Condition (HAC) Reduction Programs. Considering only the relative importance of HAIs and clinical process-of-care charts to the Hospital VBP Program, which is about 4 times as great, CMS might choose a ratio larger than 10 HAI charts for every 8 clinical process-of-care charts. However, we estimate that CMS spends about 4 times as much money per chart to validate HAIs than clinical processof-care measures. Moreover, the clinical process of care measures are still a critical part of the Hospital IQR Program. Therefore, CMS proposed this mix of 40 HAI and 32 clinical process of care charts per year because we believe it to be optimal after considering both the relative importance of the two types of charts to the Hospital IQR Program and related payment incentive programs and the relative cost of validation for the two types of charts. We invite public comment on these proposals. (3) HAI Validation: Measures and Measure-Specific Sample Sizes In the FY 2014 IPPS/LTCH final rule (78 FR 50828 through 50832) for the FY 2016 payment determination and subsequent years, we finalized the HAI measures to be included in validation, the processes for completing validation, and the specific sample sizes for each. To validate HAI data, hospitals must use Validation Templates to provide supplemental data to CMS. These supplemental data provide CMS with a set of candidate infections for each HAI. As finalized previously, hospitals sampled for validation will be randomly assigned to provide two Validation Templates, either: (1) CLABSI and CAUTI, or 2) MRSA and CDI. Consequently, up to 300 hospitals will provide data on each of these 4 measures. We also previously finalized a decision to validate a smaller number of patient charts for SSI from twice as many hospitals because of the smaller number of candidate SSIs expected per hospital per quarter. We are not proposing to change the process for validating individual measures. However, above in this section, we are proposing to increase the total HAI sample size by 1 chart per quarter for a total of 4 more charts per year. As explained below in this section, HAI measures have greater relative scoring weights in the Hospital VBP and HAC Reduction Programs than clinical process-of-care measures. Therefore, in order to align the Hospital IQR Program with the Hospital VBP and HAC Reduction Programs, we are proposing to increase measure-specific sample size targets to support this 1 chart per quarter increase in the Hospital IQR Program for the FY 2017 payment determination and subsequent years. Specifically, the total number of charts for CLABSI, CAUTI, MRSA, and CDI would increase by 1 from 15 to 16; and the total number of charts for SSI would increase by 2 from 6 to 8. The previously finalized and proposed specific sample-size charts are detailed in the tables below. PREVIOUSLY FINALIZED NUMBER OF CHARTS REQUIRED FOR HAI VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS HAI Number of hospitals Previously Finalized: Central line associated bloodstream infections (CLABSI) ........... Catheter-associated urinary tract infections (CAUTI) .................. MRSA ........................................................................................... Number of quarters Up to 300 ................... Up to 300 ................... Up to 300 ................... VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00272 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM Charts/quarter/ hospital 4 4 4 15MYP2 * 3.75 * 3.75 * 3.75 Number of charts per hospital 15 15 15 28249 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PREVIOUSLY FINALIZED NUMBER OF CHARTS REQUIRED FOR HAI VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued HAI Number of quarters Number of hospitals CDI ............................................................................................... SSI ................................................................................................ Up to 300 ................... Up to 600 ................... Charts/quarter/ hospital 4 4 Number of charts per hospital * 3.75 * 1.5 15 6 * As previously finalized, within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI, and 3, 3, and 1 respectively for MRSA, CDI, and SSI. As finalized, 2 additional charts per quarter per hospital were to be randomized to meet the fractional case targets on average. PROPOSED NUMBER OF CHARTS TO BE SUBMITTED FOR HAI VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS HAI Number of quarters Number of hospitals Proposed: Central line associated bloodstream infections (CLABSI) ........... Catheter-associated urinary tract infections (CAUTI) .................. MRSA ........................................................................................... CDI ............................................................................................... SSI ................................................................................................ We invite public comment on this proposal. (4) Clinical Process of Care Measures: Topic Areas and Sample Design As discussed above in this section, we are proposing to sample 8 total patient charts for clinical process-of-care measures per quarter per hospital included in validation for the Hospital IQR Program for the FY 2017 payment determination and subsequent years. Those 8 charts are discussed in greater detail below. As shown in the table below, two other Hospital IQR Program clinical Up Up Up Up Up to to to to to 300 300 300 300 600 ................... ................... ................... ................... ................... process-of-care topic areas overlap with measures proposed for inclusion in the FY 2017 Hospital VBP Program. Regardless, we are not proposing to target those topic areas for the following reasons. One of these measures, PC–01, Elective delivery prior to 39 completed weeks of gestation, is reported in aggregate. We cannot use the same mechanism to validate PC–01 as we use for measures reported at the patient level, but we hope to include it in our validation program in the future should reporting PC–01 as an electronic clinical quality measure becomes a requirement. Charts/quarter/ hospital 4 4 4 4 4 Number of charts per hospital 4 4 4 4 2 16 16 16 16 8 The second measure is AMI–7a. AMI–7a describes a process of care only performed in small rural hospitals. Of the approximately 3,300 hospitals participating in the Hospital IQR Program for the FY 2015 payment determination, only 113 submitted cases for this measure in the first two quarters of CY 2013. Therefore, targeting hospitals that report the AMI–7a measure would unduly single out small rural hospitals that disproportionately report relatively high AMI–7a measure denominator counts for validation, and would be inequitable. NUMBER OF CHART-ABSTRACTED CLINICAL PROCESS-OF-CARE MEASURES PER TOPIC AREA PROPOSED TO BE REPORTED IN THE HOSPITAL IQR PROGRAM IN THE CY 2014 AND CY 2015 DATA COLLECTION PERIODS * Number of required measures reported in CY 2014 for FY 2016 hospital IQR program mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Topic area Number of required measures proposed for CY 2015 for FY 2017 hospital IQR program 2 1 1 7 6 8 2 1 0 1 1 0 0 0 5 4 2 1 1 1 Acute Myocardial Infarction (AMI) ......................................................................................... Heart Failure (HF) ................................................................................................................. Pneumonia (PN) .................................................................................................................... Surgical Care Improvement Project (SCIP) .......................................................................... Venous thromboembolism (VTE) .......................................................................................... Stroke (STK) .......................................................................................................................... Emergency department throughput (ED) .............................................................................. Prevention—global immunization (IMM) ............................................................................... Sepsis .................................................................................................................................... Perinatal Care (PC) ** ........................................................................................................... Proposed to include in the Hospital VBP program for FY 2017 Yes. No. No. No. No. No. No. Yes. No. Yes. * Data validated for the FY 2017 payment determination are Quarter 3, CY 2014, Quarter 4, CY 2014 Quarter 1, CY 2015 and Quarter 2, CY 2015 (78 FR 50824). ** Not reported at the patient level and not proposed for inclusion in validation. For the FY 2017 payment determination and subsequent years, we VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 are proposing that the remaining 5 of the 8 clinical process-of-care charts be PO 00000 Frm 00273 Fmt 4701 Sfmt 4702 drawn from a systematic random sample of charts across all topic areas E:\FR\FM\15MYP2.SGM 15MYP2 28250 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 containing required measures other aside from those in the immunization and perinatal care topic areas. Across all hospitals included in validation, we believe this approach will ensure adequate numbers of patient charts are sampled for each topic area. Under this proposal, the pool of clinical process-ofcare topic areas sampled for validation will include: STK, VTE, ED, and sepsis, as well as all other IQR required topic areas such as AMI. We received many comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through 50810; 78 FR 50825) regarding the importance of validating VTE, STK, and ED measures not included in validation for the FY 2016 payment determination. With this proposal, STK, VTE, ED, and sepsis measures would be included in the pool of clinical process-of-care measures for validation. The systematic random sample of topic areas from this pool would ensure that charts are sampled proportionate to the number of charts submitted for each topic. Thus, a sample of 20 charts per year would not be limited to only one topic area by random occurrence. In addition, across all hospitals included in validation, we believe this approach will ensure adequate numbers of patient charts are sampled for each topic area.77 This proposal simultaneously simplifies the sampling plan for clinical process-of-care measures and gives us the flexibility of introducing or removing new topic areas into validation each year without having to redesign and propose a new sampling strategy. Using a random sample ensures that new topic areas are not excluded from the validation sample and we can more easily adjust as the topic areas change over the years. If this proposal is finalized, every time a new required topic area is added to the Hospital IQR Program, it will automatically be added to validation, and every time a topic is removed from the Hospital IQR Program, it will automatically be excluded from validation. We invite public comment on these proposals. (5) Immunization Measure Validation We are proposing for the Hospital IQR Program for the FY 2017 payment determination and subsequent years, that 3 of the 8 total patient charts each quarter be targeted from the Immunization topic area. Currently, this topic area only includes the Immunization for Influenza (NQF #1659) measure, which overlaps with 77 We used data submitted to the Clinical Data Warehouse for the Hospital IQR Program from VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the Hospital VBP Program. We want to ensure that every hospital included in validation is validated for this topic area because of the overlap. c. Combining Scores for HAI and Clinical Process of Care Topic Areas We refer readers to the FY 2010 IPPS/ LTCH PPS final rule (74 FR 43885) for the process of scoring clinical processof-care measures, the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50832 through 50833) for the process of scoring HAI measures, and FY 2014 IPPS/LTCH PPS final rule (78 FR 50833) for the process to be used to compute the confidence interval. We are not proposing any changes to those established policies. However, for the FY 2017 payment determination and subsequent years, we are proposing to modify our approach to weighting the scores for each of the HAI, IMM and ‘‘other topic areas’’ with two proposals. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53548 through 53553), we established a process to combine the HAI and clinical process-of-care measure scores by weighting them proportionate to the number of measures included in validation. For example, in section IX.A.11.b.4. of the preamble of this proposed rule, our proposal to validate all clinical process of care measures required by the Hospital IQR Program for the FY 2017 payment determination would yield 14 clinical process-of-care measures in validation in CY 2015 and only 5 HAI measures in validation. Using the previously finalized weights, the clinical process of care measures score would contribute 14/19 and the HAI score would contribute only 5/19 to the combined score. This weighting does not reflect either the relative importance of HAIs to clinical process of care measures in the Hospital VBP Program nor the resources proposed to devote to their validation. In sections IV.I. and IV.J. of the preamble of this proposed rule (the Hospital VBP Program and the HAC Reduction Program, respectively), we are proposing to weight the patient safety domain (of which the HAI measures are part) more heavily in the Hospital VBP Program (20 percent for the patient safety domain versus 5 percent for the clinical process of care measures) and to use the HAI measures for the HAC Reduction Program. In this section, we are proposing to weight the HAI measures more heavily than the quarters 1 and 2 of 2013 to estimate that at least PO 00000 Frm 00274 Fmt 4701 Sfmt 4702 clinical process of care scores to align with these proposals in sections IV.I and IV.J. For the FY 2017 payment determination and subsequent years, we are proposing to weight the HAI score 66.7 percent (or 2/3) of the total score and the clinical process-of-care measures to weight 33.3 percent (or 1/3) of the total score. Further justification is provided after the second proposal. In addition, we are proposing to weight the IMM measures more heavily than other chart-abstracted clinical process-of-care measures validated in the Hospital IQR Program to align with the Hospital VBP Program. We are changing the process currently established to calculate the clinical process-of-care score, which is based on application of the formulas for the variance of a stratified single-stage cluster sample with unequal cluster sizes and the variance of a proportion in a stratified random sample (see reference to Cochran’s ‘‘Sampling Techniques’’ at 75 FR 50226 and 78 FR 53550). We have previously applied this formula without consideration for the relative importance of different measures. When so applied, each topic area is weighted proportionate to the amount of data submitted to the warehouse for that topic area. However, we are proposing to modify the formulas as previously applied to weight the IMM topic area more heavily because of the overlap with the Hospital VBP Program. For the FY 2017 payment determination and subsequent years, we are proposing to weight the ‘‘IMM’’ clinical topic area as 66.7 percent (2/3) and all other topic areas combined 33.3 percent (1/3) of the clinical process-ofcare score. The weights reflect our policy preference to place greater relative weight on Hospital VBP Program included measures to better ensure accurate scores and payment. Emphasizing chart-abstracted clinical process of care measures validated in the Hospital IQR Program to align with the Hospital VBP Program will address the need to validate Hospital IQR Program data not currently included in Hospital VBP Program for public reporting and validation feedback to hospitals. The table below shows the effect of the two proposals combined (the first to weight the HAI score more heavily than the clinical process-of-care score and the second to weight IMM data more heavily than other clinical process-ofcare topic areas). The HAI topic area will count 3 times as much as the IMM 400 cases per topic area would be validated per year (across all hospitals). E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28251 topic area and 6 times as much as all other topic areas combined. PROPOSED WEIGHTING TO COMBINE SCORES ACROSS CHART-ABSTRACTED TOPIC AREAS INCLUDED IN VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Weight (percent) Topic area Health care associated infection (HAI) ........................................................................................................................................ Immunization (IMM) ..................................................................................................................................................................... Other (AMI, ED, sepsis, STK, VTE) ............................................................................................................................................ 66.7 22.2 11.1 Total ...................................................................................................................................................................................... 100 Previously, the clinical process of care measures accounted for 20 percent of the Hospital VBP Program score, whereas the HAI measures were a subset of the outcome measures weighted 30 percent (FR 53605 through 53606). The proposed relative weights for the HAI (66 percent) and IMM (22 percent) topic areas better reflect the strong emphasis we are proposing for the HAI measures. These proposals will require adjustments to the formulas applied to compute the confidence intervals. As we have done in the past, we intend to post the specific formulas used to compute the confidence interval on the QualityNet Web site at least one year prior to final computation (https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnet Tier2&cid=1138115987129). These formulas will continue to account appropriately for the manner in which patient charts were sampled and data were abstracted. We invite public comment on these proposals. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 d. Processes To Submit Patient Medical Records for Chart-abstracted Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50834 through 50835), we finalized a process for the FY 2016 payment determination and subsequent years that allows hospitals to submit patient charts for validation via: (1) Paper patient medical records; or (2) secure transmission of electronic versions of patient information. The process previously finalized restricts electronic submission of patient information to digital images of patient medical records submitted using encrypted CD–ROMs, DVDs, or flash drives. We are proposing for the FY 2017 payment determination and subsequent years to expand the options for secure transmission of electronic versions of patient medical records. Specifically, we are proposing to allow hospitals to submit digital images (PDFs) of patient VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 charts using a Secure File Transfer Portal on the QualityNet Web site. This portal would allow hospitals to transfer files through either a Web-based portal or directly from a client application using a secure file transfer protocol. The system provides a mechanism for securely exchanging documents containing sensitive information such as Protected Health Information (PHI) or Personally Identifiable Information (PII). Detailed instructions on how to use this system are available in the Secure File Transfer 1.0 User Manual available on QualityNet at: https://www.quality net.org/dcs/ContentServer?c=Page&page name=QnetPublic%2FPage%2FQnet Basic&cid=1228773343598. After July 2014, hospitals can submit all Hospital IQR Program validation data using this portal. This proposal responds to many commenters from the FY 2014 IPPS/ LTCH PPS rulemaking that were concerned that encrypted CD–ROMs were cumbersome and requested viable alternatives. We believe that the burden associated with using this portal will be similar to or less than that involved with submitting patient medical records via portable electronic media (that is, encrypted CD–ROMS, DVDs, or flash drives). Therefore, we intend to reimburse hospitals according to the rate established for submitting patient medical records via portable electronic media (78 FR 50956). We invite public comment on this proposal. e. Plans To Validate Electronic Clinical Quality Measure Data In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through 50810), we finalized a voluntary process allowing hospitals to partially meet Hospital IQR Program requirements for the FY 2014 payment determination by submitting electronic clinical quality measure data via certified electronic health record technology. Many commenters expressed concern that we did not have an adequate methodology to validate these data. PO 00000 Frm 00275 Fmt 4701 Sfmt 4702 To respond to these concerns as well as to ensure that Hospital IQR Program data are accurate and reliable, we conducted an environmental scan, including review of prior public comments to CMS proposed rules and requests for information, review of the technical and academic literatures, numerous listening sessions, and interviews with nine hospitals. From these activities, we identified three key categories of threats to data accuracy: (1) The design of the EHR product, including both the manufacturerprovided EHR product and the hospital’s customizations of that EHR product to support the hospital’s specific workflows and processes, (2) hospital and provider documentation practice, and (3) EHR and electronic clinical quality measure standards and specifications. We understand the potential threats to validity in each of these categories. To respond to these concerns, we are currently conducting a small scale test of a remote real-time validation strategy for electronic clinical quality measures in approximately 9 hospitals. We are not proposing any requirements for validation of electronic clinical quality measures for the FY 2017 payment determination. However, we intend to conduct a larger scale pilot test of validation activities in FY 2015. The pilot test will engage up to 100 volunteer hospitals in a highly interactive test abstraction of their EHR systems using a secure remote access, real-time abstraction technology that meets the HIPAA Privacy and Security Rules’ requirements. Hospitals that volunteer to participate must meet the EHR Incentive Program Stage 2 criteria (77 FR 53968 through54162) and be able to produce QRDA Category 1 Revision 2 extracted data (individual patient data) for at least 6 of the 16 measures in the STK, VTE, ED, and PC topic areas. The Office of the National Coordinator for Health Information Technology (ONC) adopted QRDA as the standard to support both QRDA Category I E:\FR\FM\15MYP2.SGM 15MYP2 28252 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (individual patient) and QRDA Category III (aggregate) data submission approaches for meaningful use Stage 2 in the Health Information Technology: Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology, 2014 Edition; Revisions to the Permanent Certification Program for Health Information Technology rule (77 FR 54163 through 54292). Interested hospitals will be invited to attend a 30minute pre-briefing session where they will be provided with detailed instructions about the process and a demonstration explaining how to install needed software and have any concerns about security or systems requirements addressed. The software to be installed, Bomgar, is approved by CMS and meets our security requirements allowing CDAC to remotely view isolated records in real-time under hospital supervision, comparing all abstracted data with QRDA Category 1 file data and summarizing the results after the realtime session. We implemented Bomgar software, a commercial product, in a CMS data center to allow for the review of medical records securely over the Internet. The product will allow the CDAC staff and Hospital medical record staff to easily set up remote support sessions for reviewing Hospital IQR Program-related EHR records under hospital supervision. The software was tested and passed our strict security standards. The electronic sessions do not require changes to a hospital’s firewall or network because both the CDAC computer and the hospital computer connect to the product through secure outbound connections. The product will log and record every session and all session data will be safe-guarded by federal government approved encryption. While CDAC has limited, remote viewing access, hospitals will be asked to: • Generate separate lists of patients eligible for measures in each of the four topic areas (STK, VTE, ED, and PC); • Generate QRDA Category 1 files extracted automatically from an EHR for all applicable measures for up to 3 records within each of the 4 topic areas (for a total of 12 records) as selected by CDAC; and • Show selected records, such as laboratory records, and patient medical history, navigating through the EHR system as directed by CDAC. During this remote real-time session, CDAC will: • Follow the specifications for the electronic measure to abstract relevant information related to each data element from up to 10 different sources, for example, medication administration records, laboratory reports, and patient history, (including structured and unstructured fields) within each patient medical record. After concluding the real-time session with a hospital, CDAC will: • Compare all abstracted data with QRDA Category 1 file data; and • Summarize results identifying patterns of concern. Based on these results, CMS and our contractors will: • Work with measure stewards to refine measure specifications based on conflicting findings; • Share conflicting findings with individual hospitals to support improvement; • Publicize de-identified patterns of conflicting findings that allow vendors to develop automated checks; • Determine reliability (agreement) between QRDA Category 1 extracted and abstracted data; and • Produce descriptive statistics to estimate sample size requirements for future validation. To address the burden associated with this test, we intend to reimburse hospitals for the burden associated with their participation. Details about reimbursement are included in section XIII.B.6. of the preamble of this proposed rule. We will post on QualityNet a detailed draft of the operational procedures that volunteer hospitals will be expected to follow during the public comment period. We developed this process to attempt to meet all of our goals for validity, as further explained in the table below. ELECTRONIC CLINICAL QUALITY MEASURE VALIDATION STRATEGY SUMMARY FOR THE HOSPITAL IQR PROGRAM Desired Attributes of Validation Strategy • • • • • • Assesses accuracy including reliability and population representativeness. Employs a standardized process conducted by an objective third party. Minimizes burden to hospitals. Minimizes costs to CMS by being performed at a central location. Leverages the dynamic qualities of an EHR, including query functions. May ultimately integrate with validation of other IQR measures. Goals of Test • • • • Assess the accuracy and completeness of electronic clinical quality measure data. Assess Hospital IQR Program readiness for electronic clinical quality measure reporting requirements. Identify the needs for and implement updates to measure specifications and standards. Plan future validation requirements, including detailed operational instructions and sample size. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Planned Process Overview Hospitals will: • Allow CMS’ Clinical Data Abstraction Contractor (CDAC) to remotely view records in real-time. • Generate separate lists of patients eligible for measures to be validated. • Generate QRDA Category 1 extract files for all applicable measures for up to 12 records selected by CDAC. • Show selected records, navigating through the EHR system as directed by CDAC. CDAC will: • Abstract data following the specifications for the electronic measure and relevant information related to each data element from up to 10 different sources (including structured and unstructured fields) within each medical record. • Compare all abstracted data with QRDA Category 1 file data. • Assess and refine operational processes. CMS and its contractors will: • Determine reliability (agreement) between extracted and abstracted measures. • Work with measure stewards to refine measure specifications based on conflicting findings. • Share conflicting findings with individual hospitals to support improvement. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00276 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28253 ELECTRONIC CLINICAL QUALITY MEASURE VALIDATION STRATEGY SUMMARY FOR THE HOSPITAL IQR PROGRAM— Continued • Publicize de-identified common patterns of conflicting findings that allow vendors to develop automated checks. • Produce descriptive statistics to estimate sample size requirements for future validation. • Reimburse hospitals for burden associated with participation in test. We invite public comment on this voluntary pilot test for validation. We also considered other validation approaches including one that supplements the current procedures and compares quality data manually abstracted by the hospitals with QRDA Category 1 extracts from their EHRs. Although we are making no specific proposals related to these alternatives at this time, we invite comments on whether we should develop or identify existing computerized applications to assist hospitals in self-validation and on the specific functionalities that may be useful for self-validation. For example, as part of the validation process, should CMS develop or identify an existing application that would use natural language processing, to identify potential threats to validity that human abstractors might then review more closely. An example of such an application might be one that searches the unstructured fields for contraindications to VTE prophylaxis, even if such contraindications were not noted in a structured field within an EHR. We also invite comments any other types of applications that would be useful for self-validation. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 12. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53554) for information for details on DACA requirements for the FY 2017 payment determination and subsequent years. We are not proposing any changes to DACA form requirements at this time. 13. Public Display Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2008 IPPS final rule (72 FR 47360), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for details on public display requirements for the FY 2017 payment determination and subsequent years. The Hospital IQR Program quality measures are typically reported on the Hospital Compare Web site at: https:// VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites such as https://www.cms. gov and/or https://data.medicare.gov. We are not proposing any changes to public display requirements at this time. the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or exemption are available on QualityNet.org.’’ 14. Reconsideration and Appeal Procedures for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH final rule (76 FR 51650 through 51651), the FY 2014 IPPS/LTCH final rule (78 FR 50836), and at 42 CFR § 412.140(e) for details on reconsideration and appeal procedures for the FY 2017 payment determination and subsequent years. We are not proposing any changes to the reconsideration and appeals procedures at this time. B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital IQR Program extraordinary circumstances extensions or waivers. We are not proposing any substantive changes to these policies or the processes. However, in the future, we will refer to the process as the Extraordinary Circumstances Extensions or Exemptions process. We are currently in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form, previously approved under OMB control number 0938–1171. In addition, we are proposing to make a conforming change from the phrase ‘‘extension or waiver’’ to the phrase ‘‘extension or exemption’’ in 42 CFR 412.140(c)(2). Section 412.140(c)(2) currently states, ‘‘Exception. Upon request by a hospital, CMS may grant an extension or waiver of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or waiver are available on QualityNet.org.’’ We are proposing to revise this language to state, ‘‘Exception. Upon request by a hospital, CMS may grant an extension or exemption of one or more data submission deadlines in PO 00000 Frm 00277 Fmt 4701 Sfmt 4702 1. Statutory Authority Section 3005 of the Affordable Care Act added new sections 1866(a)(1)(W) and (k) to the Act. Section 1866(k) establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act (referred to as a ‘‘PPS-Exempt Cancer Hospital’’ or ‘‘PCH’’). Section 1866(k)(1) of the Act states that, for FY 2014 and each subsequent fiscal year, a PCH must submit data to the Secretary in accordance with section 1866(k)(2) of the Act with respect to such a fiscal year. Section 1866(k)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, each hospital described in section 1886(d)(1)(B)(v) of the Act must submit data to the Secretary on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time, specified by the Secretary. Section 1866(k)(3)(A) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act, unless an exception under section 1866(k)(3)(B) of the Act applies. The National Quality Forum (NQF) currently holds this contract. The NQF is a voluntary, consensus-based, standard-setting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care stakeholder organizations. The NQF was established to standardize healthcare quality measurement and reporting through its consensus development processes. We have generally adopted NQF-endorsed measures in our reporting programs. However, section 1866(k)(3)(B) of the Act provides an exception. Specifically, it provides that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section E:\FR\FM\15MYP2.SGM 15MYP2 28254 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Under section 1866(k)(3)(C) of the Act, the Secretary was required to publish the measure selection for PCHs no later than October 1, 2012, with respect to FY 2014. Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making public the data submitted by PCHs under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program. Such procedures must ensure that a PCH has the opportunity to review the data that are to be made public with respect to the PCH prior to such data being made public. The Secretary must report quality measures of process, structure, outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished by PCHs on the CMS Web site. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Covered Entities Section 1886(d)(1)(B)(v) of the Act excludes particular cancer hospitals from payment under the IPPS. This proposed rule covers only those PPSexcluded cancer hospitals meeting eligibility criteria specified in 42 CFR 412.23(f). 4. Proposed Update to the Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program 3. Previously Finalized PCHQR Program Quality Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561), we finalized five quality measures for the FY 2014 program and subsequent years. Specifically, we finalized two of the CDC NHSN-based HAI quality measures (outcome measures): (1) CLABSI; and (2) CAUTI. We also finalized three cancerspecific process of care measures: (1) Adjuvant chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with the American Joint Committee on Cancer (AJCC) III (lymph node positive) colon cancer; (2) Combination chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer; and (3) Adjuvant hormonal therapy. We also discussed the collection requirements and submission timeframes for these measures in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53566). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through 50840), we finalized one new quality measure for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the FY 2015 program and subsequent years. Specifically, we finalized the CDC’s NHSN HAI measure of Surgical Site Infection (SSI). We did not remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2015 program and subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50840 through 50846), we finalized 12 new quality measures for the FY 2016 program and subsequent years. Specifically, we finalized six new SCIP measures, five new clinical process/oncology care measures and the HCAHPS Survey for reporting beginning with the FY 2016 program and subsequent years. We did not remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2016 program and subsequent years. We also discussed the collection requirements and submission timeframes for these measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850 through 50853). We are not proposing to remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2017 program and subsequent years. Beginning with the FY 2016 program, we are proposing to update the specifications for each of the five clinical process/oncology care measures so that for each measure, PCHs must report all-patient data. We believe that the delivery of high quality care in the PCH setting is critically important and that collecting data on all patients will enable us to ensure that high quality care is delivered to Medicare beneficiaries in this setting. In addition, all-patient data increases transparency in the health care system, aligns with State and federal initiatives,78 and improves research efforts. Our proposal to require PCHs to collect all-patient data provides us with the data to inform the public with the most robust and accurate reflection of the quality of care and patient outcomes in the PCH setting. In addition, this proposal will align the specifications of the clinical process/oncology care measures with those of the SCIP PCHQR measures, for which all-patient data are required for submission. We welcome public comments on this proposal for the clinical process/ 78 All-Payer Claims Database (APCD) Fact Sheet; available at: https://www.apcdcouncil.org/issuebriefs-and-fact-sheets. PO 00000 Frm 00278 Fmt 4701 Sfmt 4702 oncology care measures for the FY 2016 program and subsequent years. 5. Proposed New Quality Measure Beginning With the FY 2017 Program a. Considerations in the Selection of Quality Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556) and in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50838), we indicated that we have taken a number of principles into consideration when developing and selecting measures for the PCHQR Program, and that many of these principles are modeled on those we use for measure development and selection under the Hospital IQR Program: • Public reporting should rely on a mix of standards, outcomes, process of care measures, and patient experience of care measures, including measures of care transitions and changes in patient functional status. • The measure set should evolve so that it includes a focused core set of measures appropriate to cancer hospitals that reflects the level of care and the most important areas of service furnished by those hospitals. The measures should address gaps in the quality of cancer care. • We also consider input solicited from the public through rulemaking and public listening sessions. • We consider suggestions and input from a PCH Technical Expert Panel (TEP), convened by a CMS measure development contractor, which rated potential PCH quality measures for importance, scientific soundness, usability, and feasibility. The TEP membership includes health care providers specializing in the treatment of cancer, cancer researchers, consumer and patient advocates, disparities experts, and representatives from payer organizations. Like the Hospital IQR Program, the PCHQR Program supports the National Quality Strategy (NQS), national priorities, HHS Strategic Plans and Initiatives, the CMS Quality Strategy, and strives for burden reduction whenever possible. The PCHQR Program also takes into consideration the recommendations of the Measure Applications Partnership (MAP). The MAP is a multi-stakeholder body convened by the NQF for the purpose of providing input to HHS on the selection of measures. b. Proposed New Quality Measure Beginning With the FY 2017 Program We are proposing to adopt one new clinical effectiveness measure for the FY 2017 program and subsequent years: E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules External Beam Radiotherapy for Bone Metastases (NQF #1822). The proposed clinical effectiveness measure was included on a publicly available document entitled ‘‘List of Measures under Consideration for December 1, 2013,’’ a list of quality and efficiency measures being considered for use in various Medicare programs. The proposed measure was submitted to the MAP Hospital Workgroup for review. The MAP supported the inclusion of this measure in the PCHQR Program. The MAP’s conclusions can be found in the ‘‘MAP Pre-Rulemaking Report: 2014 Recommendations on Measures Under Consideration by HHS,’’ which is available at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_Report_ _2014_Recommendations_on_ Measures_for_More_than_20_Federal_ Programs.aspx. We considered the MAP’s input and recommendations for this proposed measure for the PCHQR Program, and specifically, we note that the proposed measure addresses the MAP priority of palliative care for cancer patients. In addition, the proposed measure addresses the NQS domain of effective clinical care. We believe that this NQF-endorsed measure developed by the American Society for Radiation Oncology (ASTRO) meets the requirement under section 1866(k)(3)(A) of the Act that measures specified for the PCHQR generally be endorsed by the entity with a contract under section 1890(a) of the Act (currently the NQF). This measure assesses the percentage of patients (both Medicare and non-Medicare) with painful bone metastases and no history of previous radiation who receive EBRT with an acceptable dosing schedule. The measure numerator includes all patients with painful bone metastases, and no previous radiation to the same site, who receive EBRT with any of the following Topic recommended fractionation schemes: 30Gy/10fxns, 24Gy/6fxns, 20Gy/5fxns, or 8Gy/1fxn. The measure denominator includes all patients with painful bones metastases and no previous radiation to the same site, who receive EBRT. The following patients are excluded from the denominator: Patients who have had previous radiation to the same site; patients with femoral axis cortical involvement greater than 3 cm in length; patients who have undergone a surgical stabilization procedure; and patients with spinal cord compression, cauda equina compression, or radicular pain. For the reasons explained more fully below, we believe that this measure will reduce the rate of EBRT services overuse, support our commitment to promoting patient safety, and support the NQS domains. Bone metastases are a common manifestation of malignancy. Some cancer types have a bone metastasis prevalence as high as 70 to 95 percent.79 EBRT can provide significant pain relief in 50 to 80 percent of patients with painful bone metastases. In October 2009, ASTRO organized a Task Force to perform an assessment of existing recommendations in order to address a lack of palliative radiotherapy guidelines. Based on a review of the literature, the Task Force recommended the following EBRT dosing schedules for patients with previously unirradiated painful bone metastases: 30 Gy over the course of 10 fractions, 24 Gy over the course of 6 fractions, 20 Gy over the course of 5 fractions, and a single 8 Gy fraction.80 Despite the recommendations, the actual doses applied for EBRT continue to include dosing schedules as high as 25 fractions.81 Other studies support the conclusion that shorter EBRT schedules produce similar pain relief outcomes when compared to longer EBRT schedules, and that patients prefer shorter EBRT schedules because of their 28255 convenience, increased tolerability, and reduced side effects.82 In addition, the ASTRO Task Force found that the frequency and severity of side effects associated with a single fraction were the same or less than those associated with multiple fraction regimens, indicating that shorter treatment schedules may be preferable.83 The proposed External Beam Radiotherapy for Bone Metastases measure seeks to address the performance gap in treatment variation, ensure appropriate use of EBRT, and prevent the overuse of radiation therapy. We believe that this measure is necessary to support patient preferences for shorter EBRT schedules as well as to ensure patient safety, given that shorter treatment courses show similar or fewer side effects while producing similar clinical outcomes. We believe the proposed measure is applicable to the PCH setting because it addresses cancer care associated with radiation therapy. The adoption of measures that apply to multiple health care settings is one of our objectives in promoting quality care consistently across all health care settings. Detailed specifications for this proposed measure can be found at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=70374. In summary, in addition to the 18 measures that we previously finalized for the PCHQR Program, we are proposing one new measure for reporting beginning with the FY 2017 program. The proposed policies regarding the form, manner, and timing of data collection for this measure are discussed in later sections. The table below lists all previously adopted measures as well as the proposed new measure for the PCHQR Program for the FY 2017 program and subsequent years. We welcome public comment on this proposal. PCHQR program measures for the FY 2017 program and subsequent years (including proposed new measure) Safety and Healthcare-Associated Infection—HAI mstockstill on DSK4VPTVN1PROD with PROPOSALS2 • (NQF #0139) NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure *. • (NQF #0138) NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure *. • (NQF #0753) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure* (currently includes SSIs following Colon Surgery and Abdominal Hysterectomy Surgery). Clinical Process/Cancer-Specific Treatments • (NQF #0223) Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Surgery to Patients Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer *. 79 Coleman RE. Metastatic bone disease: Clinical features, pathophysiology and treatment strategies. Cancer Treat Rev. 2001;27:165–176. 80 Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for bone metastases: An ASTRO VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 evidence-based guideline. Int J Radiat Oncol Biol Phys. 2011;79(4):965–976. 81 Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id&ItemID= 70374. PO 00000 Frm 00279 Fmt 4701 Sfmt 4702 82 Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for bone metastases: An ASTRO evidence-based guideline. Int J Radiat Oncol Biol Phys. 2011;79(4):965–976. 83 FY 2013 IPPS/LTCH PPS final rule 77 FR 53561 (NQF# 0223, 0559, and 0220). E:\FR\FM\15MYP2.SGM 15MYP2 28256 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Topic PCHQR program measures for the FY 2017 program and subsequent years (including proposed new measure) • (NQF #0559) Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer *. • (NQF #0220) Adjuvant Hormonal Therapy *. SCIP • (NQF #0218) Surgery Patients who Received Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24 Hrs After Surgery End Time *. • (NQF #0453) Urinary Catheter Removed on Post-Operative Day 1 or Post-Operative Day 2 with Day of Surgery Being Day Zero *. • (NQF #0527) Prophylactic Antibiotic Received Within 1 Hr Prior to Surgical Incision *. • (NQF #0528) Prophylactic Antibiotic Selection for Surgical Patients *. • (NQF #0529) Prophylactic Antibiotic Discontinued Within 24 Hrs After Surgery End Time *. • (NQF #0284) Surgery Patients on Beta Blocker Therapy Prior to Admission who Received a Beta Blocker During the Perioperative Period *. Clinical Process/Oncology Care Measures • • • • • (NQF (NQF (NQF (NQF (NQF #0382) #0383) #0384) #0390) #0389) Oncology-Radiation Dose Limits to Normal Tissues *. Oncology: Plan of Care for Pain *. Oncology: Pain Intensity Quantified *. Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients *. Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients *. Patient Engagement/Experience of Care • (NQF #0166) HCAHPS *. Clinical Effectiveness Measure • (NQF #1822) External Beam Radiotherapy for Bone Metastases **. * Previously finalized measures. ** Proposed for the FY 2017 program and subsequent years in this proposed rule. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 6. Possible New Quality Measure Topics for Future Years We seek to develop a comprehensive set of quality measures for widespread use for informed decision-making and quality improvement in the PCH setting. Therefore, in future rulemaking, we intend to propose to adopt new or updated measures, such as measures that assess the safety and efficiency of the diagnosis and treatment of cancer, measures that take into account novel diagnostic and treatment modalities, measures that assess symptoms and functional status, and measures of appropriate disease management. Additional measure topics to be considered include patient centered care planning and care coordination, shared decision making, measures of quality of life outcomes, and measures of admissions for complications of cancer and treatment for cancer. We believe that such measures will help us further our goal of achieving better health care and improved health for Medicare beneficiaries who obtain cancer services through the widespread dissemination and use of quality of care information. We welcome public comment and specific suggestions for measure topics for the following measure domains: outcomes, quality of life, clinical quality VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 of care, care coordination, patient safety, patient and caregiver experience of care, population/community health, and efficiency. These domains align with those of the NQS, and we believe that selecting measures to address these domains will promote better cancer care while aligning the PCHQR Program with other established quality reporting and pay for performance programs such as the Hospital IQR Program, the Hospital OQR Program and the Hospital VBP Program. Generally, we retain measures from the previous years’ PCHQR Program measure sets for subsequent years. However, in future years we will consider developing criteria to determine whether or not to remove or replace measures from the PCHQR Program measure set. In developing removal criteria, we will consider those criteria used by other CMS quality reporting programs in order to align the PCHQR Program with those programs. We welcome public comments on the criteria for removal or replacement of measures from the PCHQR Program. In an effort to reduce the reporting burden for PCHs, in future years, we will consider proposing to require PCHs to report electronically specified clinical quality measures for the PCHQR Program. We believe that the collection and reporting of data through health PO 00000 Frm 00280 Fmt 4701 Sfmt 4702 information technology would greatly simplify and streamline reporting for many CMS quality reporting programs, including the PCHQR Program. Through electronic reporting, PCHs would be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS for the PCHQR Program. In developing future proposals for electronic clinical quality measures adoption, we will consider the need to align and harmonize measures across various quality reporting programs to minimize the reporting burden imposed on PCHs. We welcome public comments on the development of electronic clinical quality measure reporting criteria for future years. 7. Maintenance of Technical Specifications for Quality Measures We maintain technical specifications for the PCHQR Program measures, and we periodically update those specifications. The specifications can be found on the QualityNet Web site at: https://qualitynet.org/dcs/Content Server?cid=1228772356060&pagename= QnetPublic%2FPage%2FQnetTier2&c= Page. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505), we finalized a policy under which we use E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a subregulatory process to make nonsubstantive updates to measures used for the Hospital IQR Program. We also adopted this process for all measures adopted for the PCHQR Program. With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-by-case basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure. We believe that nonsubstantive changes may include updates to measures based upon changes to guidelines upon which the measures are based. We will continue to use rulemaking to adopt substantive updates to the measures we have adopted for the PCHQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example: Changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. We also note that to the extent a PCHQR measure is endorsed by the NQF, the NQF measure maintenance process incorporates an opportunity for public comment and engagement. We believe the endorsement processes, as well as our treatment of substantive versus nonsubstantive measure changes, adequately balances our need to incorporate updates to PCHQR Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. 8. Public Display Requirements Beginning With the FY 2014 Program Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making the data submitted under the PCHQR Program available to the public. Such procedures must ensure that a PCH has the opportunity to review the data that is to be made public with respect to the PCH prior to such data being made public. Section 1866(k)(4) of the Act also provides that the Secretary must report quality measures of process, structure, outcome, patients’ perspective VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 on care, efficiency, and costs of care that relate to services furnished in such hospital on the CMS Web site. In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53562 through 53563), we finalized our policy to publicly display the submitted data on the Hospital Compare Web site (https:// www.hospitalcompare.hhs.gov/) and established a preview period of 30 days prior to making such data public. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through 50848), we finalized our proposal to display publicly in 2014 and subsequent years the data for the measures listed below: • Adjuvant Chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with AJCC III (lymph node positive) colon cancer (NQF #0223); and • Combination Chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer (NQF #0559). This year we are proposing to publicly display in 2015 and subsequent years the data for the Adjuvant Hormonal Therapy measure (NQF #0220). We are also proposing to publicly display no later than 2017 and for subsequent years the data for the measures listed below: • NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138); and • NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). At present, all PCHs are reporting CLABSI and CAUTI data to the NHSN under the PCHQR Program. However, due to the low volume of data produced and reported by the small number of facilities (in fewer than 2 years), the CDC is unable to calculate reasonable and reliable baseline estimates, or expected rates, which are needed for the purpose of calculating these measure rates. Therefore, we estimate that the first public posting of the CLABSI and CAUTI PCHQR Program data reported to the NHSN from the PCHs will be no later than 2017. We invite public comment on these proposals. 9. Form, Manner, and Timing of Data Submission Beginning With the FY 2017 Program a. Background Section 1866(k)(2) of the Act requires that, beginning with the FY 2014 PO 00000 Frm 00281 Fmt 4701 Sfmt 4702 28257 PCHQR Program, each PCH must submit to the Secretary data on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time as specified by the Secretary. Data submission requirements and deadlines for the PCHQR Program are generally posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/ ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier3& cid=1228772864228. b. Proposed Reporting Requirements for the Proposed New Measure: External Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning With the FY 2017 Program We are proposing that PCHs report the proposed External Beam Radiotherapy for Bone Metastases (NQF #1822) measure beginning with January 1, 2015 discharges and for subsequent years. We are proposing that PCHs would report this measure to CMS via a CMS Webbased Measures Tool on an annual basis (July 1—August 15 of each respective year). This approach is consistent with the data submission deadlines finalized for the clinical process/oncology care measures (78 FR 50850 through 50851) and PCHs are already preparing to begin submitting PCHQR data using this timeline. We also believe that annual data submission of once per year (as opposed to quarterly data submission of four times per year) will reduce PCH cost and burden. We believe that these proposed dates will provide enough advance notice for PCHs to prepare to report the measure. We are proposing to collect the EBRT for Bone Metastases measure rates for the FY 2017 program and subsequent years using all-patient (both Medicare and non-Medicare) data from the four quarters (Q1, Q2, Q3, and Q4) of CY 2015, and that PCHs must submit aggregated data for the measure for each of these quarters during a data submission window that would be open from July 1 through August 15, 2016. For the FY 2017 program and subsequent years, we refer readers to the reporting periods and data submission window outlined in the table below in this section. For data collection, we are proposing that PCHs submit aggregate-level data through the CMS Web-based Measures Tool or submit an aggregate data file through a vendor (via QualityNet infrastructure). We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850 through 50851) for more information on the CMS Web-based aggregated data collection tool. E:\FR\FM\15MYP2.SGM 15MYP2 28258 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules We welcome public comment on the proposed reporting periods, data submission timeframes, and data collection methods/modes for the proposed measure for the FY 2017 program and subsequent years. PROPOSED EXTERNAL BEAM RADIOTHERAPY FOR BONE METASTASES (NQF #1822) MEASURE-REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2017 PROGRAM AND SUBSEQUENT YEARS Program year (FY) Reporting periods (CY) 2017 ................................... Q1 2015 discharges (January 1, 2015–March 31, 2015) ................................ Q2 2015 discharges (April 1, 2015–June 30, 2015) Q3 2015 discharges (July 1, 2015–September 30, 2015) Q4 2015 discharges (October 1, 2015–December 31, 2015) Q1 2016 discharges (January 1, 2016–March 31, 2016) ................................ Q2 2016 discharges (April 1, 2016–June 30, 2016) Q3 2016 discharges (July 1, 2016–September 30, 2016) Q4 2016 discharges (October 1, 2016–December 31, 2016) Q1 discharges (January 1–March 31 of each year 2 years before the program year). Q2 discharges (April 1–June 30 of each year 2 years before the program year) Q3 discharges (July 1–September 30 of each year 2 years before the program year) Q4 discharges (October 1–December 31 of each year 2 years before the program year) 2018 ................................... Subsequent Years ............. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 c. Proposed Reporting Options for the Clinical Process/Cancer Specific Treatment Measures Beginning with the FY 2015 Program and the SCIP and Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program We are proposing to modify the data submission requirements for the three clinical process/cancer specific treatment measures 84 that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53564), and the six SCIP measures and five clinical process/ oncology care measures that we adopted in the FY 2014 IPPS/LTCH final rule (78 FR 50846). Under those requirements, PCHs submit aggregate-level clinical process/cancer specific treatment measure data to a CMS contractor, aggregate-level clinical process/ oncology care measure data through the CMS Web-based Measures Tool, and patient-level SCIP measure data through the QualityNet infrastructure. We are now proposing to allow PCHs to report the clinical process/cancer specific treatment, SCIP, and clinical process/ oncology care data to CMS using one of two mechanisms. Under the first option, which is newly proposed for the SCIP and clinical process/oncology care Data submission deadlines measure sets, PCHs or their authorized vendors can enter aggregate numerator and denominator data into a CMS Web page located on the secure part of the CMS QualityNet infrastructure. Under the second option, which is newly proposed for the clinical process/cancer specific treatment, SCIP, and clinical process/oncology care measures, PCHs or their authorized vendors can submit an aggregate data file through a CMS secure QualityNet file exchange process. We are proposing these options in order to decrease the reporting burden for PCHs. We believe that the newly proposed submission option, which is further described below for the SCIP measures, will result in a considerable burden reduction for PCHs, as it includes once annually, rather than once quarterly, submission deadlines and submission of aggregate data as opposed to patient level data for the SCIP measures. We are proposing this update to the SCIP measures submission requirements in anticipation of a possible change to the Hospital IQR Program IT infrastructure to discontinue patient level SCIP data collection. This IT infrastructure change is due to the proposed removal of SCIP measures from the Hospital IQR July 1, 2016–August 15, 2016. July 1, 2017–August 15, 2017. July 1–August 15 of each year before the program year. Program, which we are proposing in section IX.A.2.b. of the preamble of this proposed rule. We believe that providing PCHs with a choice regarding how they submit data on these measures will result in a considerable burden reduction for PCHs because under both options, PCHs will be able to submit the data once annually and in an aggregate form. We are proposing that PCHs submit an annual data file stratified by four quarters for each of the SCIP measures. We believe that this proposal provides the public with sufficiently reliable quality measure information while reducing PCH burden through providing two data collection options. We will provide detailed technical file format specifications on the public QualityNet Web site (www.qualitynet.org) following publication of this year’s final rule. The newly proposed submission deadlines for the SCIP measures are outlined in the table below. These proposed requirements would replace, for the purposes of the PCHQR Program, the update to the SCIP timeline and IT infrastructure that we finalized for the PCHQR Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50851 through 50852). PROPOSED UPDATE TO THE SIX SCIP MEASURES-REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016 PROGRAM AND SUBSEQUENT YEARS Program year (FY) Reporting periods (CY) Data submission deadlines 2016 ................................... 2017 ................................... Q1 2015 discharges (January 1, 2015–March 31, 2015) ................................... Q2 2015 discharges (April 1, 2015–June 30, 2015) ........................................ July 1, 2015–August 15, 2015. July 1, 2016–August 15, 2016. 84 FY 2013 IPPS/LTCH PPS final rule; 77 FR 53561 (NQF# 0223, 0559, and 0220). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00282 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28259 PROPOSED UPDATE TO THE SIX SCIP MEASURES-REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016 PROGRAM AND SUBSEQUENT YEARS—Continued Program year (FY) Subsequent Years ............. Reporting periods (CY) Q3 2015 discharges (July 1, 2015–September 30, 2015) Q4 2015 discharges (October 1, 2015–December 31, 2015) Q1 discharges (January 1–March 31 of each year two years before the program year). Q2 discharges (April 1–June 30 of each year two years before the program year) Q3 discharges (July 1–September 30 of each year two years before the program year) Q4 discharges (October 1–December 31 of each year two years before the program year) We invite public comment on the proposed new reporting mechanism that would apply to the three clinical process/cancer specific treatment measures, five clinical process/oncology care treatment measures, and six SCIP measures. We are not proposing any changes to the previously finalized procedural requirements, Notice of Participation (NOP) requirements, or Data Accuracy and Completeness Acknowledgement (DACA) requirements. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53567) for more information on these requirements. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 d. Proposed New Sampling Methodology for the Clinical Process/ Oncology Care Measures Beginning With the FY 2016 Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50842), we adopted a policy under which PCHs could report the five clinical process/oncology care measures finalized for the FY 2016 program and subsequent years using the same sampling methodology that we allow for the reporting of those measures under the PQRS. We are proposing to replace the previously adopted sampling methodology with a sampling methodology similar to the one we have allowed hospitals to use to report the SCIP measures under the Hospital IQR Program. The sampling methodology specified in the PQRS Specifications Manual is specific to the physician office setting. We believe that the methodology we are proposing in this proposed rule is more applicable to PCHs because it was developed for hospital level reporting. The proposed methodology will allow for different numbers of cases to be reported based on each PCH’s cancer patient population size. This is necessary for the PCHQR Program because bed size varies among PCHs VerDate Mar<15>2010 Data submission deadlines 20:20 May 14, 2014 Jkt 232001 from 20 to >250 beds.85 The proposed sampling methodology for the clinical process/oncology care measures is shown below, and we believe it will decrease the reporting burden on PCHs while producing reliable measure rates. Average quarterly initial population size ‘‘N’’ >125 ......... 51–125 ..... 10–50 ....... <10 ........... Minimum required sample size ‘‘N’’ 25. 20 percent of the initial patient population. 10. No sampling; 100 percent of the initial patient population. We are also proposing that PCHs report population and sample size counts (by measure) for Medicare and non-Medicare discharges by quarter for the five clinical process/oncology care measures for the FY 2016 program and subsequent years. We are proposing these requirements in order to support our effort to align with existing reporting requirements used in other CMS quality reporting programs, such as the Hospital IQR Program, which requires participating hospitals to submit population and sample size counts for certain measures in addition to the all payer data needed to calculate measure rates. We view it as vital for PCHs to accurately determine their aggregate population and appropriate sample size data in order for CMS to assess PCHs’ data reporting accuracy and completeness for their total population of cases, including both Medicare and non-Medicare patients. We welcome public comments on these proposals for the clinical process/ oncology care measures for the FY 2016 program and subsequent years. 85 American Hospital Directory: https:// www.ahd.com/freesearch.php. PO 00000 Frm 00283 Fmt 4701 Sfmt 4702 July 1–August 15 of each year before the program year. 10. Exceptions From Program Requirements In our experience with other quality reporting and performance programs, we have noted occasions when providers have been unable to submit required quality data due to extraordinary circumstances that are not within their control (for example, natural disasters). We do not wish to unduly increase their burden during these times. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our policy that, for the FY 2014 program and subsequent years, PCHs may request and we may grant exceptions (formerly referred to as waivers) with respect to the reporting of required quality data when extraordinary circumstances beyond the control of the PCH warrant. When exceptions are granted, we will notify the respective PCH. We are in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form (CMS–10432), approved under OMB control number 0938–1171. We are not proposing any substantive changes to this PCHQR exception process. C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background In accordance with section 1886(m)(5) of the Act, as added by section 3004(a) of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under section 1886(m)(5)(A)(i) of the Act, for the rate year 2014 and each subsequent rate year, in the case of an LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a rate year, any annual update (which we also refer to as a ‘‘payment determination’’) to a standard Federal rate for discharges for the hospital during the rate year, and after E:\FR\FM\15MYP2.SGM 15MYP2 28260 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 application of section 1886(m)(3) of the Act, shall be reduced by two percentage points. As we discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51744), for the purposes of the LTCH PPS, the term ‘‘rate year’’ and the term ‘‘fiscal year’’ both refer to the time period beginning October 1 and ending September 30. In order to eliminate any possible confusion, we will use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ in our discussion of the LTCHQR Program. Under section 1886(m)(5)(D)(i) of the Act, the quality measures for the LTCHQR Program are measures selected by the Secretary that have been endorsed by an entity that holds a contract with the Secretary under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of the Act applies. This contract is currently held by NQF. Additional information regarding NQF and its measure review processes is available at: https:// www.qualityforum.org/Measuring_ Performance/Measuring_ Performance.aspx. While as a general matter the Secretary must select endorsed measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act provides that an exception may be made in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity that holds a contract with the Secretary under section 1890(a) of the Act. In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the Secretary to specify a measure that is not so endorsed, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. The LTCHQR Program was implemented in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51743 through 51756). 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program We seek to promote higher quality and more efficient health care for the beneficiaries we serve. Quality reporting programs, including public reporting of quality information, advance such quality improvement efforts. Quality measurement remains the key tool to the success of these programs. Therefore, the selection of only the highest caliber of measures is a priority for CMS. We seek to adopt measures for the LTCHQR Program that promote better, safer, and more efficient care. Our measure development and selection activities for the LTCHQR Program take VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 into account national priorities, such as those established by the National Priorities Partnership (https:// www.qualityforum.org/Setting_ Priorities/NPP/National_Priorities_ Partnership.aspx), the HHS Strategic Plan (https://www.hhs.gov/secretary/ about/priorities/priorities.html), the National Quality Strategy (NQS) (https://www.ahrq.gov/ workingforquality/nqs/ nqs2011annlrpt.htm), and the CMS Quality Strategy (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Quality InitiativesGenInfo/CMS-QualityStrategy.html). We also must consider input from the NQF MAP when selecting measures under the LTCHQR Program. The MAP is composed of multi-stakeholder groups convened by the NQF, our current contractor under section 1890 of the Act. The NQF must convene these stakeholders and provide us with the stakeholders’ input on the selection of certain categories of quality and efficiency measures as part of a prerulemaking process described in section 1890A of the Act. We, in turn, must take this input into consideration in selecting those categories of measures. The NQF MAP met in December 2013 and January 2014 and provided input to CMS as required under section 1890A(a)(3) of the Act. This input appears in the MAP’s January 2014 PreRulemaking Report available for download at: https://www.qualityforum. org/Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. Measures proposed for the LTCHQR Program in this proposed rule are measures CMS included under the List of Measures under Consideration (MUC List) for December 1, 2013,86 a list that the Secretary must make available to the public by December 1 of each year, as part of the pre-rulemaking process, as described in section 1890A(a)(2) of the Act. The measures we are proposing in this rule for the LTCHQR Program are discussed in the MAP Pre-Rulemaking Report (pp. 192–193). The MAP reviewed each measure proposed in this rule. We refer readers to the following sections of the preamble of this proposed rule for more information on the MAP’s recommendations: IX.C.7.a.(1), Functional Status Quality Measure: Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment 86 Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id&Item ID=74245. PO 00000 Frm 00284 Fmt 4701 Sfmt 4702 and a Care Plan That Addresses Function; IX.C.7.a.(2), Functional Status Quality Measure: Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and IX.C.7.b., Proposed Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. After due consideration to any measures that may have been endorsed or adopted by a consensus organization, including the NQF, for the LTCH setting, we are proposing measures that are either fully supported by the MAP for the LTCHQR Program, or that we believe most closely align with the national priorities discussed in this section of the proposed rule. In the absence of the MAP’s full support, in some cases we are proposing measures for which there is MAP conditional support and that meet the exception criteria in section 1886(m)(5)(D)(ii) of the Act. Further discussion of why each proposed measure is a high priority in the LTCH setting is included below. 3. Policy for Retention of LTCHQR Program Measures Adopted for Previous Payment Determinations In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 53615), for the LTCHQR Program, we adopted a policy that once a quality measure is adopted, it will be retained for use in subsequent years, unless otherwise stated. For the purpose of streamlining the rulemaking process, when we initially adopt a measure for the LTCHQR Program for a payment determination, this measure will be automatically adopted for all subsequent years or until we propose to remove, suspend, or replace the measure. For further information on how measures are considered for removal, suspension, or replacement, we refer readers to the FY 2013 IPPS/ LTCH PPS final rule. We are not proposing any changes to this policy for retaining LTCHQR Program measures adopted for previous payment determinations. 4. Policy for Adopting Changes to LTCHQR Program Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616), we adopted our policy that if the NQF updates an endorsed measure that we have adopted for the LTCHQR Program in a manner that we consider to not substantively change the nature of the measure, we will use a subregulatory process to incorporate those updates to the measure specifications that apply to the LTCHQR Program. With respect to E:\FR\FM\15MYP2.SGM 15MYP2 28261 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules what constitutes a substantive versus a nonsubstantive change, we expect to make this determination on a measureby-measure basis. Examples of such nonsubstantive changes might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and changes to exclusions for a measure. The subregulatory process for nonsubstantive changes will include revision of the LTCHQR Program Manual and posting of updates on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent, such as changes in acceptable timing of medication, procedure/ process, test administration, or expansion of the measure to a new setting. We are not proposing any changes to this policy for adopting changes to LTCHQR Program measures. 5. Previously Adopted Quality Measures a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53636), we retained the application of Percent of Residents with Pressure Ulcers That are New or Worsened (Short-Stay) (NQF #0678) to the LTCH setting (initially adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51745 through 51750)) for the FY 2015 payment determination and subsequent years, and adopted updated versions of National Health Safety Network (NHSN) CatheterAssociated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) and NHSN Central Line-Associated Blood Stream Infection (CLABSI) Outcome Measure (NQF #0139), for the FY 2014 payment determination and subsequent years. We also adopted two new quality measures for the LTCHQR Program for the FY 2016 payment determination and subsequent years, in addition to the three previously adopted measures (the CAUTI measure, CLABSI measure, and Pressure Ulcer measure): (1) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (ShortStay) (NQF #0680); and (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) (77 FR 53624 through 53636). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863), we adopted the NQF-endorsed version of the Pressure Ulcer measure, Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), for the LTCHQR Program for the FY 2015 payment determination and subsequent years. Set out below are the quality measures, both previously adopted measures retained in the LTCHQR Program and measures adopted in FY 2013 and FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016 payment determinations and subsequent years. LTCHQR PROGRAM QUALITY MEASURES ADOPTED FOR THE FY 2015 AND FY 2016 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS NQF Measure ID Measure title Payment determination NQF #0138 ................ National Health Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure*. National Health Safety Network (NHSN) Central Line-Associated Blood Stream Infection (CLABSI) Outcome Measure*. Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay)*. Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay)**. Influenza Vaccination Coverage among Healthcare Personnel** ................................... FY 2015 and Subsequent FYs. NQF #0139 ................ NQF #0678 ................ NQF #0680 ................ NQF #0431 ................ b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule, we adopted three additional measures for the FY 2017 payment determination and subsequent years (78 FR 50863 through 50874) and one additional measure for the FY 2018 payment determination and subsequent FY 2015 and Subsequent FYs. FY 2015 and Subsequent FYs. FY 2016 and Subsequent FYs. FY 2016 and Subsequent FYs. years (78 FR 50874 through 50877). These measures are set out in the table below. LTCHQR PROGRAM QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS Payment determination Measure title NQF #1716 ................ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 NQF Measure ID National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure. All-cause Unplanned Readmission Measure for 30 Days Post-Discharge from LongTerm Care Hospitals. Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) ... NQF #1717 ................ NQF Review Pending (NQF #2512). Application of NQF #0674. VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 PO 00000 Frm 00285 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM FY 2017 Years. FY 2017 Years. FY 2017 Years. FY 2017 Years. 15MYP2 and Subsequent and Subsequent and Subsequent and Subsequent 28262 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 6. Proposed Revisions to Data Collection Timelines and Submission Deadlines for Previously Adopted Quality Measures We are proposing, for the FY 2016 payment determination and subsequent years, to revise data collection timelines and submission deadlines for a measure that we previously adopted for the LTCHQR Program: Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). We are also reproposing, for the FY 2018 payment determination only, revised data collection timelines and submission deadlines for the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (Application of NQF #0674) measure. For all subsequent years (FY 2019 and beyond), data collection for this measure would begin on January 1 and continue through December 31. a. Proposed Revisions to Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through 50861), we revised the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure for the FY 2016 payment determination and subsequent years. Specifically, we finalized that for the FY 2016 payment determination, LTCHs must collect data for any patient admitted or discharged during the influenza vaccination season, from October 1, 2014, through April 30, 2015, and submit data for these patients by May 15, 2015. We are seeking to better align the data collection timelines and submission deadlines of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure with the data collection timelines and submission deadlines of the Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) measure because both measures are reported using the same data collection instrument, the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set. Therefore, for the FY 2016 payment determination and subsequent years, we are proposing to revise the data collection timelines and submission deadlines for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure. Specifically, we are proposing that the first data collection timeline would take place during the fourth quarter of the CY preceding the applicable FY (for example, October 2014 through December 2014 for the FY 2016 payment determination), with data submission by February 15, 2015 and the second data collection timeline would take place during the first quarter of the CY preceding the applicable FY (for example, January 2015 through March 2015 for the FY 2016 payment determination), with data submission by May 15, 2015. The proposed changes are illustrated below for the FY 2016 and FY 2017 payment determinations only, but similar collection timelines and submission deadlines would also apply to subsequent years. By taking into account the influenza vaccination season, these proposed changes would align data collection and submission for this measure (NQF #0680) with the rest of the LTCH CARE Data Set. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES FOR LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 AND FY 2017 PAYMENT DETERMINATIONS: PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Data collection timelines mstockstill on DSK4VPTVN1PROD with PROPOSALS2 October January October January 1, 1, 1, 1, Submission deadlines 2014–December 31, 2014 ................................................................. 2015–March 31, 2015 ........................................................................ 2015–December 31, 2015 ................................................................. 2016–March 31, 2016 ........................................................................ We note that these proposed changes would only apply to the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) for the LTCHQR Program, and would not be applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. We invite public comments on our proposal to revise the data collection timelines and submission deadlines for this patient influenza vaccination measure (NQF #0680) for the FY 2016 payment determination and subsequent years. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 February 15, 2015 ................................ May 15, 2015. February 15, 2016 ................................ May 15, 2016. b. Proposed Revisions to Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long-Stay) (NQF #0674) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 through 50877), we adopted this measure for the FY 2018 payment determination. We further finalized that LTCHs should begin to collect and submit data on this measure using the LTCH CARE Data Set starting January 1, 2016. To ensure the successful implementation of new and updated versions of LTCH CARE Data Set, we will be following an implementation cycle beginning April 1, 2016, which will allow for a predictable future release schedule. We believe that adherence to a predictable future release PO 00000 Frm 00286 Fmt 4701 Sfmt 4702 Payment determination FY 2016. FY 2017. schedule that takes into account both the changes that must be made to the LTCH CARE Data Set, as well as requirements that are managed by LTCHs for such changes, will help ensure successful implementation. Therefore, we will be adhering to a date of April 1 of any given year, when releasing future iterations of the LTCH CARE Data Set. This change will effectively delay the implementation of the January 1, 2016, release by three months, allowing LTCHs additional time to become familiar with and to participate in trainings related to the revised LTCH CARE Data Set, as well as time to incorporate given changes into their existing IT infrastructure. Therefore, we are proposing that for the FY 2018 payment determination, data collection for this measure would begin on April 1, 2016. For all E:\FR\FM\15MYP2.SGM 15MYP2 28263 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules subsequent years, data collection for this measure would begin on January 1 and continue through December 31. The proposed changes are illustrated below for the FY 2018 and FY 2019 payment determinations. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES FOR LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 AND FY 2019 PAYMENT DETERMINATIONS: APPLICATION OF PERCENT OF RESIDENTS EXPERIENCING ONE OR MORE FALLS WITH MAJOR INJURY (LONG-STAY) (NQF #0674) Data collection timelines Submission deadlines April 1, 2016–June 30, 2016 ................................................................................ July 1, 2016–September 30, 2016 ....................................................................... October 1, 2016–December 31, 2016 ................................................................. January 1, 2017–March 31, 2017 ........................................................................ April 1, 2017–June 30, 2017 ................................................................................ July 1, 2017–September 30, 2017 ....................................................................... October 1, 2017–December 31, 2017 ................................................................. August 15, 2016 ................................... November 15, 2016.. February 15, 2017.. May 15, 2017 ........................................ August 15, 2017. November 15, 2017. February 15, 2018. We note that these proposed changes would be applicable only to the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) measure, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless specifically proposed for such measures. We invite public comments on these proposals. 7. Proposed New LTCHQR Program Quality Measures for the FY 2018 Payment Determination and Subsequent Years We are proposing three new quality measures for the FY 2018 payment determination and subsequent years. Two of these are related to functional status, and one measure is related to ventilator-associated events (VAE). One of the proposed functional status quality measures is Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. The second proposed functional status quality measure is Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. The quality measures are described in more detail below. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Proposed New LTCHQR Program Functional Status Quality Measures for the FY 2018 Payment Determination and Subsequent Years Patients in LTCHs present with clinically complex conditions. In addition to having complex medical care needs for an extended period of time, LTCH patients often have functional limitations due to the nature of their conditions, as well as deconditioning due to prolonged bed rest and treatment requirements (for example, ventilator use). These patients are therefore at high risk for functional VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 decline during the LTCH stay that is both condition-related and iatrogenic. The National Committee on Vital and Health Statistics, Subcommittee on Health,87 noted: ‘‘[i]nformation on functional status is becoming increasingly essential for fostering healthy people and a healthy population. Achieving optimal health and well-being for Americans requires an understanding across the life span of the effects of people’s health conditions on their ability to do basic activities and participate in life situations in other words, their functional status.’’ The functional assessment items included in the two functional status quality measures were originally developed and tested as part of the PostAcute Care Payment Reform Demonstration version of the CARE Item Set, which was designed to standardize assessment of patients’ status across acute and post-acute settings, including LTCHs, IRFs, SNFs, and HHAs. The functional status items on the CARE Item Set are daily activities that clinicians typically assess at the time of admission and/or discharge in order to determine patients’ needs, evaluate patient progress and prepare patients and families for a transition to home or to another setting. The development of the CARE Item Set and a description and rationale for each item is described in a report entitled ‘‘The Development and Testing of the Continuity Assessment Record and Evaluation (CARE) Item Set: Final Report on the Development of the CARE Item Set: Volume 1 of 3.’’ 88 Reliability and validity testing were conducted as part of CMS’ Post-Acute Care Payment 87 Subcommittee on Health National Committee on Vital and Health Statistics, ‘‘Classifying and Reporting Functional Status’’ (2001). 88 Barbara Gage et al., ‘‘The Development and Testing of the Continuity Assessment Record and Evaluation (CARE) Item Set: Final Report on the Development of the CARE Item Set’’ (RTI International, 2012). PO 00000 Frm 00287 Fmt 4701 Sfmt 4702 Payment determination FY 2018. FY 2019 Reform Demonstration, and we concluded that the functional status items have acceptable reliability and validity. A description of the testing methodology and results are available in several reports, including the report entitled ‘‘The Development and Testing of the Continuity Assessment Record And Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 2 of 3’’ 89 and the report entitled ‘‘The Development and Testing of The Continuity Assessment Record And Evaluation (CARE) Item Set: Final Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 3.’’ 90 The reports are available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/CARE-Item-Set-and-BCARE.html. (1) Proposed Functional Status Quality Measure: Percent of Long-Term Care Hospital Patients With an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function The first functional status quality measure we are proposing for the FY 2018 payment determination and subsequent years is a process quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. This quality measure reports the percent of LTCH patients with both an admission and a discharge functional assessment and a care plan that addresses function. This process measure requires the collection of admission and discharge functional status data by trained clinicians using standardized clinical assessment items, or data elements, that assess specific functional activities (that 89 Ibid. 90 Ibid. E:\FR\FM\15MYP2.SGM 15MYP2 28264 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 is, self-care, mobility, cognition, communication, and bladder continence). The self-care and mobility function items are coded using a 6-level rating scale that indicates the patient’s level of independence with the activity; higher scores indicate more independence. The codes for rating the cognition, communication and bladder items range from 2 to 7 levels. For this quality measure, inclusion of function in the patient’s care plan is determined based on whether a functional goal is recorded at admission for at least one of the standardized self-care or mobility function items using the 6-level rating scale. An increasing body of reported evidence has supported the safety and feasibility of early mobilization and rehabilitation of critically ill but stable patients, with minimal adverse events and risk to the patient.91 92 93 94 95 96 Early mobility and rehabilitation in these settings have been associated with improved patient outcomes. Therefore, this quality measure addresses the importance of: (1) Conducting a functional assessment at the time of admission addressing self-care, mobility, cognition, communication, and bladder continence; (2) incorporating the functional assessment findings made at the time of admission into the patients’ care plan and setting at least one discharge self-care or mobility functional status goal; and (3) conducting a functional assessment at the time of discharge addressing selfcare, mobility, cognition, communication, and bladder continence. Functional limitations following critical illness are becoming increasingly prevalent as a result of improving critical care medicine and survival rates.97 Short-term and long91 J. Adler and D. Malone, ‘‘Early mobilization in the intensive care unit: a systematic review,’’ Cardiopulm Phys Ther J 23, no. 1 (2012). 92 J.P. Kress, ‘‘Clinical trials of early mobilization of critically ill patients,’’ Crit Care Med 37, no. 10 Suppl (2009). 93 W.D. Schweickert and J.P. Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU,’’ Chest 140, no. 6 (2011). 94 W.D. Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial,’’ Lancet 373, no. 9678 (2009). 95 J.M. Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project,’’ J Crit Care 25, no. 2 (2010). 96 A. Drolet et al., ‘‘Move to improve: the feasibility of using an early mobility protocol to increase ambulation in the intensive and intermediate care settings,’’ Phys Ther 93, no. 2 (2013). 97 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 term adverse consequences among critically ill and chronically, critically ill patients in LTCH and Intensive Care Unit (ICU) settings include severe weakness,98 99 100 101 muscle atrophy,102 connective-tissue shortening,103 loss of bone mass,104 increased risk for blood clots,105 increased risk for pressure ulcers,106 deconditioning,107 108 deficits in self-care and ambulation,109 and functional impairment,110 fatigue,111 as well as cognitive impairment, including profound and persistent deficits in memory, attention/concentration, and executive function,112 113 114 and the inability to return to work one year after hospital discharge.115 116 Cognitive impairment in survivors of critical illness has been associated with anxiety and depression, inability to return to work, and inability of older persons to return home.117 To mitigate these adverse consequences, traditional practices of bed rest and immobility have been challenged in recent years, and early mobility and rehabilitation 98 Ibid. 99 S.L. Dang, ‘‘ABCDEs of ICU: Early mobility,’’ Crit Care Nurs Q 36, no. 2 (2013). 100 E.H. Skinner et al., ‘‘Development of a physical function outcome measure (PFIT) and a pilot exercise training protocol for use in intensive care,’’ Crit Care Resusc 11, no. 2 (2009). 101 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ National Institute for Health and Clinical Excellence (NICE), https://www.nice.org.uk/ nicemedia/live/12137/43564/43564.pdf. 102 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project.’’ 103 Ibid. 104 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 105 Ibid. 106 Ibid. 107 Schweickert and Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU.’’ 108 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project.’’ 109 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 110 Skinner et al., ‘‘Development of a physical function outcome measure (PFIT) and a pilot exercise training protocol for use in intensive care.’’ 111 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ 112 Ibid. 113 M.E. Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: risk factors, predictors, and rehabilitation interventions,’’ Crit Care Med 41, no. 9 Suppl 1 (2013). 114 N.E. Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: the activity and cognitive therapy in the intensive care unit (ACT– ICU) trial,’’ Phys Ther 92, no. 12 (2012). 115 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 116 H.J. Engel et al., ‘‘ICU early mobilization: from recommendation to implementation at three medical centers,’’ Crit Care Med 41, no. 9 Suppl 1 (2013). 117 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: risk factors, predictors, and rehabilitation interventions.’’ PO 00000 Frm 00288 Fmt 4701 Sfmt 4702 have been increasingly recognized as important to improve patients’ longterm functional outcomes,118 119 120 with recovery of function being described as both desirable and possible.121 The lack of early mobility initiation in ICU settings has also been described as a strong predictor of patient outcomes.122 The clinical practice guideline Rehabilitation after Critical Illness 123 from the National Institute for Health and Clinical Excellence (NICE) recommends performing clinical assessment to determine the patient’s risk of developing physical and nonphysical morbidity during the critical care stay as early as clinically possible, identifying current rehabilitation needs for patients at risk of morbidity, establishing short-term and medium-term rehabilitation goals based on the clinical assessment, starting an individualized structured rehabilitation program as early as possible, and performing clinical reassessment before discharge. The importance of standardized functional assessment in LTCH settings is also supported by the high prevalence of therapy services provided in this setting, as well as the need for care coordination for patients returning home and receiving follow-up care in the community and patients receiving additional institutional healthcare services after discharge from an LTCH. A study 124 of 1,419 ventilatordependent patients from 23 LTCHs reported that physical, occupational, and speech therapy were the most commonly provided services among a comprehensive list of 34 procedures, services, and treatments provided during the LTCH stay. The high frequency of physical (84.8 percent), occupational (81.5 percent), and speech (79.7 percent) therapy reflects use of the rehabilitative model of care adopted by many post-ICU ventilator weaning programs, which is important in restoration of function. This high utilization of therapy services supports the need for standardized functional 118 Drolet et al., ‘‘Move to improve: the feasibility of using an early mobility protocol to increase ambulation in the intensive and intermediate care settings.’’ 119 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 120 Z. Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review,’’ Arch Phys Med Rehabil 94, no. 3 (2013). 121 C.L. Rochester, ‘‘Rehabilitation in the intensive care unit,’’ Semin Respir Crit Care Med 30, no. 6 (2009). 122 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 123 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ 124 D.J. Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: a multicenter outcomes study,’’ Chest 131, no. 1 (2007). E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules assessment at admission to document functional status, identify the need for therapy, set functional status goals and assist with discharge planning and care coordination. Whether an LTCH patient is discharged home or to another care setting for continuing health care, functional status is an important aspect of a person’s health status to document at the time of transition. The study 125 also reported that 28.8 percent of patients were discharged directly home or to assisted living, further supporting the importance of functional assessment and early rehabilitation to facilitate discharge planning and home discharge, when possible. Reported benefits of early mobility and rehabilitation include: (1) Improved strength 126 127 128 and functional status; 129 130 131 (2) earlier achievement of mobilization milestones, such as outof-bed mobilization; 132 133 (3) improvement in mobility and self-care function scores from admission to discharge; 134 135 (4) greater incidence of return to functional baseline in mobility and self-care, greater unassisted walking and walking distances, and improved self-reported physical function scores at hospital discharge compared with persons not participating in early mobility and rehabilitation; 136 (5) enhanced recovery of functional exercise capacity; 137 (6) improved selfperceived functional status; 138 and (7) reduced physiological and cognitive complications 139 and improved mstockstill on DSK4VPTVN1PROD with PROPOSALS2 125 Ibid. 126 Schweickert and Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU.’’ 127 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 128 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 129 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 130 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial.’’ 131 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 132 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 133 P.E. Morris, ‘‘Moving our critically ill patients: Mobility barriers and benefits,’’ Crit Care Clin 23, no. 1 (2007). 134 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 135 Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: a multicenter outcomes study.’’ 136 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 137 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 138 Ibid. 139 Ibid. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 cognitive function.140 Early mobility and rehabilitation have also been associated with reduced ICU and hospital length of stay; 141 142 143 144 145 146 reduced incidence of delirium and improved patient awareness; 147 148 increased ventilator-free days and improved weaning outcomes; 149 150 151 greater incidence of discharge home directly after hospitalization compared with patients not receiving early mobilization; 152 153 and reduced hospital readmission or death in the year following hospitalization.154 155 Short-term and long-term cognitive impairment are very frequent complications of critical illness, and negatively influence survivors’ abilities to function independently.156 157 158 Delirium during hospitalization is highly prevalent in critically ill patients and has been associated with longer lengths of stay, increased duration of mechanical ventilation, and higher risk 140 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 141 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 142 Kress, ‘‘Clinical trials of early mobilization of critically ill patients.’’ 143 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial.’’ 144 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 145 Engel et al., ‘‘ICU early mobilization: From recommendation to implementation at three medical centers.’’ 146 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 147 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 148 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial.’’ 149 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 150 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 151 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 152 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial.’’ 153 Engel et al., ‘‘ICU early mobilization: From recommendation to implementation at three medical centers.’’ 154 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 155 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ 156 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: Risk factors, predictors, and rehabilitation interventions.’’ 157 Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: The activity and cognitive therapy in the intensive care unit (ACT–ICU) trial.’’ 158 P.P. Pandharipande, T.D. Girard, and E.W. Ely, ‘‘Long-term cognitive impairment after critical illness,’’ N Engl J Med 370, no. 2 (2014). PO 00000 Frm 00289 Fmt 4701 Sfmt 4702 28265 of death.159 A longer duration of delirium has been associated with worse short- and long-term cognition and executive function.160 161 Given these adverse consequences, the importance of early assessment of cognitive function, including possible delirium, and early initiation of cognitive rehabilitation in critical care settings, is being increasingly recognized.162 163 Also, given the positive effects of physical exercise on cognitive function in other populations, the potential positive influence of exercise on cognitive function in the critically ill population is being examined by researchers. A technical expert panel convened by our measure development contractor provided input on the technical specifications of this quality measure, including the items included in the quality measure, inclusion and exclusion criteria and risk adjustors. We also solicited public comment on the draft specifications of this quality measure on the CMS Quality Measures Public Comment Page (https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/MMS/ CallforPublicComment.html) between February 21 and March 14 2014, and received 22 responses from stakeholders with comments and suggestions. Additional information regarding these comments may be found on our Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. Based on the evidence discussed above, we are proposing to adopt for the LTCHQR Program for the FY 2018 payment determination and subsequent years the quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. This quality measure was developed by CMS, and we plan to submit the quality measure to the NQF for review. The MAP met in December 2013 and January 2014, and provided input to CMS as required under section 1890A(a)(3) of the Act. In its January 2014 PreRulemaking Report, the MAP 159 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: Risk factors, predictors, and rehabilitation interventions.’’ 160 Ibid. 161 Pandharipande, Girard, and Ely, ‘‘Long-term cognitive impairment after critical illness.’’ 162 Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: The activity and cognitive therapy in the intensive care unit (ACT–ICU) trial.’’ 163 R.S. Miller et al., ‘‘Outcomes of trauma patients who survive prolonged lengths of stay in the intensive care unit,’’ J Trauma 48, no. 2 (2000). E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28266 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules conditionally supported this proposed measure and stated that the measure concept is promising, but requires modification or further development, and that functional status is a critical area of measurement. Since the time of the MAP meeting, we have continued further development of the measure with input from technical experts, including empirical data analysis. Subsequently, we released draft specifications for the function quality measures, and requested public comment between February 21 and March 14, 2014. We received 22 responses from stakeholders with comments and suggestions during the public comment period, and have updated the quality measures specifications based on these comments and suggestions. The updated specifications are available for review at the LTCHQR Program Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html?redirect=/LTCH-QualityReporting/. We refer readers to section IX.C.2. of the preamble of this proposed rule for more information on the MAP. In section 1886(m)(5)(D)(ii) of the Act, the exception authority provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures focused on assessment of function for patients in the LTCH setting. We are unaware of any other quality measures for functional assessment that have been endorsed or adopted by another consensus organization for the LTCH setting. Therefore, we are proposing to adopt this functional assessment measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures. Additional information regarding the quality measure may be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. We are proposing that data for the proposed quality measure be collected through the LTCH CARE Data Set, with VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the submission through the Quality Improvement and Evaluation System (QIES) Assessment Submission and Processing (ASAP) system. For more information on LTCHQR Program reporting using the QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data Set to include new items that assess functional status, should this proposed measure be adopted. These items, which assess specific functional activities (that is, self-care, mobility, cognition, communication, and bladder continence), would be based on functional items included in the PostAcute Care Payment Reform Demonstration version of the CARE Item Set. The items have been carefully developed and tested for reliability and validity. We invite public comments on our proposal to adopt the quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function for the LTCHQR Program, with data collection starting on April 1, 2016, for the FY 2018 payment determination and subsequent years. We refer readers to section IX.C.9.c. of the preamble of this proposed rule for more information on the proposed data collection and submission timeline for this proposed quality measure. (2) Proposed Functional Status Quality Measure: Functional Outcome Measure: Change in Mobility Among Long-Term Care Hospital Patients Requiring Ventilator Support Section 1206(c) of Division B of Public Law 113–67, the Pathway to SGR Reform Act of 2013, amended section 1886(m)(5)(D) of the Act to add a new clause (iv) requiring the Secretary to establish by no later than October 1, 2015, ‘‘a functional status quality measure for change in mobility among inpatients requiring ventilator support.’’ Accordingly, the second functional status quality measure that we are proposing is an outcome quality measure entitled the Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. This measure estimates the risk-adjusted change in mobility score between the time of admission and the time of discharge among LTCH patients requiring ventilator support at the time of admission. As noted above, LTCH patients often have functional PO 00000 Frm 00290 Fmt 4701 Sfmt 4702 limitations and receive rehabilitation therapy services so that they can become more independent when performing functional activities. Functional improvement is particularly relevant for patients who require ventilator support because these patients have traditionally had limited mobility due to cardiovascular and pulmonary instability, delirium, sedation, lack of rehabilitation therapy staff, and lack of physician referral.164 Several studies have examined functional improvement among patients in the long-term care hospitals and setting. In a sample of 101 patients in LTCHs (three-quarters were ventilatordependent), median functional status scores using the Functional Status Score (FSS)–ICU (rolling, supine-to-sit transfers, unsupported sitting, sit-tostand transfers, and ambulation) improved significantly from admission to discharge, with significant change in all five functional items.165 A separate study of 103 patients with respiratory failure examined functional improvement and found that by the end of the respiratory ICU stay, 69.4 percent of survivors ambulated more than 100 feet, 8.2 percent ambulated less than 100 feet, 15.3 percent could sit in a chair, 4.7 percent could sit on the edge of the bed, and 2.4 percent did not accomplish any of these activities.166 The importance of monitoring improvement in mobility skills among LTCH patients who require ventilator support at the time of admission is also supported by the high prevalence of therapy service provision as part of the treatment plan and the percent of patients discharged home after an LTCH stay. In a study of 1,419 ventilatordependent patients from 23 LTCHs with weaning programs,167 physical therapy, occupational therapy, and speech therapy were the three most commonly provided services among 34 procedures, services, and treatments provided during the LTCH admission. The very high frequency of physical (84.8 percent), occupational (81.5 percent), and speech (79.7 percent) therapy reflects use of the rehabilitative model of care adopted by many post-ICU 164 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: An observational pilot project.’’ 165 A. Thrush, M. Rozek, and J.L. Dekerlegand, ‘‘The clinical utility of the functional status score for the intensive care unit (FSS–ICU) at a long-term acute care hospital: A prospective cohort study,’’ Phys Ther 92, no. 12 (2012). 166 P. Bailey et al., ‘‘Early activity is feasible and safe in respiratory failure patients,’’ Crit Care Med 35, no. 1 (2007). 167 Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: A multicenter outcomes study.’’ E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules weaning programs, which is important in the restoration of function. Improvement in functional status, including mobility and self-care was noted from admission to discharge. Nearly 30 percent of all patients discharged alive returned directly home or to assisted living.168 A technical expert panel convened by our measure development contractor provided input on the technical specifications of this quality measure. We also solicited public comment on the draft specifications of this quality measure, on the CMS Quality Measures Public Comment Page (https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/MMS/ CallforPublicComment.html) between February 21 and March 14, 2014 and received 22 responses from stakeholder with comments and suggestions. Additional information regard the quality measure may be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. We are proposing that data for the proposed quality measure be collected through the LTCH CARE Data Set, with the submission through the QIES ASAP system. For more information on LTCHQR Program reporting using the QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/ LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data Set to include new items that assess the functional status and the risk adjustors, should this proposed application of the measure be adopted. These items, which assess specific functional activities (that is, self-care, mobility, cognition, communication, and bladder continence), would be based on functional status items included in the Post-Acute Care Payment Reform demonstration version of the CARE Item Set. The items have been carefully developed and tested for reliability and validity. Based on the evidence discussed above, we are proposing to adopt for the LTCHQR Program for the FY 2018 payment determination and subsequent years the quality measure entitled Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. This quality measure is developed by CMS, and we plan to submit the quality measure to the NQF 168 Ibid. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 for review. The MAP met in December 2013 and January 2014, and the NQF provided the MAP’s input to CMS as required under section 1890A(a)(3) of the Act. In its January 2014 PreRulemaking Report, the MAP conditionally supported this proposed measure and stated that the measure concept is promising, but requires modification or further development, and that functional status is a critical area of measurement. Since the time of the MAP meeting, we have continued further development of the measure with input from technical experts, including empirical data analysis. Subsequently, we have released draft specifications for the function quality measures, and requested public comment between February 21 and March 14, 2014. We received 22 responses from stakeholders with comments and suggestions during the public comment period, and have updated the quality measures specifications based on these comments and suggestions. The updated specifications are available for review at the LTCHQR Program Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html?redirect=/LTCH-QualityReporting/. We refer readers to section IX.C.2. of the preamble of this proposed rule for more information on the MAP. In section 1886(m)(5)(D)(ii) of the Act, the exception authority provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures focused on improvement of function among patients in the LTCH setting. We are unaware of any other quality measures for functional improvement that have been endorsed or adopted by another consensus organization for the LTCH setting. Moreover, as discussed above, the Secretary is now required to establish such a measure by October 1, 2015. Therefore, we are proposing to adopt this functional improvement measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years PO 00000 Frm 00291 Fmt 4701 Sfmt 4702 28267 under the Secretary’s authority to select non-NQF-endorsed measures. We invite public comments on our proposal to adopt the quality measure entitled Functional Outcome Measure: Change in Mobility among Patients Requiring Ventilator Support for the LTCHQR Program, with data collection starting on April 1, 2016, for the FY 2018 payment determination and subsequent years. We refer readers to section IX.C.9.c. of the preamble of this proposed rule for more information on the proposed data collection and submission timeline for this proposed quality measure. b. Proposed Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure The third quality measure that we are proposing is the CDC-developed National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) outcome measure. The term ‘‘Ventilator-Associated Events’’ incorporates a range of ventilatorassociated events, including ventilatorassociated pneumonia (VAP), pulmonary edema, acute respiratory distress syndrome, sepsis, and atelectasis.169 The NHSN VAE Outcome Measure provides increased measure sensitivity, more objective definitions for ventilator-associated conditions, and the potential for automated outcome detection.170 The NHSN VAE Outcome Measure is designed for use across multiple inpatient care settings, including LTCHs. The measure specifications were created and tested in the acute care setting. During CY 2013, 105 LTCHs submitted VAE data to CDC’s NHSN.171 According to the CDC, ‘‘more than 300,000 patients receive mechanical ventilation in the United States each year.’’ 172 These patients are at increased risk for infections, such as pneumonia and sepsis, as well as other serious complications including pulmonary edema, pulmonary embolism, and death.173 174 175 These complications can 169 Klompas, M., Y. Khan, et al. (2011). ‘‘Multicenter Evaluation of a Novel Surveillance Paradigm for Complications of Mechanical Ventilation.’’ PLoS ONE 6(3): e18062. 170 Magill, S. S., M. Klompas, et al. (2013). ‘‘Developing a new, national approach to surveillance for ventilator-associated events*.’’ Crit Care Med 41(11): 2467–2475. 171 Data from CMS–CDC correspondence on February 10, 2014. 172 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/ 10-VAE_FINAL.pdf. 173 Esteban, A., A. Anzueto, et al. (2002). ‘‘Characteristics and outcomes in adult patients E:\FR\FM\15MYP2.SGM Continued 15MYP2 28268 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 lead to longer stays in the ICU and hospital, increased health care costs and increased risk of disability (or death).176 The estimated mortality rate in patients aged 85 years and older with acute lung injury on mechanical ventilation is 60 percent.177 Ventilator-Associated Events represent a high-priority complication in the LTCH setting, given the older, medically complex population in LTCHs and the high prevalence of mechanical ventilation in this setting. A MedPAC analysis of MedPAR data found that 16 percent of LTCH patients used at least one ventilator-related service in 2012.178 In FY 2012, MS– LTC–DRG 207, a diagnosis-related group that refers to respiratory diagnosis with ventilator support for 96 or more hours, represented the most frequently occurring diagnosis among LTCH patients, at 11.3 percent of all LTCH discharges,179 and MS–LTC–DRG–4, a diagnosis-related group that refers to tracheostomy with ventilator support for 96 or more hours or primary diagnosis except face, mouth, and neck without major OR procedure, represented an additional 1.3 percent of all LTCH discharges. Together, the two diagnosisrelated groups account for a total of nearly 18,000 discharges. Furthermore, the number of ventilated patients in LTCHs is increasing—the number of discharged patients with respiratory diagnosis with ventilator support for 96 or more hours increased 7.4 percent between 2008 and 2011.180 Although there are no nationwide or LTCH-specific estimates of the prevalence of ventilator-associated conditions (VACs) and infection-related ventilator-associated complications (IVACs), a recent study of mechanically ventilated patients in ICUs found that approximately 10 percent developed a VAC and 5 percent developed an IVAC.181 Adherence to clinical practice guidelines for the prevention of VAP has been associated with decreased VAC rates in ICUs.182 Because VAP, one type of VAC, is considered preventable, surveillance and measurement of infection rates is important to improving quality of care and patient safety. The importance of the NHSN VAE Outcome Measure in LTCHs was underscored by the MAP, which stated in its January 2014 Pre-Rulemaking Report that the measure addresses a National Quality Strategy aim or priority that is currently not adequately addressed. The MAP supported the addition of this measure addressing VAEs in the LTCH setting and stated that ‘‘although this measure is not NQFendorsed, it provides useful information for healthcare facilities to help them monitor ventilator use and identify improvements for preventing complications.’’ 183 The exception authority found in section 1886(m)(5)(D)(ii) of the Act provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed measures for VAEs in the LTCH setting (or a related setting). We are unaware of any other measures for VAEs that have been endorsed or adopted by another consensus organization for the LTCH setting (or a related inpatient setting). Therefore, we are proposing to adopt the NHSN VAE Outcome Measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures. We are proposing to use the CDC’s NHSN reporting and submission infrastructure for reporting of the proposed NHSN VAE Outcome Measure. Details related to the procedures for using CDC’s NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the proposed NHSN VAE Outcome Measure can be found at: https://www.cdc.gov/nhsn/ PDFs/pscManual/10-VAE_FINAL.pdf. CDC’s NHSN is the data collection and submission framework currently used for reporting the CAUTI (NQF #0138) and CLABSI (NQF #0139) measures for the LTCHQR Program. Further, CDC’s NHSN is the data collection and submission framework adopted for data collection and reporting for the Influenza Vaccination Coverage among Healthcare Personnel measure (NQF #0431) starting on October 1, 2014, and for the NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) and NHSN Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) starting on January 1, 2015. By building on the CDC’s NHSN reporting and submission infrastructure, we intend to reduce the administrative burden related to data collection and submission for this measure under the LTCHQR Program. We refer readers to section IX.C.9.d. of the preamble of this proposed rule for more information on the proposed data collection and submission timeline for this proposed quality measure. We invite public comments on our proposal to adopt the NHSN VAE Outcome Measure for the LTCHQR Program, with data collection beginning on January 1, 2016, for the FY 2018 payment determination and subsequent years. We also invite public comments on our proposal to use the CDC’s NHSN for data collection and submission for this measure. receiving mechanical ventilation: A 28-day international study.’’ JAMA 287(3): 345–355. 174 Klompas, M., Y. Khan, et al. (2011). ‘‘Multicenter Evaluation of a Novel Surveillance Paradigm for Complications of Mechanical Ventilation.’’ PLoS ONE 6(3): e18062. 175 Rubenfeld, G.D., E. Caldwell, et al. (2005). ‘‘Incidence and outcomes of acute lung injury.’’ N Engl J Med 353(16): 1685–1693. 176 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/ 10-VAE_FINAL.pdf. 177 Rubenfeld G.D, Caldwell E, Peabody E, et al. Incidence and outcomes of acute lung injury. N Engl J Med 2005: 353:1685–93. 178 MedPAC ‘‘Report to Congress: Medicare Payment Policy’’ Chapter 11 ‘‘Long-term care hospital services.’’ March 2014. https:// www.medpac.gov/chapters/Mar14_Ch11.pdf. 179 Ibid. 180 Ibid. 181 Muscedere, J., T. Sinuff, et al. (2013). ‘‘The clinical impact and preventability of ventilatorassociated conditions in critically ill patients who are mechanically ventilated.’’ Chest 144(5): 1453– 1460. 182 Ibid. 183 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: Public Comment Draft: January 2014. Available: https://www.qualityforum.org/map/. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00292 Fmt 4701 Sfmt 4702 8. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years We are considering whether to propose one or more of the quality measures and quality measure topics listed in the table below for future years in the LTCHQR Program. We invite public comments on these measures and measure topics. We specifically invite public comments regarding the clinical importance of these measures and measure topics in LTCH setting, feasibility of data collection and implementation, current use of these measures and measure topics in the LTCH setting, and the usability of data for these measures and measure topics E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28269 to inform future quality improvements in the LTCH setting. FUTURE MEASURES AND MEASURE TOPICS UNDER CONSIDERATION FOR PROPOSAL FOR THE LTCH QUALITY REPORTING PROGRAM National Quality Strategy Priority: Patient Safety: • Measures addressing Ventilator Bundle. • Measures addressing avoidable injuries secondary to polypharmacy. • Application of Hospital-Based Inpatient Psychiatric Services (HBIPS)-2 Hours of Physical Restraint Use (NQF #0640). • Application of Percent of Residents Who Were Physically Restrained (Long Stay) (NQF #0687). National Quality Strategy Priority: Effective Clinical Processes: • Severe Sepsis and Septic Shock: Management Bundle. • Venous Thromboembolism Prophylaxis (NQF #0371). • Ventilator Weaning Rate. • Pain Management. National Quality Strategy Priority: Patient- and Caregiver-Centered Care: • Depression Assessment and Management. • Application of Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) (NQF #0166). • Measures addressing patients’ experience of care. • Measures addressing pain control—patients’ preference. National Quality Strategy Priority: Communication and Coordination of Care: • Application of Medication Reconciliation (NQF #0097). • Application of Medication Reconciliation Post-Discharge (NQF #0554). • Reconciled Medication List Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0646). • Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0647). • Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648). • Measures addressing care transitions. 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determination and Subsequent Years mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Background Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 payment determination and subsequent years, each LTCH submit to the Secretary data on quality measures specified by the Secretary and that such data shall be submitted in a form and manner, and at a time, specified by the Secretary. As required by section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to a given rate year, any annual update to the standard Federal rate for discharges for the hospital during the rate year must be reduced by two percentage points. b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 and FY 2017 Payment Determinations (Except NQF #0680 and NQF #0431) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861 and 50878 through 50881), we finalized the data submission timelines and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 submission deadlines for measures for the FY 2016 and FY 2017 payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for a more detailed discussion of these timelines and deadlines. Specifically, we refer readers to the table at 78 FR 50878 of the FY 2014 IPPS/LTCH PPS final rule for the data collection timelines and submission deadlines for the FY 2016 payment determination and the tables at 78 FR 50881 of that final rule for the data collection timelines and submission deadlines for the FY 2017 payment determination. c. Proposed Revision to the Previously Adopted Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through 50861), we revised the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure for the FY 2016 payment determination and subsequent PO 00000 Frm 00293 Fmt 4701 Sfmt 4702 years. In that rule (78 FR 50861, 50880 through 50882), we also revised the data collection timelines and submission deadlines for the FY 2016 through FY 2018 payment determinations for this measure. For the reasons discussed in section IX.C.6.a. of the preamble of this proposed rule, we are proposing to change to the data collection timeframes and submission deadlines for the FY 2016 payment determination and subsequent years. Specifically, as discussed in section IX.C.6.a. of the preamble of this proposed rule, for the FY 2016 payment determination, we are proposing submission deadlines of February 15, 2015, and May 15, 2015, respectively, for this measure for data collection periods October 1–December 31, 2014, and January 1–March 31, 2015, respectively, instead of the previously finalized submission deadline of May 15, 2015, for the data collection period of October 1, 2014– April 30, 2015. The proposed changes applicable to this measure (NQF #680) are illustrated below for the FY 2016 payment determination. Please refer to section IX.C.6 of the preamble of this proposed rule for further information regarding this proposed revision. E:\FR\FM\15MYP2.SGM 15MYP2 28270 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION FOR PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program FY 2016 payment determination Data collection timelines (CY) Q4 (October–December 2014) ................................................................. Q1 (January–March 2015) ........................................................................ Further, as discussed in section IX.C.6.a. of the preamble of this proposed rule, we are proposing similar February 15, 2015. May 15, 2015. deadlines for the FY 2017 payment determination and subsequent years for the LTCHQR Program. The proposed changes applicable to this measure (NQF #680) are illustrated below. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS FOR PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program payment determination (FY) Data collection timelines (CY) Q4 of the CY two years before the payment determination year (for ex- February 15, of the FY preceding the payment determination year (for ample, October–December 2015 for the FY 2017 payment deterexample, February 15, 2016 for the FY 2017 payment determinamination). tion). Q1 of the CY one year before the payment determination year (for ex- May 15 of the FY preceding the payment determination year (for example, January–March 2016 for the FY 2017 payment determination). ample, May 15, 2016 for the FY 2017 payment determination). We invite public comment on the proposed submission deadlines for this measure (NQF #0680) for the FY 2016 payment determination and subsequent years. d. Proposed Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for Proposed New LTCHQR Program Quality Measures and for Proposed Revisions to Previously Adopted Quality Measures For the two proposed functional status measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure, we are proposing that all LTCHs would be required to collect data using the LTCH CARE Data Set (Version 3.00).184 We will release the technical data submission specifications and update LTCHQR Program Manual for the LTCH CARE Data Set (Version 3.00) to include items related to the functional status measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long- Stay) (NQF #0674) measure in CY 2015. The QIES ASAP system would remain the data submission mechanism for the LTCH CARE Data Set. Further information on data submission of the LTCH CARE Data Set for the LTCHQR Program Reporting using the QIES ASAP system is available at: https:// www.qtso.com/ and https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. For the proposed VAE measure, we are proposing that LTCHs would be required to use the CDC’s NHSN reporting and submission infrastructure. Details related to the procedures for using CDC’s NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the proposed NHSN VAE Outcome Measure can be found at: https:// www.cdc.gov/nhsn/PDFs/pscManual/ 10-VAE_FINAL.pdf. We invite public comments on these proposals. e. Proposed Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2018 Payment Determination In sections IX.C.9.c. and f. of the preamble of this proposed rule, we are proposing, for the FY 2016 payment determination and subsequent years, to revise the data collection timelines and submission deadlines for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) measure and, for the FY 2018 payment determination and subsequent years, to revise the data collection timelines and submission deadlines for the application of the Percent of Residents Experiencing One or More Falls with Major Injury (LongStay) (NQF #0674) measure. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50882), we adopted the data collection timelines and submission deadlines for the remaining quality measures applicable to the FY 2018 payment determination as listed in the following tables. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 TIMEFRAMES FOR DATA COLLECTION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION NQF measure ID Data collection timelines NQF #0138 ............................................................................................... 184 The LTCH CARE Data Set (Version 2.01) was approved on June 10, 2013, by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. Available on the Web site at: https://www.cms.gov/Regulations- VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 January 1, 2016–December 31, 2016. and-Guidance/Legislation/PaperworkReductionAct of1995/PRA-Listing-Items/CMS1252160.html. CMS will revise the LTCH CARE Data Set (Version 3.00) and submit for OMB review for PRA approval to support data collection for the two functional status PO 00000 Frm 00294 Fmt 4701 Sfmt 4702 measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). LTCH CARE Data Set (Version 3.00) is proposed for April 1, 2016, implementation date. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28271 TIMEFRAMES FOR DATA COLLECTION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION—Continued NQF measure ID Data collection timelines NQF #0139 ............................................................................................... NQF #0678 ............................................................................................... NQF #0431 ............................................................................................... NQF #1716 ............................................................................................... NQF #1717 ............................................................................................... January January October 2017. January January 1, 2016–December 31, 2016. 1, 2016–December 31, 2016. 1, 2016 (or when vaccine becomes available)–March 31, 1, 2016–December 31, 2016. 1, 2016–December 31, 2016. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) AND PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeline: CY 2016 Q1 Q2 Q3 Q4 (January–March 2016) ........................................................................ (April–June 2016) ................................................................................ (July–September 2016) ....................................................................... (October–December 2016) ................................................................. May 15, 2016. August 15, 2016. November 15, 2016. February 15, 2017. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeline October 1 2016 (or when vaccine becomes available)–March 31, 2017 For the new measures that we are proposing to adopt for the FY 2018 May 15, 2017. payment determination and subsequent years, we are proposing the following data collection timelines and submission deadlines. PROPOSED DATA COLLECTION TIMELINES FOR NEW LTCHQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION NQF Measure ID or Measure Name (when NQF Measure ID not available) Data collection timeline National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. January 1, 2016–December 31, 2016. April 1, 2016–December 31, 2016. April 1, 2016–December 31, 2016. PROPOSED SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: NATIONAL HEALTHCARE SAFETY NETWORK (NHSN) VENTILATOR-ASSOCIATED EVENT (VAE) OUTCOME MEASURE Final submission deadlines for the LTCHQR Program FY 2018 payment determination mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Data collection timeline Q1 Q2 Q3 Q4 (January–March 2016) ........................................................................ (April–June 2016) ................................................................................ (July–September 2016) ....................................................................... (October–December 2016). ................................................................ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00295 Fmt 4701 May 15, 2016. August 15, 2016. November 15, 2016. February 15, 2017. Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28272 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: FUNCTIONAL OUTCOME MEASURE: CHANGE IN MOBILITY AMONG LONG-TERM CARE HOSPITAL PATIENTS REQUIRING VENTILATOR SUPPORT AND PERCENT OF LONG-TERM CARE HOSPITAL PATIENTS WITH AN ADMISSION AND DISCHARGE FUNCTIONAL ASSESSMENT AND A CARE PLAN THAT ADDRESSES FUNCTION Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeline Q2 (April–June 2016) ................................................................................ Q3 (July–September 2016) ....................................................................... Q4 (October–December 2016) ................................................................. We invite public comments on these data collection timelines and submission deadlines for the three proposed new quality measures for FY 2018 payment determination. f. Proposed Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for the FY 2018 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule, we revised the Application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long August 15, 2016. November 15, 2016. February 15, 2017. Stay) (NQF #0674) measure for the FY 2018 payment determination and subsequent years (78 FR 50874 through 50877). We are proposing, for the FY 2018 payment determination only, to move the start date for data collection of this measure to April 1, 2016, instead of the previously finalized start date of January 1, 2016. Data collection and submission of this measure would continue through December 31, 2016, as previously finalized for the FY 2018 payment determination. This proposed change in the data collection start date would only affect CY 2016 data collection and submission for the LTCHQR Program for the FY 2018 payment determination. For all subsequent years, data collection for this measure would begin on January 1 and continue through December 31. We note that these proposed changes would be applicable only to the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. We refer readers to section IX.C.6. of the preamble of this proposed rule for further information and rationale. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION FOR THE APPLICATION OF PERCENT OF RESIDENTS EXPERIENCING ONE OR MORE FALLS WITH MAJOR INJURY (LONG STAY) (NQF #0674) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeline: CY 2016 Q2 (April–June 2016) ................................................................................ Q3 (July–September 2016) ....................................................................... Q4 (October–December 2016) ................................................................. We invite public comment on the proposed data collection timeline and quarterly submission deadlines for the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for the FY 2018 payment determination. August 15, 2016. November 15, 2016. February 15, 2017. g. Proposed Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2019 Payment Determination and Subsequent Years For the quality measures applicable to the FY 2019 payment determination and subsequent years, including those that we are proposing in section IX.C.7. of the preamble of this proposed rule, if finalized, we are proposing the following data collection timelines and submission deadlines. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION mstockstill on DSK4VPTVN1PROD with PROPOSALS2 NQF Measure ID or Measure Name (when NQF Measure ID not available) Data collection timeline National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138). National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00296 Fmt 4701 January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. October 1, 2017–March 31, 2018. October 1, 2017–March 31, 2018. Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28273 PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION—Continued NQF Measure ID or Measure Name (when NQF Measure ID not available) Data collection timeline National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-resistant Staphylococcus areus (MRSA) Bacteremia Outcome Measure (NQF #1716). National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674). National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Functional Outcome Measure: Change in Mobility among Patients Requiring Ventilator Support. Percent of LTCH Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) AND PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program FY 2019 payment determination Data collection timeline: CY 2017 Q1 Q2 Q3 Q4 (January–March 2017) ........................................................................ (April–June 2017) ................................................................................ (July–September 2017) ....................................................................... (October–December 2017) ................................................................. May 15, 2017. August 15, 2017. November 15, 2017. February 15, 2018. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION: PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program FY 2019 payment determination Data collection timeline October 1, 2017–December 31, 2017 ...................................................... January 1, 2018–March 31, 2018 ............................................................. February 15, 2018. May 15, 2018. PROPOSED DATA COLLECTION TIMELINES AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION: INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) Final submission deadlines for the LTCHQR Program FY 2019 payment determination Data collection timeline October 1 2017–March 31, 2018 .............................................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 We invite public comment on these proposals. 10. Proposed LTCHQR Program Data Completion Thresholds for the FY 2016 Payment Determination and Subsequent Years a. Overview Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 payment determination and subsequent years, each LTCH submit to the Secretary data on quality measures specified by the Secretary in a form and manner, and at a time, specified by the Secretary. As VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 May 15, 2018. required by section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to a given fiscal year, any annual update to the standard Federal rate for discharges for the hospital during the rate fiscal year must be reduced by two percentage points. To date, we have not established a standard for compliance other than that LTCHs submit all applicable required data for all finalized measures, by the previously finalized quarterly deadlines. In response to input from our stakeholders seeking additional PO 00000 Frm 00297 Fmt 4701 Sfmt 4702 specificity related to the LTCHQR Program compliance affecting FY payment update determinations and, due to the importance of ensuring the integrity of quality data submitted to CMS, we are proposing to set specific LTCHQR Program thresholds for completeness of LTCH quality data beginning with data affecting the FY 2016 payment determination and subsequent years. The LTCHQR Program, through the FY 2012, FY 2013, and FY 2014 IPPS/ LTCH PPS final rules, requires LTCHs to submit quality data using two separate E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28274 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules data collection/submission mechanisms: measures collected using the LTCH CARE Data Set (LCDS) are submitted through the CMS Quality Improvement Evaluation System (QIES); and measures stewarded by the CDC (such as Healthcare Acquired Infection (HAI) and vaccination measures), are submitted using the CDC’s National Healthcare Safety Network (NHSN). We have also previously finalized a claimsbased measure (All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Long Term Care Hospitals); however, claims-based measures do not require LTCHs to actually submit quality data to CMS, as they are calculated using claims data submitted to CMS for payment purposes. Thus, with claims-based measures, there is no submitted quality data to which we could apply data completion thresholds. To ensure that LTCHs are meeting an acceptable standard for completeness of submitted data, we are proposing that for the FY 2016 payment determination and subsequent years, LTCHs meet or exceed two separate program thresholds: one threshold for completion of quality measures data collected using the LCDS and submitted through QIES; and a second threshold for quality measures data collected and submitted using the CDC’s NHSN. We are proposing that LTCHs must meet or exceed both thresholds discussed below, in order to avoid receiving a 2 percentage point reduction to their annual payment update for a given FY, beginning with FY 2016. We are proposing to hold LTCHs accountable for different data completion thresholds for each of the two data submission mechanisms; an 80 percent data completion threshold for data collected using the LCDS and submitted through the QIES mechanism; and a 100 percent data completion threshold for data submitted through the CDC’s NHSN. We are proposing to hold LTCHs to the higher data completion threshold for the CDC’s NHSN initially, because many LTCHs have been mandated by States to report infection data using the CDC’s NHSN system for surveillance purposes, prior to the start of the LTCHQR Program on October 1, 2012, and, therefore, we believe LTCHs are more familiar with the NHSN collection and submission process. In contrast, LTCHs had never submitted quality data using a standardized data collection instrument before October 1, 2012, such as the LCDS submitted through the QIES mechanism. In addition, we require the submission of LCDS admission and discharge data through QIES, in order VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 for LTCHs to meet the proposed data accuracy compliance standard, which with regard to discharge data, may be more difficult to collect on patients that are discharged emergently or against medical advice, in effect making it more difficult to meet a higher level of compliance initially. Lastly, through the FY 2014 IPPS/LTCH PPS final rule, we finalized accelerated quarterly deadlines for submission of quality data, beginning January 2014, of 45 days beyond the end of each CY quarter, as opposed to the previous 135 day postquarterly deadline LTCHs were previously required to meet. We feel that this is an additional challenge that LTCHs may face. We invite comment on other obstacles LTCHs may face in meeting a higher level of compliance with regard to submission of quality data using the LCDS. b. Proposed LTCHQR Program Data Completion Threshold for the Required LTCH CARE Data Set (LCDS) Data Items The LCDS is composed of data collection items designed to inform quality measure calculations, including risk-adjustment calculations, as well as internal consistency checks for logical inaccuracies. We are proposing that beginning with quality data affecting the FY 2016 payment determination and subsequent years, LTCHs must meet or exceed a proposed LCDS data completion threshold of 80 percent. We are proposing to assess the completeness of submitted data by verifying that for all LCDS assessments submitted by any given LTCH, at least 80 percent of those LCDS Assessments must have 100 percent of the required quality data items completed, where, for the purposes of this proposed rule, ‘‘completed’’ is defined as having provided actual patient data, as opposed to a non-informative response, such as a dash (-), that indicates the LTCH was unable to provide patient data. The proposed threshold of 80 percent is based on the need for substantially complete records, which allows appropriate analysis of quality measure data for the purposes of updating quality measure specifications as they undergo yearly and triennial measure maintenance reviews with the NQF. In addition, complete data is needed to understand the validity and reliability of quality data items, including riskadjustment models. Finally, we want to ensure complete quality data from LTCHs, which will ultimately be reported to the public, allowing our beneficiaries to gain an understanding of LTCH performance related to these quality metrics, and helping them to make informed health care choices. PO 00000 Frm 00298 Fmt 4701 Sfmt 4702 Our data suggest that the majority of current LTCHs are in compliance with, or exceeding, this proposed threshold already. Our decision to set this proposed data completion threshold at a lower level initially, with the intent to raise the proposed 80 percent threshold in subsequent program years, is based on our understanding that LTCHs are still new to quality reporting, and that their experience and understanding, with respect to reporting quality data using a standardized data collection instrument, and thus their compliance, will increase over time. However, we invite public comment on circumstances that might prevent LTCHs from meeting this level of compliance. All items that we are proposing to require under the LTCHQR Program are identified in Appendix D of the LTCHQR Program Manual version 2.01, which is available for download on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. We are also proposing that any LTCH that does not meet the proposed requirement that 80 percent of all LCDS assessments submitted contain 100 percent of all required quality data items, will be subject to a reduction of 2 percentage points to the applicable FY annual payment update beginning with FY 2016. In order to establish this program threshold, we analyzed all LCDS submissions from January 2013 through September 2013, and we believe that the majority of LTCHs will be able to meet the proposed 80 percent data completion threshold. It is our intent to raise this threshold over the next 2 years, through the formal noticeand-comment rulemaking process. As stated above, we feel that as LTCHs continue to submit data using a standardized data collection instrument, such as the LCDS, and as they continue to take advantage of the resources we provide to guide LTCHs in their submission of this data (national trainings, CMS Special Open Door Forums, LTCHQR Program Manual, and technical trainings available on our Web site), we feel LTCH performance with respect to data completion will improve over time. We are proposing that this threshold will have to be met by LTCHs, in addition to the CDC NHSN threshold discussed below, in order to avoid receiving a 2 percentage point reduction to the applicable FY annual payment update. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 c. LTCHQR Program Data Completion Threshold For Measures Submitted Using the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) The LTCHQR Program through the FY 2012, FY 2013, and FY 2014 IPPS/LTCH PPS final rules, requires that LTCHs submit CDC-stewarded quality measure data using the CDC’s NHSN, including data for the previously finalized CAUTI, CLABSI, and Influenza Vaccination Coverage among Healthcare Personnel (HCP) quality measures. More specifically, we require LTCHs follow CDC quality measure protocols, which require them LTCHs to complete all data fields required for both numerator and denominator data within NHSN, including the ‘‘no events’’ field for any month during which no infection events were identified. LTCHs are required to submit this data on a monthly basis (except for the HCP measure, which is only required to be reported once per year). However, LTCHs have until the associated quarterly deadline (45 calendar days beyond the end of each CY quarter) by which to report infection data to the CDC for each of the three months within any given quarter. For more information on the LTCHQR Program quarterly deadlines, we refer readers to section IX.C.9.b. of the preamble of this proposed rule. We are proposing that beginning with FY 2016 payment determination and subsequent years, this previously finalized requirement for monthly reporting must be met in addition to the proposed LCDS data completion threshold discussed above in order to avoid a 2 percentage point reduction to the applicable FY annual payment update. That is, we are proposing that LTCHs must meet a threshold of 100 percent for measures submitted via the NHSN, achieved by submitting relevant infection, vaccination, or other required quality measure data for each month of any given CY, in addition to meeting the above-proposed data item completion threshold for required quality data items on the LCDS. As the LTCHQR Program expands, and LTCHs begin reporting measures that were previously finalized, but not yet implemented, or newly proposed and finalized measures, we are proposing to apply this same threshold. d. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Proposed Data Completion Thresholds Above we have proposed that LTCHs must meet two separate data completion thresholds in order to avoid a 2 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 percentage point reduction to their applicable FY annual payment update; a data completion threshold of 80 percent for those required data elements collected using the LCDS and submitted through QIES; and a second data completion threshold of 100 percent for quality measure data submitted through the CDC’s NHSN. We are proposing that these data completion thresholds must be met in addition to the data validation threshold of 75 percent we are proposing below, in order to avoid a 2 percentage point reduction to their applicable FY annual payment update. While we are proposing that LTCHs must meet both the proposed data completion and data validation thresholds, LTCHs cannot have their applicable annual payment update reduced twice. That is, should an LTCH fail to meet either one or both of the proposed thresholds, it will only receive one reduction of 2 percentage points to its applicable fiscal year annual payment update. We invite public comment on these proposals. 11. Proposed Data Validation Process for the FY 2016 Payment Determination and Subsequent Years a. Proposed Data Validation Process Historically, we have built consistency and internal validation checks into our data submission specifications to ensure that the basic elements of the LCDS assessments conform to requirements such as proper format and facility information. These internal consistency checks are automated and occur during the LTCH submission process, and help ensure the integrity of the data submitted by LTCHs by rejecting submissions or issuing warnings when LTCH data contain logical inconsistencies. These internal consistency checks are referred to as ‘‘system edits’’ and are further outlined in the LTCH Data Submission Specifications version 1.01, which are available for download on the LTCH Quality Reporting Technical Information Web page at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. Validation is intended to provide added assurance of the accuracy of the data that will be reported to the public as required by section 1886(m)(5)(E) of the Act. We are proposing, for the FY 2016 payment determination and subsequent years, to validate the data elements submitted to CMS for quality purposes. Initially, for the FY 2016 payment determination, this data PO 00000 Frm 00299 Fmt 4701 Sfmt 4702 28275 accuracy validation will apply only to the LCDS items that inform the measures Percent of Patients or Residents with Pressure Ulcers That are New or Worsened (Short-Stay) (NQF #0678). We intend to expand this validation process for quality measures affecting the FY 2017 payment determination and subsequent years through future notice-and-comment rulemaking. We are proposing to validate the data elements submitted to CMS for Percent of Residents or Patients with Pressure Ulcers That are New or Have Worsened (Short-Stay) (NQF #0678) under the LTCHQR Program by requesting the minimum chart data necessary to confirm a statistically valid random sample of 260 LTCHs. From the random sample of 260 LTCHs, 5 LCDS assessments submitted through the National Assessment Collection Database would be randomly selected by the CMS validation contractor. In accordance with § 164.512 (d)(1)(iii) of the HIPAA Privacy Rule, we would request from these LTCHs the specified portions of the 5 Medicare patient charts that correspond to the randomly selected assessments, which would need to be copied and submitted via traceable mail to a CMS contractor for validation. We are proposing that the specific portions of the 5 beneficiary charts would be identified in the written request, but may include: admission and discharge assessments, relevant nursing notes following the admission, relevant nursing notes preceding the discharge, physician admission summary and discharge summary, and any Assessment of Pressure Ulcer Form the facility may utilize. We are proposing that the CMS contractor would utilize the portions of the patient charts to compare that information with the quality data submitted to CMS. Differences that would affect measure outcomes or measure rates would be identified and reported to CMS. These differences could include but are not limited to unreported worsened pressure ulcers. We are proposing that all data that has been submitted to the National Assessment Collection Database under the LTCHQR Program would be subject to the data validation process. Specifically, we are proposing that the contractor would request copies of the randomly selected medical charts from each LTCH via certified mail (or other traceable methods that require an LTCH representative to sign for CMS correspondence), and the LTCH would have 45 days from the date of the request (as documented on the request letter) to submit the requested records to E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28276 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the contractor. If the LTCH does not comply within 30 days, the contractor would send a second certified letter to them, reminding the LTCH that it must return copies of the requested medical records within 45 calendar days following the date of the initial contractor medical record request. If the LTCH still does not comply, then the contractor would assign a ‘‘zero’’ score to each measure in each missing record. If, however, the LTCH does comply, the contractor would review the data submitted by the LTCH on the LCDS assessments for the required data elements associated with the Pressure Ulcer measure, until such time that LTCHs begin to submit additional quality measures that are collected using the LCDS. Initially, this review would consist solely of those required data elements that inform the Pressure Ulcer measure calculation and checks for logical inconsistencies. As LTCHs begin to report additional finalized measures, we intend to expand this validation process to quality measures affecting the FY 2017 payment determination and subsequent years, through future notice-and-comment rulemaking. The contractor would then calculate the percentage of matching data elements which would constitute a validation score. Because we would not be validating all records, we would need to calculate a confidence interval that incorporates a potential sampling error. To receive the full FY 2016 annual payment update, we are proposing that LTCHs in the random sample must attain at least a 75 percent validation score, based upon our validation process, which would use charts requested from patient assessments submitted for CY 2013. We would calculate a 95 percent confidence interval associated with the observed validation score. If the upper bound of this confidence interval is below the 75 percent cutoff point, we would not consider a hospital’s data to be ‘‘validated’’ for payment purposes. We are proposing that LTCHs failing the validation requirements would be subject to the 2 percent annual payment update reduction, beginning with their fiscal year annual payment update. In addition, all LTCHs validated would receive educational feedback, including specific case details. b. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Proposed Data Accuracy Threshold We are proposing that LTCHs must meet a data accuracy threshold of 75 percent in order to avoid receiving a 2 percentage point reduction to their applicable fiscal year annual payment VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 update. We are proposing that this proposed data accuracy threshold of 75 percent must be met in addition to the proposed data completion thresholds (80 percent for data collected using the LTCH CARE Data Set and submitted using QIES, and 100 percent for data submitted using the CDC’s NHSN), in order to avoid receiving a 2 percentage point reduction to their applicable FY annual payment update. While we are proposing that LTCHs must meet both the proposed data accuracy and data completion thresholds, LTCHs cannot have their applicable annual payment update reduced twice. That is, should an LTCH fail to meet either one or both of the proposed thresholds (data completion and/or data accuracy), it will only receive one reduction of 2 percentage points to its applicable FY annual payment update. We invite public comment on these proposals and suggestions to improve the utility of the approach or to reduce the burden on LTCHs. 12. Public Display of Quality Measure Data for the LTCHQR Program Under section 1886(m)(5)(E) of the Act, the Secretary is required to establish procedures for making data submitted under section 1886(m)(5)(C) of the Act available to the public. Section 1886(m)(5)(E) of the Act requires that such procedures shall ensure that an LTCH has the opportunity to review the data that is to be made public with respect to the LTCH prior to such data being made public. The statute also requires that the Secretary report quality measures that relate to services furnished in inpatient settings in LTCHs on our Web site. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we received and responded to public comments regarding the public reporting of quality data under the LTCHQR Program. Currently, we are developing plans regarding the implementation of these provisions. We appreciate the need for transparency into the processes and procedures that will be implemented to allow for public reporting of the LTCHQR Program data and to afford LTCHs the opportunity to review that data before it is made public. At this time, we have not established procedures or timelines for public reporting of data, but we intend to include related proposals in future rulemaking. We welcome public comment on what we should consider when developing future proposals related to public reporting of quality measures for the LTCHQR Program. PO 00000 Frm 00300 Fmt 4701 Sfmt 4702 13. Proposed LTCHQR Program Submission Exception and Extension Requirements for the FY 2017 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50883 through 50885), we referred to these requirements as submission ‘‘waiver’’ requirements. We are proposing to instead use the phrase ‘‘exception and extension’’ requirements for purposes of clarity. For the FY 2017 payment determination and subsequent years, we are proposing to continue using the LTCHQR Program’s requirements that we adopted in the FY 2014 IPPS/LTCH PPS final rule for the FY 2015 payment determination and subsequent years, although the term ‘‘waiver’’ is replaced by ‘‘exception and extension.’’ In the FY 2014 IPPS/LTCH PPS final rule, we finalized a process for LTCHs to request and for us to grant waivers with respect to the quality data reporting requirements of the LTCHQR Program for one or more quarters, beginning with the FY 2015 payment determination, when there are certain extraordinary circumstances beyond the control of the LTCH. We are proposing to continue to use this previously finalized process. In the event that an LTCH seeks to request a submission exception or extension for quality reporting purposes, the LTCH must request an exception or extension within 30 days of the date that the extraordinary circumstances occurred by submitting a written request to CMS via email to the LTCH mailbox at LTCHQRP Reconsiderations@cms.hhs.gov. Exception or extension requests sent to CMS through any other channel will not be considered as a valid request for an exception or extension from the LTCHQR Program’s reporting requirements for any payment determination. The written request must contain all of the finalized requirements in the FY 2014 IPPS/LTCH PPS final rule, and on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. When an exception or extension is granted, an LTCH will not incur payment reduction penalties for failure to comply with the requirements of the LTCHQR Program, for the timeframe specified by CMS. If an LTCH is granted an exception, we will not require that the LTCH submit any quality data for a given period of time. If we grant an extension to an LTCH, the LTCH will E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 still remain responsible for submitting quality data collected during the timeframe in question, although we will specify a revised deadline by which the LTCH must submit this quality data. In addition, in the FY 2014 IPPS/ LTCH PPS final rule, we finalized a policy that allowed CMS to grant exceptions or extensions to LTCHs that have not requested them if it is determined that extraordinary circumstances affects an entire region or locale. We stated that if this determination was made, we will communicate this decision through routine communication channels to LTCHs and vendors, including, but not limited to, issuing memos, emails, and notices at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. More information on the LTCHQR Program exception and extension requirements and processes, and all related announcements may be found at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. For the FY 2017 payment determination and subsequent years, we are proposing that we may grant an exception or extension to LTCHs if we determine that a systemic problem with one of our data collection systems directly affected the ability of the LTCH to submit data. Because we do not anticipate that these types of systemic errors will happen often, we do not anticipate granting a waiver or extension on this proposed basis frequently. We are proposing that if we make the determination to grant an exception or extension, we would communicate this decision through routine communication channels to LTCHs and vendors, including, but not limited to, issuing memos, emails, and notices on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. We invite public comment on these proposals. 14. Proposed LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years a. Previously Finalized LTCHQR Program Reconsideration and Appeals Procedures for the FY 2014 and FY 2015 Payment Determinations In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50885 through 50887), we finalized a voluntary process that allowed LTCHs the opportunity to seek VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reconsideration of our initial noncompliance decision for the FY 2014 and FY 2015 payment determinations. We refer readers to that rule for a discussion of this process. b. Proposed LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years For the FY 2016 payment determination and subsequent years, we are proposing to adopt an updated process, as described below, that will enable an LTCH to request a reconsideration of our initial noncompliance decision in the event that an LTCH believes that it was incorrectly identified as being subject to the 2-percentage point reduction to its annual payment due to noncompliance with the LTCHQR Program reporting requirements for a given reporting period. For the FY 2016 payment determination, and subsequent years, we are proposing that an LTCH would receive a notification of noncompliance if we determine that the LTCH did not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to the applicable fiscal year and that the LTCH is therefore subject to a 2percentage point reduction in the applicable payment determination as required by section 1886(m)(5)(A)(i) of the Act. We would only consider requests for reconsideration after an LTCH has been found to be noncompliant and not before. An LTCH would have 30 days from the date of the initial notification of noncompliance to review its payment determination and submit to us a request for reconsideration. This proposed time frame would allow us to balance our desire to ensure that LTCHs have the opportunity to request reconsideration with our need to complete the process and provide LTCHs with our reconsideration decision in a timely manner. Notifications of noncompliance and any subsequent notifications from CMS would be sent via a traceable delivery method, such as certified U.S. mail or registered U.S. mail. We are proposing that an LTCH may withdraw its request at any time and may file an updated request within the proposed 30-day deadline. We also are proposing that, in very limited circumstances, we may grant a request by an LTCH to extend the proposed deadline for reconsideration requests. It would be the responsibility of an LTCH to request an extension and demonstrate that extenuating circumstances existed that prevented the filing of the PO 00000 Frm 00301 Fmt 4701 Sfmt 4702 28277 reconsideration request by the proposed deadline. We also are proposing that as part of the LTCH’s request for reconsideration, the LTCH would be required to submit all supporting documentation and evidence demonstrating: (1) Full compliance with all LTCHQR Program reporting requirements during the reporting period; or (2) extenuating circumstances that affected noncompliance if the LTCH was not able to comply with the requirements during the reporting period. We would not review any reconsideration request that fails to provide the necessary documentation and evidence along with the request. The documentation and evidence may include copies of any communications that demonstrate its compliance with the program’s requirements, as well as any other records that support the LTCH’s rationale for seeking reconsideration. A sample list of acceptable supporting documentation and evidence, as well as instructions for LTCHs to retrieve copies of the data submitted to CMS for the appropriate program year can be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. We are proposing that an LTCH wishing to request a reconsideration of our initial noncompliance determination would be required to do so by submitting an email to the following email address: LTCHQRP Reconsiderations@cms.hhs.gov. Any request for reconsideration submitted to us by an LTCH would be required to follow the guidelines outlined on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. Following receipt of a request for reconsideration, we will provide— • An email acknowledgment, using the contact information provided in the reconsideration request, to the CEO or CEO-designated representative that the request has been received; and • Once we have reached a decision regarding the reconsideration request, an email to the LTCH CEO or CEOdesignated representative, using the contact information provided in the reconsideration request, regarding our decision. We are proposing to require an LTCH that believes it was incorrectly identified as being subject to the 2percentage point reduction to its annual E:\FR\FM\15MYP2.SGM 15MYP2 28278 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payment update to submit a timely request for reconsideration and receive a decision on that request before the LTCH can file an appeal with the PRRB. If the LTCH is dissatisfied with the decision rendered at the reconsideration level, the LTCH could appeal the decision with the PRRB under 42 CFR 405.1835. We believe this proposed process is more efficient and less costly for CMS and for LTCHs because it decreases the number of PRRB appeals by resolving issues earlier in the process. Additional information about the reconsideration process including requirements for submitting a reconsideration request is posted on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. We invite public comment on the proposed procedures for reconsideration and appeals. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 15. Electronic Health Records (EHR) and Health Information Exchange (HIE) We are also interested in understanding the current state of electronic health record (EHR) adoption and use of Health Information Exchange (HIE) in the LTCH community. Therefore, we are soliciting feedback and input from LTCHs and the public on EHR adoption and HIE usage. We are especially interested in LTCH feedback and input on the following questions: • Have you adopted an EHR in your LTCH setting? • If your LTCH setting uses EHRs, what functional aspects of EHRs do you find most important (for example, the ability to send or receive transfer of care information; the ability to support medication orders/medication reconciliation)? • Does the EHR system used in your LTCH setting support interoperable document exchange with other healthcare providers (for example, acute care hospitals, physician practices, skilled nursing facilities, etc.)? In addition to seeking public feedback and input on the feasibility and desirability of EHR adoption and use of HIE in LTCHs, we are also interested in public comment on the need to develop electronic clinical quality measures, and the benefits and limitations of implementing these measures for LTCHs. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 D. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 1. Background The HITECH Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA) authorizes incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified electronic health record (EHR) technology (CEHRT). We refer to this program as the EHR Incentive Program. Eligible hospitals (EHs) and critical access hospitals (CAHs) may qualify for these incentive payments under Medicare (as authorized under sections 1886(n) and 1814(l) of the Act, respectively) if they successfully demonstrate meaningful use of CEHRT, which includes reporting on clinical quality measures (CQMs) using CEHRT. Sections 1886(b)(3)(B) and 1814(l) of the Act also establish downward payment adjustments under Medicare, beginning with fiscal year 2015, for eligible hospitals and CAHs that are not meaningful users of CEHRT for certain associated reporting periods. We refer to this part of the EHR Incentive Program as the Medicare EHR Incentive Program. Sections 1903(a)(3)(F) and 1903(t) of the Act provide the statutory basis for Medicaid incentive payments. The set of CQMs from which eligible hospitals and CAHs will report under the EHR Incentive Program beginning in FY 2014 is listed in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087). We continue to believe there are important synergies with respect to the Medicare EHR Incentive Program and the Hospital IQR Program. We believe the financial incentives under the Medicare EHR Incentive Program for the adoption and meaningful use of CEHRT by EHs and CAHs will encourage the adoption and use of CEHRT for the electronic reporting of CQMs under the Hospital IQR Program. We expect that the electronic submission of quality data from EHRs under the EHR Incentive Program will provide a foundation for establishing the capacity of hospitals to send, and for CMS to receive, CQMs via CEHRT for certain Hospital IQR Program measures. 2. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines We believe it is important to continue our goal of aligning the EHR Incentive Program with the Hospital IQR Program PO 00000 Frm 00302 Fmt 4701 Sfmt 4702 because alignment of these programs will serve to reduce hospital reporting burden and encourage the adoption and meaningful use of CEHRT by eligible hospitals and CAHs. Section 1886(n)(3)(B)(iii) of the Act requires that, in selecting measures and establishing the form and manner for reporting measures under the EHR Incentive Program, the Secretary shall seek to avoid redundant or duplicative reporting with reporting otherwise required, including reporting under section 1886(b)(3)(B)(viii) of the Act (the Hospital IQR Program). The reporting and submission timelines for the EHR Incentive Program for eligible hospitals and CAHs currently operate on a Federal fiscal year basis, while the reporting and submission timelines for the Hospital IQR Program currently operate on a calendar year basis. This difference may create confusion and additional burden for hospitals attempting to report data to both programs. To alleviate this possible confusion, reduce provider burden, and strengthen our commitment to aligning programs, we are proposing to align the reporting and submission periods for clinical quality measures for the Medicare EHR Incentive Program with that of the Hospital IQR Program on a calendar year basis in 2015 and 2016. We realize that aligning the Medicare EHR Incentive Program to the calendar year would mean shifting the timeline for reporting and submission of CQMs such that the submission period would continue through February of the subsequent calendar year rather than ending in November as it is currently done, and therefore would delay the incentive eligibility assessment, and subsequently delay the EHR incentive payments under Medicare made to eligible hospitals and CAHs. In order to ease the transition of the reporting period to the calendar year, and to prevent the delay of Medicare EHR incentive payments, we are proposing to incrementally shift the Medicare EHR Incentive Program reporting periods for CQMs. Specifically, for 2015 and 2016, we are proposing for the Medicare EHR Incentive Program to require calendar year reporting for CQM data that are submitted electronically, but require that the data be reported only for the first three calendar quarters (that is, January through March, April through June and July through September) allowing the reporting period, incentive eligibility assessment, and incentive payments to remain on their current schedule. We note that this proposal would only apply for eligible hospitals and CAHs submitting CQMs electronically for 2015 E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules and 2016, and that hospitals demonstrating meaningful use for the first time in 2015 or 2016 would still be required to report CQMs by attestation for a continuous 90-day period in FY 2015 or 2016, or report CQMs electronically for a 3-month calendar year quarter, by July 1 of the given year to avoid the Medicare penalty in the subsequent year as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905). Medicaid-only providers would continue to report according to State requirements. The proposal would not change the reporting periods or requirements for the meaningful use objectives and associated measures under 42 CFR 495.6 or for CQMs that are reported by attestation via the Registration and Attestation System. This proposal would allow us to align the CQM reporting periods for the Medicare EHR Incentive Program with that of the Hospital IQR Program without delaying payment of the Medicare EHR incentive payments for 2015 and 2016. To further align CQM reporting for the two programs, we are proposing to require quarterly reporting of electronically reported CQMs for the Medicare EHR Incentive Program to align with the currently established quarterly electronic CQM reporting periods for the Hospital IQR Program. 28279 Additionally, the Hospital IQR Program is proposing to change its submission period for electronic CQMs from annual to quarterly submission in this rule. We refer readers to the Hospital IQR Program discussion in section IX.A.7.h. of the preamble of this proposed rule for more information about this proposal. Therefore, for the CY 2015 and 2016 reporting periods, we are also proposing to align the Medicare EHR Incentive Program submission period with that being proposed for the Hospital IQR Program. The table below illustrates the current reporting periods, and the following table further illustrates our proposals. CURRENT (2014) TIMELINES FOR EHR INCENTIVE PROGRAM AND HOSPITAL IQR PROGRAM REPORTING AND SUBMISSION EHR incentive program CQM reporting requirements 2014 Reporting Period ...... FY 2014 October 1, 2013– September 30, 2014. Hospital IQR program reporting requirements for FY 2016 payment determination Report one full year OR .... Q4 CY 2013 ...................... October 1, 2013–December 31, 2013. N/A for 2014 Hospital IQR Program reporting. Report one three-month quarter OR. Report any continuous 90day period. Q1 CY 2014 ...................... January 1–March 31, 2014. April 1–June 30, 2014. Q2 CY 2014 ...................... Q3 CY 2014 ...................... Submission Period ............ Jan 2, 2014–Nov 30, 2014 July 1–September 30, 2014. October 1, 2013–November 30, 2014. PROPOSED TIMELINES TO ALIGN THE EHR INCENTIVE PROGRAM WITH PROPOSED HOSPITAL IQR PROGRAM REPORTING AND SUBMISSION CY Q1 ... January 1–March 31, 2015 ....... January 1–March 31, 2015 ....... April 1–June 30, 2015 ............... April 1–June 30, 2015 ............... July 1–September 30, 2015 ...... July 1–September 30, 2015 ...... Q4 ... N/A for EHR Incentive Program October 1–December 31, 2015 Q1 ... January 1–March 31, 2016 ....... January 1–March 31, 2016 ....... Q2 ... April 1–June 30, 2016 ............... April 1–June 30, 2016 ............... Q3 ... July 1–September 30, 2016 ...... July 1–September 30, 2016 ...... Q4 ... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Submission period ** Q3 ... 2016 Reporting Period .. Hospital IQR program reporting requirements Q2 ... 2015 Reporting Period .. EHR incentive program reporting requirements * N/A for EHR Incentive Program October 1–December 31, 2016 Data must be submitted by May 30, 2015. Data must be submitted by August 30, 2015. Data must be submitted by November 30, 2015. For Hospital IQR Program, data must be submitted by February 28, 2016. Data must be submitted by May 30, 2016. Data must be submitted by August 30, 2016. Data must be submitted by November 30, 2016. For Hospital IQR Program, data must be submitted by February 28, 2017. * Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM data only. ** Proposed EHR Incentive Program and Hospital IQR Program submission period would allow data submission on an ongoing basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the quarter. We invite public comment on these proposals. 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2015 In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we finalized VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 two options for eligible hospitals and CAHs to electronically submit CQMs beginning in FY 2014 under the Medicare EHR Incentive Program. Option 1 was to electronically submit aggregate-level CQM data using QRDA– PO 00000 Frm 00303 Fmt 4701 Sfmt 4702 III. Option 2 was to electronically submit data using a method similar to the 2012 and 2013 EHR Incentive Program electronic reporting pilot for EHs and CAHs, which used QRDA–I (patient-level data). We also stated in E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28280 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules that final rule that, consistent with section 1886(n)(3)(B)(ii) of the Act, in the event the Secretary does not have the capacity to receive CQM data electronically, eligible hospitals and CAHs that are beyond their first year of meaningful use may continue to report aggregate CQM results through attestation. We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50904 through 50905) that we had determined that the electronic submission of aggregate-level data using QRDA–III would not be feasible in 2014 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. Therefore, for the 2014 reporting period under the Medicare EHR Incentive Program, eligible hospitals and CAHs would have the option to continue to report aggregate CQM results through attestation. We stated that we would reassess this policy for the 2015 and future reporting periods. We have determined that the electronic submission of aggregate-level data using QRDA–III will not be feasible in 2015 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. Therefore, for the 2015 reporting period under the Medicare EHR Incentive Program, eligible hospitals and CAHs would have the option to continue to report aggregate CQM results through attestation. We note that submissions of aggregate CQM data via attestation would not satisfy the reporting requirements for the Hospital IQR Program, and consistent with our proposal above regarding alignment of these programs, attested CQM data would need to be submitted for one full fiscal year in 2015 via the Registration and Attestation System, and would not require quarterly submissions. Hospitals in their first year of demonstrating meaningful use in 2015 would still be required to report CQMs by attestation for a continuous 90-day period in FY 2015, or report CQMs electronically for a 3-month calendar year quarter, by July 1, 2015 to avoid the Medicare penalty in FY 2016 as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905). We also note that this policy does not apply to the Medicaid EHR Incentive Program. Therefore, States may still require the submission of QRDA–III files to fulfill the CQM reporting requirements for hospitals that participate in the Medicaid EHR Incentive Program. In order to remain aligned with the Hospital IQR Program, and because over 66 percent of hospitals that participate in the Hospital IQR Program are already meaningful users, we strongly recommend that hospitals that are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 eligible to participate in both programs electronically submit up to 16 electronic clinical quality measures of the 28 inpatient measures identified by the Hospital IQR Program. We believe that keeping the two programs aligned will ultimately reduce reporting burden for hospitals. We note again that reporting via attestation would not count towards the reporting requirements for the Hospital IQR Program. 4. Electronically Specified Clinical Quality Measures (CQMs) Reporting for 2015 In the EHR Incentive Program Stage 2 final rule, we finalized the CQMs that eligible hospitals and CAHs would be required to report for purposes of meeting the CQM component of meaningful use under the EHR Incentive Program starting in 2014 (77 FR 54083 through 54077 Table 10). These CQMs are updated routinely to account for changes, including but not limited to changes in billing and diagnosis codes and changes in medical practices. The requirements specified in the EHR Incentive Program Stage 2 final rule allow for the reporting of different versions of the CQMs. For 2015, it is not technically feasible for CMS to accept data that is electronically reported according to the specifications of the older versions of the CQMs, including versions that may be allowed for reporting under the EHR Incentive Program. We stated in the EHR Incentive Program Stage 2 final rule that, consistent with section 1886(n)(3)(B)(ii) of the Act, in the event that the Secretary does not have the capacity to receive CQM data electronically, eligible hospitals and CAHs may continue to report aggregate CQM results through attestation (77 FR 54088). We are proposing that eligible hospitals and CAHs that seek to report CQMs electronically under the Medicare EHR Incentive Program must use the most recent version of the electronic specifications for the CQMs and have CEHRT that is tested and certified to the most recent version of the electronic specifications for the CQMs. Eligible hospitals and CAHs that do not wish to report CQMs electronically using the most recent version of the electronic specifications (for example, if their CEHRT has not been certified for that particular version) would be allowed to report CQM data by attestation for the Medicare EHR Incentive Program. We invite public comment on these proposals. PO 00000 Frm 00304 Fmt 4701 Sfmt 4702 5. Clarification Regarding Reporting Zero Denominators As we stated in the EHR Incentive Program Stage 2 final rule (77 FR 54079) we expect eligible hospitals and CAHs to adopt EHR technology that includes CQMs relevant to each eligible hospital’s or CAH’s patient mix. We understand, however, that there are situations in which an eligible hospital or CAH does not have data to report on a particular CQM, and its EHR is not certified to additional CQMs that can be used to replace that CQM with another for which it has data. For example, a health system with multiple eligible hospitals or CAHs may have an EHR certified for 16 CQMs, which is the minimum number of required CQMs for reporting, but not all of the eligible hospitals or CAHs in the health system may have cases to report on those particular 16 CQMs. We have received questions on how eligible hospitals and CAHs should meet their reporting requirements in this situation; therefore, we are clarifying our policy as set forth below regarding the reporting of a zero denominator for the purposes of the EHR Incentive Program and the Hospital IQR Program. If the eligible hospital’s or CAH’s EHR is certified to a CQM, but the eligible hospital or CAH does not have patients that meet the denominator criteria of that CQM, the eligible hospital or CAH can submit a zero in the denominator for that CQM. Submission of a zero in the denominator for a CQM counts as a successful submission for that CQM for both the EHR Incentive Program and the Hospital IQR Program. For example, if the eligible hospital or CAH within the previously mentioned health system does not provide maternity services, but one of the 16 CQMs the health system’s EHR is certified to is a maternity measure, that eligible hospital’s or CAH’s EHR may render a zero in the denominator for that CQM. The eligible hospital or CAH would therefore report a zero denominator for that maternity care CQM, and this would count toward the 16 required CQMs for the EHR Incentive Program and the Hospital IQR Program. Eligible hospitals or CAHs within that health system for which that maternity CQM does apply would provide data on that measure. 6. Case Threshold Exemption Policy; Clarification for 2014 and Proposed Change for 2015 In the EHR Incentive Program—Stage 2 final rule (77 FR 54080), we finalized the policy that eligible hospitals and CAHs that have 5 or fewer discharges per quarter in the same quarter as their E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules reporting period in FY 2014, or 20 or fewer discharges per full FY reporting period beginning in FY 2015, for which data are being electronically submitted (Medicare and non-Medicare combined) as defined by the clinical quality measure’s denominator population are exempted from reporting the CQM. To be eligible for the exemption, eligible hospitals and CAHs must submit their aggregate population and sample size counts for Medicare and non-Medicare discharges for the CQM for the reporting period. In the Health Information Technology: Revisions to the 2014 Edition Electronic Health Record Certification Criteria; and Medicare and Medicaid Programs; Revisions to the Electronic Health Record Incentive Program interim final rule, we revised the case threshold exemption policy to make it applicable for eligible hospitals and CAHs in all stages of meaningful use beginning with FY 2013, including those that are demonstrating meaningful use for the first time and submitting CQMs by attestation (77 FR 72988 through 72989). Eligible hospitals and CAHs with 5 or fewer discharges during the relevant EHR reporting period (if attesting to a 90-day EHR reporting period), or 20 or fewer discharges during the year (if attesting to a full year EHR reporting period) as defined by the CQM’s denominator population would be exempted from reporting on that CQM. We stated in the interim final rule (77 FR 72989) that beginning in FY 2014, the reporting requirement is to report 16 CQMs covering at least 3 domains from a list of 29 CQMs. We stated further that in order to be exempted from reporting fewer than 16 CQMs, the eligible hospital or CAH would need to qualify for the case threshold exemption for more than 13 of the 29 CQMs. If the eligible hospital or CAH does not meet the criteria for a case threshold exemption for 13 or more CQMs, the eligible hospital or CAH would be able to report at least 16 CQMs. Likewise, we stated that if the CQMs for which the eligible hospital or CAH can meet the case threshold of discharges do not cover at least 3 domains, the eligible hospital or CAH would be exempt from the requirement to cover the remaining domains. For example, if the eligible hospital or CAH does not meet the case threshold of discharges for 13 clinical quality measures, and thus could report 16 clinical quality measures, but the 16 clinical quality measures cover only 2 of the 3 domains, the eligible hospital or CAH would be exempt from covering the third domain. For the reporting periods in 2014, our policy requires that an eligible hospital VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 or CAH that claims a case threshold exemption for one CQM must choose another CQM on which to submit data, or continue to invoke the case threshold exemption until it exceeds 13 case threshold exemptions and may therefore report fewer than the 16 required CQMs. This policy assumes that the eligible hospital or CAH has an EHR that is certified to more than the minimum of 16 CQMs, and the eligible hospital or CAH has other CQMs in its EHR to choose from for reporting. We realize, however, that there could be many EHRs that are certified to only the minimum of 16 CQMs required by ONC’s regulations at 45 CFR 170.102 (the definition of ‘‘Base EHR’’), and for eligible hospitals and CAHs using those EHRs, this policy may result in the eligible hospital or CAH needing to submit data on a CQM for which the EHR is not certified. It was not our intent to have eligible hospitals or CAHs report on measures for which their EHRs are not certified. Beginning with the reporting periods in 2015, we are proposing to change the case threshold exemption policy so that if an eligible hospital or CAH qualifies for an exemption from reporting on a particular CQM, the exemption would count toward the 16 required CQMs. For example, if the eligible hospital’s or CAH’s EHR is certified to report 16 CQMs, and for one of those CQMs the eligible hospital or CAH has 5 or fewer discharges during the relevant EHR reporting period (if attesting to a 90-day EHR reporting period), or 20 or fewer discharges during the year (if attesting to a full year EHR reporting period) as defined by the CQM’s denominator population, the eligible hospital or CAH would report data for the 15 CQMs for which the case threshold exemption does not apply, and invoke a case threshold exemption for the one CQM for which the exemption does apply for a total of 16 CQMs. We expect eligible hospitals and CAHs to adopt EHR technology that includes CQMs relevant to the eligible hospital’s or CAH’s case mix, though we understand that in some cases, the eligible hospital or CAH may not meet the case threshold of discharges for a particular CQM. We believe this proposed policy better reflects our intent for eligible hospitals and CAHs to report on only those measures for which their EHRs are certified while meeting the reporting requirements for the EHR Incentive Program and Hospital IQR Program. We invite public comment on this proposal. PO 00000 Frm 00305 Fmt 4701 Sfmt 4702 28281 X. Proposed Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data A. Background Section 1853 of the Act requires the Secretary to make payments to Medicare Advantage (MA) organizations offering local and regional MA plans with respect to coverage of individuals enrolled under Medicare Part C. Section 1853(a)(1)(C) of the Act requires the Secretary to adjust such payments for such risk factors as age, disability status, gender, institutional status, and such other factors as the Secretary determines appropriate, including health status. To support these risk adjustments, section 1853(a)(3)(B) of the Act requires submission of data by MA organizations regarding the services provided to enrollees and other information the Secretary deems necessary but does not limit the Secretary’s use of such data or information. In addition, section 1106 of the Act authorizes the Secretary to adopt regulations governing release of information gathered in the course of administering programs under the Act. Implementing regulations at 42 CFR 422.310 set forth the requirements for the submission of risk adjustment data that CMS uses to risk-adjust payments. MA organizations must submit data, in accordance with CMS instructions, to characterize the context and purposes of items and services provided to their enrollees by a provider, supplier, physician, or other practitioner. Section 422.310(d)(1) provides that MA organizations submit risk adjustment data to CMS as specified by CMS. This includes comprehensive data equivalent to Medicare fee-for-service claims data (often referred to as encounter data) or data in abbreviated formats. Section 422.310(f) currently specifies CMS’ uses of the risk adjustment data. In this proposed rule, we are proposing to revise the existing regulation at § 422.310(f) to broaden the specified uses of risk adjustment data in order to strengthen program management and increase transparency in the MA program and to specify the conditions for release of risk adjustment data to entities outside of CMS. B. Proposed Regulatory Changes 1. Proposed Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data We are first proposing to revise a reference in existing § 422.310(f) (now proposed paragraph (f)(1)) from ‘‘data obtained under this section’’ to ‘‘data described in paragraphs (a) through (d) of this section’’ in order to indicate that E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28282 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the data used or released under proposed paragraph (f)(1) would not include the medical records and other data collected separately under paragraph (e) for the purpose of risk adjustment data validation (RADV) audits. We do not intend for the proposed § 422.310(f) to authorize any additional use or release of the data described in paragraph (e). The data described in paragraphs (a) through (d) would include those elements that constitute an encounter data record, including contract, plan, and provider identifiers, with the exception of disaggregated payment data as discussed below. In addition, we note that paragraph (d)(1) also authorizes the collection of abbreviated data. The existing regulation at § 422.310(f) specifies five purposes for which CMS may use risk adjustment data obtained from MA organizations. We are clarifying in this proposed rule that CMS’ uses of these data may include disclosure to CMS contractors or other agents that perform activities or analyses on CMS’ behalf in connection with authorized use of the data. The existing specified purposes are: (1) To determine the risk adjustment factors used to adjust payments, as required under §§ 422.304(a) and (c); (2) to update risk adjustment models; (3) to calculate Medicare DSH percentages; (4) to conduct quality review and improvement activities; and (5) for Medicare coverage purposes. Under our proposal, paragraph (f) would be restructured to identify the purposes for which CMS may use and release risk adjustment data and to impose certain conditions on any release of that data. We are proposing to revise paragraph (f) to add four purposes for which CMS may use risk adjustment data submitted by MA organizations: (1) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related research; (2) for activities to support the administration of the Medicare program; (3) for activities conducted to support program integrity; and (4) for purposes permitted by other laws. These new authorized purposes are proposed at § 422.310(f)(1)(vi) through (f)(1)(ix). In general, we anticipate that comprehensive risk adjustment data submitted by MA organizations, which MA organizations began submitting to CMS effective CY 2012, will enable CMS to generate improved data analyses that could support Medicare program evaluations, demonstration designs, and CMS’ effective and efficient operational management of the Medicare program. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Risk adjustment data also could be useful to support public health initiatives by governmental entities and to advance health care-related research by universities and other research organizations. We also believe that risk adjustment data can support CMS’ program integrity activities in the Medicare program and other Federal health care and related programs; we intend this general term to encompass audits, investigations, efforts to combat waste, fraud, and abuse, and any other actions designed to ensure that the program operates within its authority. This includes audits, evaluations, and investigations by the Office of the Inspector General (OIG) as well as CMS’ own efforts. In addition, risk adjustment data may be useful in supporting Medicare administrative activities, such as the review of the validity of bid and medical loss ratio data submitted by MA organizations. Finally, we are proposing to acknowledge that other laws may permit other uses of risk adjustment data and that this regulation is not intended to supersede such other laws. Regarding the use of risk adjustment data outside of CMS, we are proposing at § 422.310(f)(2) that other HHS agencies, other Federal executive branch agencies, States, and external entities would only be able to obtain from CMS and use risk adjustment data for one or more of the purposes listed in proposed paragraph (f)(1). An external entity may be an individual, group, or organization. We anticipate that other HHS agencies and other Federal executive branch agencies may request this data for the same purposes CMS proposes to use the data and believe such use is appropriate. Under our proposal, other agencies that evaluate and analyze the Medicare program, perform health carerelated research, support public health initiatives, perform activities in the administration of the Medicare program, or conduct activities to support program integrity in the Medicare program and other Federal health care and related programs would be able to access and use risk adjustment data for these purposes. States, such as while conducting program integrity activities for Medicaid programs or in the administration of Medicare-Medicaid demonstrations (for example, refer to the Web site at: https://www.cms.gov/ Medicare-Medicaid-Coordination/ Medicare-and-Medicaid-Coordination/ Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/ FinancialModelstoSupportStatesEfforts inCareCoordination.html), may access and use risk adjustment data under this proposal. We anticipate that PO 00000 Frm 00306 Fmt 4701 Sfmt 4702 nongovernmental external entities would generally only gain access to risk adjustment data under this proposal in connection with public health initiatives and health care-related research, as such external entities appear to have limited, if any, roles in the other purposes identified in our proposal. CMS is seeking to balance protection of confidential beneficiary information and the proprietary interests of MA organizations with the need to effectively administer Federal health care programs and to encourage research into better ways to provide health care. CMS is seeking public comments on the proposed uses and release of data and how else to achieve the necessary balance. In particular, we are soliciting public comment on the extent to which a commercial purpose underlying a request for risk adjustment data should be a factor in evaluating whether the request is for one of the purposes that permit a disclosure under this regulation or if one of the purposes in paragraph (f)(1) of § 422.310, for which CMS would disclose data under this section, should address commercial uses of the data. 2. Proposed Conditions for CMS Release of Data The existing regulations at § 422.310 do not specify conditions for release by CMS of risk adjustment data that are submitted by MA organizations to CMS. We are proposing to add a paragraph (2) to § 422.310(f) to address CMS’ release of such data to non-CMS entities. First, as discussed above in connection with proposed paragraph (f)(1), our proposal is limited to the risk adjustment data described in § 422.310(a) through (d) and does not include the medical records and other data collected separately under paragraph (e) for the purpose of risk adjustment data validation (RADV) audits. We do not intend for the proposed revision to § 422.310(f) to authorize any additional use or release of the data described in paragraph (e). Second, we are proposing that CMS would release only the minimum data that CMS determines is necessary to fulfill the analytical or operational goal for a particular project. In other words, CMS may determine that the appropriate data release for an approved research project is a subset of encounter data records requested to conduct the proposed inquiry (instead of all encounter data in CMS’ systems for all years and provider types) or is a subset of the abbreviated data requested. Third, we are proposing that CMS may release data under this authority to E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Federal executive branch agencies, States, and external entities, only for purposes identified in paragraph (f)(1) (discussed above) and subject to a number of additional limitations: (i) Applicable Federal laws; (ii) CMS data sharing procedures; (iii) protection of beneficiary identifier elements and beneficiary confidentiality, including: (A) a prohibition against public disclosure of beneficiary identifying information; (B) release of beneficiary identifying information to other HHS agencies, other Federal executive branch agencies, Congressional support agencies, and States only when such information is needed to accomplish the purpose(s) of the disclosure; and (C) release of beneficiary identifying information to external entities only to the extent needed to link datasets; and (iv) the aggregation of payment data to protect commercially sensitive data. These limitations are included at proposed paragraphs (f)(2)(i) through (f)(2)(iv), respectively, of § 422.310. We are soliciting public comment on other conditions or limitations on the release of this data that will help maintain a balance between protecting confidential and proprietary information with the need to effectively administer Federal health care programs and to encourage research into better ways to provide health care. Under the provisions at proposed § 422.310(f)(2)(iv), we would not release payment data at the encounter level. We believe that release of payment data at the level of the encounter record might reveal proprietary negotiated payment rates between MA plans and providers. Given the commercially sensitive nature of this information, we are not proposing to release payment data at the level of the encounter record. In the interest of providing as much transparency as possible, while at the same time protecting proprietary information, we are proposing to authorize release of aggregate payment information. For example, we could aggregate the payment data by service category, by plan, by contract, or across contracts. We are seeking public comments on these or other approaches to aggregating payment data for release and whether the specified options are sufficiently aggregated to protect commercially sensitive information. In addition, we are seeking public comment on our conclusion that releasing payment rates at the level of the encounter data record would reveal proprietary negotiated payment rates. Specifically, we are requesting public comment on what strategies might be used under which payment data could VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 be released while protecting commercially sensitive information. To the extent that a requestor has separate statutory authority for requiring CMS disclosure of data, these proposed provisions do not limit or supersede such authority. For example, some Congressional support agencies may compel release of data under separate statutory authority, such as 31 U.S.C. 716; 2 U.S.C. 166(d)(1) and 601(d); and section 1805 of the Act (42 U.S.C. 1395b–6), for the purposes of conducting Congressional oversight, monitoring, making recommendations and analysis of the Medicare program. In addition, the OIG has separate statutory authority under section 1128J of the Act (42 U.S.C. 1320a–7k), coupled with section 6(a) of the Inspector General Act of 1978 (5 U.S.C. App. 3) authorizing the OIG to access data as necessary to perform its responsibilities. This regulation would not limit that authority. 3. Proposed Technical Change We are proposing to amend § 422.300, which identifies the basis and scope of the regulations for payments to MA organizations, to add a reference to section 1106 of the Social Security Act, which governs the release of information gathered in the course of administering our programs under the Act. XI. Proposed Changes to Enforcement Provisions for Organ Transplant Centers A. Background In February 2004, the Office of the Inspector General (OIG) published a report entitled ‘‘Medicare-Approved Heart Transplant Centers’’ (OEI–01–02– 00520), in which the OIG outlined three recommendations for CMS’ oversight of heart transplant centers: (1) That CMS expedite the development of continuing criteria for volume and survival-rate performance and for periodic recertification; (2) that CMS develop guidelines and procedures for taking actions against centers that do not meet Medicare criteria for volume and survival-rate performance requirements; and (3) that CMS take immediate steps to improve its ability to maintain accurate and timely data regarding the performance of transplant centers. As part of CMS’ efforts to strengthen oversight of organ transplant centers, we published the final rule ‘‘Medicare Program: Hospital Conditions of Participation, Requirements for Approval and Reapproval of Transplant Centers To Perform Organ Transplants’’ on March 30, 2007 in the Federal PO 00000 Frm 00307 Fmt 4701 Sfmt 4702 28283 Register (72 FR 15198) that established conditions of participation (CoPs) for organ transplant centers and applied the survey and certification enforcement process (that is used for all other providers and suppliers of Medicare services) to Medicare-approved transplant centers. In the preamble of that final rule, we discussed our efforts to improve organ donation and transplantation services and our goals to: (1) Protect patients who are awaiting organs for transplantation; (2) establish key quality and procedural standards; and (3) improve outcomes for patients (such as patient survival) and reduce Medicare expenses by decreasing the likelihood that a transplant would fail. In the March 30, 2007 final rule, we codified the CoPs for transplant centers at 42 CFR Part 482, Subpart E (§§ 482.68 through 482.104) and the special procedures for approval and re-approval of organ transplant centers at 42 CFR 488.61. The CoPs set forth explicit expectations for outcomes, patient safety, informed choice, and quality of transplantation services. In particular, §§ 482.80 and 482.82 specify that a transplant center’s outcomes are not acceptable if, among other factors, the number of observed patient deaths or graft failures 1 year after receipt of a transplant exceeds the risk-adjusted expected number by 1.5 times, based on the most recent program-specific report from the Scientific Registry of Transplant Recipients (SRTR). Failure to meet the transplant center requirements will lead CMS to deny approval or re-approval of a center’s Medicare participation under § 488.61. However, §§ 488.61(a)(4) and (c)(4) authorize CMS to consider mitigating factors when determining approval and re-approval, respectively, for a transplant center that has not met the data submission, clinical experience, or outcome requirements, or other CoPs, if the center submits a formal, written request for such a review. The existing regulations do not limit the factors that CMS may consider, but enumerates, at a minimum, the following factors to be considered: (1) The extent to which outcome measures are met or exceeded; (2) the availability of Medicareapproved transplant centers in the area; and (3) extenuating circumstances that may have a temporary effect on a transplant center meeting the requirements under the CoPs, such as a natural disaster. CMS approval or reapproval based on mitigating factors permits a transplant center to operate as a Medicare-approved transplant center under certain circumstances despite a finding of noncompliance. Under existing regulations at E:\FR\FM\15MYP2.SGM 15MYP2 28284 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules §§ 488.61(b)(4)(iv) and (c)(4)(iv), CMS will not approve a center with condition-level deficiencies but may reapprove a center with standard-level deficiencies. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 B. Basis for Proposals in This Proposed Rule In this proposed rule, we are proposing to strengthen, clarify, and provide additional transparency for the survey, certification, and enforcement procedures under § 488.61 for transplant centers that are requesting initial approval or re-approval for participation in the Medicare program when the centers have not met one or more of the CoPs but wish to have certain mitigating factors taken into consideration. 1. Proposed Expansion of Mitigating Factors Based on CMS’ Experience The existing organ transplant enforcement regulation at § 488.61 does not provide detailed information on the factors generally needed for approval or re-approval of a request based on mitigating factors that a transplant center may make in order to participate, or continue to participate, in Medicare. However, since the adoption of the organ transplant CoPs and corresponding enforcement regulations, we have expanded our knowledge regarding: (a) The factors and processes that promote improvement in transplant center outcomes; and (b) other mitigating factors that merit explicit recognition under CMS regulations. The preponderance of requests for initial approval or re-approval based on mitigating factors that we have approved are for the transplant centers that have been able to effect substantial program improvements and, based on meaningful post-transplant survival data, demonstrated much-improved patient and graft survival subsequent to those program reforms. These performance improvements occurred after the program was cited for substandard performance by CMS and was at risk of losing Medicare participation, usually while the program was operating during the mitigating factors review process or under a binding Systems Improvement Agreement (SIA) with CMS. Under an SIA, CMS agrees to extend the effective date of a prospectively scheduled termination from Medicare participation (that is, denial of re-approval) and holds in temporary abeyance a final review of the transplant center’s mitigating factors request if the transplant center agrees to engage in a structured regimen of quality improvement to improve performance during a specified period of time. At the end of the SIA period VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (typically 12 months), we review the transplant center’s performance and make a final decision as to whether: (a) The transplant center’s patient and graft survival is within the acceptable limits set forth in the regulations; or (b) the transplant center qualifies for approval or re-approval based on mitigating factors. As of August 2013, CMS had rendered a final determination for 129 requests for approval to operate as a Medicareapproved transplant center based on mitigating factors. Of those determinations, 48 of the requests (37.8 percent) were approved based on information provided by the transplant center on its mitigating factors alone (that is, without entering into an SIA) because the transplant center had implemented substantial program improvements during the extended CMS review period, and CMS concluded that the most recent patient and graft survival data (taking into consideration the lag time in data inherent in the SRTR reports) demonstrated compliance with outcome requirements; 33 of the requests (25.6 percent) were eventually approved on the basis of the transplant center’s successful SIA completion and much-improved outcomes data for the affected program; 24 of the requests (18.6 percent) involved transplant centers that were approved and the transplant centers were permitted to continue operation because CMS determined that the transplant centers met the outcome requirements during the time period it took for CMS to review the mitigating factors request; 2 of the requests (1.6 percent) were approved where the transplant center did not enter into a SIA but had made extensive use of innovative practices that were not included in the SRTR riskadjustment methodology; 2 of the requests (1.6 percent) were approved because natural disasters temporarily impacted the transplant centers; and 20 of the requests (15.5 percent) were denied because the center failed to meet the outcome or clinical experience requirements and therefore voluntarily withdrew its participation from the Medicare program. 2. Coordination With Efforts of the Organ Procurement and Transplantation Network (OPTN) and Health Resources and Services Administration When we adopted the outcome standards for transplant programs in 2007, we sought to harmonize CMS’ outcome standards with standards of the Organ Procurement and Transplantation Network (OPTN) so that transplant centers would have a single, consistent set of outcome expectations on which to PO 00000 Frm 00308 Fmt 4701 Sfmt 4702 focus. We also sought to organize CMS activities in a manner that would reinforce and continue the OPTN as the first line of external review and quality improvement for transplant centers. The OPTN is the unified transplant network established under the National Organ Transplant Act (NOTA) of 1984. The NOTA called for the network to be operated by a private, nonprofit organization under Federal contract. The OPTN is a public-private partnership that links all of the professionals involved in the donation and transplantation system. The primary goals of the OPTN are to: (a) Increase the effectiveness and efficiency of organ-sharing and equity in the national system of organ allocation; and (b) increase the supply of donated organs available for transplantation. For more details about the OPTN, we refer readers to the Web site at: https:// optn.transplant.hrsa.gov/optn/ profile.asp. The OPTN and the Health Resources and Services Administration (HRSA) are considering adoption of an alternative methodology for calculating expected transplant outcomes, known as the ‘‘Bayesian’’ methodology, and for setting a threshold that would ‘‘flag’’ a transplant center for OPTN review of performance. However, CMS has insufficient experience with the new ‘‘Bayesian’’ methodology, and insufficient data to determine an appropriate threshold for a Medicare outcomes deficiency under a ‘‘Bayesian’’ methodology. Therefore, we are not proposing any changes in our regulations regarding this new methodology. However, we wish to continue to coordinate with, and reinforce, the OPTN’s efforts if the OPTN chooses to adopt a new methodology. Therefore, we are proposing that if a program has been cited for an outcomes deficiency by CMS, but has not been flagged for review by the OPTN, CMS would take these facts into consideration if the transplant program has requested approval based on mitigating factors. For a perspective on the ‘‘Bayesian’’ methodology, we refer readers to the Web site at: https://www.srtr.org/faqs/ 16.aspx. C. Provisions of the Proposed Regulations We are proposing to revise the regulations at § 488.61 to include specific additional provisions describing and expanding the mitigating factors that CMS may consider when determining requests and explain the conditions under which each factor would apply. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Proposed Expansion of Mitigating Factors List Existing §§ 488.61(a)(4) and (c)(4) provide three specific mitigating factors for review by CMS when determining whether a transplant center can be approved or re-approved, respectively, based on mitigating factors. These mitigating factors are: (1) The extent to which outcome measures are met or exceeded; (2) the availability of Medicare-approved transplant centers in the area; and (3) extenuating circumstances that may have a temporary effect on meeting the CoPs. We are proposing to move the listing of mitigating factors from paragraphs (a)(4)(i) through (a)(4)(iii) and (c)(4)(i) through (c)(4)(iii) to new proposed paragraphs (f), (g), and (h) under § 488.61, and to include additional factors under these three new proposed paragraphs that may be reviewed in addition to the existing three factors. We are proposing to move existing paragraphs (a)(4)(iv) and (c)(4)(iv) to the proposed new paragraph (g)(2). We also are proposing to provide clarification of the existing three mitigating factors and the conditions under which they would apply. Finally, we are proposing to revise existing paragraphs (a)(4) and (c)(4) of § 488.61 to include crossreferences to the new proposed paragraphs (f), (g), and (h). Under proposed new paragraph (f) of § 488.61, we are proposing to relist the existing three mitigating factors under paragraphs (a)(4)(i) through (a)(4)(iii) and paragraphs (c)(4)(i) through (c)(4)(iii) and expand the mitigating factors that CMS may consider by adding more description to those factors, as well as by adding new factors for review. We also are proposing to specify the procedures and timeframes for transplant centers to request consideration for approval based on mitigating factors. Specifically, in proposed new paragraph (f)(1), we are proposing to specify the mitigating factors, except for situations of immediate jeopardy, as follows: • The extent to which outcome measures are not met or exceeded (existing paragraphs (a)(4)(i) and (c)(4)(i); now proposed paragraph (f)(1)(i)). • Availability of Medicare-approved transplant centers in the area (existing paragraphs (a)(4)(ii) and (c)(4)(ii); now proposed paragraph (f)(1)(ii)). • Extenuating circumstances (for example, natural disaster) that may have a temporary effect on meeting the CoPs (existing paragraphs (a)(4)(iii) and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (c)(4)(iii); now proposed paragraph (f)(1)(iii)). • Program improvements that substantially address root causes of graft failures or patient deaths and that have been implemented and institutionalized on a sustainable basis (proposed new paragraph (f)(1)(iv)). • Recent patient and graft survival data to determine if there is sufficient clinical experience and survival for CMS to conclude that the program is in compliance with CMS requirements, except for the data lag inherent in the reports from the SRTR (proposed new paragraph (f)(1)(v)). • Extensive use of innovative transplantation practices relative to other transplant programs, such as a high rate of transplantation of individuals who are highly sensitized or children who have undergone the Fontan procedure, where CMS finds that the innovative practices are supported by evidence-based, published research or nationally recognized standards or Institutional Review Board (IRB) approvals, and the SRTR riskadjustment methodology does not take the relevant key factors into consideration (proposed new paragraph (f)(1)(vi)). • The program’s performance, based on the OPTN method of calculating patient and graft survival, is within the OPTN’s thresholds for acceptable performance and does not flag OPTN performance review under the applicable OPTN policy (proposed new paragraph (f)(1)(vii)). Under proposed new paragraph (f)(2), we are proposing to include details on the content of the request for consideration of mitigating factors, based on examples that have proven to be most useful in considering successful mitigating requests. Specifically, we are proposing that a request for consideration of mitigating factors include sufficient information to permit an adequate review and understanding of the transplant program, the factors that have contributed to outcomes, program improvements or innovations that have been implemented or planned, and, in the case of natural disasters, the recovery actions planned. Examples of information to be submitted with each request could include, but are not limited to, the following: (i) The name and contact information for the transplant hospital and the names and roles of key personnel of the transplant program; (ii) The type of organ transplant program(s) for which approval is requested; (iii) The CoPs that the program failed to meet, and with respect to which the PO 00000 Frm 00309 Fmt 4701 Sfmt 4702 28285 transplant center is requesting CMS’ review of mitigating factors; (iv) The rationale and relevant supporting evidence for CMS’ review must include, but not be limited to— Æ Root Cause Analysis of patient deaths and graft failures, including factors the program has identified as likely causal or contributing factors for patient deaths and graft failures; Æ Program improvements or innovations (where applicable) that have been implemented and improvements that are planned; Æ Patient and donor/organ selection criteria and evaluation protocols, including methods for pre-transplant patient evaluation by cardiologists, hematologists, nephrologists, and psychiatrists or psychologists, to the extent applicable; Æ Organizational chart with full-time equivalent levels, roles, and structure for reporting to hospital leadership; Æ Waitlist management protocols and practices relevant to outcomes; Æ Pre-operative management protocols and practices; Æ Immunosuppression/infection prophylaxis protocols; Æ Post-transplant monitoring and management protocols and practices; Æ Quality Assessment and Performance Improvement (QAPI) Program meeting minutes from the most recent four meetings and attendance rosters from the most recent 12 months; Æ Quality dashboard and other performance indicators; Æ Recent outcomes data for both patient survival and graft survival; and Æ Documentation of whether the program has engaged with the OPTN to review program outcomes, the status of any such review, and any steps taken to address program outcomes in accordance with the OPTN review. Under proposed new paragraph (f)(3), we are proposing to specify a timeline for the transplant program to submit a request for mitigating factors and to make clear that, for requests related to clinical experience or outcomes, the program has additional time within which to submit supporting information. Specifically, we are proposing that within 10 days after CMS has issued formal written notice of a condition-level deficiency to the program, CMS must receive notice of the program’s request to seek consideration of mitigating factors. CMS would require that all information necessary for consideration be received within 30 days of CMS’ initial notification for any deficiency, except a deficiency based on insufficient clinical experience or outcomes; and within 120 days of CMS’ written notification for a E:\FR\FM\15MYP2.SGM 15MYP2 28286 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 deficiency based on insufficient clinical experience or outcomes. Failure of a transplant program to meet these timeframes may be the basis for denial of requests for consideration based on mitigating factors. 2. Content and Timeframe for Mitigating Factors Requests Under proposed new § 488.61(g), we propose to clarify and expand on the description of the mitigating factors application and review process. Under existing regulations, a transplant center seeking initial approval or re-approval of Medicare participation based on the presence of mitigating factors is required to submit a formal written request to the CMS Central Office, as described earlier. If there are no deficiencies that constitute immediate jeopardy to a patient’s health and safety, in limited circumstances, CMS may approve continued Medicare participation based on mitigating factors. However, where a transplant program demonstrates that it is making significant progress toward correction and program improvement, but does not yet qualify for approval based on mitigating factors, we believe there may be merit in many cases to temporarily extend the effective date of the program’s Medicare participation termination in exchange for a hospital’s agreement to engage in a significant and directed regimen of further quality improvement under a Systems Improvement Agreement (SIA). As we noted above, programs that have entered into SIAs have demonstrated significant improvements. Therefore, we are proposing to provide an explicit procedure in the regulations at proposed new § 488.61(g)(1)(iii) for CMS to offer an SIA and hold in abeyance a final decision on the mitigating factors request until the SIA period has ended. Proposed new paragraphs (g)(1)(i), (g)(1)(ii), and (g)(1)(iii) outline the three outcomes of CMS mitigating factors decisions: (i) Initial approval or reapproval of a program’s Medicare participation based upon consideration of mitigating factors; (ii) denial of the program’s request; or (iii) offer of a timelimited SIA when a transplant program has waived its appeal rights, has committed to substantial program improvements that address root causes and are institutionally supported by the hospital’s governing body on a sustainable basis, and has requested more time to design or implement additional improvements or demonstrate compliance with CMS outcome requirements. The proposed new paragraph (g)(1)(iii) would clarify that, during the SIA, CMS holds the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 mitigating factors request in abeyance and makes a final decision to approve or deny Medicare participation when the SIA is ended, based on the results of the program’s performance of the SIA. Existing regulations at §§ 488.61(a)(4)(iv) and (c)(4)(iv)) state that CMS will not approve any program with a condition-level deficiency. However, CMS could approve a program with a standard-level deficiency upon receipt of an acceptable plan of correction. A condition-level deficiency represents a serious classification and, unless the deficiency is remedied, precludes a provider from participating in Medicare. A standard-level deficiency represents a less serious deficiency, such as one in which just a small part of a CoP is found to be out of compliance. We are proposing to move this to the proposed new paragraph § 488.61(g)(2). 3. System Improvement Agreements (SIAs) We are proposing to add proposed new paragraph (h) to § 488.61 to set forth the purpose, intent, and contents of an SIA and the timeframes for an approved SIA with CMS. a. Purpose and Intent of an SIA Based on information and documentation provided by the transplant program at the time of its request, CMS may determine that, despite a deficiency or deficiencies, the transplant center has made substantial progress, has full support of the hospital governing body, and is on a quality improvement path that promises to improve prospects for patient survival. In such cases, we exercise our limited discretion to offer the transplant program the opportunity to enter into an SIA. In the absence of a written request for consideration on the basis of mitigating factors, CMS would otherwise proceed with the proposed date of termination based on noncompliance with one or more of the CoPs. In this proposed regulation, we are clarifying and specifying the terms for such SIAs. CMS may offer an SIA to a transplant program if the transplant center can show that it has identified, or is actively improving its identification of, the root causes of its noncompliance and if the transplant center has initiated actions to correct those root causes. However, if we conclude that a transplant center does not qualify for initial approval or re-approval based on mitigating factors, the proposed rule would explicitly provide CMS with the option of offering a time-limited SIA to those transplant centers that have demonstrated progress PO 00000 Frm 00310 Fmt 4701 Sfmt 4702 in making substantive program improvements to address root causes of deficient outcomes, agree to undertake a structured regimen of further quality improvement, and agree to waive their appeal rights. In some instances, a voluntary period of inactivity of the transplant center is warranted, or a period of inactivity may be required by CMS as a condition of an SIA approval, as a requirement of initiating an SIA for a specified period, or until certain milestones are achieved. During the SIA period, CMS’ oversight and enforcement authority continue and CMS may conduct routine unannounced surveys, complaint investigations, and/or terminate the transplant center’s participation in the Medicare program if there is not substantial compliance with Federal requirements under 42 CFR Part 482 or if the program fails to follow the terms of the SIA. In consideration for the opportunity to continue to participate in the Medicare program under an SIA during the time that structured improvements and corrections are made, despite having been found to be in noncompliance with the requirements, a transplant center would be required to waive any appeal rights that they may have, either administratively or judicially, if CMS ultimately terminates Medicare participation or denies initial approval of the transplant center. We are proposing that such a waiver applies, regardless of whether revocation or termination of approval/re-approval occurs due to a finding that the hospital failed to fulfill the terms of the SIA or due to the deficiency findings that the SIA was designed to address, pursuant to CMS’ enforcement authority under the regulations. A transplant center’s approval to operate as a Medicare-approved transplant center does not guarantee any subsequent re-approvals and may be time-limited. The transplant center must submit a separate request for consideration of mitigating factors, including updated supporting documentation each time a CMS review (generally a 3–5 year cycle) or complaint investigation determines that the transplant center does not meet one or more of the data submission, clinical experience, and outcomes requirements, or other CoPs. At such time, we would review any prior mitigating factors approval to determine if the circumstances that originally warranted approval would still apply. However, in the case of past mitigating factors approval based on innovative practice, CMS may seek information in advance of a recertification survey to determine E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 if the reasons for past approval still prevail and, in such a case, CMS may consider mitigating factors concomitantly with the recertification survey. b. Description and Contents of an SIA The SIA is a binding agreement between CMS and the hospital within which a transplant center operates. A transplant center, in turn, may have one or more organ-specific programs, such as a heart, kidney, pancreas, liver, or lung transplant program. Each SIA is focused on a particular organ transplant program. The SIA is a plan for a series of actions, activities, and goals that provide opportunities for the hospital and transplant center to conduct internal improvement analysis and action, and engage external experts to ensure that the transplant center is in compliance with evidence-based standards and advances in the field that would optimize the care provided to patients. Through an SIA, CMS is able to offer transplant centers additional time to achieve compliance with the CoPs through a structured and monitored process. In particular, the use of the formal SIA process reflects CMS’ recognition that it may sometimes require more than the usual time to correct the 1-year post-transplant patient or graft survival and have the results of such improvement become manifest in the tracking data, or to develop and implement a plan to correct low-volume performance rates. We generally do not expect to use an SIA in cases of noncompliance with other CoPs, although we do not preclude such a possibility if highly unusual circumstances are present. The SIA process (discussed in more detail below) has demonstrated effectiveness in improving patient and graft survival. An important measure of outcome is the extent to which observed patient deaths 1 year after transplant compare with the risk-adjusted expected number of deaths or graft failure for a particular transplant program. The SRTR risk adjustment methodology (used to calculate the expected numbers) takes into consideration the organs transplanted and the characteristics of the donors and recipients (for example, factors that have a bearing on the risk to patient or graft survival, such as diabetes, hypertension, advanced age, cold ischemic time of the organ to be transplanted, among others). For example, the national number of expected deaths 1 year after transplant for all transplant centers in the United States is 1.0. A transplant center that VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 had twice the expected number of deaths would have a standardized mortality ratio (SMR) of 2.0. As of August 2013, adult kidney transplant programs cited by CMS for substandard outcomes and placed on a Medicare enforcement track, for which there was a 2-year post-CMS survey tracking period (N=15), improved their average SMR for 1-year post-transplant patient survival performance rate from 2.05 to 1.17 (close to the 1.0 national average). The transplant centers under an approved SIA improved their outcomes from an average SMR ranging from 2.41 before the SIA to 0.76 after the SIA (much better than the national average). Transplant centers not cited for substandard kidney transplant outcomes improved outcomes slightly from 0.89 to 0.84.185 The proposed new § 488.61(h) explicitly incorporates and specifies elements that have been important to the successful use of the SIA structure. We propose to define an SIA as a binding agreement, entered into voluntarily by the hospital and CMS, through which CMS extends the effective date of a prospectively scheduled termination of the center’s Medicare participation (thereby permitting the program additional time to achieve compliance with the CoPs), contingent on the hospital’s agreement to participate in a structured regimen of quality improvement activities and subsequent demonstration of improved outcomes. In some cases, transplant programs have entered a period of inactivity—voluntarily, or imposed as a condition of the SIA. Under proposed new § 488.61(h)(1)(i) through (h)(1)(x), we are proposing that in the SIA, in exchange for additional time to initiate or continue activities to achieve compliance with the CoPs, the transplant center must agree to a regimen of specified activities, including (but not limited to) all of the following: • Patient notification about the degree and type of noncompliance by the program, an explanation of what the program improvement efforts mean for patients, and financial assistance to defray the out-of-pocket costs of copayments and testing expenses for any wait-listed individual who wishes to be listed with another program (proposed paragraph (h)(1)(i)). • An external independent peer review team that conducts an onsite assessment of program policies, staffing, 185 Hamilton, Thomas E., Regulatory Oversight in Transplantation: Are Patients Really Better Off, Curr Opin Organ Transplant 2013, 18:203–209. Available at: at https://www.co-transplantation.com. PO 00000 Frm 00311 Fmt 4701 Sfmt 4702 28287 operations, relationship to hospital services, and factors that contribute to program outcomes; that suggests quality improvements the hospital should consider; that provides both verbal and written feedback to the hospital; and that provides a verbal debriefing to CMS. Neither the hospital nor the peer review team may be required to provide a written report to CMS. The peer review team would include a transplant surgeon with expertise in the relevant organ type(s), a transplant administrator, an individual with expertise in transplant QAPI systems, a social worker or psychologist or psychiatrist, and a specialty physician with expertise in conditions particularly relevant to the applicable organ types(s) such as a cardiologist, nephrologist, or hepatologist. Except for the transplant surgeon, CMS may permit substitution of an individual with one type of expertise for another individual who has expertise particularly needed for the type of challenges experienced by the program, such as substitution of an infection control specialist in lieu of, or in addition to, a social worker (proposed paragraph (h)(1)(ii)). • An action plan that addresses systemic quality improvements and is updated after the onsite peer review (proposed paragraph (h)(1)(iii)). • An onsite consultant whose qualifications are approved by CMS, and who provides services for 8 days per month on average for the duration of the agreement, except that CMS may permit a portion of the time to be spent offsite and may agree to fewer consultant days each month after the first 3 months of the SIA (proposed paragraph (h)(1)(iv)). • A comparative effectiveness analysis that compares policies, procedures, and protocols of the transplant program with those of other programs in areas of endeavor that are relevant to the transplant center’s current quality improvement needs (proposed paragraph (h)(1)(v)). • Development of increased proficiency, or demonstration of current proficiency, with patient-level data from the SRTR and the use of registry data to analyze outcomes and inform quality improvement efforts (proposed paragraph (h)(1)(vi)). • A staffing analysis that examines the level, type, training, and skill of staff in order to inform transplant center efforts to ensure the engagement and appropriate training and credentialing of staff (proposed paragraph (h)(1)(vii)). • Activities to strengthen performance of the Quality Assessment and Performance Improvement (QAPI) Program to ensure full compliance with E:\FR\FM\15MYP2.SGM 15MYP2 28288 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the requirements at § 482.96 (proposed paragraph (h)(1)(viii)). • Monthly (unless otherwise specified) reporting and conference calls with CMS regarding the status of programmatic improvements, the results of the actions, data, reports, or other deliverables specified in the SIA, and regarding the number of transplants, the death and graft failures that occur within 1 year post-transplant (proposed paragraph (h)(1)(ix)). • Additional or alternative requirements specified by CMS, tailored to the transplant program type and circumstances (proposed paragraph (h)(1)(x)). c. Effective Period for an SIA Under proposed new § 488.61(h)(2), we are proposing to specify that an SIA will be established for a 12-month period, subject to CMS’ discretion to determine if a shorter time period would suffice. At the hospital’s request and at CMS’s discretion, CMS may extend an SIA for up to one additional 6-month period. Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC’s recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary’s recommendations regarding MedPAC’s recommendations. We have reviewed MedPAC’s March 2014 ‘‘Report to the Congress: Medicare Payment Policy’’ and have given the recommendations in the report consideration in conjunction with the proposed policies set forth in this proposed rule. MedPAC recommendations for the IPPS for FY 2015 are addressed in Appendix B to this proposed rule. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653–7226, or visit MedPAC’s Web site at: https:// www.medpac.gov. XIII. Other Required Information mstockstill on DSK4VPTVN1PROD with PROPOSALS2 A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are now available on compact disc (CD) format. However, many of the files are available on the Internet at: https:// www.cms.hhs.gov/Medicare/Medicare- 20:20 May 14, 2014 Jkt 232001 1. CMS Wage Data Public Use File This file contains the hospital hours and salaries from Worksheet S–3, Parts II and III from FY 2011 Medicare cost reports used to create the proposed FY 2015 prospective payment system wage index. Multiple versions of this file are created each year. For a complete schedule on the release of different versions of this file, we refer readers to the wage index schedule in section III.J. of the preamble of this proposed rule. Processing year XII. MedPAC Recommendations VerDate Mar<15>2010 Fee-for-Service-Payment/AcuteInpatient PPS/. Data files and the cost for each file, if applicable, are listed below. Anyone wishing to purchase data tapes, cartridges, or diskettes should submit a written request along with a company check or money order (payable to CMS–PUF) to cover the cost to the following address: Centers for Medicare & Medicaid Services, Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520, (410) 786–3691. Files on the Internet may be downloaded without charge. Wage data year PPS fiscal year 2014 2013 2012 2011 2010 2009 2008 2007 2011 2010 2009 2008 2007 2006 2005 2004 2015 2014 2013 2012 2011 2010 2009 2008 Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Periods Available: FY 2007 through FY 2015 IPPS Update. 2. CMS Occupational Mix Data Public Use File This file contains the 2010 occupational mix survey data to be used to compute the occupational mix adjustment wage indexes. Multiple versions of this file are created each year. For a complete schedule on the release of different versions of this file, we refer readers to the wage index schedule in section III.J. of the preamble of this proposed rule. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. 3. Provider Occupational Mix Adjustment Factors for Each Occupational Category Public Use File This file contains each hospital’s occupational mix adjustment factors by occupational category. Two versions of PO 00000 Frm 00312 Fmt 4701 Sfmt 4702 these files are created each year to support the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. 4. Other Wage Index Files CMS releases other wage index analysis files after each proposed and final rule. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Periods Available: FY 2005 through FY 2015 IPPS Update. 5. FY 2015 IPPS SSA/FIPS CBSA State and County Crosswalk This file contains a crosswalk of State and county codes used by the Social Security Administration (SSA) and the Federal Information Processing Standards (FIPS), county name, and a historical list of Metropolitan Statistical Areas (MSAs). Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. 6. HCRIS Cost Report Data The data included in this file contain cost reports with fiscal years ending on or after September 30, 1996. These data files contain the highest level of cost report status. Media: Internet at: https:// www.cms.hhs.gov/CostReports/02_ HospitalCostReport.asp and Compact Disc (CD). File Cost: $100.00 per year. 7. Provider-Specific File This file is a component of the PRICER program used in the MAC’s system to compute DRG/MS–DRG payments for individual bills. The file contains records for all prospective payment system eligible hospitals, including hospitals in waiver States, and data elements used in the prospective payment system recalibration processes and related activities. Beginning with December 1988, the individual records were enlarged to include pass-through per diems and other elements. Media: Internet at: https:// www.cms.hhs.gov/ProspMedicareFee SvcPmtGen/03_psf_text.asp. Period Available: Quarterly Update. 8. CMS Medicare Case-Mix Index File This file contains the Medicare casemix index by provider number as published in each year’s update of the E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Medicare hospital inpatient prospective payment system. The case-mix index is a measure of the costliness of cases treated by a hospital relative to the cost of the national average of all Medicare hospital cases, using DRG/MS–DRG weights as a measure of relative costliness of cases. Two versions of this file are created each year to support the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 1985 through FY 2015. 9. MS–DRG Relative Weights (Also Table 5—MS–DRGs) This file contains a listing of MS– DRGs, MS–DRG narrative descriptions, relative weights, and geometric and arithmetic mean lengths of stay for the annual rulemaking. There are two versions of this file to support the rulemaking. (We note that Table 5 is issued concurrently with the proposed rule and the final rule and is available only via the Internet on the CMS Web site.) Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 2005 through FY 2015 IPPS Update. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 10. IPPS Payment Impact File This file contains data used to estimate payments under Medicare’s hospital inpatient prospective payment systems for operating and capital-related costs. The data are taken from various sources, including the Provider-Specific File, HCRIS Cost Report Data, Minimum Data Sets, and prior impact files. The data set is abstracted from an internal file used for the impact analysis of the changes to the prospective payment systems published in the Federal Register. Two versions of this file are created each year to support the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ HIF/list.asp#TopOfPage. Periods Available: FY 1994 through FY 2015 IPPS Update. 11. AOR/BOR Tables This file contains data used to develop the MS–DRG relative weights. It contains mean, maximum, minimum, standard deviation, and coefficient of variation statistics by MS–DRG for length of stay and standardized charges. The BOR tables are ‘‘Before Outliers Removed’’ and the AOR is ‘‘After Outliers Removed.’’ (Outliers refer to statistical outliers, not payment outliers.) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Two versions of this file are created each year to support the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 2005 through FY 2015 IPPS Update. 12. Prospective Payment System (PPS) Standardizing File This file contains information that standardizes the charges used to calculate relative weights to determine payments under the hospital inpatient operating and capital prospective payment systems. Variables include wage index, cost-of-living adjustment (COLA), case-mix index, indirect medical education (IME) adjustment, disproportionate share, and the Corebased Statistical Area (CBSA). The file supports the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. 13. Hospital Readmissions Reduction Program File This file contains information on the calculation of the Hospital Readmissions Reduction Program payment adjustment. Variables include the proxy excess readmission ratios for acute myocardial infarction, pneumonia and heart failure and the proxy readmissions payment adjustment for each provider included in the program. The file supports the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. 14. Medicare Disproportionate Share Hospital (DSH) Supplemental File This file contains information on the calculation of the uncompensated care payments for FY 2015. Variables include a hospital’s SSI days and Medicaid days used to determine a hospital’s share of uncompensated care payments, total uncompensated care payments and estimated per claim uncompensated care payment amounts. The file supports the rulemaking. Media: Internet at: https://www.cms. hhs.gov/AcuteInpatientPPS/FFD/list. asp#TopOfPage. Period Available: FY 2015 IPPS Update. 15. Hospital-Acquired Condition (HAC) Reduction Program File This file contains information on the calculation of the payment adjustment under the HAC Reduction Program. PO 00000 Frm 00313 Fmt 4701 Sfmt 4702 28289 Variables include the current estimate of a hospital’s total HAC Score for use in the FY 2015 HAC reduction program, the associated percentile, and a flag if the hospital would be subject to the FY 2015 reduction under section 1886(p)(1) of the Act based on this percentile. The file supports the rulemaking. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Period Available: FY 2015 IPPS Update. For further information concerning these data tapes, contact the CMS Public Use Files Hotline at (410) 786–3691. Commenters interested in discussing any data used in constructing this proposed rule should contact Nisha Bhat at (410) 786–5320. B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In this proposed rule, we are soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). 2. ICRs for Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of this proposed rule discusses add-on payments for new services and technologies. Specifically, this section states that applicants for add-on payments for new medical services or technologies for FY 2016 must submit a formal request. A formal request includes a full description of the clinical applications of the medical service or technology and the results of E:\FR\FM\15MYP2.SGM 15MYP2 28290 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement. In addition, the request must contain a significant sample of the data to demonstrate that the medical service or technology meets the high-cost threshold. We believe the burden associated with this requirement is exempt from the PRA under 5 CFR 1320.3(c), which defines the agency collection of information subject to the requirements of the PRA as information collection imposed on 10 or more persons within any 12-month period. This information collection does not impact 10 or more entities in a 12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, FY 2014, and FY 2015, we received 1, 4, 5, 3, 3, 5, 5, and 7 applications, respectively. 3. ICRs for the Proposed Occupational Mix Adjustment to the Proposed FY 2015 Index (Hospital Wage Index Occupational Mix Survey) Section III.F. of the preamble of this proposed rule discusses the occupational mix adjustment to the proposed FY 2015 wage index, respectively. While the preamble of this proposed rule does not contain any new ICRs, we note that there is an OMB approved information collection request associated with the hospital wage index. Section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data at least once every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program in order to construct an occupational mix adjustment to the wage index. We collect the data via the occupational mix survey. The burden associated with this information collection requirement is the time and effort required to collect and submit the data in the Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned burden is subject to the PRA; it is currently approved under OCN 0938–0907. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Hospital Applications for Geographic Reclassifications by the MGCRB Section III.H.2. of the preamble of this proposed rule discusses proposed changes to the wage index based on hospital reclassifications. As stated in that section, under section 1886(d)(10) of the Act, the MGCRB has the authority to accept short-term IPPS hospital applications requesting geographic reclassification for wage index and to issue decisions on these requests by VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospitals for geographic reclassification for purposes of payment under the IPPS. The burden associated with this application process is the time and effort necessary for an IPPS hospital to complete and submit an application for reclassification to the MGCRB. The burden associated with this requirement is subject to the PRA. It is currently approved under OCN 0938–0573. 5. ICRs for Application for GME Resident Slots The information collection requirements associated with the preservation of resident cap positions from closed hospitals, addressed under section IV.J.3. of this preamble, are not subject to the Paperwork Reduction Act, as stated in section 5506 of the Affordable Care Act. 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program The Hospital IQR Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment (RHQDAPU) Program) was originally established to implement section 501(b) of the MMA, Public Law 108–173. This program expanded our voluntary Hospital Quality Initiative. The Hospital IQR Program originally consisted of a ‘‘starter set’’ of 10 quality measures. The collection of information associated with the original starter set of quality measures was previously approved under OMB control number 0938–0918. All of the information collection requirements previously approved under OMB control number 0938–0918 have been combined with the information collection request previously approved under OMB control number 0938–1022. We no longer use OMB control number 0938– 0918. We added additional quality measures to the Hospital IQR Program and submitted the information collection request to OMB for approval. This expansion of the Hospital IQR measures was part of our implementation of section 5001(a) of the DRA. Section 1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the DRA, requires that the Secretary expand the ‘‘starter set’’ of 10 quality measures that were established by the Secretary as of November 1, 2003, to include measures ‘‘that the Secretary determines to be appropriate for the measurement of the quality of care furnished by hospitals in inpatient settings.’’ The burden associated with these reporting requirements was previously approved under OMB control number 0938–1022. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated that, for PO 00000 Frm 00314 Fmt 4701 Sfmt 4702 the FY 2016 payment determinations and subsequent years updates, we sought OMB approval for a revised information collection request using the same OMB control number (0938–1022). The FY 2014 IPPS/LTCH PPS final rule (78 FR 50955) does not change the method for information collection requests. In a revised request for the FY 2017 payment determination, we will add the 4 claims-based measures that we are proposing in this proposed rule: (1) Hospital 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery; (2) Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery; (3) Hospital-level, riskstandardized 30-day episode-of-care payment measure for pneumonia; and (4) Hospital-level, risk-standardized 30day episode-of-care payment measure for heart failure. We will also add the chart-abstracted measure we are proposing in this proposed rule: Severe sepsis and septic shock: management bundle (NQF#0500). In addition, we believe there will be a reduction in the burden associated with the removal of 20 total measures proposed for removal in this rule: 186 (1) AMI–1 Aspirin at Arrival; (2) AMI–3 ACEI/ARB for left ventricular systolic dysfunction; (3) AMI–5 Beta-blocker prescribed at discharge; (4) AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI); (5) HF–2 Evaluation of left ventricular systolic function; (6) SCIP– INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision; (7) SCIP–INF–2 Prophylactic antibiotic selection for surgical patients; (8) SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery); (9) SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose; (10) SCIP INF–6 Appropriate hair removal; (11) SCIP–INF–9 Postoperative urinary catheter removal on post-operative day 1 or 2 with day of surgery being day zero; (12) SCIP–VTE–2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/postsurgery; (13) SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period; (14) PN–6 Appropriate initial antibiotic 186 We note that some of these measures are being proposed to be removed as chart-abstracted measures, but are being proposed to be retained as electronic clinical quality measures. We refer readers to section IX.A.2.b. of the preamble of this proposed rule for further discussion. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules selection; (15) STK–2 Antithrombotic therapy for ischemic stroke; (16) STK– 3 Anticoagulation therapy for Afib/ flutter; (17) STK–5 Antithrombotic therapy by the end of hospital day 2; (18) STK–10 Assessed for rehab; and (19) VTE–4 Patients receiving unfractionated Heparin with doses/labs monitored by protocol, and (20) one structural measure: Participation in a systematic database for cardiac surgery. Because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe no additional information collection will be required from the hospitals for the four proposed claimsbased measures. However, we believe that the proposed chart-abstracted measure will cause some additional burden. For the FY 2017 payment 28291 determination, we estimate the burden to be 1,775 hours annually per hospital. We estimate the total burden for chart abstraction and structural measures for the approximately 3,300 Hospital IQR Program-participating hospitals to be 5.86 million hours. The table below describes the hospital burden associated with the all Hospital IQR Program requirements. BURDEN IMPACT OF HOSPITAL IQR PROGRAM REQUIREMENTS Burden per hospital for previously finalized requirements Burden per hospital for all requirements as proposed (continuing, removed, added) Chart-abstracted and structural measures, forms .... Review reports for claims-based measures ............. Reporting of voluntary electronic clinical quality measures (E–CQM) in place of chart-abstracted measures. Validation templates .................................................. E–CQM validation test .............................................. Validation charts photocopying ................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Hospital IQR program requirement Number of hospitals impacted 3,300 ......................... 3,300 ......................... Unknown ................... 1,291 hours ............... 4 hours ...................... ¥570 hours ............... 963 hours .................. 4 hours ...................... ¥554 hours ............... ¥328 hours. 0. 16 hours. Up to 600 .................. Up to 100 .................. Up to 600 .................. 144 hours .................. 0 ................................ $8,640 ....................... 144 hours .................. 16 hours .................... $8,496 ....................... 0. 16 hours. ¥$144. In addition, we believe that there will be a reduction in burden for 15 of the 20 chart-abstracted measures that we are proposing for removal: (1) AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI); (2) HF–2 Evaluation of left ventricular systolic function; (3) SCIP– INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision; (4) SCIP–INF–2 Prophylactic antibiotic selection for surgical patients; (5) SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery); (6) SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose; (7) SCIP– INF–9 Postoperative urinary catheter removal on postoperative day 1 or 2 with day of surgery being day zero; (8) SCIP–VTE–2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/postsurgery; (9) SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period; (10) PN–6 Appropriate initial antibiotic selection; (11) STK–2 Antithrombotic therapy for ischemic stroke; (12) STK–3 Anticoagulation therapy for Afib/flutter; (13) STK–5 Antithrombotic therapy by the end of hospital day 2; (14) STK–10 Assessed for rehab; and (15) VTE–4 Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. The four chart-abstracted measures that we are proposing to remove have VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 been suspended from the program; therefore, their removal will not impact the reporting burden. The structural measure we have proposed to remove, participation in a systematic database for cardiac surgery (NQF #0113), has an estimated a burden of nearly zero hours; therefore, its removal will not result a reduction in a significant burden reduction. Therefore, for the FY 2017 payment determination, we estimate a reduction in burden from our proposed removal of 20 measures (both chartabstracted and structural) to be 1,775 hours annually per hospital. We estimate the total reduction in burden for chart abstraction and structural measures for the approximately 3,300 Hospital IQR Program-participating hospitals to be 5.86 million hours. Utilizing the estimates above, we estimate an overall reduction in burden from the from the FY 2016 estimate of 5.9 million hours annually to 3.7 million hours annually for the FY 2017 payment determination year. This burden estimate includes both the new proposed measures and the measures which we are reproposing. It excludes the burden associated with the NHSN and HCAHPS measures, both of which are submitted under separate information collection requests and are approved under separate OMB control numbers. We intend to enroll up to 100 hospitals in a voluntary large scale test of validation for electronic clinical quality measures for the Hospital IQR Program. We estimate a total of 16 hours PO 00000 Frm 00315 Fmt 4701 Sfmt 4702 Net change in burden per hospital each. We intend to reimburse hospitals $26 per hour for up to 16 hours for their participation in this test. Details regarding this reimbursement rate are as follows: • The labor performed can be accomplished by medical records and health information technology staff, with a mean hourly wage in general medical and surgical hospitals of $19.24.187 • Applying OMB Circular A–76, we assumed full fringe benefits of 36.25 percent, for a fully burdened labor rate of $26.25 per hour, rounding to $26 per hour, that accounts for the full cost of labor. The circular is available at https:// www.whitehouse.gov/sites/default/files/ omb/assets/omb/circulars/a076/a76_ incl_tech_correction.pdf. For the FY 2017 payment determination, we also are encouraging hospitals to voluntarily submit up to 16 measures electronically for the Hospital IQR Program in a manner that would permit eligible hospitals to partially align Hospital IQR Program requirements with some requirements under the Medicare EHR Incentive Program. We estimate that the total burden associated with the electronic 187 In May 2012, the hourly wage was $18.68. Occupational employment and wages, May 2012, 29–2071 Medical records and health information technicians. Bureau of Labor Statistics, https:// www.bls.gov/oes/2012/may/oes292071.htm, last accessed 3/31/2014. We increased this wage by 3.0 percent to account for inflation in the past 24 months. U.S. Inflation Calculator. https:// www.usinflationcalculator.com/inflation/currentinflation-rates/, last accessed 3/31/2014. E:\FR\FM\15MYP2.SGM 15MYP2 28292 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 clinical quality measure reporting option will be similar to the burden outlined for hospitals in the EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). As described above for participation in the test of validation for electronic clinical quality metrics in the Hospital IQR Program, we believe an individual with commensurate skills will submit electronic clinical quality measures on behalf of the hospital at a rate of approximately $26.00 per hour. Therefore, we believe it will cost a hospital approximately $277.33 ($26.00 x 10 hours and 40 minutes) to report 16 electronic clinical quality measures. Additional information about the chart abstraction burden is detailed in section II.K. of Appendix A to this proposed rule. Previously, we required hospitals to provide 96 patient charts for validation per hospital per year, including 36 charts for HAI validation (with an average page length of 1,500) and 60 charts for clinical process of care measure validation (with an average page length of 300) for a total of 72,000 pages per hospital per year. For the FY 2017 payment determination and subsequent years, we are proposing to reduce this requirement to 72 charts per hospital per year, including 40 charts for HAI validation and 36 charts for clinical process of care validation, for a total of 70,800 pages per hospital per year—a decrease of 1,200 pages per hospital per year. We reimburse hospitals at 12 cents per photocopied page (68 FR 67956 and 70 FR 23667). Therefore, the reduced burden is $144 per hospital for up to 600 hospitals. To support validation of four HAI measures for the FY 2017 payment determination and subsequent years, we estimate an annual burden of 43,200 hours. This estimate is based on up to 600 hospitals completing HAI Templates averaging 18 hours per quarter over 4 quarters. This burden is 10,800 hours more than that for the FY 2016 payment determination as finalized in the FY 2014 IPPPS/LTCH PPS final rule (78 FR 50822 through 50825) of 32,400 hours because the HAI measures are to be validated for 4 quarters instead of 3 quarters. 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program As discussed in section IX.B. of the preamble of this proposed rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 with section 1866(k)(2) of the Act with respect to such fiscal year. In this proposed rule, we are proposing to adopt one new clinical effectiveness measure (External Beam Radiotherapy for Bone Metastases) for the FY 2017 program and subsequent years, which, if finalized, would increase the total number of measures for the FY 2017 PCHQR measure set to 19 measures. We also are proposing to update the specifications for the 5 previously finalized clinical process/oncology care measures to require PCHs to report allpatient data for each of these measures, and to adopt a new sampling methodology that PCHs can use to report these measures. Furthermore, we are proposing to require PCHs to submit population and sample size counts for these measures. We believe that requiring PCHs to submit the proposed new clinical effectiveness measure data as well as the proposed sample and population size data will not prove burdensome. At least seven PCHs are currently reporting quality measure data (including population and sampling data for HCAHPS measures) on a voluntary basis to CMS. PCHs may also have experience submitting quality and population/ sample size data to other entities, such as State survey agencies and The Joint Commission. As a result, we believe that the new reporting requirements we are proposing to adopt will not significantly impact PCHs. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50957 through 50959), we included burden estimates for the FY 2015 and FY 2016 programs. We noted in that final rule that those estimates represented a worst case scenario of estimated burden. In this proposed rule, we are providing a revised burden estimate for FY 2016 and a burden estimate for FY 2017. The revised estimate for FY 2016 takes into account our proposal to adopt a new sampling methodology that PCHs can use to report the five clinical process/oncology care measures. The revised FY 2016 and new FY 2017 burden estimates also incorporate the sampling methodology allowed for the SCIP measures and HCAHPS Survey because last year’s burden reflected the ‘‘worst-case scenario’’ of our burden estimates (78 FR 50958). The anticipated revised burden on PCHs for the FY 2016 program and the anticipated new burden on PCHs for the FY 2017 program consist of the following: new measure training and measure maintenance, as well as the time required for collection, aggregation, and submission of data for all measures. PO 00000 Frm 00316 Fmt 4701 Sfmt 4702 We estimate that 11 PCHs will submit quality measure data on approximately 37,496 cancer cases annually beginning with FY 2016 and 43,266 cancer cases annually beginning with FY 2017.188 In addition, we estimate that PCHs will spend 0.5 hours on chart abstraction and data submission per case/event, 0.5 hours on training per each new measure, 0.25 hours on measure maintenance per each existing measure, and a maximum of 5 hours summarizing and reporting population and sample size counts for the six SCIP measures and five oncology care measures. We are reducing the burden estimates for the HCAHPS Survey, the six SCIP measures, and the five clinical process/ oncology care measures in this proposed rule to take into consideration the sampling that PCHs may use for these measures. As a result, we estimate that the reporting burden on each PCH for the FY 2016 program will be 18,758 hours. We estimate that the reporting burden on each PCH for FY 2017 would increase by 2,885 hours because PCHs would be required to report an additional quality measure (External Beam Radiotherapy for Bone Metastases). Therefore, we estimate the overall burden for all of the FY 2017 PCHQR Program requirements to be 21,643 hours per PCH. This FY 2017 estimate, which includes an additional proposed measure, represents a decrease of 30,287 hours 189 per PCH from the FY 2016 burden estimate that we published in the FY 2014 IPPS/LTCH final rule (78 FR 50957 through 50959), or an overall decrease of 58 percent in the number of hours for each PCH. Coupled with our estimated salary costs,190 this revised estimate results in a net reduction in estimated cost of $285,252 per PCH. We believe that this burden estimate more accurately captures the hour and cost impact on PCHs participating in the PCHQR Program and reflects efforts to minimize the burden impact through the proposed adoption of a new sampling methodology that PCHs can use to report the clinical process/ oncology care measures. However, we note that these estimates are based on PCH reporting of Medicare data only. We intend to update the burden estimate to more accurately reflect the burden to PCHs for reporting 188 FY 2011 CMS MedPAR file based on Medicare data alone. 189 Represents the difference between previous burden estimate (51,930 hours) in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50958) and current burden estimate (21,643 hours). 190 We are now estimating an hourly salary of $33 (https://swz.salary.com/salarywizard/Staff-Nurse-RN -Hourly-Salary-Details.aspxper). After accounting for employee benefits and overhead, this results in a total cost of $66 per labor hour. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules all-patient data in future years, should we adopt our proposal to use all-patient data. We will be submitting a revision of the information collection request currently approved under ONC 0938– 1175 to account for the aforementioned proposed changes to the program when they are finalized. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 8. ICRs for the Hospital Value-Based Purchasing (VBP) Program In section IV.I. of the preamble of this proposed rule, we discuss requirements for the Hospital VBP Program. Specifically, in this proposed rule, we are proposing to adopt three new measures for the FY 2017 Hospital VBP Program: (1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia; (2) Clostridium difficile are measures of healthcare-associated infections reported via the CDC’s National Healthcare Safety Network; and (3) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation is a chart-abstracted measure. We also are proposing to adopt Hospital-level RiskStandardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) for the FY 2019 Hospital VBP Program. As provided for in section 1886(o)(2)(A) of the Act, all of these additional measures are required for the Hospital IQR Program. Therefore, their inclusion in the Hospital VBP Program does not result in any additional burden because the Hospital VBP Program uses data that are required for the Hospital IQR Program. 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program As discussed in sections IX.C.3. through IX.C.5. of the preamble of this proposed rule, for the LTCHQR Program, for the FY 2015 payment determination and subsequent years, we are retaining the following three quality measures: (1) National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138); (2) National Healthcare Safety Network (NHSN) Central Line CatheterAssociated Blood Stream Infection Event (CLABSI) Outcome Measure (NQF #0139); and (3) and Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). For the FY 2016 payment determination and subsequent years, we are retaining the following two measures in addition to the measures finalized for previous years: (1) Percent of Residents or Patients Who Were Assessed and Appropriately Given the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Seasonal Influenza Vaccine (Short-Stay) (NQF #0680); and (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431). For the FY 2017 payment determination and subsequent years, we are retaining the following three measures in addition to the measures finalized for previous years: (1) National Health Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); (2) National Health Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium Difficile Infection (CDI) Outcome Measure (NQF #1717); and (3) All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals. For the FY 2018 payment determination and subsequent years, we are retaining the following measure in addition to the measures finalized for previous years: Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). As discussed in section IX.C.7.of the preamble of this proposed rule, we are proposing three new quality measures for inclusion in the LTCHQR Program for the FY 2018 payment determination and subsequent years: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; (2) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and (3) National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Six of the previously adopted and newly proposed measures either will or would be collected via the NHSN. The NHSN is a secure, Internet-based healthcare-associated infection (HAI) tracking system maintained and managed by the CDC. The NHSN enables health care facilities to collect and use data about HAIs, adherence to clinical practices known to prevent HAIs, and other adverse events within their organizations. NHSN data collection occurs via a Web-based tool hosted by the CDC and provided free of charge to facilities. We believe that any burden increase related to complying with the submission of the proposed NHSN VAE Outcome Measure would be minimal because LTCHs have already completed the initial setup of the NHSN submission process and have become familiar with reporting data in the NHSN system due to the requirement to report CAUTI and CLABSI measures. While this requirement is subject to the PO 00000 Frm 00317 Fmt 4701 Sfmt 4702 28293 PRA, we believe that the associated burden is approved under OMB control number 0920–0666, for those measures previously finalized, with an expiration date of November, 31, 2016. The All-Cause Unplanned Readmission Measure for 30 Days PostDischarge from Long-Term Care Hospitals is a Medicare claims-based measure. Because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe that this measure will not add any additional reporting burden for LTCHs. The remaining five previously adopted and newly proposed measures either will or would be collected utilizing the LTCH CARE Data Set. The LTCH CARE Data Set, in its current form, has been approved under OMB control number 0938–1163. Additions will need to be made to the LTCH CARE Data Set in order to allow for collection of the two functional status measures we are proposing in section IX.C.7.a. of the preamble of this proposed rule: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; and (2) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. The revised data collection will be resubmitted to OMB for approval. While this requirement is subject to the PRA, we believe the associated burden is either approved under OMB control number 0938–1163, for those measures previously finalized, with an expiration date of June 30, 2016, or will be contained in the updated information collection request. Assuring data accuracy is vital to public reporting programs. In section IX.C.11. of the preamble of this proposed rule, we are proposing, for the FY 2016 payment determination and subsequent years, to validate data submitted to CMS on the LTCH CARE Data Set by requesting that a statistically valid random sample of 260 LTCHs copy and send portions of five patient charts each from a given CY (for a total of portions of 1,300 LTCH patient charts) to a CMS validation contractor. We are proposing that the specific portions of the patient charts would be identified in the written request, but may include the following sections, which are listed with our estimated number of pages for each: first 3 days of nurses’ notes would be approximately 15 pages; the last 3 days of nurses’ notes would be approximately 10 pages; the physician, physician’s assistant, or nurse practitioner’s admission history E:\FR\FM\15MYP2.SGM 15MYP2 28294 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules our proposal, the proposal does not require a review by OMB under the authority of the Paperwork Reduction Act of 1995. If you comment on these information collection and recordkeeping requirements, please submit your comments electronically as specified in the ADDRESSES section of this proposed rule. 10. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) In section IX.D. of the preamble of this proposed rule, we are proposing to align the Medicare EHR Incentive Program reporting and submission timelines for clinical quality measures for eligible hospitals and CAHs with the Hospital IQR Program’s reporting and submission timelines. In addition, we provide guidance and clarification of certain policies for reporting zero denominators on clinical quality measures and our policy on case threshold exemptions. Because these proposals for data collection would align with the reporting requirements in place for the Hospital IQR Program, we do not believe there is any additional burden for this collection of information. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 and physical would be approximately 30 pages; the physician, physician’s assistant, or nurse practitioner’s discharge summary would be approximately 15 pages; the nurses’ admission database would be approximately 40 pages; pressure ulcer assessments will would approximately 30 pages; physician’s progress notes would be approximately 30 pages; physician’s orders would be approximately 30 pages; and laboratory reports would be approximately 70 pages. We estimate the total submission to be no more than 270 pages in length. We estimate that 1,300 charts will allow us to validate data submitted to CMS with an estimated reliability of 70 percent, with a 5-percent margin of error, at a 95-percent confidence level. Although charts will be randomly selected, we are proposing to limit the request to specific portions of five charts per LTCH. 42 CFR Part 405 Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping, rural areas, X-rays. 42 CFR Part 412 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 2. Section 405.1801 is amended by— a. Removing the definition of ‘‘Intermediary determination’’ under paragraph (a). ■ b. Adding in alphabetical order a new definition of ‘‘Medicare Administrative Contractor determination (contractor determination)’’ under paragraph (a). ■ c. Revising paragraph (b)(1). The additions and revisions read as follows: § 405.1801 11. ICR Regarding Proposed Revision of Regulations Governing Use and Release of Medicare Advantage (MA) Risk Adjustment Data (§ 422.310(f)) Medicare Advantage (MA) organizations are required to submit risk adjustment data to CMS organizations under current authority at § 422.310(b) through (d). The proposed changes we are proposing to make to the use and release of MA risk adjustment data under section X. of the preamble of this proposed rule provision do not change the requirements on MA organizations for submission of information to CMS, which have been in place for several years. Therefore, this proposal does not impose new information collection requirements on MA organizations. Consequently, because there are no new information collection requirements in 42 CFR Part 422 Administrative practice and procedure, Health facilities, Health maintenance, organizations (HMO), Medicare, Penalties, Privacy, Reporting and recordkeeping requirements. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 C. Response to Public Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all public comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the public comments in the preamble of that document. List of Subjects 42 CFR Part 413 Health facilities, Kidney diseases, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 415 Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 424 Emergency medical services, Health facilities, Health professions, Medicare. 42 CFR Part 485 Grant programs—health, Health facilities, Medicaid, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 488 Administrative practice and procedure, Health facilities, Medicare, Reporting and recordkeeping requirements. PO 00000 Frm 00318 Fmt 4701 Sfmt 4702 For the reasons stated in the preamble of this proposed rule, the Centers for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter IV as set forth below: Title 42—Public Health PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED Subpart R—Provider Reimbursement Determinations and Appeals 1. The authority citation for Subpart R is revised to read as follows: ■ Authority: Secs. 205, 1102, 1814(b), 1815(a), 1816, 1833, 1861(v), 1871, 1872, 1874A, 1878, and 1886 of the Social Security Act (42 U.S.C. 405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 1395oo, and 1395ww). ■ ■ Introduction. (a) * * * Medicare Administrative Contractor determination (contractor determination) means the following: (1) With respect to a provider of services that has filed a cost report under §§ 413.20 and 413.24 of this chapter, the term means a final determination of the amount of total reimbursement due the provider, pursuant to § 405.1803 following the close of the provider’s cost reporting period, for items and services furnished to beneficiaries for which reimbursement may be made on a reasonable cost basis under Medicare for the period covered by the cost report. (2) With respect to a hospital that receives payments for inpatient hospital services under the prospective payment system (part 412 of this chapter), the term means a final determination of the total amount of payment due the hospital, pursuant to § 405.1803 following the close of the hospital’s cost reporting period, under that system for the period covered by the final determination. (3) For purposes of appeal to the Provider Reimbursement Review Board, the term is synonymous with the phrases ‘‘intermediary’s final determination,’’ ‘‘final determination of the organization serving as its fiscal E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules intermediary,’’ ‘‘Secretary’s final determination’’ and ‘‘final determination of the Secretary’’, as those phrases are used in section 1878(a) of the Act, and with the phrases ‘‘final Medicare administrative contractor determination, ’’ ‘‘final contractor determination’’, and ‘‘final Secretary determination’’ as those phrases are used in this subpart. (4) For purposes of § 405.376 concerning claims collection activities, the term does not include an action by CMS with respect to a compromise of a Medicare overpayment claim, or termination or suspension of collection action on an overpayment claim, against a provider or physician or other supplier. * * * * * (b) * * *(1) Providers. In order to be paid for covered services furnished to Medicare beneficiaries, a provider must file a cost report with its contractor as specified in § 413.24 of this chapter. For purposes of this subpart, the term ‘‘provider’’ includes a hospital (as described in part 482 of this chapter), hospice program (as described in § 418.3 of this chapter), critical access hospital (CAH), comprehensive outpatient rehabilitation facility (CORF), renal dialysis facility, Federally qualified health center (FQHC), home health agency (HHA), rural health clinic (RHC), skilled nursing facility (SNF), and any other entity included under the Act. (FQHCs and RHCs are providers, for purposes of this subpart, effective with cost reporting periods beginning on or after October 1, 1991). * * * * * ■ 3. Section 405.1803 is amended by revising the section heading and paragraph (a) introductory text to read as follows: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 405.1803 Contractor determination and notice of amount of program reimbursement. (a) General requirement. Upon receipt of a provider’s cost report, or amended cost report where permitted or required, the contractor must within a reasonable period of time (as described in § 405.1835(a)(2)(ii)), furnish the provider and other parties as appropriate (see § 405.1805) a written notice reflecting the contractor’s final determination of the total amount of reimbursement due the provider. The contractor must include the following information in the notice, as appropriate: * * * * * ■ 4. Section 405.1811 is amended by— ■ a. Revising the section heading. ■ b. Revising paragraph (a). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 c. Revising paragraph (b) introductory text and paragraphs (b)(1) and (b)(2). ■ d. Revising paragraphs (c)(1), (c)(2), and (c)(3). The revisions read as follows: ■ § 405.1811 Right to contractor hearing; contents of, and adding issues to, hearing request. (a) Right to a contractor hearing on final contractor determination. A provider (but no other individual, entity, or party) has a right to a contractor hearing, as a single provider appeal, for specific items claimed for a cost reporting period that is subject to a final contractor or Secretary determination if— (1) The amount in controversy (as determined in accordance with § 405.1839) is at least $1,000 but less than $10,000; and (2) Unless the provider qualifies for a good cause extension under § 405.1813, the date of receipt by the contractor of the provider’s hearing request is— (i) No later than 180 days after the date of receipt by the provider of the final contractor or Secretary determination; or (ii) If the final contractor determination is not issued (through no fault of the provider) within 12 months of the date of receipt by the contractor of the provider’s perfected cost report or amended cost report (as specified in § 413.24(f) of this chapter), no later than 180 days after the expiration of the 12month period for issuance of the final contractor determination. The date of receipt by the contractor of the provider’s perfected cost report or amended cost report is presumed to be the date the contractor stamped ‘‘Received’’ unless it is shown by a preponderance of the evidence that the contractor received the cost report on an earlier date. (b) Contents of request for a contractor hearing. The provider’s request for a contractor hearing must be submitted in writing to the contractor, and the request must include the elements described in paragraphs (b)(1) through (b)(3) of this section. If the provider submits a hearing request that does not meet the requirements of paragraph (b)(1), (b)(2), or (b)(3) of this section, the contractor hearing officer may dismiss with prejudice the appeal, or take any other remedial action he or she considers appropriate. (1) A demonstration that the provider satisfies the requirements for a contractor hearing as specified in paragraph (a) of this section, including a specific identification of the final contractor or Secretary determination under appeal. PO 00000 Frm 00319 Fmt 4701 Sfmt 4702 28295 (2) For each specific item under appeal, a separate explanation of why, and a description of how, the provider disagrees with the specific aspects of the final contractor or Secretary determination under appeal, including an account of all of the following: (i) Why the provider believes Medicare payment is incorrect for each disputed item (or, where applicable, why the provider is unable to determine whether Medicare payment is correct because it allegedly does not have access to underlying information concerning the calculation of its payment); (ii) How and why the provider believes Medicare payment should be determined differently for each disputed item; and (iii) If the provider self-disallows a specific item (as specified in § 413.24(j) of this chapter), an explanation of the nature and amount of each selfdisallowed item, the reimbursement sought for the item, and why the provider self-disallowed the item instead of claiming reimbursement for the item. * * * * * (c) * * * (1) The request to add issues complies with the requirements of paragraphs (a) and (b) of this section as to each new specific item at issue. (2) The specific items raised in the initial hearing request and the specific matters identified in subsequent requests to add issues, when combined, satisfy the requirements of paragraph (a)(1) of this section. (3) The contractor hearing officer receives the requests to add issues no later than 60 days after the expiration of the applicable 180-day period prescribed in paragraph (a)(2) of this section. § 405.1813 [Amended] 5. In § 405.1813, paragraphs (a) and (b) are amended by removing the crossreference ‘‘§ 405.1811(a)(3)’’ and adding in its place the cross-reference ‘‘§ 405.1811(a)(2)’’. ■ § 405.1814 [Amended] 6. Section 405.1814 is amended by removing paragraph (b)(3). ■ 7. A new § 405.1832 is added to read as follows: ■ § 405.1832 Contractor hearing officer review of compliance with the substantive reimbursement requirement of an appropriate cost report claim. (a) General. In order to receive or potentially qualify for reimbursement for a specific item, the provider must include in its cost report an appropriate E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28296 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules claim for the specific item (as prescribed in § 413.24(j) of this chapter). If the provider files an appeal to the contractor seeking reimbursement for a specific item and any party to such appeal questions whether the provider’s cost report included an appropriate claim for the specific item, the contractor hearing officer(s) must address such questions in accordance with the procedures set forth in this section. (b) Summary of procedures. (1) Preliminary steps. The contractor hearing officer(s) must give each party to the appeal an adequate opportunity to submit factual evidence and legal argument regarding the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal. Upon receipt of timely submitted factual evidence and legal argument (if any), the contractor hearing officer(s) must review such evidence and argument, and prepare written specific findings of fact and conclusions of law on the question of whether the provider’s cost report complied with, for the specific item under appeal, the cost report claim requirements prescribed in § 413.24(j) of this chapter. In reaching such specific factual findings and legal conclusions, the contractor hearing officer(s) must follow the procedures set forth in § 413.24(j)(3) of this chapter for determining whether the provider’s cost report included an appropriate claim for the specific item under appeal. The contractor hearing officer(s) must promptly give a copy of such written specific factual findings and legal conclusions to each party to the appeal, and such factual findings and legal conclusions must be included in the record of administrative proceedings for the appeal (as prescribed in § 405.1827). (2) Limits on contractor hearing officer(s) actions. The contractor hearing officer(s)’s specific findings of fact and conclusions of law (pursuant to paragraph (b)(1) of this section) must not be invoked or relied on by the contractor hearing officer(s) as a basis to deny, or decline to exercise, jurisdiction over a specific item or take any other of the actions specified in paragraph (c) of this section. Upon giving the parties to the appeal the contractor hearing officer(s)’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) on the question of whether the provider’s cost report included an appropriate cost report claim for the specific item under appeal, the contractor hearing officer(s) must proceed to issue one of the two types of overall decisions specified in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 paragraphs (d) and (e) of this section with respect to the specific item. If the contractor hearing officer(s) issues an overall contractor hearing decision (as specified in paragraph (d) of this section) regarding the specific item under appeal, the contractor hearing officer(s)’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) must be included in such overall contractor hearing decision regarding the specific item, along with the other matters that are required by the regulations for an overall contractor hearing decision. However, if the contractor hearing officer(s) issues an overall jurisdictional dismissal decision (as specified in paragraph (e) of this section) regarding the specific item under appeal, the contractor hearing officer(s)’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) must not be included in the overall jurisdictional dismissal decision regarding the specific item. The contractor hearing officer(s) may permit reimbursement for the specific item under appeal, as part of an overall contractor hearing decision, but such reimbursement may be permitted only to the extent authorized by paragraph (f) of this section. (c) Prohibition of certain types of decisions, orders, and other actions. (1) If the contractor hearing officer(s) determines, in its findings of fact and conclusions of law (as prescribed by paragraph (b)(1) of this section), that the provider’s cost report did not include an appropriate claim for the specific item under appeal, the contractor hearing officer(s) may not— (i) Deny jurisdiction over the specific item under appeal, based on (in whole or in part) the contractor hearing officer(s)’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section); (ii) Decline to exercise jurisdiction over the specific item under appeal, based on (in whole or in part) the contractor hearing officer(s)’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section); or (iii) Impose any sanction or take any other action against the interests of any party to the appeal except as provided in paragraph (f) of this section, based on (in whole or in part) the contractor hearing officer(s)’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section). (2) Regardless of whether the contractor hearing officer(s) determines, in its findings of fact and conclusions of law (as prescribed by paragraph (b)(1) of PO 00000 Frm 00320 Fmt 4701 Sfmt 4702 this section), that the provider’s cost report did or did not include an appropriate claim for the specific item under appeal, the contractor hearing officer(s) may not— (i) Deny jurisdiction over the specific item under appeal, based on (in whole or in part) the absence, in the final contractor or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item. Exception: If the provider’s appeal of the specific item is based on a reopening of such item (pursuant to § 405.1885) where the specific item is not revised, adjusted, corrected, or otherwise changed in a revised final contractor or Secretary determination, the contractor must deny jurisdiction over the specific item under appeal (as prescribed in §§ 405.1887(d) and 405.1889(b)); (ii) Decline to exercise jurisdiction over the specific item under appeal, based on (in whole or in part) the absence, in the final contractor or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item; or (iii) Impose any sanction or take any other action against the interests of any party to the appeal except as provided in paragraph (f) of this section, based on (in whole or in part) the absence, in the final contractor or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item. (d) Contractor hearing decision must include any factual findings and legal conclusions under paragraph (b)(1) of this section. If the contractor hearing officer(s) issues a hearing decision regarding the specific item under appeal (pursuant to § 405.1831), any specific findings of fact and conclusions of law by the contractor hearing officer(s) (reached under paragraph (b)(1) of this section), on the question of whether the provider’s cost report included an appropriate claim for the specific item, must be included in such hearing decision along with the other matters prescribed by § 405.1831. The contractor hearing officer(s)’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section) about whether there was an appropriate cost report claim for the specific item under appeal are subject to the provisions of E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules § 405.1833 just as those provisions apply to the other parts of the contractor hearing decision. If the contractor hearing officer(s) determines that the provider’s cost report— (1) Included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter), the contractor hearing decision must also address whether the other substantive reimbursement requirements for the specific item are also satisfied; or (2) Did not include an appropriate claim for the specific item under appeal, the contractor hearing officer(s) has discretion whether or not to address in the contractor hearing decision whether the other substantive reimbursement requirements for the specific item are also satisfied. (e) Contractor jurisdictional dismissal decision must not include factual findings and legal conclusions under paragraph (b)(1) of this section. If the contractor hearing officer(s) issues a jurisdictional dismissal decision regarding the specific item under appeal (pursuant to § 405.1814(c)), the contractor hearing officer(s)’s specific findings of fact and conclusions of law (reached under paragraph (b)(1) of this section) on the question of whether the provider’s cost report included an appropriate claim for the specific item must not be included in such jurisdictional dismissal decision. (f) Effects of the contractor hearing officer(s)’s factual findings and legal conclusions under paragraph (b)(1) of this section when part of a final contractor hearing decision. If the contractor hearing officer(s) determines, as part of a final and binding contractor hearing decision (pursuant to § 405.1833 and paragraphs (b)(1) and (d) of this section), that the provider’s cost report— (1) Included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter), the specific item is reimbursable in accordance with Medicare policy, but only if the contractor hearing officer(s) further determines in such final contractor hearing decision that all the other substantive reimbursement requirements for the specific item are also satisfied; or (2) Did not include an appropriate cost report claim for the specific item under appeal, then the specific item is not reimbursable, regardless of whether the contractor hearing officer(s) further determines in such final contractor hearing decision that the other substantive reimbursement requirements for the specific item are or are not satisfied. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 8. Section 405.1834 is amended by adding a new paragraph (b)(2)(iii) to read as follows: ■ § 405.1834 CMS reviewing official procedure. * * * * * (b) * * * (2) * * * (iii) If the CMS reviewing official reviews an contractor hearing decision regarding a specific item, the CMS reviewing official’s review of such a contractor hearing decision will include, and any decision issued by the CMS reviewing official (under paragraph (e) of this section) will address, the contractor hearing officer(s)’s specific findings of fact and conclusions of law in such contractor hearing decision (as prescribed in § 405.1832(b)(1) and (d)) on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter). * * * * * ■ 9. Section 405.1835 is amended by— ■ a. Revising paragraph (a). ■ b. Revising paragraphs (b)(1), (b)(2) introductory text, and (b)(2)(iii). ■ c. Revising paragraphs (c)(1), (c)(2), and (c)(3). The revisions read as follows: § 405.1835 Right to Board hearing; contents of, and adding issues to, hearing request. (a) Right to hearing on final contractor determination. A provider (but no other individual, entity, or party) has a right to a Board hearing, as a single provider appeal, for specific items claimed in its cost report for a cost reporting period that is subject to a final contractor or Secretary determination, if— (1) The amount in controversy (as determined in accordance with § 405.1839) is $10,000 or more; and (2) Unless the provider qualifies for a good cause extension under § 405.1836, the date of receipt by the Board of the provider’s hearing request is— (i) No later than 180 days after the date of receipt by the provider of the final contractor or Secretary determination; or (ii) If the final contractor determination is not issued (through no fault of the provider) within 12 months of the date of receipt by the contractor of the provider’s perfected cost report or amended cost report (as specified in § 413.24(f) of this chapter), no later than 180 days after the expiration of the 12month period for issuance of the final contractor determination. The date of receipt by the contractor of the provider’s perfected cost report or PO 00000 Frm 00321 Fmt 4701 Sfmt 4702 28297 amended cost report is presumed to be the date the contractor stamped ‘‘Received’’ unless it is shown by a preponderance of the evidence that the contractor received the cost report on an earlier date. (b) * * * (1) A demonstration that the provider satisfies the requirements for a Board hearing as specified in paragraph (a) of this section, including a specific identification of the final contractor or Secretary determination under appeal. (2) For each specific item under appeal, a separate explanation of why, and a description of how, the provider disagrees with the specific aspects of the final contractor or Secretary determination under appeal, including an account of all of the following: * * * * * (iii) If the provider self-disallows a specific item (as specified in § 413.24(j) of this chapter), an explanation of the nature and amount of each selfdisallowed item, the reimbursement sought for the item, and why the provider self-disallowed the item instead of claiming reimbursement for the item. * * * * * (c) * * * (1) The request to add issues complies with the requirements of paragraphs (a) and (b) of this section as to each new specific item at issue. (2) The specific items raised in the initial hearing request and the specific items identified in subsequent requests to add issues, when combined, satisfy the requirements of paragraph (a)(2) of this section. (3) The Board receives the request to add issues no later than 60 days after the expiration of the applicable 180-day period prescribed in paragraph (a)(2) of this section. § 405.1836 [Amended] 10. In § 405.1836, paragraphs (a) and (b) are amended by removing the crossreference ‘‘§ 405.1835(a)(3)’’ and adding in its place the cross-reference ‘‘§ 405.1835(a)(2)’’. ■ 11. Section 405.1837 is amended by revising paragraphs (a)(1), (c)(2) introductory text, (c)(2)(iii) and (e)(4) to read as follows: ■ § 405.1837 Group appeals. (a) * * * (1) The provider satisfies individually the requirements for a Board hearing under § 405.1835(a)(1); * * * * * (c) * * * (2) An explanation (for each specific item at issue) of each provider’s E:\FR\FM\15MYP2.SGM 15MYP2 28298 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules disagreement with its final contractor or Secretary determination under appeal, including an account of— * * * * * (iii) If the provider self-disallows a specific item (as specified in § 413.24(j) of this chapter), an explanation of the nature and amount of each selfdisallowed item, the reimbursement sought for the item, and why the provider self-disallowed the item instead of claiming reimbursement for the item. * * * * * (e) * * * (4) A provider may submit a request to the Board to join a group appeal any time before the Board issues one of the decisions specified in § 405.1875(a)(1). By submitting a request, the provider agrees that, if the request is granted, the provider is bound by the Board’s actions and decision in the appeal. If the Board denies a request, the Board’s action is without prejudice to any separate appeal the provider may bring in accordance with § 405.1811, § 405.1835, or this section. For purposes of determining timeliness for the filing of any separate appeal and for the adding of issues to such appeal, the date of receipt of the provider’s request to form or join the group appeal is considered the date of receipt for purposes of meeting the applicable 180-day period prescribed in § 405.1835(a)(2). * * * * * § 405.1839 [Amended] 12. In 405.1839, paragraph (a)(1) is amended by removing the crossreference ‘‘§ 405.1811(a)(2) of this subpart’’ and adding in its place the cross-reference ‘‘§ 405.1811(a)(1)’’; and by removing the cross-reference ‘‘§ 405.1835(a)(2) of this subpart’’ and adding in its place the cross-reference ‘‘§ 405.1835(a)(1)’’. ■ § 405.1840 [Amended] 13. Section 405.1840 is amended by removing paragraph (b)(3). ■ 14. A new § 405.1873 is added to read as follows: ■ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 405.1873 Board review of compliance with the reimbursement requirement of an appropriate cost report claim. (a) General. In order to receive or potentially receive reimbursement for a specific item, the provider must include in its cost report an appropriate claim for the specific item (as prescribed in § 413.24(j) of this chapter). If the provider files an appeal to the Board seeking reimbursement for the specific item and any party to such appeal questions whether the provider’s cost report included an appropriate claim for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the specific item, the Board must address such question in accordance with the procedures set forth in this section. (b) Summary of procedures. (1) Preliminary steps. The Board must give the parties an adequate opportunity to submit factual evidence and legal argument regarding the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal. Upon receipt of timely submitted factual evidence or legal argument (if any), the Board must review such evidence and argument and prepare written specific findings of fact and conclusions of law on the question of whether the provider’s cost report complied with, for the specific item under appeal, the cost report claim requirements prescribed in § 413.24(j) of this chapter. In reaching such specific factual findings and legal conclusions, the Board must follow the procedures set forth in § 413.24(j)(3) of this chapter for determining whether the provider’s cost report included an appropriate claim for the specific item under appeal. The Board must promptly give a copy of such written specific factual findings and legal conclusions to each party to the appeal, and such factual findings and legal conclusions must be included in the record of administrative proceedings for the appeal (as prescribed in § 405.1865). (2) Limits on Board actions. The Board’s specific findings of fact and conclusions of law (pursuant to paragraph (b)(1) of this section) must not be invoked or relied on by the Board as a basis to deny, or decline to exercise, jurisdiction over a specific item or take any other of the actions specified in paragraph (c) of this section. Upon giving the parties to the appeal the Board’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) on the question of whether the provider’s cost report included an appropriate cost report claim for the specific item under appeal, the Board must proceed to issue one of the four types of overall decisions specified in paragraphs (d) and (e) of this section with respect to the specific item. If the Board issues either of two types of overall Board decisions (as specified in paragraph (d) of this section) regarding the specific item under appeal, the Board’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) must be included in such overall Board decision regarding the specific item, along with the other matters that are required by the regulations for the pertinent type of overall Board decision. However, if the PO 00000 Frm 00322 Fmt 4701 Sfmt 4702 Board issues either of two other types of overall Board decisions (as specified in paragraph (e) of this section) regarding the specific item under appeal, the Board’s written specific factual findings and legal conclusions (pursuant to paragraph (b)(1) of this section) must not be included in the overall Board decision regarding the specific item. The Board may permit reimbursement for the specific item under appeal, as part of one of the two types of overall Board decisions that are specified in paragraph (d) of this section, but such reimbursement may be permitted only to the extent authorized by paragraph (f) of this section. (c) Prohibition of certain types of decisions, orders, and other actions. (1) If the Board determines, in its findings of fact and conclusions of law (as prescribed by paragraph (b)(1) of this section), that the provider’s cost report did not include an appropriate claim for the specific item under appeal, the Board may not— (i) Deny jurisdiction over the specific item under appeal, based on (in whole or in part) the Board’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section); (ii) Decline to exercise jurisdiction over the specific item under appeal, based on (in whole or in part) the Board’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section); or (iii) Take any of the actions set forth in § 405.1868(b), (c), or (d), impose any sanction, or take any other action against the interests of any party to the appeal, except as provided in paragraph (f) of this section, based on (in whole or in part) the Board’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section). (2) Regardless of whether the Board determines, in its findings of fact and conclusions of law (as prescribed by paragraph (b)(1) of this section), that the provider’s cost report did or did not include an appropriate claim for the specific item under appeal, the Board may not— (i) Deny jurisdiction over the specific item under appeal, based on (in whole or in part) the absence, in the final contractor determination or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item. Exception: If the provider’s appeal of the specific item is based on a reopening of such item (pursuant to § 405.1885) where the specific item is not revised, adjusted, corrected, otherwise changed E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules in a revised final contractor or Secretary determination, the Board must deny jurisdiction over the specific item under appeal (as prescribed in §§ 405.1887(d) and 405.1889(b)); (ii) Decline to exercise jurisdiction over the specific item under appeal, based on (in whole or in part) the absence, in the final contractor determination or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item; or (iii) Take any of the actions set forth in § 405.1868(b), (c), or (d), impose any sanction, or take any other action against the interests of any party to the appeal, except as provided in paragraph (f) of this section, based on (in whole or in part) the absence, in the final contractor determination or Secretary determination under appeal, of an adjustment, revision, correction, or other change to the specific item under appeal, or the lack of a particular determination by the contractor or the Secretary regarding the specific item. (d) Two types of Board decisions that must include any factual findings and legal conclusions under paragraph (b)(1) of this section. (1) Board hearing decision. If the Board issues a hearing decision regarding the specific item under appeal (pursuant to § 405.1871), any specific findings of fact and conclusions of law by the Board (reached under paragraph (b)(1) of this section), on the question of whether the provider’s cost report included an appropriate claim for the specific item, must be included in such hearing decision along with the other matters prescribed by § 405.1871(a). The Board’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section), about whether there was an appropriate cost report claim for the specific item under appeal, are subject to the provisions of § 405.1871(b) just as those provisions apply to the other parts of the Board’s hearing decision. If the Board determines that the provider’s cost report— (i) Included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter), the Board’s hearing decision must also address whether the other substantive reimbursement requirements for the specific item are also satisfied; or (ii) Did not include an appropriate claim for the specific item under appeal, the Board has discretion whether or not to address in the Board’s hearing decision whether the other substantive VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 reimbursement requirements for the specific item are also satisfied. (2) Board expedited judicial review (EJR) decision, where EJR is granted. If the Board issues an EJR decision where EJR is granted regarding a legal question that is relevant to the specific item under appeal (pursuant to § 405.1842(f)(1)), the Board’s specific findings of fact and conclusions of law (reached under paragraph (b)(1) of this section), on the question of whether the provider’s cost report included an appropriate claim for the specific item, must be included in such EJR decision along with the other matters prescribed by § 405.1842(f)(1). The Board’s factual findings and legal conclusions (reached under paragraph (b)(1) of this section) about whether there was an appropriate cost report claim for the specific item under appeal are subject to the provisions of § 405.1842(g)(1), (g)(2), (h)(1), and (h)(3) just as those provisions apply to the other parts of the Board’s EJR decision. (e) Two other types of Board decisions that must not include the Board’s factual findings and legal conclusions under paragraph (b)(1) of this section. (1) Board jurisdictional dismissal decision. If the Board issues a jurisdictional dismissal decision regarding the specific item under appeal (pursuant to § 405.1840(c)), the Board’s specific findings of fact and conclusions of law (reached under paragraph (b)(1) of this section), on the question of whether the provider’s cost report included an appropriate claim for the specific item, must not be included in such jurisdictional dismissal decision. (2) Board expedited judicial review (EJR) decision, where EJR is denied. If the Board issues an EJR decision where EJR is denied regarding a legal question that is relevant to the specific item under appeal (pursuant to § 405.1842(f)(2)), the Board’s specific findings of fact and conclusions of law (reached under paragraph (b)(1) of this section), on the question of whether the provider’s cost report included an appropriate claim for the same item, must not be included in such EJR decision. If the Board conducts further proceedings and issues another decision (as specified in § 405.1842(h)(2)(i)), the Board’s specific findings of fact and conclusions of law (reached under paragraph (b)(1) of this section)— (i) Must be included in any further hearing decision or EJR decision where EJR is granted regarding the specific item under appeal (as prescribed in paragraph (d) of this section); but (ii) Must not be included in any further jurisdictional dismissal decision or EJR decision where EJR is denied PO 00000 Frm 00323 Fmt 4701 Sfmt 4702 28299 regarding the specific item under appeal (as prescribed in paragraph (e) of this section). (f) Effects of the Board’s factual findings and legal conclusions under paragraph (b)(1) of this section in two types of final decisions. (1) When part of a final hearing decision. If the Board determines, as part of a final and binding hearing decision (pursuant to § 405.1871(b) and paragraphs (b)(1) and (d)(1) of this section), that the provider’s cost report— (i) Included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter), the specific item is reimbursable in accordance with Medicare policy, but only if the Board further determines in such final hearing decision that all the other substantive reimbursement requirements for the specific item are also satisfied; or (ii) Did not include an appropriate cost report claim for the specific item under appeal, then the specific item is not reimbursable, regardless of whether the Board further determines in such final hearing decision that the other substantive reimbursement requirements for the specific item are or are not satisfied. (2) When part of a final EJR decision that grants EJR. If the Board determines or the Administrator of CMS determines (pursuant to § 405.1875), as applicable, in a final and binding EJR decision that grants EJR regarding a legal question that is relevant to the specific item under appeal (pursuant to § 405.1842(g)(1) and paragraphs (b)(1) and (d)(2) of this section), that the provider’s cost report— (i) Included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter), the specific item is reimbursable in accordance with Medicare policy, but only to the extent permitted by the final decision of a Federal court pursuant to the EJR provisions of section 1878(f)(1) of the Act (see also §§ 405.1842 and 405.1877)); or (ii) Did not include an appropriate claim for the specific item under appeal, then the specific item is not reimbursable, unless— (A) The specific factual findings and legal conclusions (reached under paragraph (b)(1) of this section) of the Board or the Administrator, as applicable, on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal, are reversed or modified by the final decision of a Federal court (pursuant to section 1878(f)(1) of the Act and § 405.1877); and E:\FR\FM\15MYP2.SGM 15MYP2 28300 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (B) Only to the extent otherwise permitted by the final decision of a Federal court pursuant to the EJR provisions of section 1878(f)(1) of the Act (see also §§ 405.1842 and 405.1877) and by Medicare policy. ■ 15. Section 405.1875 is amended by— ■ a. Revising the last sentence of paragraph (a) introductory text. ■ b. Adding a new paragraph (a)(2)(v). ■ c. Revising paragraph (f)(5). The revisions and additions read as follows: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 405.1875 Subpart R—[Amended] 16. Amend Subpart R of part 405 by removing the term or phrase in the first column and replacing it with the term or phrase in the second column: ■ Remove Add an intermediary ......... intermediary .............. intermediaries ............ intermediaries ............ ‘‘intermediary’s’’ ......... ‘‘a contractor’’ ‘‘contractor’’ ‘‘contractors’’ ‘‘contractors’’’ ‘‘contractor’s’’ 20:20 May 14, 2014 Jkt 232001 Subpart X—Rural Health Clinic and Federally Qualified Health Center Services 17. The authority citation for Subpart X, continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 18. Section 405.2468 is amended by revising paragraph (f)(1) to read as follows: ■ § 405.2468 Allowable costs. * * * * * (f) * * * (1) Effective for portions of cost reporting periods occurring on or after January 1, 1999, if an RHC or an FQHC incurs ‘‘all or substantially all’’ of the costs for the training program in the nonhospital setting as defined in § 413.75(b) of this chapter, the RHC or FQHC may receive direct graduate medical education payment for those residents. However, in connection with cost reporting periods for which ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ is not defined in § 413.75(b) of this chapter, if an RHC or an FQHC incurs the salaries and fringe benefits (including travel and lodging where applicable) of residents training at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical education payments for those residents. * * * * * PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 19. The authority citation for Part 412 is revised to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), sec. 124 of Public Law 106–113 (113 Stat. 1501A–332), sec. 1206 of Public Law 113–67, and sec. 112 of Public Law 113– 93. 20. Section 412.23 is amended by— a. Revising paragraphs (e)(6)(i), (e)(6)(ii) introductory text, and (e)(6)(ii)(B)(2). ■ ■ PO 00000 Frm 00324 Fmt 4701 Sfmt 4702 b. Revising paragraphs (e)(7)(i) and (e)(7)(ii) introductory text. ■ c. Adding new paragraph (e)(7)(iii). The revisions and additions read as follows: ■ Administrator review. (a) * * * The Board is required to send to the Office of the Attorney Advisor a copy of each decision specified in paragraphs (a)(2)(i), (a)(2)(ii), and (a)(2)(iii) of this section upon issuance of the decision. * * * * * (2) * * * (v) If the Administrator reviews a Board hearing decision regarding a specific item, or for a Board EJR decision, on the question of whether there is Board jurisdiction over a specific item, the Administrator’s review of such a hearing decision or EJR decision, as applicable, will include, and any decision issued by the Administrator (under paragraph (e) of this section) will address, the Board’s specific findings of fact and conclusions of law in such hearing decision or EJR decision (as prescribed in § 405.1873(b)(1) and (d)) on the question of whether the provider’s cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter). * * * * * (f) * * * (5) In addition to ordering a remand to the Board, the Administrator may order a remand to any component of HHS or CMS or to a contractor under appropriate circumstances, including, but not limited to, for the purpose of effectuating a court order (as described in § 405.1877(g)(2)). When the contractor’s denial of the relief, that the provider sought before the Board and that is under review by the Administrator, was based on procedural grounds (such as the alleged failure of the provider to satisfy a time limit) or was based on the alleged failure to supply adequate documentation to support the provider’s claim, and the Administrator rules that the basis of the contractor’s denial is invalid, the Administrator remands to the contractor for the contractor to make a determination on the merits of the provider’s claim. VerDate Mar<15>2010 Nomenclature Changes § 412.23 Excluded hospitals: Classifications. * * * * * (e) * * * (6) * * * (i) General rule. Except as specified in paragraphs (e)(6)(ii) and (e)(6)(iii) of this section for the period beginning December 29, 2007 and ending December 28, 2012, and the period beginning April 1, 2014 and ending September 30, 2017, a moratorium applies to the establishment and classification of a long-term care hospital as described in paragraphs (e) and (e)(1) through (e)(5) of this section or a long-term care hospital satellite facility as described in § 412.22(h). (ii) Exception. The moratorium specified in paragraph (e)(6)(i) of this section is not applicable to the establishment and classification of a long-term care hospital that meets the requirements of paragraphs (e) and (e)(1) through (e)(5) of this section, or a longterm care hospital satellite facility that meets the requirements of § 412.22(h), if the long-term care hospital or long-term care satellite facility meets the following criteria on or before December 29, 2007, or on or before April 1, 2014, as applicable: * * * * * (B) * * * (2)(i) Has expended before December 29, 2007, at least 10 percent (or, if less, $2.5 million) of the estimated cost of the project specified in paragraph (e)(6)(ii)(B)(1) of his section; (ii) Has expended, before April 1, 2014, at least 10 percent (or, if less, $2.5 million) of the estimated cost of the project specified in paragraph (e)(6)(ii)(B)(1) of this section. * * * * * (7) * * * (i) For purposes of this paragraph, an existing long-term care hospital or long-term care hospital satellite facility means a long-term care hospital that meets the requirements of paragraph (e) of this section or longterm care hospital satellite facility that meets the requirements of § 412.22(h) and received payment under the provisions of subpart O of this part prior to the dates noted in the following moratorium clauses. (ii) December 29, 2007, through December 28, 2007— * * * * * (iii) April 1, 2014 through September 30, 2017—The number of Medicarecertified beds in an existing long-term E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules care hospital or an existing long-term care hospital satellite facility must not be increased beyond the number of Medicare-certified beds on April 1, 2014. * * * * * ■ 21. Section 412.64 is amended by— ■ a. Removing paragraph (b)(1)(ii)(D). ■ b. Revising paragraph (b)(3)(i). ■ c. Revising paragraphs (d)(1), (d)(2)(i) introductory text, (d)(2)(ii), and (d)(3) introductory text. ■ d. In paragraphs (h)(4) and (h)(4)(vi), removing the date ‘‘October 1, 2014’’ and adding in its place the date ‘‘October 1, 2015’’. The revisions read as follows: § 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * * * * * (b) * * * (3)(i) For discharges occurring on or after October 1, 2004, a hospital that is located in a rural county adjacent to one or more urban areas is deemed to be located in an urban area and receives the Federal payment amount for the urban area to which the greater number of workers in the county commute if the rural county would otherwise be considered part of an urban area, under the standards for designating MSAs if the commuting rates used in determining outlying counties were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or central counties of all adjacent MSAs. Qualifying counties are determined based upon OMB standards, using the most recent OMB standards for delineating statistical areas adopted by CMS. * * * * * (d) * * * (1) The applicable percentage change for updating the standardized amount for all hospitals in all areas is— (i) For fiscal year 2005 through fiscal year 2009, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section. (ii) For fiscal year 2010, for discharges— (A) On or after October 1, 2009 and before April 1, 2010, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section; and (B) On or after April 1, 2010 and before October 1, 2010, the percentage VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less 0.25 percentage point. (iii) For fiscal year 2011, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this subchapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less 0.25 percentage point. (iv) For fiscal years 2012 and 2013, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.1 percentage point. (v) For fiscal year 2014, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.3 percentage point. (vi) For fiscal year 2015, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraphs (d)(2) and (d)(3) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.2 percentage point. (2)(i) In the case of a ‘‘subsection (d) hospital,’’ as defined under section 1886(d)(1)(B) of the Act, that does not submit quality data on a quarterly basis to CMS, in the form and manner specified by CMS, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals is reduced— * * * * * (ii) Any reduction pursuant to this paragraph (d)(2) will apply only to the fiscal year involved and will not be taken into account in computing the applicable percentage change for a subsequent fiscal year. (3) Beginning fiscal year 2015, in the case of a ‘‘subsection (d) hospital,’’ as defined under section 1886(d)(1)(B) of the Act, that is not a meaningful electronic health record (EHR) user as defined in Part 495 of this chapter for the applicable EHR reporting period and does not receive an exception, threefourths of the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for PO 00000 Frm 00325 Fmt 4701 Sfmt 4702 28301 prospective payment hospitals is reduced— * * * * * ■ 22. Section 412.101 is amended by revising paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2) introductory text, and (d) to read as follows: § 412.101 Special treatment: Inpatient hospital payment adjustment for lowvolume hospitals. * * * * * (b) * * * (2) * * * (i) For FY 2005 through FY 2010 and the portion of FY 2015 beginning on April 1, 2015, and subsequent fiscal years, a hospital must have fewer than 200 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital’s most recently submitted cost report, and be located more than 25 road miles (as defined in paragraph (a) of this section) from the nearest ‘‘subsection (d)’’ (section 1886(d) of the Act) hospital. (ii) For FY 2011 through FY 2014, and the portion of FY 2015 before April 1, 2015, a hospital must have fewer than 1,600 Medicare discharges, as defined in paragraph (a) of this section, during the fiscal year, based on the hospital’s Medicare discharges from the most recently available MedPAR data as determined by CMS, and be located more than 15 road miles, as defined in paragraph (a) of this section, from the nearest ‘‘subsection (d)’’ (section 1886(d) of the Act) hospital. * * * * * (c) * * * (1) For FY 2005 through FY 2010 and the portion of FY 2015 beginning on April 1, 2015 and subsequent fiscal years, the adjustment is an additional 25 percent for each Medicare discharge. (2) For FY 2011 through FY 2014 and the portion of FY 2015 before April 1, 2015, the adjustment is as follows: * * * * * (d) Eligibility of new hospitals for the adjustment. For FYs 2005 through 2010 and the portion of FY 2015 beginning on April 1, 2015, and subsequent fiscal years, a new hospital will be eligible for a low-volume adjustment under this section once it has submitted a cost report for a cost reporting period that indicates that it meets discharge requirements during the applicable fiscal year and has provided its fiscal intermediary or Medicare administrative contractor with sufficient evidence that it meets the distance requirement, as specified under paragraph (b)(2) of this section. ■ 23. Section 412.102 is revised to read as follows: E:\FR\FM\15MYP2.SGM 15MYP2 28302 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 412.102 Special treatment: Hospitals located in areas that are changing from urban to rural as a result of a geographic redesignation. An urban hospital that was part of an MSA, but was redesignated as rural as a result of the most recent OMB standards for delineating statistical areas adopted by CMS, may receive an adjustment to its rural Federal payment amount for operating costs for 2 successive fiscal years as provided in paragraphs (a) and (b) of this section. (a) First year adjustment. (1) Effective on or after October 1, 1983 and before October 1, 2014, the hospital’s rural average standardized amount and disproportionate share payments as described in § 412.106 are adjusted on the basis of an additional amount that equals two-thirds of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its geographic redesignation and the rural standardized amount and disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. (2) Effective on or after October 1, 2014, the hospital’s rural disproportionate share payments as described in § 412.106 are adjusted on the basis of an additional amount that equals two-thirds of the difference between the disproportionate share payments as an urban hospital applicable to the hospital before its geographic redesignation to a rural area as a result of implementation of the most recent OMB standards for delineating statistical areas adopted by CMS and the rural disproportionate share payment otherwise applicable to the Federal fiscal year for which the adjustment is made. (b) Second year adjustment. (1) Effective on or after October 1, 1983 and before October 1, 2014, if a hospital’s status continues to be rural as a result of geographic redesignation, its rural average standardized amount and disproportionate share payments are adjusted on the basis of an additional amount that equals one-third of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its redesignation and the rural standardized amounts and disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. (2) Effective on or after October 1, 2014, if a hospital’s status continues to be rural as a result of geographic redesignation, its disproportionate share VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 payments are adjusted on the basis of an additional amount that equals one-third of the difference between the disproportionate share payments applicable to the hospital before its geographic redesignation to a rural area as a result of implementation of the most recent OMB standards for delineating statistical areas adopted by CMS and the rural disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. ■ 24. Section 412.103 is amended by adding a new paragraph (a)(6) to read as follows: § 412.103 Special treatment: Hospitals located in urban areas and that apply for reclassification as rural. (a) * * * (6) For any period on or after October 1, 2014, a CAH in a county that was not in an urban area as defined by the Office of Management and Budget (OMB), but was included in an urban area as a result of the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, may be reclassified as being located in a rural area for purposes of meeting the rural location requirement at § 485.610(b) of this chapter for a period of 2 years, beginning with the date of the implementation of the new labor market area delineations, if it meets any of the requirements under paragraph (a)(1), (a)(2), or (a)(3) of this section. * * * * * ■ 25. Section 412.105 is amended by revising paragraphs (a)(1)(ii), (f)(1)(iv)(D), and (f)(1)(v), to read as follows: § 412.105 Special treatment: Hospitals that incur indirect costs for graduate medical education programs. * * * * * (a) * * * (1) * * * (ii) (A) For new programs started prior to October 1, 2012, the exception for new programs described in paragraph (f)(1)(vii) of this section applies to each new program individually for which the full-time equivalent cap may be adjusted based on the period of years equal to the minimum accredited length of each new program. (B) For new programs started on or after October 1, 2012, the exception for new programs described in paragraph (f)(1)(vii) of this section applies to each new program individually during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the PO 00000 Frm 00326 Fmt 4701 Sfmt 4702 first new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the each individual new program started, for hospitals for which the fulltime equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter. * * * * * (f) * * * (1) * * * (iv) * * * (D) A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, may retain the increases to its full-time equivalent resident cap that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this section while it was located in a rural area. Effective for cost reporting periods beginning on or after October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS and was training residents in a new program prior to the redesignation becoming effective, the redesignated urban hospital may retain any existing increases to its full-time equivalent resident cap and receive an increase to its full-time equivalent resident cap for the new program in which it was training residents when the redesignation became effective, in accordance with paragraph (f)(1)(vii) of this section. (v)(A) For a hospital’s cost reporting periods beginning on or after October 1, 1997, and before October 1, 1998, the total number of full-time equivalent residents for payment purposes is equal to the average of the actual full-time equivalent resident counts (subject to the requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost reporting period and the preceding cost reporting period. (B) For a hospital’s cost reporting periods beginning on or after October 1, 1998, the total number of full-time equivalent residents for payment purposes is equal to the average of the actual full-time equivalent resident count (subject to the requirements set forth in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost reporting period and the preceding two cost reporting periods. (C) For new programs started prior to October 1, 2012, if a hospital qualified for an adjustment to the limit E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules established under paragraph (f)(1)(iv) of this section for new medical residency programs created under paragraph (f)(1)(vii) of this section, the count of residents participating in new medical residency training programs above the number included in the hospital’s fulltime equivalent count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in paragraphs (f)(l)(v)(A), (f)(1)(v)(B), and this paragraph (f)(1)(v)(C) for a period of years. Residents participating in new medical residency training programs are included in the hospital’s full-time equivalent count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, for each new program started, the period of years equals the minimum accredited length for each new program. The period of years for each new program begins when the first resident begins training in each new program. (D) For new programs started on or after October 1, 2012, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e) of this chapter, full-time equivalent residents participating in new medical residency training programs are excluded from the hospital’s full-time equivalent count before applying the averaging rules during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the each individual new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter. After the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and after the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each individual new program started for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter, full-time equivalent residents participating in new medical residency training VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 programs are included in the hospital’s full-time equivalent count before applying the averaging cap. (E) Subject to the provisions of paragraph (f)(1)(ix) of this section, fulltime equivalent residents that are displaced by the closure of either another hospital or another hospital’s program are added to the full-time equivalent count after applying the averaging rules in this paragraph (f)(1)(v)(B) for the receiving hospital for the duration of time that the displaced residents are training at the receiving hospital. (F) Subject to the provisions of paragraph (f)(1)(x) of this section, effective for cost reporting periods beginning on or after April 1, 2000, fulltime equivalent residents at an urban hospital in a rural track program are included in the urban hospital’s rolling average calculation described in this paragraph (f)(1)(v)(B). * * * * * ■ 26. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to read as follows: § 412.106 Special treatment: Hospitals that serve a disproportionate share of lowincome patients. * * * * * (g) * * * (1) (iii) * * * (C) For fiscal year 2014 and for fiscal year 2015, CMS will base its estimates of the amount of hospital uncompensated care on the most recent available data on utilization for Medicaid and Medicare SSI patients, as determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of this section. * * * * * § 412.108 [Amended] 27. In § 412.108, paragraph (a)(1) introductory text and paragraph (c)(2)(iii) introductory text, remove the date ‘‘April 1, 2014’’ and add in its place the date ‘‘April 1, 2015’’. ■ 28. Section 412.140 is amended by revising paragraph (c)(2) to read as follows: ■ § 412.140 Participation, data submission, and validation requirements under the Hospital Inpatient Quality Reporting (IQR) Program. * * * * * (c) * * * (2) Exception. Upon request by a hospital, CMS may grant an extension or exemption of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific PO 00000 Frm 00327 Fmt 4701 Sfmt 4702 28303 requirements for submission of a request for an extension or exemption are available on QualityNet.org. * * * * * ■ 29. Section 412.152 is amended by revising the definition of ‘‘Applicable hospital’’ to read as follows: § 412.152 Definitions for the Hospital Readmissions Reduction Program. * * * * * Applicable hospital is a hospital described in section 1886(d)(1)(B) of the Act or a hospital paid under section 1814(b)(3) of the Act. * * * * * § 412.154 [Amended] 30. Section 412.154 is amended by removing and reserving paragraph (d). ■ 31. Section 412.160 is amended by revising the definitions of ‘‘Base operating DRG payment amount’’ and ‘‘Performance standards’’ to read as follows: ■ § 412.160 Definitions for the Hospital Value-Based Purchasing (VBP) Program. * * * * * Base operating DRG payment amount means the following: (1) With respect to a subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Act), the wageadjusted DRG operating payment plus any applicable new technology add-on payments under subpart F of this part. This amount is determined without regard to any payment adjustments under the Hospital Readmissions Reduction Program, as specified under § 412.154. This amount does not include any additional payments for indirect medical education under § 412.105, the treatment of a disproportionate share of low-income patients under § 412.106, outliers under subpart F of this part, or a low volume of discharges under § 412.101. (2) With respect to a Medicaredependent, small rural hospital that receives payments under § 412.108(c) or a sole community hospital that receives payments under § 412.92(d), the wageadjusted DRG operating payment plus any applicable new technology add-on payments under subpart F of this part. This amount does not include any additional payments for indirect medical education under § 412.105, the treatment of a disproportionate share of low-income patients under § 412.106, outliers under subpart F of this part, or a low volume of discharges under § 412.101. With respect to a Medicaredependent, small rural hospital that receives payments under § 412.108(c) (for discharges occurring in FY 2013) or a sole community hospital that receives E:\FR\FM\15MYP2.SGM 15MYP2 28304 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payments under § 412.92(d), this amount also does not include the difference between the hospital-specific payment rate and the Federal payment rate determined under subpart D of this part. * * * * * Performance standards are the levels of performance that hospitals must meet or exceed in order to earn points under the Hospital VBP Program, and are calculated with respect to a measure for a fiscal year no later than 60 days prior to the start of the performance period for that measure for that fiscal year. The performance standards for a measure may be updated as follows: (1) To make a single correction to correct a calculation error, data issue, or other problem that would significantly change the performance standards; or (2) To incorporate nonsubstantive technical updates made to the measure between the time that CMS first displays the performance standards for that measure for a fiscal year and the time that CMS calculates hospital performance on that measure at the conclusion of the performance period for that measure for a fiscal year. * * * * * ■ 32. Section 412.161 is revised to read as follows: § 412.161 Applicability of the Hospital Value-Based Purchasing (VBP) Program The Hospital VBP Program applies to hospitals, as that term is defined in § 412.160. § 412.172 [Amended] 33. Section 412.172 is amended by removing and reserving paragraph (c). ■ 34. Section 412.232 is amended by revising paragraph (b)(2) to read as follows: ■ § 412.232 Criteria for all hospitals in a rural county seeking urban redesignation. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * * * * * (b) * * * (2) For fiscal years beginning with FY 2005, the group of hospitals must demonstrate that the county in which the hospitals are located meets the standards for redesignation to an MSA as an outlying county using the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data. * * * * * ■ 35. Section 412.234 is amended by revising paragraph (a)(3)(iv) to read as follows: § 412.234 Criteria for all hospitals in an urban county seeking redesignation to another urban area. (a) * * * VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (3) * * * (iv) For Federal fiscal year 2008 and thereafter, hospitals located in counties that are in the same Combined Statistical Area (CSA) or Core-Based Statistical Area (CBSA) (under the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data) as the urban area to which they seek redesignation qualify as meeting the proximity requirement for reclassification to the urban area to which they seek redesignation. * * * * * ■ 36. Section 412.500 is amended by adding paragraphs (a)(4), (a)(5), and (a)(6) to read as follows: § 412.500 Basis and scope of subpart. (a) * * * (4) Section 4302(a) of Public Law 111–5, which amended sections 114(c) and (d) of Public Law 110–173 relating to several moratoria on the establishment of new long-term care hospitals and satellite facilities and on the increase in the number of beds in existing long-term care hospitals and satellite facilities under the long-term care hospital prospective payment system. (5) Sections 3106(a) and 10312(a) of Public Law 111–148, which extended certain payment rules and moratoria under the long-term care hospital prospective payment system by further amending sections 114(c) and (d) of Public Law 110–173. (6) Section 1206 of Public Law 113– 67, which further extended certain payment rules and moratoria under the long-term care hospital prospective payment system by amending sections 114(c) and (d) of Public Law 110–173, and which: (i) Added a new section 1886(m)(6) to the Act to establish a site neutral payment amount for long-term care hospital discharges that fail to meet the applicable criteria in cost reporting periods beginning on or after October 1, 2015; and (ii) Requires the Secretary’s review of the payment rates and regulations governing long-term care hospitals established under section 1886(d)(1)(B)(iv)(II) of the Act and application of payment adjustments based on that review. * * * * * ■ 37. Section 412.521 is amended by revising paragraph (a)(2) to read as follows: § 412.521 Basis for payment. (a) * * * (2) Except as provided for in § 412.526, the amount of payment under PO 00000 Frm 00328 Fmt 4701 Sfmt 4702 the prospective payment system is based on the Federal payment rate established in accordance with § 412.523, including adjustments described in § 412.525, and, if applicable during a transition period, on a blend of the Federal payment rate and the cost-based reimbursement rate described in § 412.533. * * * * * ■ 38. Section 412.523 is amended by adding a new paragraph (c)(3)(xi) to read as follows: § 412.523 Methodology for calculating the Federal prospective payment rates. * * * * * (c) * * * (3) * * * (xi) For long-term care hospital prospective payment system fiscal year beginning October 1, 2014, and ending September 30, 2015. The standard Federal rate for the long-term care hospital prospective payment system beginning October 1, 2014, and ending September 30, 2015, is the standard Federal rate for the previous long-term care hospital prospective payment system fiscal year updated by 2.1 percent, and further adjusted, as appropriate, as described in paragraph (d) of this section. * * * * * § 412.525 [Amended] 39. Section 412.525 is amended by removing and reserving paragraph (d)(3). ■ 40. A new § 412.526 is added to read as follows: ■ § 412.526 Payment provisions for a ‘‘subclause (II)’’ long-term care hospital. (a) Definition. A ‘‘subclause (II)’’ longterm care hospital is a hospital that qualifies as an LTCH under section 1886(d)(1)(B)(iv)(II) of the Act. (b) Method of payment.—(1) For cost reporting periods beginning on or after October 1, 2003 and before September 30, 2014, payment to a ‘‘subclause (II)’’ long-term care hospital is made under the prospective payment system specified in § 412.1(a)(4) and Subpart O of this part. (2) For cost reporting periods beginning on or after October 1, 2014, payment to a ‘‘subclause (II)’’ long-term care hospital is made under the prospective payment system specified in § 412.1(a)(4) and under Subpart O of this part, as adjusted. The adjusted payment amount is determined based on reasonable cost, as described at § 412.526(c). (c) Determining the adjusted payment for Medicare inpatient operating and capital-related costs under the E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 reasonable cost-based reimbursement rules. Medicare inpatient operating costs are paid based on reasonable cost, subject to a ceiling. The ceiling is the aggregate upper limit on the amount of a hospital’s net Medicare inpatient operating costs that the program will recognize for payment purposes, as determined under paragraph (c)(1) of this section. (1) Ceiling. For each cost reporting period, the ceiling is determined by multiplying the updated target amount, as defined in paragraph (c)(2) of this section, for that period by the number of Medicare discharges paid under this subpart during that period. (2) Target amounts.—(i) For cost reporting periods beginning during Federal fiscal year 2015, the target amount equals the hospital’s target amount determined under § 413.40(c)(4) for its cost reporting period beginning during Federal fiscal year 2000, updated by the applicable annual rate-of-increase percentages specified in § 413.40(c)(3) to the subject period. (ii) For subsequent cost reporting periods, the target amount equals the hospital’s target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period. (3) Payment for inpatient operating costs. For cost reporting periods subject to this section, the hospital’s Medicare allowable net inpatient operating costs for that period (as defined at § 413.40(a)(3)) are paid on a reasonable cost basis, subject to that hospital’s ceiling (as determined under paragraph (c)(1) of this section) for that period. (4) Payment for inpatient capitalrelated costs. Medicare allowable net inpatient capital costs are paid on a reasonable cost basis, in accordance with the regulations under Part 413 of this chapter. ■ 41. Section 412.531 is amended by— ■ a. Revising paragraph (a)(2) introductory text. ■ b. Adding a new paragraph (a)(3). ■ c. Revising paragraph (b)(4) introductory text. ■ d. Adding a new paragraph (b)(5). The revisions and additions read as follows: § 412.531 Special payment provisions when an interruption of a stay occurs in a long-term care hospital. § 412.532 (a) * * * (2) A greater than 3-day interruption of stay defined. For long-term care hospital discharges occurring on or before September 30, 2014, ‘‘a greater than 3-day or less interruption of stay’’ means a stay in a long-term care VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospital during which a Medicare inpatient is discharged from the longterm care hospital to an acute care hospital, an IRF, or a SNF for a period of greater than 3 days but within the applicable fixed-day period specified in paragraphs (a)(2)(i) through (a)(2)(iii) of this section before being readmitted to the same long-term care hospital. * * * * * (3) For long-term care hospital discharges occurring on or after October 1, 2014, ‘‘a greater than 3-day or less interruption of stay’’ means a stay in a long-term care hospital during which a Medicare inpatient is discharged from the long-term care hospital to an acute care hospital, an IRF, or a SNF for a fixed day period of between 4 days and 30 consecutive days before being readmitted to the same long-term care hospital. (b) * * * (4) Except as provided in paragraph (b)(5) of this section, if a patient who has been discharged from a long-term care hospital to another facility and is readmitted to the long-term care hospital for additional treatment or services in the long-term care hospital directly following the stay at the other facility, the subsequent admission to the long-term care hospital is considered a new stay, even if the case is determined to fall into the same MS–LTC–DRG, and the long-term care hospital will receive two separate Federal prospective payments if one of the following conditions are met: * * * * * (5) For long-term care hospital discharges occurring on or after October 1, 2014, if a patient who has been discharged from a long-term care hospital to another facility is readmitted to the long-term care hospital for additional treatment or services directly following the stay at the other facility, the subsequent admission to the longterm care hospital is considered a new stay, even if the case is determined to fall into the same MS–LTC–DRG, and the long-term care hospital will receive two separate Federal prospective payments only if the patient has a length of stay at the other facility that exceeded 30 days from the initial date of discharge from the long-term care hospital. * * * * * [Removed] 42. Section 412.532 is removed. 43. Section 412.534 is amended by— a. Revising and paragraph (c)(1). b. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraph (c)(1)(i) and (ii) and (c)(2) paragraph heading. ■ ■ ■ ■ PO 00000 Frm 00329 Fmt 4701 Sfmt 4702 28305 c. Revising paragraph (c)(3). d. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraphs (d)(1) heading, (d)(1)(i), and (d)(2) heading. ■ e. Revising paragraph (d)(3). ■ f. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraphs (e)(1) heading, (e)(1)(i), and (e)(2) heading. ■ g. Revising paragraph (e)(3). ■ h. Revising paragraphs (h) introductory text, (h)(4), and (h)(5). ■ i. Removing paragraph (h)(6). The revisions read as follows: ■ ■ § 412.534 Special payment provisions for long-term care hospitals within hospitals and satellites of long-term care hospitals. * * * * * (c) * * * (1) For cost reporting periods beginning on or after October 1, 2004 and before October 1, 2007 and for cost reporting periods beginning on or after October 1, 2016. (i) Except as provided in paragraphs (c)(3), (g), and (h) of this section, for any cost reporting period beginning on or after October 1, 2004 and before October 1, 2007, and for cost reporting periods beginning on or after October 1, 2016 in which the long-term care hospital or its satellite facility has a discharged Medicare inpatient population of whom no more than 25 percent were admitted to the hospital or its satellite facility from the co-located hospital, payments are made under the rules at §§ 412.500 through 412.541 in this subpart with no adjustment under this section. * * * * * (3) For a long-term care hospital satellite facility described in § 412.22(h)(3)(i), for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payments will be determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 50 percent. (d) * * * (3) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payment for a longterm care hospital satellite facility described in § 412.22(h)(3)(i) will be determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 75 percent. (e) * * * (3) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payments for a longterm care hospital satellite facility described in § 412.22(h)(3)(i) will be E:\FR\FM\15MYP2.SGM 15MYP2 28306 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 75 percent. * * * * * (h) Effective date of policies in this section for certain co-located long-term care hospitals and satellite facilities of long-term care hospitals. Except as specified in paragraph (h)(4) of this section, the policies set forth in this paragraph (h) apply to Medicare patient discharges that were admitted from a hospital located in the same building or on the same campus as a long-term care hospital described in § 412.23(e)(2)(i) that meets the criteria in § 412.22(f) and a satellite facility of a long-term care hospital as described under § 412.22(h)(3)(i) for discharges occurring in cost reporting periods beginning on or after July 1, 2007. * * * * * (4) For a long-term care hospital described in § 412.23(e)(2)(i) that meets the criteria in § 412.22(f), the policies set forth in this paragraph (h) and in § 412.536 do not apply for discharges occurring in cost reporting periods beginning on or after July 1, 2007. (5) For a long-term care hospital or a satellite facility that, as of December 29, 2007, was co-located with an entity that is a provider-based, off-campus location of a subsection (d) hospital which did not provide services payable under section 1886(d) of the Act at the offcampus location, the policies set forth in this paragraph (h) and in § 412.536 do not apply for discharges occurring in cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016. ■ 44. Section 412.536 is amended by— ■ a. Removing and reserving paragraph (a)(1)(iii). ■ b. Revising paragraph (a)(2) introductory text. ■ c. Removing and reserving paragraph (a)(2)(ii). ■ d. Removing paragraph (a)(3). The revisions read as follows: § 412.536 Special payment provisions for long-term care hospitals and satellites of long-term care hospitals that discharged Medicare patients admitted from a hospital not located in the same building or on the same campus as the long-term care hospital or satellite of the long-term care hospital. (a) * * * (1) * * * (iii) [Reserved]. * * * * * (2) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, the policies set forth VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 in this section are not applicable to discharges from: * * * * * (ii) [Reserved]. * * * * * PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END–STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 45. The authority for Part 413 continues to read as follows: ■ Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh). Nomenclature Changes PART 413 [Amended] 46. Throughout Part 413, according to the list below, remove the term or phrase in the first column and replace it with the term or phrase in the second column: ■ Remove Add an intermediary’s .... fiscal intermediary .. fiscal intermediary’s intermediary ............ intermediaries ......... intermediary’s ......... ‘‘a contractor’s’’ ‘‘contractor’’ ‘‘contractor’s’’ ‘‘contractor’’ ‘‘contractors’’ ‘‘contractor’s’’ 47. Section 413.24 is amended by reserving paragraph (i) and adding a new paragraph (j) to read as follows: ■ § 413.24 finding. Adequate cost data and cost * * * * * (i) [Reserved] (j) Substantive reimbursement requirement of an appropriate cost report claim. (1) General requirement. In order for a provider to receive or potentially qualify for reimbursement for a specific item for its cost reporting period, the provider’s cost report, whether determined on an as submitted, as amended, or as adjusted basis (as prescribed in paragraph (j)(3) of this section), must include an appropriate claim for the specific item, by either— (i) Claiming full reimbursement in the provider’s cost report for the specific item in accordance with Medicare policy, if the provider seeks payment for the item that it believes comports with program policy; or (ii) Self-disallowing the specific item in the provider’s cost report, if the provider seeks payment that it believes may not be allowable or may not comport with Medicare policy (for example, if the provider believes the PO 00000 Frm 00330 Fmt 4701 Sfmt 4702 contractor lacks the authority or discretion to award the reimbursement the provider seeks for the item), by following the procedures (set forth in paragraph (j)(2) of this section) for properly self-disallowing the specific item in the provider’s cost report as a protested amount. (2) Self-disallowance procedures. In order to properly self-disallow a specific item, the provider must— (i) Include an estimated reimbursement amount for each specific self-disallowed item in the protested amount line (or lines) of the provider’s cost report; and (ii) Attach a separate work sheet to the provider’s cost report for each specific self-disallowed item, explaining why the provider self-disallowed each specific item (instead of claiming full reimbursement in its cost report for the specific item) and describing how the provider calculated the estimated reimbursement amount for each specific self-disallowed item. (3) Procedures for determining whether there is an appropriate cost report claim. Whether the provider’s cost report for its cost reporting period includes an appropriate claim for a specific item (as prescribed in paragraph (j)(1) of this section) must be determined by reference to the cost report that the provider submits originally to, and was accepted by, the contractor for such period, provided that none of the following exceptions applies: (i) If the provider submits an amended cost report for its cost reporting period and such amended cost report is accepted by the contractor, whether there is an appropriate cost report claim for the specific item must be determined by reference to such amended cost report, provided that neither of the exceptions set forth in paragraphs (j)(3)(ii) and (j)(3)(iii) of this section applies; (ii) If the contractor adjusts the provider’s cost report, as submitted originally by the provider and accepted by the contractor or as amended by the provider and accepted by the contractor, whichever is applicable, with respect to the specific item, whether there is an appropriate cost report claim for the specific item must be determined by reference to the provider’s cost report, as such cost report claim is adjusted for the specific item in the initial contractor determination (as defined in § 405.1801(a) of this chapter) for the provider’s cost reporting period, provided that the exception set forth in paragraph (j)(3)(iii) of this section does not apply; (iii) If the contractor reopens either the initial contractor determination for E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules the provider’s cost reporting period (pursuant to § 405.1885 of this chapter) or a revised contractor determination for such period (issued pursuant to § 405.1889 of this chapter) and the contractor adjusts the provider’s cost report with respect to the specific item, whether there is an appropriate cost report claim for the specific item must be determined by reference to the provider’s cost report, as such cost report claim is adjusted for the specific item in the most recent revised contractor determination for such period. (4) Reimbursement effects of contractor’s determination of whether there is an appropriate cost report claim. If the contractor determines that the provider’s cost report included an appropriate claim for a specific item (as specified in paragraphs (j)(1), (j)(2), and (j)(3) of this section) and that all the other substantive reimbursement requirements for the specific item are also satisfied, the final contractor determination (as defined in § 405.1801(a) of this chapter) must include reimbursement for the specific item to the extent permitted by Medicare policy. If the contractor determines that the provider made an appropriate cost report claim for a specific item but the contractor disagrees with material aspects of the provider’s claim for the specific item, the contractor must make appropriate adjustments to the provider’s cost report and include reimbursement for the specific item in the final contractor determination in accordance with such cost report adjustments and to the extent permitted by program policy. If the contractor determines that the provider did not make an appropriate cost report claim for a specific item, the final contractor determination must not include any reimbursement for the specific item, regardless of whether the other substantive reimbursement requirements for the specific item are or are not satisfied. (5) Administrative review of whether there is an appropriate cost report claim. If the provider files an administrative appeal (pursuant to Part 405, Subpart R of this chapter) seeking reimbursement for a specific item and any party to such appeal questions whether the provider’s cost report included an appropriate claim for the specific item under appeal (as specified in paragraphs (j)(1), (j)(2), (j)(3), and (j)(4) of this section), the reviewing entity (as defined in § 405.1801(a) of this chapter) must follow the procedures prescribed in § 405.1873 of this chapter (if the appeal was filed originally with the Board), or the procedures set forth VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 in § 405.1832 of this chapter (if the appeal was filed initially with the contractor), for review of whether the substantive reimbursement requirement of an appropriate cost report claim for the specific item under appeal is satisfied. The reviewing entity must follow the procedures set forth in paragraph (j)(3) of this section in determining whether the provider’s cost report included an appropriate claim for the specific item under appeal. The reviewing entity may permit reimbursement for the specific item under appeal solely to the extent authorized by § 405.1873(f) of this chapter (if the appeal was filed originally with the Board) or by § 405.1832(f) of this chapter (if the appeal was filed initially with the contractor). ■ 48. Section 413.75 is amended by revising the definition of ‘‘Rural track FTE limitation’’ under paragraph (b) to read as follows: § 413.75 Direct GME payments: General requirements. * * * * * (b) * * * Rural track FTE limitation means the maximum number of residents (as specified in § 413.79(k)) training in a rural track residency program that an urban hospital may include in its FTE count and that is in addition to the number of FTE residents already included in the hospital’s FTE cap. * * * * * ■ 49. Section 413.78 is amended by revising paragraph (g)(6) to read as follows: § 413.78 Direct GME payment: Determination of the total number of FTE residents. * * * * * (g) * * * (6) The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section shall not be applied in a manner that requires reopening of any settled cost reports as to which there is not a jurisdictionally proper appeal pending as of March 23, 2010, on direct GME or IME payments. Cost reporting periods beginning before July 1, 2010 are not governed by paragraph (g) of this section. * * * * * ■ 50. Section 413.79 is amended by revising paragraphs (c)(6), (d)(5), and (k)(7), to read as follows: § 413.79 Direct GME payments: Determination of the weighted number of FTE residents. * * * (c) * * * PO 00000 Frm 00331 * Fmt 4701 * Sfmt 4702 28307 (6) FTE resident caps for rural hospitals that are redesignated as urban. A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003, may retain the increases to its FTE resident cap that it received under paragraphs (c)(2)(i), (e)(1)(iii), and (e)(3) of this section while it was located in a rural area. Effective for cost reporting periods beginning on or after October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, and was training residents in a new program prior to the redesignation becoming effective, the redesignated urban hospital may retain any existing increases to its FTE resident cap, and receive an increase to its FTE resident cap for the new program in which it was training residents when the redesignation became effective, in accordance with paragraph (e) of this section. (d) * * * (5)(i) For new programs started prior to October 1, 2012, if a hospital qualifies for an adjustment to the limit established under paragraph (c)(2) of this section for new medical residency programs created under paragraph (e) of this section, the count of the residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (d), for a period of years. Residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph (d), for each new program started, the period of years equals the minimum accredited length for each new program. The period of years begins when the first resident begins training in each new program. (ii) For new programs started on or after October 1, 2012, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e) of this chapter, FTE residents participating in new medical residency training programs are excluded from the hospital’s FTE count before applying the averaging rules during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started, for hospitals for which the FTE may be adjusted in accordance with § 413.79(e)(1) of this chapter, and E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28308 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the each individual new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3) of this chapter. After the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and after the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the each individual new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3) of this chapter, FTE residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules. * * * * * (k) * * * (7) (i) Effective for cost reporting periods beginning prior to October 1, 2014, if an urban hospital had established a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) for the rural track programs established prior to the adoption of such new labor market area definitions. In order to receive an adjustment to its FTE resident cap for a new rural track residency program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location delineations adopted by CMS. (ii) Effective for cost reporting periods beginning on or after October 1, 2014, if an urban hospital had started a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and, during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) and subject to paragraph (k)(7)(iii) for the rural track programs established prior to the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 adoption of such new OMB standards for delineating statistical areas. (iii) Effective for cost reporting periods beginning on or after October 1, 2014, if an urban hospital had established a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, or after the 3-year period used to calculate the urban hospital’s rural track FTE limit, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) based on the rural track programs established prior to the change in the hospital’s geographic designation. In order for the urban hospital to receive or use the adjustment to its FTE resident cap for training FTE residents in the rural track residency program that was established prior to the most recent OMB standards for delineating statistical areas adopted by CMS, one of the following two conditions must be met by the end of a 2-year period that begins when the most recent OMB standards for delineating statistical areas are adopted by CMS: the hospital that has been redesignated from rural to urban must reclassify as rural under § 412.103 of this chapter, for purposes of IME only; or the urban hospital must find a new site that is geographically rural consistent with the most recent geographical location delineations adopted by CMS. In order to receive an adjustment to its FTE resident cap for an additional new rural track residency program, the urban hospital must establish a rural track program with sites that are geographically rural based on the most recent geographical location delineations adopted by CMS. * * * * * PART 415—SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS 51. The authority citation for Part 415 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106–113 (113 Stat. 1501A–332). 52. Section 415.70 is amended by revising paragraph (b) to read as follows: ■ PO 00000 Frm 00332 Fmt 4701 Sfmt 4702 § 415.70 Limits on compensation for physician services in providers. * * * * * (b) Methodology for establishing limits. (1) For cost reporting periods beginning before January 1, 2015. CMS establishes a methodology for determining annual reasonable compensation equivalency limits and, to the extent possible, considers average physician incomes by specialty and type of location using the best available data. (2) For cost reporting periods beginning on or after January 1, 2015. CMS establishes a methodology for determining annual reasonable compensation equivalency limits and, to the extent possible, considers average physician incomes by specialty using the best available data. * * * * * PART 422—MEDICARE ADVANTAGE PROGRAM 53. The authority citation for Part 422 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 54. Section 422.300 is revised to read as follows: ■ § 422.300 Basis and scope. This subpart is based on sections 1106, 1853, 1854, and 1858 of the Act. It sets forth the rules for making payments to Medicare Advantage (MA) organizations offering local and regional MA plans, including calculation of MA capitation rates and benchmarks, conditions under which payment is based on plan bids, adjustments to capitation rates (including risk adjustment), collection of risk adjustment data, conditions for use and disclosure of risk adjustment data, and other payment rules. See § 422.458 in subpart J for rules on risk sharing payments to MA regional organizations. ■ 55. Section 422.310 is amended by revising paragraph (f) to read as follows: § 422.310 Risk adjustment data. * * * * * (f) Use and release of data. (1) CMS use of data. CMS may use the data described in paragraphs (a) through (d) of this section for the following purposes: (i) To determine the risk adjustment factors used to adjust payments, as required under §§ 422.304(a) and (c); (ii) To update risk adjustment models; (iii) To calculate Medicare DSH percentages; (iv) To conduct quality review and improvement activities; (v) For Medicare coverage purposes; E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (vi) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related research; (vii) For activities to support the administration of the Medicare program; (viii) For activities conducted to support program integrity; and (ix) For purposes permitted by other laws. (2) CMS release of data. Regarding data described in paragraphs (a) through (d) of this section, CMS may release the minimum data it determines is necessary for one or more of the purposes listed in paragraph (f)(1) of this section to other HHS agencies, other Federal executive branch agencies, States, and external entities in accordance with the following: (i) Applicable Federal laws; (ii) CMS data sharing procedures; (iii) Subject to the protection of beneficiary identifier elements and beneficiary confidentiality, including— (A) A prohibition against public disclosure of beneficiary identifying information; (B) Release of beneficiary identifying information to other HHS agencies, other Federal executive branch agencies, Congressional support agencies, and States only when such information is needed; and (C) Release of beneficiary identifying information to external entities only to the extent needed to link datasets. (iv) Subject to the aggregation of payment data to protect commercially sensitive data. * * * * * PART 424—CONDITIONS FOR MEDICARE PAYMENT 56. The authority citation for Part 424 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 57. Section 424.11 is amended by revising paragraph (d)(5) to read as follows: ■ § 424.11 General procedures. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * * * * * (d) * * * (5) For all inpatient hospital services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. * * * * * ■ 58. Section 424.15 is amended by revising paragraph (b) to read as follows: § 424.15 Requirements for inpatient CAH services. * * * VerDate Mar<15>2010 * * 20:20 May 14, 2014 Jkt 232001 (b) Certification begins with the order for inpatient admission. The certification must be completed, signed, and documented in the medical record no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. * * * * * PART 485—CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS 59. The authority citation for Part 485 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 60. Section 485.610 is amended by revising paragraph (b) introductory text and adding a new paragraph (b)(5) to read as follows: ■ § 485.610 Conditions of participation: Status and location. * * * * * (b) Standard: Location in a rural area or treatment as rural. The CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this section or the requirements of paragraph (b)(3), (b)(4), or (b)(5) of this section. * * * * * (5) Effective on or after October 1, 2014, for a period of 2 years beginning with the effective date of the most recent Office of Management and Budget (OMB) standards for delineating statistical areas adopted by CMS, the CAH no longer meets the location requirements in either paragraph (b)(1) or (b)(2) of this section and is located in a county that, prior to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, was located in a rural area as defined by OMB, but under the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, is located in an urban area. * * * * * PART 488—SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES 61. The authority citation for Part 488 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 62. Section 488.61 is amended by— a. Revising paragraphs (a)(4) and (c)(4). ■ b. Adding new paragraphs (f), (g), and (h). The revisions and additions read as follows: ■ ■ PO 00000 Frm 00333 Fmt 4701 Sfmt 4702 28309 § 488.61 Special procedures for approval and re-approval of organ transplant centers. * * * * * (a) * * * (4) CMS will consider mitigating factors in accordance with paragraphs (f), (g), and (h) of this section. * * * * * (c) * * * (4) CMS will consider mitigating factors in accordance with paragraphs (f), (g), and (h) of this section. * * * * * (f) Consideration of mitigating factors in initial approval and re-approval survey, certification, and enforcement actions for transplant centers. (1) Factors. Except for situations of immediate jeopardy, CMS will consider mitigating factors, including (but not limited to) the following, in making a decision of initial and re-approval of a transplant center that does not meet the data submission, clinical experience, or outcome requirements, or other conditions of participation: (i) The extent to which outcome measures are not met or exceeded; (ii) Availability of Medicare-approved transplant centers in the area; (iii) Extenuating circumstances (for example, natural disaster) that have a temporary effect on meeting the conditions of participation; (iv) Program improvements that substantially address root causes of graft failures or patient deaths and that have been implemented and institutionalized on a sustainable basis; (v) Recent patient and graft survival data to determine if there is sufficient clinical experience and survival for CMS to conclude that the program is in compliance with CMS requirements, except for the data lag inherent in the reports from the Scientific Registry of Transplant Recipients (SRTR); (vi) Whether the program has made extensive use of innovative transplantation practices relative to other transplant programs, such as a high rate of transplantation of individuals who are highly sensitized or children who have undergone a Fontan procedure compared to most other transplant programs, where CMS finds that the innovative practices are supported by evidence-based published research literature or nationally recognized standards or Institution Review Board (IRB) approvals, and the SRTR risk-adjustment methodology does not take the relevant key factors into consideration; and (vii) Whether the program’s performance, based on the OPTN method of calculating patient and graft survival, is within the OPTN’s E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28310 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules thresholds for acceptable performance and does not flag OPTN performance review under the applicable OPTN policy. (2) Content. A request for consideration of mitigating factors must include sufficient information to permit an adequate review and understanding of the transplant program, the factors that have contributed to outcomes, program improvements or innovations that have been implemented or planned, and in the case of natural disasters, the recovery actions planned. Examples of information to be submitted with each request include (but are not limited to) the following: (i) The name and contact information for the transplant hospital and the names and roles of key personnel of the transplant program; (ii) The type of organ transplant program(s) for which approval is requested; (iii) The conditions of participation that the program does not meet for which the transplant center is requesting CMS’ review for mitigating factors; (iv) The rationale and supporting evidence for CMS’ review may include (but is not limited to)— (A) Root Cause Analysis for patient deaths and graft failures, including factors the program has identified as likely causal or contributing factors for patient deaths and graft failures; (B) Program improvements or innovations (where applicable) that have been implemented and improvements that are planned; (C) Patient and donor/organ selection criteria and evaluation protocols, including methods for pre-transplant patient evaluation by cardiologists, hematologists, nephrologists, and psychiatrists or psychologists to the extent applicable; (D) Organizational chart with fulltime equivalent levels, roles, and structure for reporting to hospital leadership; (E) Waitlist management protocols and practices relevant to outcomes; (F) Pre-operative management protocols and practices; (G) Immunosuppression/infection prophylaxis protocols; (H) Post-transplant monitoring and management protocols and practices; (I) Quality Assessment and Performance Improvement (QAPI) Program meeting minutes from the most recent four meetings and attendance rosters from the most recent 12 months; (J) Quality dashboard and other performance indicators; (K) Recent outcomes data for both patient survival and graft survival; and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (L) Whether the program has engaged with the OPTN to review program outcomes, the status of any such review, and any steps taken to address program outcomes pursuant to the OPTN review. (3) Timing. Within 10 days after CMS has issued formal written notice of a condition-level deficiency to the program, CMS must receive notification of the program’s intent to seek mitigating factors approval or reapproval, and receive all information for consideration of mitigating factors within 30 days of the CMS written notification for any deficiency that is not for insufficient clinical experience or outcomes, and 120 days of the CMS written notification for a deficiency due to clinical experience or outcomes. Failure to meet these timeframes may be the basis for denial of mitigating factors. (g) Results of mitigating factors review. (1) Actions. Upon review of the request to consider mitigating factors, CMS may take the following actions: (i) Approve initial approval or reapproval of a program’s Medicare participation based upon approval of mitigating factors; (ii) Deny the program’s request for Medicare approval or re-approval based on mitigating factors. (iii) Offer a time-limited Systems Improvement Agreement, in accordance with paragraph (h) of this section, when a transplant program has waived its appeal rights, has implemented substantial program improvements that address root causes and are institutionally supported by the hospital’s governing body on a sustainable basis, and has requested more time to design or implement additional improvements or demonstrate compliance with CMS outcome requirements. Upon completion of the Systems Improvement Agreement or a CMS finding that the hospital has failed to meet the terms of the Agreement, CMS makes a final determination of whether to approve or deny a program’s request for Medicare approval or re-approval based on mitigating factors. A Systems Improvement Agreement follows the process specified in paragraph (h) of this section. (2) Limitation. CMS will not approve any program with a condition-level deficiency. However, CMS may approve a program with a standard-level deficiency upon receipt of an acceptable plan of correction. (h) Transplant Systems Improvement Agreement. A Systems Improvement Agreement is a binding agreement, entered into voluntarily by the hospital and CMS, through which CMS extends PO 00000 Frm 00334 Fmt 4701 Sfmt 4702 a prospective Medicare termination date and offers the program additional time to achieve compliance with the conditions of participation, contingent on the hospital’s agreement to participate in a structured regimen of quality improvement activities, demonstrate improved outcomes, and waive the right to appeal termination based on the identified deficiency or deficiencies that led to the Agreement in consideration for more time to demonstrate compliance. In some cases, transplant programs may enter a period of inactivity—voluntarily, or imposed as a condition of the Systems Improvement Agreement. (1) Content. In exchange for the additional time to initiate or continue activities to achieve compliance with the conditions of participation, the hospital must agree to a regimen of specified activities, including (but not limited to) all of the following: (i) Patient notification about the degree and type of noncompliance by the program, an explanation of what the program improvement efforts mean for patients, and financial assistance to defray the out-of-pocket costs of copayments and testing expenses for any wait-listed individual who wishes to be listed with another program; (ii) An external independent peer review team that conducts: An onsite assessment of program policies, staffing, operations, relationship to hospital services, and factors that contribute to program outcomes; that suggests quality improvements the hospital should consider; that provides both verbal and written feedback to the hospital; and that provides a verbal debriefing to CMS. Neither the hospital nor the peer review team is required to provide a written report to CMS. The peer review team must include a transplant surgeon with expertise in the relevant organ type(s), a transplant administrator, an individual with expertise in transplant QAPI systems, a social worker or psychologist or psychiatrist, and a specialty physician with expertise in conditions particularly relevant to the applicable organ types(s) such as a cardiologist, nephrologist, or hepatologist. Except for the transplant surgeon, CMS may permit substitution of one type of expertise for another individual who has expertise particularly needed for the type of challenges experienced by the program, such as substitution of an infection control specialist in lieu of, or in addition to, a social worker; (iii) An action plan that addresses systemic quality improvements and is updated after the onsite peer review; E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules (iv) An onsite consultant whose qualifications are approved by CMS, and who provides services for 8 days per month on average for the duration of the agreement, except that CMS may permit a portion of the time to be spent offsite and may agree to fewer consultant days each month after the first 3 months of the Systems Improvement Agreement; (v) A comparative effectiveness analysis that compares policies, procedures, and protocols of the transplant program with those of other programs in areas of endeavor that are relevant to the center’s current quality improvement needs; (vi) Development of increased proficiency, or demonstration of current proficiency, with patient-level data from the Scientific Registry of Transplant Recipients and the use of registry data to analyze outcomes and inform quality improvement efforts; (vii) A staffing analysis that examines the level, type, training, and skill of staff in order to inform transplant center efforts to ensure the engagement and appropriate training and credentialing of staff. (viii) Activities to strengthen performance of the Quality Assessment and Performance Improvement Program to ensure full compliance with the requirements of § 482.96 of this chapter; (ix) Monthly (unless otherwise specified) reporting and conference calls with CMS regarding the status of programmatic improvements, results of the deliverables in the Systems Improvement Agreement, and the number of transplants, deaths, and graft failures that occur within 1 year posttransplant; and (x) Additional or alternative requirements specified by CMS, tailored to the transplant program type and circumstances. (2) Timeframe. A Systems Improvement Agreement will be established for up to a 12-month period, subject to CMS’ discretion to determine if a shorter timeframe may suffice. At the hospital’s request, CMS may extend the agreement for up to an additional 6month period. (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; Program No. 93.774, Medicare— Supplementary Medical Insurance Program; and Program No. 93.778, Medical Assistance) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Dated: April 18, 2014. Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services. Dated: April 22, 2014. Kathleen Sebelius, Secretary, Department of Health and Human Services. Note: The following Addendum and Appendixes will not appear in the Code of Federal Regulations. Addendum—Proposed Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2014 and Payment Rates for LTCHs Effective for Discharges Occurring On or After October 1, 2014. I. Summary and Background In this Addendum, we are setting forth a description of the methods and data we used to determine the proposed prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capitalrelated costs for FY 2015 for acute care hospitals. We also are setting forth the proposed rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS for FY 2015. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this proposed rule, we are proposing the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS that are effective for cost reporting periods beginning on or after October 1, 2014. In addition, we are setting forth a description of the methods and data we used to determine the proposed standard Federal rate that will be applicable to Medicare LTCHs for FY 2015. In general, except for SCHs, MDHs and hospitals located in Puerto Rico, for FY 2015, each hospital’s payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate (including, as discussed in section PO 00000 Frm 00335 Fmt 4701 Sfmt 4702 28311 IV.F. of the preamble to this proposed rule, uncompensated care payments under section 1886(r)(2) of the Act); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge. We note that, as discussed in section IV.G. of the preamble of this proposed rule, section 1106 of the Pathway to SGR Reform Act of 2013 (Pub. L. 113– 67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 (that is, for discharges occurring after September 30, 2013) through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Prior to the enactment of Public Law 113–67, the MDH program was only to be in effect through the end of FY 2013. Under current law, the MDH program will expire for discharges on or after April 1, 2015. Under section 1886(d)(5)(G) of the Act, MDHs historically have been paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever was higher. Section 5003(c) of Public Law 109–171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate. Further, based on the provisions of section 5003(d) of Public Law 109–171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. For hospitals located in Puerto Rico, the payment per discharge is based on the sum of 25 percent of an updated Puerto Rico-specific rate based on average costs per case of Puerto Rico hospitals for the base year and 75 percent of the Federal national rate. (We refer readers to section II.D.2. of this Addendum for a complete description.) As discussed below in section II. of this Addendum, we are proposing to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2015. In E:\FR\FM\15MYP2.SGM 15MYP2 28312 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules section III. of this Addendum, we discuss our proposed policy changes for determining the prospective payment rates for Medicare inpatient capitalrelated costs for FY 2015. In section IV. of this Addendum, we are setting forth our proposed changes for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2015. In section V. of this Addendum, we discuss proposed policy changes for determining the standard Federal rate for LTCHs paid under the LTCH PPS for FY 2015. The tables to which we refer in the preamble of this proposed rule are listed in section VI. of this Addendum and are available via the Internet. II. Proposed Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2015 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth under § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth under §§ 412.211 and 412.212. Below we discuss the factors we are using for determining the proposed prospective payment rates for FY 2015. In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the Internet) reflect— • Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act. Hospital submitted quality data and is a meaningful EHR user FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Market Basket Rate-of-Increase ...................................................................... Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ......................................................................... Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act .......................................................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......................... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... Proposed Applicable Percentage Increase Applied to Standardized Amount • A proposed update of 2.1 percent to the Puerto Rico-specific standardized amount (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.7 percent less a proposed adjustment of 0.4 percentage point for MFP and less 0.2 percentage point), in accordance with section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of Public Law 108–173, which sets the update to the Puerto Rico-specific standardized amount equal to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act. • An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act. • An adjustment to ensure the wage index changes are budget neutral, as provided for under section 1886(d)(3)(E)(i) of the Act. We note that section 1886(d)(3)(E)(i) of the Act requires that when we compute such budget neutrality, we assume that the provisions of section 1886(d)(3)(E)(ii) of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Frm 00336 Fmt 4701 Sfmt 4702 Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.7 2.7 2.7 2.7 0.0 0.0 ¥0.675 ¥0.675 0.0 ¥0.4 ¥0.2 2.1 ¥0.675 ¥0.4 ¥0.2 1.425 0.0 ¥0.4 ¥0.2 1.425 ¥0.675 ¥0.4 ¥0.2 0.75 the Act (requiring a 62 percent laborrelated share in certain circumstances) had not been enacted. • An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for under section 1886(d)(8)(D) of the Act, by removing the FY 2014 budget neutrality factor and applying a revised factor. • As discussed below and in section III. of the preamble of this proposed rule, an adjustment to offset the cost of the transitional wage index provisions provided by CMS as a result of the proposed adoption of the new OMB labor market area delineations. • An adjustment to ensure the effects of the rural community hospital demonstration program required under section 410A of Public Law 108–173, as amended by sections 3123 and 10313 of Public Law 111–148, which extended the demonstration program for an additional 5 years, are budget neutral as required under section 410A(c)(2) of Public Law 108–173. PO 00000 • The labor-related share that is applied to the standardized amounts and Puerto Rico-specific standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the national standardized amount. We refer the reader to section IV.B. of the preamble of this proposed rule for a complete discussion on the FY 2015 proposed inpatient hospital update. Below is a table with these four options: • An adjustment to remove the FY 2014 outlier offset and apply an offset for FY 2015, as provided for under section 1886(d)(3)(B) of the Act. • As discussed below and in section II.D. of the preamble of this proposed rule, a proposed recoupment to meet the requirements of section 631 of ATRA to adjust the standardized amount to offset the estimated amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Beginning in FY 2008, we applied the budget neutrality adjustment for the rural floor to the hospital wage indices rather than the standardized amount. As we did for FY 2014, for FY 2015, consistent with current law, we are proposing to continue to apply the rural floor budget neutrality adjustment to hospital wage indexes rather than the standardized amount. Also, consistent with section 3141 of the Affordable Care Act, instead of applying a State level rural floor budget neutrality adjustment E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules to the wage index, we are proposing to apply a uniform, national budget neutrality adjustment to the proposed FY 2015 wage index for the rural floor. We note that, in section III.G.2.b. of the preamble to this proposed rule, we are proposing to extend the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015. Therefore, for this proposed rule, we are proposing to continue to include the imputed floor (calculated under the original and alternative methodologies) in calculating the uniform, national rural floor budget neutrality adjustment, which will be reflected in the proposed FY 2015 wage index. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 A. Calculation of the Proposed Adjusted Standardized Amount 1. Standardization of Base-Year Costs or Target Amounts In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. For Puerto Rico hospitals, the Puerto Rico-specific standardized amount is based on per discharge averages of adjusted target amounts from a base period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d)(9) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates. Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include casemix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of low-income patients. In accordance with section 1886(d)(3)(E) of the Act, the Secretary estimates, from time-to-time, the proportion of hospitals’ costs that are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 attributable to wages and wage-related costs. In general, the standardized amount is divided into labor-related and nonlabor-related amounts; only the proportion considered to be the laborrelated amount is adjusted by the wage index. Section 1886(d)(3)(E) of the Act requires that 62 percent of the standardized amount be adjusted by the wage index, unless doing so would result in lower payments to a hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this provision to the labor-related share for hospitals located in Puerto Rico.) For FY 2015, we are proposing to use the national and Puerto Rico-specific labor-related and nonlabor-related shares established for FY 2014, using the FY 2010-based hospital market basket. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are laborrelated: ‘‘[T]he Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs, of the DRG prospective payment rates . . . .’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ For FY 2015, as discussed in section III. of the preamble of this proposed rule, we are proposing to establish a labor-related share of 69.6 percent for the national standardized amounts, and 63.2 percent for the Puerto Rico-specific standardized amount, if the hospital has a wage index value that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount for all IPPS hospitals whose wage index values are less than or equal to 1.0000. For all IPPS hospitals whose wage indices are greater than 1.0000, we are proposing to apply the wage index to a labor-related share of 69.6 percent of the national standardized amount. For FY 2015, all Puerto Rico hospitals have a proposed wage index value that is less than 1.0000 because the proposed average hourly rate of every hospital in Puerto Rico divided by the proposed national average hourly rate (the sum of all salaries and hours for all hospitals in the 50 United States and Puerto Rico) results in a proposed wage index that is below 1.0000. However, when we divide the proposed average hourly rate of every hospital located in Puerto Rico by the proposed Puerto Rico-specific national average hourly rate (the sum of all salaries and hours for all hospitals PO 00000 Frm 00337 Fmt 4701 Sfmt 4702 28313 located only in Puerto Rico), we determine a proposed Puerto Ricospecific wage index value for some hospitals that is either above, or below 1.0000, depending on the hospital’s location within Puerto Rico. Therefore, for hospitals located in Puerto Rico, we are proposing to apply a labor-related share of 63.2 percent if its Puerto Rico-specific wage index is greater than 1.0000. For hospitals located in Puerto Rico whose Puerto Rico-specific wage index values are less than or equal to 1.0000, we are proposing to apply a labor share of 62 percent. The proposed standardized amounts for operating costs appear in Tables 1A, 1B, and 1C that are listed and published in section VI. of the Addendum to this proposed rule and are available via the Internet. 2. Computing the National Average Standardized Amount and Puerto RicoSpecific Standardized Amount Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Section 1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific urban and rural area rates. Accordingly, we are proposing to calculate the FY 2015 national average standardized amount and Puerto Rico-specific standardized amount irrespective of whether a hospital is located in an urban or rural location. 3. Updating the National Average Standardized Amount and Puerto RicoSpecific Standardized Amount Section 1886(b)(3)(B) of the Act specifies the applicable percentage increase used to update the standardized amount for payment for inpatient hospital operating costs. We note that, in compliance with section 404 of the MMA, in this proposed rule, we are using the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2015 (which replaced the FY 2006-based IPPS operating and capital market baskets in FY 2014). As discussed in section IV.B. of the preamble of this proposed rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are proposing to reduce the proposed FY 2015 applicable percentage increase (which is based on IHS Global Insight, Inc.’s (IGI’s) first quarter 2014 forecast of the FY 2010-based IPPS market basket) by the proposed MFP adjustment (the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28314 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 10-year moving average of MFP for the period ending FY 2015) of 0.4 percentage point, which is calculated based on IGI’s first quarter 2014 forecast. In addition, in accordance with section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are proposing to further update the standardized amount for FY 2015 by the estimated market basket percentage increase less 0.2 percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of Act, as added and amended by sections 3401(a) and 10319(a) of the Affordable Care Act, further state that these adjustments may result in the applicable percentage increase being less than zero. The percentage increase in the market basket reflects the average change in the price of goods and services comprising routine, ancillary, and special care unit hospital inpatient services. Based on IGI’s 2014 first quarter forecast of the hospital market basket increase (as discussed in Appendix B of this proposed rule), the most recent forecast of the hospital market basket increase for FY 2015 is 2.7 percent. As discussed above, for FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, there are four possible applicable percentage increases that could be applied to the standardized amount. We refer readers to section IV. of the preamble of this proposed rule for a complete discussion on the FY 2015 proposed inpatient hospital update to the standardized amount. We also refer readers to the table above for the four possible proposed applicable percentage increases that would be applied to update the national standardized amount. The proposed standardized amounts shown in Tables 1A through 1C that are published in section VI. of this Addendum and that are available via the Internet reflect these differential amounts. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are proposing to establish an applicable percentage increase to the Puerto Ricospecific standardized amount of 2.1 percent for FY 2015. Although the update factors for FY 2015 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC’s recommendations, appropriate update factors for FY 2015 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our proposed recommendations in the Federal Register for public comment. Our recommendation on the update factors is set forth in Appendix B of this proposed rule. 4. Other Adjustments to the Average Standardized Amount As in the past, we are proposing to adjust the FY 2015 standardized amount to remove the effects of the FY 2014 geographic reclassifications and outlier payments before applying the proposed FY 2015 updates. We then apply budget neutrality offsets for outliers and geographic reclassifications to the proposed standardized amount based on proposed FY 2015 payment policies. We do not remove the prior year’s budget neutrality adjustments for reclassification and recalibration of the DRG relative weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year’s adjustment, we would not satisfy these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS–DRG classifications, recalibration of the MS– DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. PO 00000 Frm 00338 Fmt 4701 Sfmt 4702 In order to appropriately estimate aggregate payments in our modeling, we make several inclusions and exclusions so that the appropriate universe of claims and charges are included. We discuss IME Medicare Advantage payment amounts, fee-for-service only claims, and charges for anti-hemophilic blood factor and organ acquisition below. First, consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare Advantage payments are made to IPPS hospitals under section 1886(d) of the Act, we believe these payments must be part of these budget neutrality calculations. However, we note that it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation or the outlier offset to the standardized amount because the statute requires that outlier payments be not less than 5 percent nor more than 6 percent of total ‘‘operating DRG payments,’’ which does not include IME and DSH payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments. Second, consistent with the methodology in the FY 2012 IPPS/LTCH PPS final rule, in order to ensure that we capture only fee-for-service claims, we are only including claims with a ‘‘Claim Type’’ of 60 (which is a field on the MedPAR file that indicates a claim is a fee-for-service claim). Third, consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the MedPAR file and removed pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of ‘‘3’’ for blood clotting with a revenue code of ‘‘0636’’ from the covered charge field for the budget neutrality adjustments. We also removed organ acquisition charges from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS. The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS Center for Medicare and Medicaid Innovation’s Web site at: https:// innovation.cms.gov/initiatives/BundledPayments/. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343), for FY 2013 and subsequent fiscal years, we finalized a methodology to treat hospitals that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process (which includes recalibration of the MS–DRG relative weights, ratesetting, calculation of the budget neutrality factors, and the impact analysis) without regard to a hospital’s participation within these bundled payment models (that is, as if they are not participating in those models under the BPCI initiative). Therefore, for FY 2015, as discussed in section II.H.4.of the preamble to this proposed rule, we are proposing to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer the reader to the FY 2013 IPPS/ LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals in the BPCI initiative in our rate setting process. The Affordable Care Act established the Hospital Readmissions Reduction Program and the Hospital VBP Program which adjust payments to certain IPPS hospitals beginning with discharges on or after October 1, 2012. Because the adjustments made under these programs affect the estimation of aggregate IPPS payments, in this proposed rule, consistent with our methodology established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that it is appropriate to include adjustments for these programs within our budget neutrality calculations. We discuss the treatment of these two programs in the context of budget neutrality adjustments below. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act are reduced to account for certain excess readmissions. Under the Hospital Readmissions Reduction Program, for discharges beginning on October 1, 2012 discharges from an ‘‘applicable VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospital’’ are paid at an amount equal to the product of the ‘‘base operating DRG payment amount’’ and an ‘‘adjustment factor’’ that accounts for excess readmissions for the hospital for the fiscal year plus any applicable add-on payments. We refer readers to section IV.H. of the preamble of this proposed rule for full details of our implementation of and proposed FY 2015 policy changes to the Hospital Readmissions Reduction Program. We also note that the Hospital Readmissions Reduction Program provided for under section 1886(q) of the Act is not budget neutral. Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which, for discharges beginning on October 1, 2012, valuebased incentive payments are made in a fiscal year to eligible subsection (d) hospitals that meet performance standards established for a performance period for that fiscal year. As specified under section 1886(o)(7)(B)(i) of the Act, these value-based incentive payments are funded by a reduction applied to each eligible hospital’s base-operating DRG payment amount, for each discharge occurring in the fiscal year. As required by section 1886(o)(7)(A) of the Act, the total amount of allocated funds available for value-based incentive payments with respect to a fiscal year is equal to the total amount of base-operating DRG payment reductions, as estimated by the Secretary. In a given fiscal year, hospitals may earn a value-based incentive payment amount for a fiscal year that is greater than, equal to, or less than the reduction amount, based on their performance on quality measures under the Hospital VBP Program. Thus, the Hospital VBP Program is estimated to have no net effect on overall payments. We refer readers to section IV.I. of the preamble of this proposed rule for full details regarding the Hospital VBP Program. Both the hospital readmissions payment adjustment (reduction) and the hospital VBP payment adjustment (redistribution) are applied on a claimby-claim basis by adjusting, as applicable, the base-operating DRG payment amount for individual subsection (d) hospitals, which affects the overall sum of aggregate payments on each side of the comparison within the budget neutrality calculations. For example, when we calculate the budget neutrality factor for MS–DRG reclassification and recalibration of the relative weights, we compare aggregate payments estimated using the prior year’s GROUPER and relative weights to estimated payments using the new PO 00000 Frm 00339 Fmt 4701 Sfmt 4702 28315 GROUPER and relative weights. (We refer readers to section II.A.4.a. of this Addendum for full details.) Other factors, such as the DSH and IME payment adjustments, are the same on both sides of the comparison because we are only seeking to ensure that aggregate payments do not increase or decrease as a result of the changes of MS–DRG reclassification and recalibration. In order to properly determine aggregate payments on each side of the comparison, as we did for FY 2014, for FY 2015 and subsequent years, we are proposing to continue to apply the hospital readmissions payment adjustment and the hospital VBP payment adjustment on each side of the comparison, consistent with the methodology that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That is, we are proposing to apply the readmissions payment adjustment factor and the hospital VBP payment adjustment factor on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. For the purpose of calculating the proposed FY 2015 readmissions payment adjustment factors, we are proposing to use excess readmission ratios and aggregate payments for excess readmissions based on admissions from the prior fiscal year’s applicable period because hospitals have had the opportunity to review and correct these data before the data were made public under the policy we adopted regarding the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act. For this proposed rule, we are proposing to calculate the readmissions payment adjustment factors using excess readmission ratios and aggregate payments for excess readmissions based on admissions from the finalized applicable period for FY 2015 as hospitals have had the opportunity to review and correct these data under our policy regarding the reporting of hospital-specific readmission rates consistent with section 1886(q)(6) of the Act. We discuss our policy regarding the reporting of hospital-specific readmission rates for FY 2015 in section IV.H.3.f. of the preamble of this proposed rule. (For additional information on our general policy for the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53400).) In addition, for this proposed rule, for the purpose of modeling aggregate E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28316 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payments when determining all budget neutrality factors, we are proposing to use proxy hospital VBP payment adjustment factors for FY 2015 that are based on data from a historical period because hospitals have not yet had an opportunity to review and submit corrections for their data from the FY 2015 performance period. (For additional information on our policy regarding the review and correction of hospital-specific measure rates under the Hospital VBP Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 through 53581), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74544 through 74547), and the Hospital Inpatient VBP final rule (76 FR 26534 through 26536).) The Affordable Care Act also established section 1886(r) of the Act, which modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments will receive an empirically justified Medicare DSH payment equal to 25 percent of the amount that would previously have been received under the current statutory formula set forth under section 1886(d)(5)(F) of the Act governing the Medicare DSH payment adjustment. In accordance with section 1886(r)(2) of the Act, the remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, will be available to make additional payments to Medicare DSH hospitals based on their share of the total amount of uncompensated care reported by Medicare DSH hospitals for a given time period. In order to properly determine aggregate payments on each side of the comparison for budget neutrality, prior to FY2014, we included estimated Medicare DSH payments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. To do this for FY 2015 and subsequent years (as we did for FY 2014), we are proposing to include estimated empirically justified Medicare DSH payments that will be paid in accordance with section 1886(r)(1) of the Act and also to include estimates of the additional uncompensated care payments made to hospitals receiving Medicare DSH payment adjustments as described by section 1886(r)(2) of the Act. That is, we are proposing to consider estimated empirically justified VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Medicare DSH payments at 25 percent of what would otherwise have been paid, and also the estimated additional uncompensated care payments for hospitals receiving Medicare DSH payment adjustments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. We note that, when calculating total payments for budget neutrality, to determine total payments for SCHs we model total hospital-specific rate payments and total federal rate payments and then include whichever one of the total payments are greater. As discussed in section IV.F. of the preamble to this proposed rule and below, we are continuing the FY 2014 finalized methodology under which we will take into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we are including estimated uncompensated care payments in this comparison. Similarly, for MDHs, as discussed in section IV. of the preamble to this proposed rule, when computing the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospitalspecific rate, we are continuing to take into consideration uncompensated care payments in the computation of payments under the Federal rate and the hospital-specific rate for MDHs. Also, for FY 2015, CMS has yet to finalize a list of hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. Therefore, we are proposing not to include this adjustment to the standardized amount (for those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for budget neutrality for FY 2015. CMS intends to release a final list of hospitals that are not meaningful EHR user in September 2014. Hospitals identified on this list will be paid based on the applicable proposed standardized amount in Table 1A for discharges occurring in FY 2015. We finally note that the wage index value is calculated and assigned to a hospital based on the hospital’s labor market area. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by the Office of Management and Budget (OMB). The current statistical areas used in FY 2014 are based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 PO 00000 Frm 00340 Fmt 4701 Sfmt 4702 and 2008 (OMB Bulletin No. 10–02). For purposes of determining all of the FY 2014 budget neutrality factors, we determined aggregate payments on each side of the comparison for our budget neutrality calculations using wage indexes based on the current CBSAs. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. In order to implement these changes for the IPPS, it is necessary to identify the new OMB labor market area delineation for each county and hospital in the country. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index policy based on the new OMB delineations in this FY 2015 proposed rule. As discussed in section III. of the preamble of this proposed rule, we are proposing to adopt the new OMB labor market area delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. Consistent with our proposal to adopt the new OMB delineations, in order to properly determine aggregate payments on each side of the comparison for our budget neutrality calculations, we are proposing to use wage indexes based on the new OMB delineations in the determination of all of the proposed budget neutrality factors discussed below (with the exception of the proposed transitional budget neutrality factor and proposed outlier threshold as explained below). We also note that, consistent with past practice as finalized in the FY 2005 IPPS final rule (69 FR 49034), we are not adopting the new OMB delineations themselves in a budget neutral manner. We continue to believe that the revision to the labor market areas in and of itself do not constitute an ‘‘adjustment or update’’ to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act. a. Proposed Recalibration of MS–DRG Relative Weights and Updated Wage Index—Budget Neutrality Adjustment Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II.H. of the preamble of this proposed E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules rule, we normalized the recalibrated MS–DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, equating the average case relative weight after recalibration to the average case relative weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Therefore, as we have done in past years, we are proposing to make a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. Section 1886(d)(3)(E)(i) of the Act requires that we implement the wage index adjustment in a budget neutral manner. However, section 1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent for hospitals with a wage index less than or equal to 1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, this section of the statute requires that we implement the updates to the wage index in a budget neutral manner, but that our budget neutrality adjustment should not take into account the requirement that we set the laborrelated share for hospitals with wage indices less than or equal to 1.0 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage index less than or equal to 1.0000 are paid using a laborrelated share of 62 percent. Consistent with current policy, for FY 2015, we are proposing to adjust 100 percent of the wage index factor for occupational mix. We describe the proposed occupational mix adjustment in section III.F. of the preamble of this proposed rule. For FY 2015, to comply with the requirement that MS–DRG reclassification and recalibration of the relative weights be budget neutral for the Puerto Rico standardized amount VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 and the hospital-specific rates, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, the FY 2014 relative weights, and the FY 2014 prereclassified wage data, and applied the proposed FY 2015 hospital readmissions payment adjustments and estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, the proposed FY 2015 relative weights, and the FY 2014 pre-reclassified wage data, and applied the same hospital readmissions payment adjustments and estimated hospital VBP payment adjustments applied above. Based on this comparison, we computed a proposed budget neutrality adjustment factor equal to 0.992938. As discussed in section IV. of this Addendum, we also are proposing to apply the proposed MS–DRG reclassification and recalibration budget neutrality factor of 0.992938 to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2014. In order to meet the statutory requirements that we do not take into account the labor-related share of 62 percent when computing wage index budget neutrality, it was necessary to use a three-step process to comply with the requirements that MS–DRG reclassification and recalibration of the relative weights and the updated wage index and labor-related share have no effect on aggregate payments for IPPS hospitals. Under the first step, we determined a proposed MS–DRG reclassification and recalibration budget neutrality factor of 0.992938 (by using the same methodology described above to determine the MS–DRG reclassification and recalibration budget neutrality factor for the Puerto Rico standardized amount and hospitalspecific rates). Under the second step, to compute a proposed budget neutrality factor for wage index and labor-related share changes we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, proposed FY 2015 relative weights and the FY 2014 pre-reclassified wage indices, applied the FY 2014 labor-related share of 69.6 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0), and applied the proposed FY 2015 hospital readmissions payment adjustment and PO 00000 Frm 00341 Fmt 4701 Sfmt 4702 28317 the proposed FY 2015 estimated hospital VBP payment adjustment; and • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, proposed FY 2015 relative weights and the proposed FY 2015 pre-reclassified wage indices, applied the proposed labor-related share for FY 2015 of 69.6 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0), and applied the same proposed FY 2015 hospital readmissions payment adjustments and estimated proposed FY 2015 hospital VBP payment adjustments applied above. In addition, we applied the proposed MS–DRG reclassification and recalibration budget neutrality factor (derived in the first step) to the payment rates that were used to simulate payments for this comparison of aggregate payments from FY 2014 to FY 2015. By applying this methodology, we determined a proposed budget neutrality adjustment factor of 1.000578 for changes to the wage index. Finally, we multiplied the proposed MS–DRG reclassification and recalibration budget neutrality adjustment factor of 0.992938 (derived in the first step) by the proposed budget neutrality adjustment factor of 1.000578 for changes to the wage index (derived in the second step) to determine the proposed MS–DRG reclassification and recalibration and updated wage index budget neutrality adjustment factor of 0.993512. b. Reclassified Hospitals—Budget Neutrality Adjustment Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided for under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account in ‘‘applying any budget neutrality adjustment with respect to such index’’ under section E:\FR\FM\15MYP2.SGM 15MYP2 28318 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1886(d)(8)(D) of the Act. To calculate the proposed budget neutrality factor for FY 2015, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, proposed FY 2015 relative weights, and proposed FY 2015 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied the proposed FY 2015 hospital readmissions payment adjustments and the proposed estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using the new OMB labor market area delineations proposed for FY 2015, proposed FY 2015 relative weights, and proposed FY 2015 wage data after such reclassifications, and applied the same proposed hospital readmissions payment adjustments and the estimated hospital VBP payment adjustments applied above. We note that the reclassifications applied under the second simulation and comparison are those listed in Tables 9A2 and 9C2, which are posted on the CMS Web site. These tables reflect reclassification crosswalks based on the new OMB labor market area delineations proposed for FY 2015, and apply the policies explained in section III. of the preamble to this proposed rule. Based on these simulations, we calculated a proposed budget neutrality adjustment factor of 0.991412 to ensure that the effects of these provisions are budget neutral, consistent with the statute. The proposed FY 2015 budget neutrality adjustment factor was applied to the proposed standardized amount after removing the effects of the FY 2014 budget neutrality adjustment factor. We note that the proposed FY 2015 budget neutrality adjustment reflects proposed FY 2015 wage index reclassifications approved by the MGCRB or the Administrator. c. Proposed Rural Floor Budget Neutrality Adjustment Under § 412.64(e)(4), we make an adjustment to the wage index to ensure that aggregate payments after implementation of the rural floor under section 4410 of the BBA (Pub. L. 105– 33) and the imputed floor under § 412.64(h)(4) are equal to the aggregate prospective payments that would have been made in the absence of such provisions. Consistent with section 3141 of the Affordable Care Act and as discussed in section III.G. of the preamble of this proposed rule and VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 codified at § 412.64(e)(4)(ii), the budget neutrality adjustment for the rural and imputed floor is a national adjustment to the wage index. As noted above and as discussed in section III.G.2.b. of the preamble of this proposed rule, in the FY 2012 IPPS/ LTCH PPS final rule, we extended the imputed floor calculated under the original methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/ LTCH PPS final rule, we established an alternative methodology for calculating the imputed floor and established a policy that the minimum wage index value for an all-urban state would be the higher of the value determined under the original methodology or the value computed using the alternative methodology (77 FR 53368 through 53369). Consistent with the methodology for treating the imputed floor, similar to the methodology we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we included this alternative methodology for computing the imputed floor index in the calculation of the uniform, national rural floor budget neutrality adjustment for FY 2014. For FY 2015, as discussed in section III.G.2.b. of the preamble of this proposed rule, we are proposing to extend the imputed floor using the higher of the value determined under the original methodology or the alternative methodology for FY 2015. Therefore, in order to ensure that aggregate payments to hospitals are not affected, similar to prior years, we would follow our policy of including the imputed floor in the rural floor budget neutrality adjustment to the wage index. As discussed above, for FY 2015, we are proposing to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. Therefore, the budget neutrality adjustment for the rural floor and imputed floor would be calculated using the new OMB delineations. Under the OMB delineations used for FY 2014, the imputed floor (both the original methodology and alternative methodology) was applied to New Jersey and Rhode Island because these were the only two all-urban States. Under OMB’s 2010 revised delineations based on Census 2010 data, in addition to New Jersey and Rhode Island, Delaware would become an all-urban state. Therefore, for FY 2015, the proposed imputed floor would be applied to New Jersey, Rhode Island, and Delaware. Similar to our calculation in the FY 2012 IPPS/LTCH PPS final rule (76 FR PO 00000 Frm 00342 Fmt 4701 Sfmt 4702 51593 and 51788), the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53689), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50975 through 50976), for FY 2015, we are calculating a proposed national rural Puerto Rico wage index (used to adjust the labor-related share of the national standardized amount for hospitals located in Puerto Rico which receive 75 percent of the national standardized amount) and a proposed rural Puerto Rico-specific wage index (which is used to adjust the laborrelated share of the Puerto Rico-specific standardized amount for hospitals located in Puerto Rico that receive 25 percent of the Puerto Rico-specific standardized amount). Because there are no rural Puerto Rico hospitals with established wage data, our calculation of the FY 2015 rural Puerto Rico wage index is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we will use the unweighted average of the wage indexes from all CBSAs (urban areas) that are contiguous (share a border with) to the rural counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under the new OMB labor market area delineations, except for Arecibo, Puerto Rico (CBSA 11640), all other Puerto Rico urban areas are contiguous to a rural area. Therefore, based on our existing policy, the FY 2015 rural Puerto Rico wage index is calculated based on the average of the FY 2015 wage indices for the following urban areas: Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660), San German, PR (CBSA 41900) and San JuanCarolina-Caguas, PR, PR (CBSA 41980). To calculate the proposed national rural floor and imputed floor budget neutrality adjustment factor and the proposed Puerto Rico-specific rural floor budget neutrality adjustment factor, we used FY 2013 discharge data to simulate payments, the proposed FY 2015 new OMB labor market area delineations, and post-reclassified national and Puerto Rico-specific wage indices and compared the following: • The national and Puerto Ricospecific simulated payments without the national rural floor and imputed floor and Puerto Rico-specific rural floor applied; and • The national and Puerto Ricospecific simulated payments with the national rural floor and imputed floor and Puerto Rico-specific rural floor applied. Based on this comparison, we determined a proposed national rural budget neutrality adjustment factor of 0.989455 and the proposed Puerto Rico- E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 specific budget neutrality adjustment factor of 0.991359. The proposed national adjustment was applied to the proposed national wage indexes to produce a proposed national rural floor budget neutral wage index and the proposed Puerto Rico-specific adjustment was applied to the proposed Puerto Rico-specific wage indexes to produce a proposed Puerto Rico-specific rural floor budget neutral wage index. d. Proposed Wage Index Transition Budget Neutrality As discussed in section III. of the preamble to this proposed rule, in the past, we have provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. Similar to FY 2005, for FY 2015, we have determined that the proposed transition to using the new OMB delineations would have the largest impact on hospitals that are currently located in an urban county that would become rural under the new OMB delineations. To alleviate the decreased payments associated with having a rural wage index, in calculating the area wage index, similar to the transition provided in the FY 2005 IPPS final rule, we generally are proposing a policy to assign them the urban wage index value of the CBSA to which they are physically located for FY 2014 for FYs 2015, 2016, and 2017. In addition to the 3-year transition adjustment for hospitals being transitioned from urban to rural status as discussed above, we are proposing a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively due to the proposed implementation of the new OMB delineations. Similar to the policy adopted in the FY 2005 IPPS final rule (69 FR 49033), we are proposing that a post-reclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We are proposing to compare these two wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we are proposing that a blended wage index VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 would be computed, consisting of 50 percent of each of the two wage indexes added together. We are proposing that this blended wage index would be the hospital’s wage index for FY 2015. Hospitals that benefit from the proposed adoption of the new OMB delineations would receive their new wage index based on the new OMB delineations. We refer readers to section III. of the preamble to this proposed rule for a completer discussion on the transitional wage index policy. In the past, CMS has budget neutralized transitional wage indexes. Because we are proposing a policy that allows for the application of a transitional wage index only when it would benefit the hospital, we believe that it would be appropriate to ensure that such a transitional policy does not increase aggregate Medicare payments beyond the payments that would be made had we simply adopted the new OMB delineations without any transitional provisions. Therefore, for FY 2015, we are proposing to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to make an adjustment to the national and Puerto Rico-specific standardized amounts to ensure that total payments, including the effect of the transitional wage index provisions, would equal what payments would have been if we had proposed to fully adopt the new OMB delineations without any transitional provisions. As stated above, the proposed 50/50 blended wage indexes would use postreclassified wage index data with the rural and imputed floor applied computed based on FY 2014 CBSAs. Because the proposed 50/50 blend methodology would use data based on FY 2014 CBSAs, in order to properly calculate the proposed transitional budget neutrality factor, it was first necessary to calculate the following proposed budget neutrality factors based on the FY 2014 CBSAs: An MS–DRG and a wage index budget neutrality, a reclassification budget neutrality, and a rural floor budget neutrality. It was necessary to compute the first three budget neutrality factors of MS–DRG, wage index, and reclassification budget neutrality (which are applied to the standardized amount) to ensure that the calculation of the rural and imputed floor budget neutrality factor applied to the wage index based on FY 2014 CBSAs is accurate. We calculated these four budget neutrality factors using the same methodology stated above, but used the FY 2014 CBSAs instead of the proposed FY 2015 CBSAs on both the sides of the comparison. PO 00000 Frm 00343 Fmt 4701 Sfmt 4702 28319 After calculating all of the proposed budget neutrality factors using FY 2014 and FY 2015 CBSAs, to calculate the proposed transitional wage index budget neutrality factor for FY 2015, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using new OMB delineations proposed for FY 2015, the proposed FY 2015 relative weights, proposed FY 2015 wage data after such reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act (using the new OMB delineations), applied the proposed rural floor budget neutrality factor to the wage index (using the new OMB delineations), and applied the proposed FY 2015 hospital readmissions payment adjustments and the proposed estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using proposed FY 2015 relative weights, proposed FY 2015 wage data after applying the transitional wage indexes, and applied the same proposed hospital readmissions payment adjustments and the estimated hospital VBP payment adjustments applied above. We note that hospitals that did not receive the proposed transitional 50/50 blended wage index were assigned the postreclassified wage index values with the proposed rural floor budget neutrality based on the proposed FY 2015 new OMB delineations. Based on these simulations, we calculated a proposed budget neutrality adjustment factor of 0.998856. Therefore, for FY 2015, we are proposing to apply a transitional wage index budget neutrality adjustment factor of 0.998856 to the national average and Puerto Rico-specific standardized amounts to ensure that the effects of these proposed transitional wage indices are budget neutral. We note that the proposed budget neutrality adjustment factor calculated above is based on the increase in payments in FY 2015 that would result from the transitional wage indexes. Therefore, we are proposing to apply this budget neutrality adjustment factor as a one-time adjustment to the FY 2015 national and Puerto Rico-specific standardized amounts in order to offset the increase in payments in FY 2015 as a result of these transitional wage indexes. For subsequent fiscal years, we are proposing to not take into consideration the adjustment factor applied to the national and Puerto Ricospecific standardized amounts in the previous fiscal year’s update when calculating the current fiscal year transitional wage index budget neutrality adjustment factor (that is, we E:\FR\FM\15MYP2.SGM 15MYP2 28320 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules are proposing that this adjustment would not be applied cumulatively). Because we are proposing a 3-year transitional wage index policy for urban hospitals that became rural as a result of the proposed adoption of the new OMB delineations, we intend to propose transitional wage index budget neutrality adjustment factors to apply to the FY 2016 and FY 2017 national and Puerto Rico-specific standardized amounts during those respective rulemaking cycles. Similar to the proposal for FY 2015, we plan on proposing that the FYs 2016 and 2017 adjustments would be applied as ‘‘onetime’’ adjustments and not cumulative adjustments applied each fiscal year. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 d. Proposed Case-Mix Budget Neutrality Adjustment Below we summarize the proposed recoupment adjustment to the proposed FY 2015 payment rates, as required by section 631 of ATRA, to account for the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. We refer readers to section II.D. of the preamble of this proposed rule for a complete discussion regarding our proposed policies for FY 2015 in this proposed rule and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case-mix. (1) Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) to the National Standardized Amount Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment totaling $11 billion by FY 2017. Our actuaries estimated that if CMS were to fully account for the $11 billion recoupment required by section 631 of ATRA in FY 2014, a one-time ¥9.3 percent adjustment to the standardized amount would be necessary. It is often our practice to delay or phase-in payment rate adjustments over more than 1 year, in order to moderate the effect on payment rates in any 1 year. Therefore, consistent with the policies that we have adopted in many similar cases, for FY 2014, we applied a ¥0.8 percent adjustment to the standardized amount. In this proposed rule, we are proposing to apply an additional ¥0.8 percent adjustment to the standardized amount for FY 2015. We note that, as section 631 of the ATRA instructs the Secretary VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 to make a recoupment adjustment only to the standardized amount, this adjustment would not apply to the Puerto Rico-specific standardized amount and hospital-specific payment rates. e. Rural Community Hospital Demonstration Program Adjustment As discussed in section IV.L. of the preamble of this proposed rule, section 410A of Public Law 108–173 originally required the Secretary to establish a demonstration program that modifies reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) of Public Law 108–173 requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ Sections 3123 and 10313 of the Affordable Care Act extended the demonstration program for an additional 5-year period, and allowed up to 30 hospitals to participate in 20 States with low population densities determined by the Secretary. (In determining which States to include in the expansion, the Secretary is required to use the same criteria and data that the Secretary used to determine the States for purposes of the initial 5-year period.) In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), in order to achieve budget neutrality, we adjusted the national IPPS payment rates by an amount sufficient to account for the added costs of this demonstration program as described in section IV.K. of that final rule. In other words, we applied budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration program, consistent with past practice. We stated that we believe the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration . . . was not implemented,’’ but does not identify the range across which aggregate payments must be held equal. As we did for FY 2014, for FY 2015, we are proposing to adjust the national IPPS payment rates according to the same methodology that we used for FY 2013, as set forth in section IV.L. of the preamble of this proposed rule, to account for the estimated additional PO 00000 Frm 00344 Fmt 4701 Sfmt 4702 costs of the demonstration program for FY 2015. For this proposed rule, the estimated amount of this proposed budget neutrality adjustment factor applied to the national IPPS payment rates for FY 2015 is $53,673,008. In addition, similar to previous years, we are proposing to include in the budget neutrality offset amount the amount by which the actual demonstration costs corresponding to an earlier given year (which would be determined once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. For this FY 2015 IPPS/LTCH PPS proposed rule, we have calculated the amount by which the actual costs of the demonstration in FY 2008, (that is, the costs of the demonstration for the 10 hospitals that participated in FY 2008, as shown in these hospitals’ finalized cost reports for the cost report period beginning in that calendar year), exceeded the amount that was finalized in the FY 2008 IPPS final rule. We are proposing a budget neutrality offset amount of $10,389,771 for this proposed rule, but we note that this amount may change based on data used for the FY 2015 IPPS/LTCH PPS final rule subject to methodological refinements. We also are currently working with the MACs that service the hospitals participating in the demonstration to obtain finalized cost reports for FYs 2009, 2010, and 2011). Depending on our progress in obtaining these cost reports, we may also include in the FY IPPS final rule the difference between the demonstration costs for one or more of these years and the amounts that were finalized in the respective fiscal years’ final rules. Therefore, the final total budget neutrality offset amount that we are proposing to be applied to the FY 2015 IPPS rates is $ 64,062,779. This amount is the sum of two separate components: (1) The difference between the total estimated FY 2014 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals participating in the demonstration program for covered inpatient services, and the total estimated amount that would be otherwise be paid to the participating hospitals in FY 2014 without the demonstration ($53,673,008); and (2) the amount by which the actual costs of demonstration for FY 2008, which are calculated in accordance with the finalized cost reports for the hospitals that participated in the demonstration during FY 2008, exceed the budget neutrality offset amount that was E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 finalized in the FY 2008 IPPS final rule ($10,389,771). Accordingly, using the most recent data available to account for the estimated costs of the demonstration program, for FY 2015, we computed a proposed factor of 0.999283 for the rural community hospital demonstration program budget neutrality adjustment that will be applied to the IPPS standard Federal payment rate. g. Proposed Outlier Payments Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for ‘‘outlier’’ cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the ‘‘outlier threshold’’ or ‘‘fixedloss’’ amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the outlier threshold as the outlier ‘‘fixed-loss cost threshold.’’ To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital’s CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2015 is 80 percent, the same marginal cost factor we have used since FY 1995 (59 FR 45367). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments (which does not include IME and DSH payments) plus outlier payments. When setting the outlier threshold, we compute the 5.1 percent target by dividing the total operating outlier payments by the total operating DRG payments plus outlier payments. We do not include any other payments such as IME and DSH within the outlier target amount. Therefore, it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the average standardized amount applicable to hospitals located in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ outlier.html. (1) Proposed FY 2015 Outlier FixedLoss Cost Threshold In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977–50983), in response to public comments on the FY 2013 IPPS/LTCH proposed rule, we made changes to our methodology for projecting the outlier fixed-loss cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for detailed discussion of the changes. In this proposed rule, for FY 2015, we are proposing to continue to use the outlier threshold methodology used in FY 2014. As we have done in the past, to calculate the proposed FY 2015 outlier threshold, we simulated payments by applying proposed FY 2015 payment rates and policies using cases from the FY 2013 MedPAR file. Therefore, in order to determine the proposed FY 2015 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2013 to FY 2015. As discussed in the FY 2014 IPPS/LTCH PPS final rule, we believe a methodology that is based on 1-year of charge data will provide a more stable measure to project the average charge per case because our prior methodology used a 6-month measure, which inherently uses fewer claims than a 1year measure and makes it more susceptible to fluctuations in the average charge per case as a result of any significant charge increases or decreases by hospitals. Under this new methodology, to compute the 1-year average annualized rate-of-change in charges per case for FY 2015, we are proposing to compare the second quarter of FY 2012 through the first quarter of FY 2013 (January 1, 2012, through December 31, 2012) to the second quarter of FY 2013 through the first quarter of FY 2014 (January 1, 2013, through December 31, 2013). This rateof-change is 5.6 percent (1.055736) or 11.5 percent (1.114579) over 2 years. As we have done in the past, we are proposing to establish the proposed FY 2015 outlier threshold using hospital CCRs from the December 2013 update to the Provider-Specific File (PSF)—the most recent available data at the time of PO 00000 Frm 00345 Fmt 4701 Sfmt 4702 28321 this proposed rule. For FY 2015, we also are proposing to continue to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50979), we adopted a new methodology to adjust the CCRs. Specifically, we finalized a policy to compare the national average case-weighted operating and capital CCR from the most recent update of the PSF to the national average caseweighted operating and capital CCR from the same period of the prior year. Therefore, as we did for FY 2014, for FY 2015, we are proposing to adjust the CCRs from the December 2013 update of the PSF by comparing the percentage change in the national average caseweighted operating CCR and capital CCR from the December 2012 update of the PSF to the national average caseweighted operating CCR and capital CCR from the December 2013 update of the PSF. We note that we used total transfer adjusted cases from FY 2013 to determine the national average caseweighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison as this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison. Using the proposed methodology above, we calculated a December 2012 operating national average caseweighted CCR of 0.295101 and a December 2013 operating national average case-weighted CCR of 0.289587. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the December 2012 operating national average caseweighted CCR from the December 2013 operating national average caseweighted CCR and then dividing the result by the December 2012 national operating average case-weighted CCR. This resulted in a proposed national operating CCR adjustment factor of 0.981315. We also used the same methodology proposed above to adjust the capital CCRs. Specifically, we calculated a December 2012 proposed capital national average case-weighted CCR of 0.025079 and a December 2013 proposed capital national average caseweighted CCR of 0.024868. We then calculated the percentage change between the two national capital caseweighted CCRs by subtracting the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28322 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules December 2012 capital national average case-weighted CCR from the December 2013 capital national average caseweighted CCR and then dividing the result by the December 2012 capital national average case-weighted CCR. This resulted in a proposed national capital CCR adjustment factor of 0.991587. Consistent with our methodology in the past and as stated in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe that it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2015 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. As stated above, for FY 2015, we applied the proposed FY 2015 payment rates and policies using cases from the FY 2013 MedPAR files in calculating the proposed outlier threshold. As discussed above, for FY 2015, we are proposing to apply transitional wage indexes because of the proposed adoption of the new OMB labor market area delineations. Also, as discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.G.3. of the preamble of this proposed rule, in accordance with section 10324(a) of the Affordable Care Act, beginning in FY 2011, we created a wage index floor of 1.00 for all hospitals located in States determined to be frontier States. We note that the frontier State floor adjustments will be calculated and applied after rural and imputed floor budget neutrality adjustments are calculated for all labor market areas, in order to ensure that no hospital in a frontier State will receive a wage index lesser than 1.00 due to the rural and imputed floor adjustment. In accordance with section 10324(a) of the Affordable Care Act, the frontier State adjustment will not be subject to budget neutrality, and will only be extended to hospitals geographically located within a frontier State. However, for purposes of estimating the proposed outlier threshold for FY 2015, it was necessary to apply the proposed transitional wage indexes and adjust the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 payments for FY 2015. If we did not take the above into account, our estimate of total FY 2015 payments would be too low, and, as a result, our proposed outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2015 outlier payments, we are proposing not to make any adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. We continue to believe that, due to the policy implemented in the June 9, 2003 Outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also note that reconciliation occurs because hospitals’ actual CCRs for the cost reporting period are different than the interim CCRs used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we are proposing not to make any assumptions about the effects of reconciliation on the outlier threshold calculation. As described in sections IV.H. and IV.I., respectively, of the preamble of this proposed rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe that it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the outlier threshold calculation or the outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments would continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we are proposing to exclude the hospital VBP payment adjustments and the PO 00000 Frm 00346 Fmt 4701 Sfmt 4702 hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold. We note, to the extent section 1886(r) of the Act modifies the existing DSH payment methodology under section 1886(d)(5)(F), the new uncompensated care payment under section 1886(r)(2), like the empirically justified Medicare DSH payment under section 1886(r)(1), may be considered an amount payable under section 1886(d)(5)(F) of the Act such that it would be reasonable to include the payment in the outlier determination under section 1886(d)(5)(A). As we did for FY 2014, for FY 2015 we also are proposing to allocate an estimated per-discharge uncompensated care payment amount to all cases for the hospitals eligible to receive the uncompensated care payment amount in the calculation of the outlier fixed-loss cost threshold methodology. We continue to believe that allocating an eligible hospital’s estimated uncompensated care payment to all cases equally in the calculation of the outlier fixed-loss cost threshold would best approximate the amount we would pay in uncompensated care payments during the year because, when we make claim payments to a hospital eligible for such payments, we would be making estimated perdischarge uncompensated care payments to all cases equally. Furthermore, we continue to believe that using the estimated per-claim uncompensated care payment amount to determine outlier estimates provides predictability as to the amount of uncompensated care payments included in the calculation of outlier payments. Therefore, consistent with the methodology used in FY 2014 to calculate the outlier fixed-loss cost threshold, for FY 2015, we are proposing to include estimated FY 2015 uncompensated care payments in the computation of the proposed outlier fixed-loss cost threshold. Specifically, we are proposing to use the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the outlier fixed-loss cost threshold methodology. Using this methodology, we calculated a proposed outlier fixed-loss cost threshold for FY 2015 equal to the proposed prospective payment rate for the MS–DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any add-on payments for new technology, plus $25,799. We note that, the proposed FY 2015 fixed-loss cost threshold is higher than the FY 2014 final outlier fixed-loss cost E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules threshold of $21,748. We believe that the increase in the charge inflation factor (compared to the FY 2014 charge inflation factor) contributed to a higher proposed outlier fixed-loss threshold for FY 2015. As charges increase, so do outlier payments. As a result, it would be necessary for us to raise the outlier fixed-loss cost threshold to decrease the amount of outlier payments expended in order to reach the 5.1 percent target. (2) Other Proposed Changes Concerning Outliers As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a lower percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 2015 will result in outlier payments that will equal 5.1 percent of operating DRG payments and 6.26 percent of capital payments based on the Federal rate. In accordance with section 1886(d)(3)(B) of the Act, we are proposing to reduce the proposed FY 2015 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers. The proposed outlier adjustment factors that would be applied to the standardized amount based on the FY 2015 outlier threshold are as follows: Operating standardized amounts mstockstill on DSK4VPTVN1PROD with PROPOSALS2 National ............................................................................................................................................................ Puerto Rico ...................................................................................................................................................... We are proposing to apply the outlier adjustment factors to the proposed FY 2015 payment rates after removing the effects of the FY 2014 outlier adjustment factors on the standardized amount. To determine whether a case qualifies for outlier payments, we apply hospitalspecific CCRs to the total covered charges for the case. Estimated operating and capital costs for the case are calculated separately by applying separate operating and capital CCRs. These costs are then combined and compared with the outlier fixed-loss cost threshold. Under our current policy at § 412.84, we calculate operating and capital CCR ceilings and assign a statewide average CCR for hospitals whose CCRs exceed 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Based on this calculation, for hospitals for which the fiscal intermediary or MAC computes operating CCRs greater than 1.22 or capital CCRs greater than 0.173, or hospitals for which the fiscal intermediary or MAC is unable to calculate a CCR (as described under § 412.84(i)(3) of our regulations), statewide average CCRs are used to determine whether a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and available only via the Internet) contains the proposed statewide average operating CCRs for urban hospitals and for rural hospitals for which the fiscal intermediary or MAC is unable to compute a hospital-specific CCR within the above range. Effective for discharges occurring on or after October 1, 2014, these statewide average ratios would replace the ratios posted on our Web site at https://www.cms.gov/Medicare/ VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY-2014-IPPS-FinalRule-Home-Page-Items/FY-2014-IPPSFinal-Rule-CMS-1599-F-Tables.html. Table 8B listed in section VI. of this Addendum (and available via the Internet) contains the proposed comparable statewide average capital CCRs. Again, the CCRs in Tables 8A and 8B would be used during FY 2015 when hospital-specific CCRs based on the latest settled cost report are either not available, or are outside the range noted above. Table 8C listed in section VI. of this Addendum (and available via the Internet) contains the proposed statewide average total CCRs used under the LTCH PPS as discussed in section V. of this Addendum. We finally note that we published a manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update covered an array of topics, including CCRs, reconciliation, and the time value of money. We encourage hospitals that are assigned the statewide average operating and/or capital CCRs to work with their fiscal intermediary or MAC on a possible alternative operating and/ or capital CCR as explained in Change Request 3966. Use of an alternative CCR developed by the hospital in conjunction with the fiscal intermediary or MAC can avoid possible overpayments or underpayments at cost report settlement, thereby ensuring better accuracy when making outlier payments and negating the need for outlier reconciliation. We also note that a hospital may request an alternative operating or capital CCR ratio at any time as long as the guidelines of Change PO 00000 Frm 00347 Fmt 4701 Sfmt 4702 28323 0.949000 0.928942 Capital Federal rate 0.937425 0908313 Request 3966 are followed. In addition, as mentioned above, we published an additional manual update (Change Request 7192) to our outlier policy on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/ manuals/downloads/clm104c03.pdf. (3) FY 2013 and FY 2014 Outlier Payments In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50983 through 50984), we stated that, based on available data, we estimated that actual FY 2013 outlier payments would be approximately 4.77 percent of actual total MS–DRG payments. This estimate was computed based on simulations using the FY 2012 MedPAR file (discharge data for FY 2012 claims). That is, the estimate of actual outlier payments did not reflect actual FY 2013 claims, but instead reflected the application of FY 2013 payment rates and policies to available FY 2012 claims. Our current estimate, using available FY 2013 claims data, is that actual outlier payments for FY 2013 were approximately 4.81 percent of actual total MS–DRG payments. Therefore, the data indicate that, for FY 2013, the percentage of actual outlier payments relative to actual total payments is lower than we projected for FY 2013. Consistent with the policy and statutory interpretation we have maintained since the inception of the IPPS, we do not make retroactive adjustments to outlier E:\FR\FM\15MYP2.SGM 15MYP2 28324 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules payments to ensure that total outlier payments for FY 2013 are equal to 5.1 percent of total MS–DRG payments. We currently estimate that, using the latest CCRs from the December 2013 update of the PSF, actual outlier payments for FY 2014 will be approximately 5.79 percent of actual total MS–DRG payments, approximately 0.69 percentage point higher than the 5.1 percent we projected when setting the outlier policies for FY 2014. This estimate of 5.79 percent is based on simulations using the FY 2013 MedPAR file (discharge data for FY 2013 claims). 5. Proposed FY 2015 Standardized Amount The adjusted standardized amount is divided into labor-related and nonlaborrelated portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the Internet) contain the proposed national standardized amounts that we are proposing to apply to all hospitals, except hospitals located in Puerto Rico, for FY 2015. The proposed Puerto Ricospecific amounts are shown in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). The proposed amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is 69.6 percent, and the labor-related share applied to the standardized amounts in Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are proposing to apply a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we will apply a labor-related share of 62 percent for all hospitals whose wage indices are less than or equal to 1.0000. In addition, Tables 1A and 1B include the proposed standardized amounts reflecting the proposed applicable percentage increases for FY 2015. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount (this amount is set forth in Table 1A). The proposed labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2015 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). This table also includes the proposed Puerto Rico-specific standardized amounts. The labor-related share applied to the Puerto Rico-specific standardized amount is the proposed labor-related share of 63.2 percent, or 62 percent, depending on which provides higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Public Law 108–173, provides that the laborrelated share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) The following table illustrates the proposed changes from the FY 2014 national standardized amount. The second through fifth columns display the proposed changes from the FY 2014 standardized amounts for each applicable FY 2015 proposed standardized amount. The first row of the table shows the updated (through FY 2014) average standardized amount after restoring the FY 2014 offsets for outlier payments, demonstration budget neutrality, the geographic reclassification budget neutrality, and the retrospective documentation and coding adjustment under section 7(b)(1)(B) of Public Law 110–90. The MS–DRG reclassification and recalibration wage index budget neutrality adjustment factors are cumulative. Therefore, those FY 2014 adjustment factors are not removed from this table. COMPARISON OF FY 2014 STANDARDIZED AMOUNTS TO THE FY 2015 PROPOSED STANDARDIZED AMOUNTS mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Hospital submitted quality data and is a meaningful EHR user FY 2014 Base Rate after removing: 1. FY 2014 Geographic Reclassification Budget Neutrality (0.990718) 2. FY 2014 Rural Community Hospital Demonstration Program Budget Neutrality (0.999415) 3. Cumulative Factor: FY 2008, FY 2009, FY 2012, FY 2013, and FY 2014 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012 (0.9403) 4. FY 2014 Operating Outlier Offset (0.948995) Proposed FY 2015 Update Factor ................. Proposed FY 2015 MS-DRG Recalibration and Wage Index Budget Neutrality Factor. Proposed FY 2015 Reclassification Budget Neutrality Factor. Proposed FY 2015 Rural Community Demonstration Program Budget Neutrality Factor. Proposed FY 2015 Operating Outlier Factor VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user If Proposed Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38 Nonlabor (30.4%): $1,847.75. If Proposed Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45 Nonlabor (38%): $2,309.70. If Proposed Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38 Nonlabor (30.4%): $1,847.75. If Proposed Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45 Nonlabor (38%): $2,309.70. If Proposed Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38 Nonlabor (30.4%): $1,847.75. If Proposed Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45 Nonlabor (38%): $2,309.70 If Proposed Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38 Nonlabor (30.4%): $1,847.75. If Proposed Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45 Nonlabor (38%): $2,309.70. 1.021 .......................... 0.993512 .................... 1.01425 ...................... 0.993512 .................... 1.01425 ...................... 0.993512 .................... 1.0075. 0.993512. 0.991412 .................... 0.991412 .................... 0.991412 .................... 0.991412. 0.999283 .................... 0.999283 .................... 0.999283 .................... 0.999283. 0.949000 .................... 0.949000 .................... 0.949000 .................... 0.949000. PO 00000 Frm 00348 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28325 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules COMPARISON OF FY 2014 STANDARDIZED AMOUNTS TO THE FY 2015 PROPOSED STANDARDIZED AMOUNTS—Continued Hospital submitted quality data and is a meaningful EHR user Cumulative Factor: FY 2008, FY 2009, FY 2012, FY 2013, FY 2014 and FY 2015 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012. Proposed FY 2015 New Labor Market Delineation Wage Index Transition Budget Neutrality Factor. Proposed National Standardized Amount for FY 2015 if Wage Index is Greater Than 1.0000; Labor/Non-Labor Share Percentage (69.6/30.4). Proposed National Standardized Amount for FY 2015 if Wage Index is less Than or Equal to 1.0000; Labor/Non-Labor Share Percentage (62/38). The following table illustrates the proposed changes from the FY 2014 Puerto Rico-specific payment rate for hospitals located in Puerto Rico. The second column shows the proposed changes from the FY 2014 Puerto Rico specific payment rate for hospitals with a Puerto Rico-specific wage index greater than 1.0000. The third column Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user 0.9329 ........................ 0.9329 ........................ 0.9329 ........................ 0.9329. 0.998856 .................... 0.998856 .................... 0.998856 .................... 0.998856. Labor: $3,759.46 ........ Nonlabor: $1,642.06 .. Labor: $3,734.61 ........ Nonlabor: $1,631.20 .. Labor: $3,734.61 ........ Nonlabor: $1,631.20 .. Labor: $3,709.75. Nonlabor: $1,620.35. Labor: $3,384.94 ........ Nonlabor: $2,052.58 .. Labor: $3,326.80 ........ Nonlabor: $2,039.01 .. Labor: $3,326.80 ........ Nonlabor: $2,039.01 .. Labor: $3,304.66. Nonlabor: $2,025.44. shows the proposed changes from the FY 2014 Puerto Rico specific payment rate for hospitals with a Puerto Ricospecific wage index less than or equal to 1.0000. The first row of the table shows the updated (through FY 2014) Puerto Rico-specific payment rate after restoring the FY 2014 offsets for Puerto Rico-specific outlier payments, rural community hospital demonstration program budget neutrality, and the geographic reclassification budget neutrality. The MS–DRG recalibration budget neutrality adjustment factor is cumulative and is not removed from this table. COMPARISON OF FY 2014 PUERTO RICO-SPECIFIC PAYMENT RATE TO THE FY 2015 PROPOSED PUERTO RICO-SPECIFIC PAYMENT RATE Update (2.1 percent); proposed wage index is greater than 1.0000; labor/non-labor share percentage (63.2/36.8) mstockstill on DSK4VPTVN1PROD with PROPOSALS2 FY 2014 Puerto Rico Base Rate, after removing: 1. FY 2014 Geographic Reclassification Budget Neutrality (0.990718) 2. FY 2014 Rural Community Hospital Demonstration Program Budget Neutrality (0.999415) 3. FY 2014 Puerto Rico Operating Outlier Offset (0.943455) Proposed FY 2015 Update Factor .......................................................... Proposed FY 2015 MS–DRG Recalibration Budget Neutrality Factor ... Proposed FY 2015 Reclassification Budget Neutrality Factor ................ Proposed FY 2015 Rural Community Hospital Demonstration Program Budget Neutrality Factor. Proposed FY 2015 New Labor Market Delineation Wage Index Transition Budget Neutrality Factor. Proposed FY 2015 Puerto Rico Operating Outlier Factor ...................... Proposed Puerto Rico-Specific Payment Rate for FY 2015 ................... B. Proposed Adjustments for Area Wage Levels and Cost-of-Living Tables 1A through 1C, as published in section VI. of this Addendum (and available via the Internet), contain the proposed labor-related and nonlaborrelated shares that we used to calculate VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 Labor: $1,722.31 ........................... Nonlabor: $1,002.86 ...................... Labor: $1,689.61 Nonlabor: $1,035.56. 1.021 .............................................. 0.992938 ........................................ 0.991412 ........................................ 0.999283 ........................................ 1.021. 0.992938. 0.991412. 0.999283. 0.998856 ........................................ 0.998856. 0.928942 ........................................ Labor: $1,605.07 ........................... Nonlabor: $934.59. ........................ 0.928942. Labor: $1,574.59. Nonlabor: $965.07. the proposed prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2015. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum. PO 00000 Frm 00349 Fmt 4701 Update (2.1 percent); proposed wage index is less than or equal to 1.0000; labor/non-labor share percentage (62/38) Sfmt 4702 1. Proposed Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the laborrelated portion of the national and Puerto Rico prospective payment rates, E:\FR\FM\15MYP2.SGM 15MYP2 28326 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules respectively, to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of the preamble of this proposed rule, we discuss the data and methodology for the proposed FY 2015 wage index. 2. Proposed Adjustment for Cost-ofLiving in Alaska and Hawaii Section 1886(d)(5)(H) of the Act provides discretionary authority to the Secretary to make ‘‘such adjustments . . . as the Secretary deems appropriate to take into account the unique circumstances of hospitals located in Alaska and Hawaii.’’ Higher labor- related costs for these two States are taken into account in the adjustment for area wages described above. To account for higher nonlabor-related costs for these two States, we multiply the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii by an adjustment factor. In the FY 2013 IPPS/LTCH PPS final rule, we established a methodology to update the COLA factors for Alaska and Hawaii that were published by the U.S. Office of Personnel Management (OPM) every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively). For FY 2014, in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50985 through 50987), we updated the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, we are proposing to use the same COLAs factors established in FY 2014 for FY 2015 to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii. Below is a table listing the proposed COLA factors for FY 2015. PROPOSED FY 2015 COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS Cost of living adjustment factor Area Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ............................................................................................. City of Fairbanks and 80-kilometer (50-mile) radius by road .............................................................................................. City of Juneau and 80-kilometer (50-mile) radius by road .................................................................................................. Rest of Alaska ...................................................................................................................................................................... Hawaii: City and County of Honolulu ................................................................................................................................................ County of Hawaii .................................................................................................................................................................. County of Kauai .................................................................................................................................................................... County of Maui and County of Kalawao .............................................................................................................................. Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, the next update to the COLA factors for Alaska and Hawaii would occur in FY 2018. C. Calculation of the Proposed Prospective Payment Rates mstockstill on DSK4VPTVN1PROD with PROPOSALS2 General Formula for Calculation of the Prospective Payment Rates for FY 2015 In general, the operating prospective payment rate for all hospitals paid under the IPPS located outside of Puerto Rico, except SCHs and MDHs, for FY 2015 equals the Federal rate (which includes uncompensated care payments). We note that, as discussed in section IV.G. of the preamble of this proposed rule, section 1106 of the Pathway to SGR Reform Act of 2013 (Pub. L. 113– 67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, further extended the MDH VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Prior to the enactment of Public Law 113–67, the MDH program was only to be in effect through the end of FY 2013. Under current law, the MDH program will expire for discharges beginning on April 1, 2015. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (which, as discussed in section IV.F. of the preamble of this proposed rule, includes uncompensated care payments); the updated hospitalspecific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. The prospective payment rate for SCHs for FY 2015 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. PO 00000 Frm 00350 Fmt 4701 Sfmt 4702 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 The prospective payment rate for MDHs for FY 2015 discharges occurring before April 1, 2015 equals the higher of the Federal rate or the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate as described below. For MDHs, the updated hospital-specific rate is based on FY 1982, FY 1987 or FY 2002 costs per discharge, whichever yields the greatest aggregate payment. The prospective payment rate for hospitals located in Puerto Rico for FY 2015 equals 25 percent of the Puerto Rico-specific payment rate plus 75 percent of the applicable national rate. 1. Federal Rate The Federal rate is determined as follows: Step 1—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data and is a meaningful EHR user, as described above. Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules located or the area to which the hospital is reclassified. Step 3—For hospitals located in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the applicable cost-of-living adjustment factor. Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if applicable, under Step 3). Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the applicable MS– DRG (Table 5 listed in section VI. of this Addendum and available via the Internet). The Federal payment rate as determined in Step 5 may then be further adjusted if the hospital qualifies for either the IME or DSH adjustment. In addition, for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b), the payment in Step 5 would be increased by the formula described in section IV.D. of the preamble of this proposed rule. The base-operating DRG payment amount may be further adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment as described under sections 1886(q) and 1886(o) of the Act, respectively. Finally, we add the uncompensated care payment to the total claim payment amount. We note that, as discussed above, we take uncompensated care payments into consideration when calculating outlier payments. 2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs) a. Calculation of Hospital-Specific Rate Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate (which, as discussed in section IV.F. of the preamble of this proposed rule, includes uncompensated care payments); the updated hospitalspecific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. As discussed previously, currently MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the greater of the updated hospital-specific rates based on either FY 1982, FY 1987, or FY 2002 costs per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, Hospital submitted quality data and is a meaningful EHR user FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Market Basket Rate-of-Increase ................................................ Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act .................................................. Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ....................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act .......................................................................................... Proposed Applicable Percentage Increase Applied to HospitalSpecific Rate .......................................................................... For a complete discussion of the applicable percentage increase applied to the hospital-specific rates for SCHs and MDHs, we refer readers to section IV.B. of the preamble of this proposed rule. In addition, because SCHs and MDHs use the same MS–DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospital-specific rate is adjusted by a budget neutrality factor to ensure that changes to the MS–DRG classifications and the recalibration of the MS–DRG relative weights are made VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Frm 00351 we refer readers to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082). We also refer readers to section IV.F. of the preamble of this proposed rule for a complete discussion on empirically justified Medicare DSH and uncompensated care payments. b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific Rate for FY 2015 Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospitalspecific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs and MDHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the proposed applicable percentage increases to the hospital-specific rates applicable to SCHs and MDHs are the following: Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.7 2.7 2.7 2.7 0.0 0.0 ¥0.675 ¥0.675 0.0 ¥0.4 ¥0.675 ¥0.4 0.0 ¥0.4 ¥0.675 ¥0.4 ¥0.2 ¥0.2 ¥0.2 ¥0.2 2.1 1.425 in a manner so that aggregate IPPS payments are unaffected. Therefore, a SCH’s and MDH’s hospital-specific rate is adjusted by the proposed MS–DRG reclassification and recalibration budget neutrality factor of 0.992938, as discussed in section III. of this Addendum. The resulting rate is used in determining the payment rate that an SCH would receive for its discharges beginning on or after October 1, 2014, and the payment rate that an MDH would receive for its discharges beginning on or after October 1, 2014, and before April 1, 2015. We note that, PO 00000 28327 Fmt 4701 Sfmt 4702 1.425 0.75 in this proposed rule, for FY 2015, we are not proposing to make a documentation and coding adjustment to the hospital-specific rate. We refer readers to section II.D. of the preamble of this proposed rule for a complete discussion regarding our proposed policies and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case-mix. E:\FR\FM\15MYP2.SGM 15MYP2 28328 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2014, and Before October 1, 2015 Section 1886(d)(9)(E)(iv) of the Act provides that, effective for discharges occurring on or after October 1, 2004, hospitals located in Puerto Rico are paid based on a blend of 75 percent of the national prospective payment rate and 25 percent of the Puerto Rico-specific rate. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Puerto Rico-Specific Rate The Puerto Rico-specific prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount considering the applicable wage index (obtained from Table 1C published in section VI. of this Addendum and available via the Internet). Step 2—Multiply the labor-related portion of the standardized amount by the applicable Puerto Rico-specific wage index. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet). Step 5—Multiply the result in Step 4 by 25 percent. b. National Prospective Payment Rate The national prospective payment rate is determined as follows: Step 1—Select the applicable national average standardized amount. Step 2—Multiply the labor-related portion of the national average standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the national average standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet). Step 5—Multiply the result in Step 4 by 75 percent. The sum of the Puerto Rico-specific rate and the national prospective payment rate computed above equals the prospective payment rate for a given discharge for a hospital located in Puerto Rico. This payment rate is then further adjusted if the hospital qualifies for either the IME or DSH adjustment. Finally, we add the uncompensated care payment to the total claim payment VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 amount. We note that, as discussed above, we take uncompensated care payments into consideration when calculating outlier payments. III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2015 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, over a 10-year transition period (which extended through FY 2001) the payment methodology for Medicare acute care hospital inpatient capital-related costs changed from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we used to determine the proposed capital Federal rate for FY 2015, which would be effective for discharges occurring on or after October 1, 2014. The 10-year transition period ended with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002). Therefore, for cost reporting periods beginning in FY 2002, all hospitals (except ‘‘new’’ hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) also provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for exceptions under § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no longer a need for an exceptions payment adjustment factor.) However, in limited circumstances, an additional payment exception for extraordinary circumstances is provided for under § 412.348(f) for qualifying hospitals. Therefore, in accordance with PO 00000 Frm 00352 Fmt 4701 Sfmt 4702 § 412.308(c)(3), an exceptions payment adjustment factor may need to be applied if such payments are made. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral. Section 412.374 provides for blended payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. In accordance with section 1886(d)(9)(A) of the Act, under the IPPS for acute care hospital operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Effective October 1, 2004, in accordance with section 504 of Public Law 108–173, the methodology for operating payments made to hospitals located in Puerto Rico under the IPPS was revised to make payments based on a blend of 25 percent of the applicable standardized amount specific to Puerto Rico hospitals and 75 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges occurring on or after October 1, 2004, we also revised the methodology for computing capital payments made to hospitals located in Puerto Rico to be based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the national capital Federal rate (69 FR 49185). A. Determination of the Proposed Federal Hospital Inpatient CapitalRelated Prospective Payment Rate Update In the discussion that follows, we explain the factors that we used to determine the proposed capital Federal rate for FY 2015. In particular, we explain why the proposed FY 2015 capital Federal rate increases approximately 0.9 percent, compared to the FY 2014 capital Federal rate. As discussed in the impact analysis in Appendix A to this proposed rule, we estimate that capital payments per discharge would increase 1.2 percent during that same period. Because capital payments constitute about 10 percent of hospital payments, a percent change in the capital Federal rate yields only about a 0.1 percent change in actual payments to hospitals. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we adjust the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The proposed update factor for FY 2015 under that framework is 1.5 percent based on the best data available at this time. The proposed update factor under that framework is based on a projected 1.5 percent increase in the FY 2010-based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0 percentage point adjustment for case-mix, a 0.0 percentage point adjustment for the FY 2013 DRG reclassification and recalibration, and a forecast error correction of 0.0 percentage point. As discussed below in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2015 CIPI projection in that same section of this Addendum. Below we describe the policy adjustments that we are proposing to apply in the update framework for FY 2015. The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: • The average resource use of Medicare patients changes (‘‘real’’ casemix change); • Changes in hospital documentation and coding of patient records result in higher-weighted DRG assignments (‘‘coding effects’’); and • The annual DRG reclassification and recalibration changes may not be budget neutral (‘‘reclassification effect’’). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in documentation and coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect higher resource requirements. The capital update framework includes the same case-mix VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts as discussed in section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 47707).) For FY 2015, we are projecting a 0.5 percent total increase in the case-mix index. We estimated that the real casemix increase will also equal 0.5 percent for FY 2015. The proposed net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, the proposed net adjustment for case-mix change in FY 2015 is 0.0 percentage point. The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year’s changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix indexrelated changes other than those due to patient severity of illness. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we have data available to evaluate the effects of the FY 2013 DRG reclassification and recalibration as part of our update for FY 2015. We estimate that FY 2013 DRG reclassification and recalibration resulted in no change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, we are proposing to make a 0.0 percentage point adjustment for reclassification and recalibration in the update framework for FY 2015. The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage point or more. There is a 2-year lag between the forecast and the availability of data to develop a PO 00000 Frm 00353 Fmt 4701 Sfmt 4702 28329 measurement of the forecast error. A forecast error of 0.0 percentage point was calculated for the proposed FY 2015 update. Historically, when forecast error of the CIPI is greater than 0.25 percentage point in absolute terms, it is reflected in the update recommended under this framework. Current historical data indicate that the forecasted FY 2013 rate-of-increase of the FY 2006based CIPI (1.2 percent) used in calculating the FY 2013 update factor slightly understated the actual realized FY 2013 price increases of the FY 2006based CIPI (1.3 percent) by 0.1 percentage point because the prices associated with both the depreciation and other capital-related cost categories grew more quickly than anticipated. Because this forecast error does not exceed the 0.25 percentage point threshold, we are proposing to make a 0.0 percentage point adjustment for forecast error in the update for FY 2015. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we calculated this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflected how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncost-effective services. Our intensity measure is based on a 5-year average. We calculate case-mix constant intensity as the change in total cost per discharge, adjusted for price level changes (the CIPI for hospital and related services) and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and the combination of qualityenhancing new technologies and complexity within the DRG system, we assume that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of qualityenhancing technology. In this proposed rule, we are proposing to continue to use a Medicare-specific intensity measure that is based on a 5-year adjusted average of cost per discharge for FY 2015 (we refer readers to the FY 2011 IPPS/LTCH PPS E:\FR\FM\15MYP2.SGM 15MYP2 28330 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules final rule (75 FR 50436) for a full description of our Medicare-specific intensity measure). Specifically, for FY 2015, we are proposing to use an intensity measure that is based on an average of cost per discharge data from the 5-year period beginning with FY 2007 and extending through FY 2012. Based on these data, we estimated that case-mix constant intensity declined during FYs 2007 through 2012. In the past, when we found intensity to be declining, we believed a zero (rather than a negative) intensity adjustment was appropriate. Consistent with this approach, because we estimate that intensity declined during that 5-year period, we believe it is appropriate to propose to continue to apply a zero intensity adjustment for FY 2015. Therefore, we are proposing to make a 0.0 percentage point adjustment for intensity in the update for FY 2015. Above, we described the basis of the components used to develop the proposed 1.5 percent capital update factor under the capital update framework for FY 2015 as shown in the table below. PROPOSED CMS FY 2015 UPDATE FACTOR TO THE CAPITAL FEDERAL RATE Capital Input Price Index * ........................................................................................................................................................... Intensity: ....................................................................................................................................................................................... Case-Mix Adjustment Factors: Real Across DRG Change ................................................................................................................................................... Projected Case-Mix Change ................................................................................................................................................ 1.5 0.0 ¥0.5 0.5 Subtotal ......................................................................................................................................................................... Effect of FY 2013 Reclassification and Recalibration ................................................................................................................. Forecast Error Correction ............................................................................................................................................................ 1.5 0.0 0.0 Total Update ......................................................................................................................................................................... 1.5 * The capital input price index is based on the FY 2010-based CIPI. b. Comparison of CMS and MedPAC Update Recommendation In its March 2014 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments for FY 2015. (We refer readers to MedPAC’s Report to the Congress: Medicare Payment Policy, March 2014, Chapter 3.) mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments. For FY 2014, we estimated that outlier payments for capital will equal 6.07 percent of inpatient capital-related payments based on the capital Federal rate in FY 2014. Based on the proposed thresholds as set forth in section II.A. of this Addendum, we estimate that outlier payments for capital-related costs would equal 6.26 percent for inpatient capitalrelated payments based on the proposed capital Federal rate in FY 2015. Therefore, we are proposing to apply an outlier adjustment factor of 0.9374 in VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 determining the proposed capital Federal rate for FY 2015. Thus, we estimate that the percentage of capital outlier payments to total capital Federal rate payments for FY 2015 will be slightly higher than the percentage for FY 2014. The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The proposed FY 2015 outlier adjustment of 0.9374 is a ¥0.82 percent change from the FY 2014 outlier adjustment of 0.9393. Therefore, the proposed net change in the outlier adjustment to the capital Federal rate for FY 2015 is 0.9980 (0.9374/0.9393). Thus, the outlier adjustment would decrease the proposed FY 2015 capital Federal rate by 0.82 percent compared to the FY 2014 outlier adjustment. 3. Proposed Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. Because we implemented a separate GAF for Puerto Rico, we apply separate budget neutrality adjustments for the national GAF and the Puerto Rico GAF. We apply the same budget neutrality factor PO 00000 Frm 00354 Fmt 4701 Sfmt 4702 for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was implemented in FY 1998. To determine the proposed factors for FY 2015, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG classifications and relative weights and the FY 2014 GAF to estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG classifications and relative weights and the proposed FY 2015 GAFs. To achieve budget neutrality for the changes in the national GAFs, based on calculations using updated data, we are proposing to apply an incremental budget neutrality adjustment factor of 1.0000 for FY 2015 to the previous cumulative FY 2014 adjustment factor of 0.9891, yielding a proposed adjustment factor of 0.9891 through FY 2015. For the Puerto Rico GAFs, we are proposing to apply an incremental budget neutrality adjustment factor of 1.0011 for FY 2015 to the previous cumulative FY 2014 adjustment factor of 1.0076, yielding a proposed cumulative adjustment factor of 1.0087 through FY 2015. We then compared estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG relative weights and the proposed FY 2015 GAFs to estimated aggregate capital Federal rate payments based on the cumulative effects of the proposed FY 2015 MS–DRG classifications and E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules relative weights and the proposed FY 2015 GAFs. The proposed incremental adjustment factor for DRG classifications and changes in relative weights is 0.9957 both nationally and for Puerto Rico. The proposed cumulative adjustment factors for MS– DRG classifications and changes in relative weights and for changes in the GAFs through FY 2015 are 0.9848 nationally and 1.0043 for Puerto Rico. (We note that all the values are calculated with unrounded numbers.) The GAF/DRG budget neutrality adjustment factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement under § 412.308(c)(4)(ii) that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs. The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the MS–DRG relative weights. Under the capital IPPS, there is a single GAF/DRG budget neutrality adjustment factor (the national capital rate and the Puerto Rico capital rate are determined separately) for changes in the GAF (including geographic reclassification) and the MS–DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for DSH or IME. The proposed cumulative adjustment factor accounts for the proposed MS– DRG reclassifications and recalibration and for proposed changes in the GAFs. It also incorporates the effects on the proposed GAFs of FY 2015 geographic reclassification decisions made by the MGCRB compared to FY 2014 decisions. However, it does not account for proposed changes in payments due to changes in the DSH and IME adjustment factors. 4. Proposed Capital Federal Rate for FY 2015 For FY 2014, we established a capital Federal rate of $429.31 (78 FR 50990). We are proposing to establish an update of 1.5 percent in determining the FY 2015 capital Federal rate for all hospitals. As a result of this proposed update and the proposed budget neutrality factors discussed above, we are proposing to establish a national capital Federal rate of $433.01 for FY 2015. The proposed national capital Federal rate for FY 2015 was calculated as follows: • The proposed FY 2015 update factor is 1.015, that is, the proposed update is 1.5 percent. • The proposed FY 2015 budget neutrality adjustment factor that is applied to the proposed capital Federal rate for proposed changes in the MS– DRG classifications and relative weights and changes in the GAFs is 0.9957. • The proposed FY 2015 outlier adjustment factor is 0.9374. 28331 (We note that, as discussed in section VI.C. of the preamble of this proposed rule, we are not proposing to make an additional MS–DRG documentation and coding adjustment to the capital IPPS Federal rates for FY 2015.) Because the proposed FY 2015 capital Federal rate has already been adjusted for differences in case-mix, wages, costof-living, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients, we are not proposing to make additional adjustments in the capital Federal rate for these factors, other than the proposed budget neutrality factor for proposed changes in the MS–DRG classifications and relative weights and for proposed changes in the GAFs. We are providing the following chart that shows how each of the proposed factors and adjustments for FY 2015 affects the computation of the proposed FY 2015 national capital Federal rate in comparison to the FY 2014 national capital Federal rate. The proposed FY 2015 update factor has the effect of increasing the capital Federal rate by 1.5 percent compared to the FY 2014 capital Federal rate. The proposed GAF/DRG budget neutrality adjustment factor has the effect of decreasing the capital Federal rate by 0.43 percent. The proposed FY 2015 outlier adjustment factor has the effect of decreasing the capital Federal rate by 0.20 percent compared to the FY 2014 capital Federal rate. The combined effect of all the proposed changes would increase the proposed national capital Federal rate by 0.86 percent compared to the FY 2014 national capital Federal rate. COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2014 CAPITAL FEDERAL RATE AND PROPOSED FY 2015 CAPITAL FEDERAL RATE FY 2014 Update Factor 1 ................................................................................................ GAF/DRG Adjustment Factor 1 ........................................................................ Outlier Adjustment Factor 2 .............................................................................. Capital Federal Rate ........................................................................................ 1.0090 0.9987 0.9393 429.31 Proposed FY 2015 1.0150 0.9957 0.9374 433.01 Change 1.0150 0.9957 0.9980 1.0086 Percent change 1.50 ¥0.43 ¥0.20 0.86 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1 The proposed update factor and the proposed GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal rates. Thus, for example, the proposed incremental change from FY 2014 to FY 2015 resulting from the application of the proposed 0.9957 GAF/ DRG budget neutrality adjustment factor for FY 2015 is a proposed net change of 0.9957 (or ¥0.43 percent). 2 The proposed outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining the proposed capital Federal rate. Thus, for example, the proposed net change resulting from the application of the proposed FY 2015 outlier adjustment factor is 0.9374/0.9393, or 0.9918 (or ¥0.82 percent). 5. Proposed Special Capital Rate for Puerto Rico Hospitals Section 412.374 provides for the use of a blended payment system for payments made to hospitals located in Puerto Rico under the PPS for acute care hospital inpatient capital-related costs. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. Under the broad authority of section 1886(g) of the Act, PO 00000 Frm 00355 Fmt 4701 Sfmt 4702 beginning with discharges occurring on or after October 1, 2004, capital payments made to hospitals located in Puerto Rico are based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the capital Federal rate. The Puerto Rico capital rate is E:\FR\FM\15MYP2.SGM 15MYP2 28332 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 derived from the costs of Puerto Rico hospitals only, while the capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS (including Puerto Rico). To adjust hospitals’ capital payments for geographic variations in capital costs, we apply a GAF to both portions of the blended capital rate. The GAF is calculated using the operating IPPS wage index, and varies depending on the labor market area or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended capital rate. Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality adjustment factor for MS–DRG reclassifications and recalibration nationally and for Puerto Rico. The proposed budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF and the proposed budget neutrality factor for MS–DRG reclassifications and recalibration (which is the same nationally and for Puerto Rico) are discussed in section III.A.3. of this Addendum. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). For FY 2014, the special capital rate for hospitals located in Puerto Rico was $209.82 (78 FR 50991). With the changes we are proposing to make to the other factors used to determine the proposed capital Federal rate, the proposed FY 2015 special capital rate for hospitals in Puerto Rico is $206.82. B. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2015 For purposes of calculating payments for each discharge during FY 2015, the capital Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor, if applicable). The VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 result is the adjusted capital Federal rate. Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The proposed outlier thresholds for FY 2015 are in section II.A. of this Addendum. For FY 2015, a case would qualify as a cost outlier if the cost for the case plus the (operating) IME and DSH payments (including both the empirically justified Medicare DSH payment and the estimated uncompensated care payment, as discussed in section II.A.4.g.(1) of this Addendum) is greater than the prospective payment rate for the MS– DRG plus the proposed fixed-loss amount of $25,799. Currently, as provided under § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect— the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weightedaverage of past capital purchase prices up to and including the current year. We periodically update the base year for the operating and capital input price indexes to reflect the changing composition of inputs for operating and capital expenses. In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50603 through 50607), we rebased and revised the CIPI to a FY 2010 base year to reflect the more current structure of capital PO 00000 Frm 00356 Fmt 4701 Sfmt 4702 costs in hospitals. For a complete discussion of this rebasing, we refer readers to the FY 2014 IPPS/LTCH PPS final rule. 2. Forecast of the CIPI for FY 2015 Based on the latest forecast by IHS Global Insight, Inc. (first quarter of 2014), we are forecasting the FY 2010based CIPI to increase 1.5 percent in FY 2015. This reflects a projected 1.9 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), and a projected 2.6 percent increase in other capital expense prices in FY 2015, partially offset by a projected 1.0 percent decline in vintage-weighted interest expenses in FY 2015. The weighted average of these three factors produces the forecasted 1.5 percent increase for the FY 2010-based CIPI as a whole in FY 2015. IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-ofIncrease Percentages for FY 2015 Payments for services furnished in children’s hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) that are excluded from the IPPS are made on the basis of reasonable costs based on the hospital’s own historical cost experience, subject to a rate-ofincrease ceiling. A per discharge limit (the target amount as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital’s own cost experience in its base year, and updated annually by a rate-ofincrease percentage. (We note that, in accordance with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) In this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing that the FY 2015 rate-of-increase percentage for updating the target amounts for the 11 cancer hospitals, children’s hospitals, and the short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, as well as RNHCIs would be the estimated percentage increase in the FY 2015 IPPS operating market basket, in accordance with applicable regulations at § 413.40. As we did in FY 2014, we would use the percentage increase in the FY 2010based IPPS operating market basket to update these target amounts. Based on IHS Global Insight, Inc.’s 2014 first quarter forecast, we estimate that the FY E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 2010-based IPPS operating market basket update for FY 2015 is 2.7 percent (that is, the estimate of the market basket rate-of-increase). However, we are proposing that if more recent data become available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2015. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section VII. of the preamble of this proposed rule and section V. of the Addendum to this proposed rule for the proposed update changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2015. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 2015 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 A. Proposed LTCH PPS Standard Federal Rate for FY 2015 1. Background In section VII. of the preamble of this proposed rule, we discuss our proposed updates to the payment rates, factors, and specific policies under the LTCH PPS for FY 2015. Under § 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate years beginning RY 2004 through RY 2006, we updated the standard Federal rate annually by a factor to adjust for the most recent estimate of the increases in prices of an appropriate market basket of goods and services for LTCHs. We established this policy of annually updating the standard Federal rate because, at that time, we believed that was the most appropriate method for updating the LTCH PPS standard Federal rate for years after the initial implementation of the LTCH PPS in FY 2003. Therefore, under § 412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to the LTCH PPS standard Federal rate was equal to the previous rate year’s Federal rate updated by the most recent estimate of increases in the appropriate market basket of goods and services included in covered inpatient LTCH services. In determining the annual update to the standard Federal rate for RY 2007, based on our ongoing monitoring activity, we believed that, rather than solely using the most recent estimate of the LTCH PPS market basket update as the basis of the annual update factor, it was appropriate to adjust the standard Federal rate to account for the effect of documentation and coding in a prior period that was unrelated to patients’ severity of illness (71 FR 27818). VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Accordingly, we established under § 412.523(c)(3)(iii) that the annual update to the standard Federal rate for RY 2007 was zero percent based on the most recent estimate of the LTCH PPS market basket at that time, offset by an adjustment to account for changes in case-mix in prior periods due to the effect of documentation and coding that were unrelated to patients’ severity of illness. For RY 2008 through FY 2011, we also made an adjustment for the effect of documentation and coding that was unrelated to patients’ severity of illness in establishing the annual update to the standard Federal rate as set forth in the regulations at §§ 412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012, 2013, and 2014, we updated the standard Federal rate by the most recent estimate of the LTCH PPS market basket at that time, including additional statutory adjustments required by section 1886(m)(3)(A) of the Act as set forth in the regulations at §§ 412.523(c)(3)(viii) through (c)(3)(ix). Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the other adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) as discussed in section VII.C.2. of the preamble of this proposed rule. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. (As noted in section VII.C.2.a. of the preamble of this proposed rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) For FY 2014, consistent with our historical practice, we established an update to the LTCH PPS standard Federal rate based on the full estimated LTCH PPS market basket increase of 2.5 PO 00000 Frm 00357 Fmt 4701 Sfmt 4702 28333 percent and the 0.8 percentage point reductions required by sections 1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(x) of the regulations, we established an annual update of 1.7 percent to the standard Federal rate for FY 2014 (78 FR 50761 through 50763). For FY 2015, as discussed in greater detail in section VII.C.2. of the preamble of this proposed rule, we are proposing to establish an annual update to the LTCH PPS standard Federal rate based on the full estimated increase in the LTCH PPS market basket, less the proposed MFP adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In addition, as discussed in greater detail in section VII.C.2. of the preamble of this proposed rule, beginning in FY 2014, the annual update would be further reduced by 2.0 percentage points for LTCHs that fail to submit quality reporting data in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act. Specifically, in this proposed rule, based on the best available data, we are proposing to establish an annual update to the standard Federal rate of 2.1 percent, which is based on the full estimated increase in the LTCH PPS market basket of 2.7 percent, less the proposed MFP adjustment of 0.4 percentage point consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. As discussed in greater detail in section VII.C.2.c. of the preamble of this proposed rule, for LTCHs that fail to submit the required quality reporting data for FY 2015 in accordance with the LTCHQR Program, the proposed annual update would be further reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. Accordingly, we are proposing to establish an annual update to the LTCH PPS standard Federal rate of 0.1 percent for LTCHs that fail to submit the required quality reporting data for FY 2015. This proposed 0.1 percent update is calculated based on the full estimated increase in the LTCH PPS market basket of 2.7 percent, less a proposed MFP adjustment of 0.4 percentage point, less an additional adjustment of 0.2 percentage point required by the statute, and less 2.0 percentage points for failure to submit quality reporting data as required by section 1886(m)(5) of the Act. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28334 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 2. Development of the Proposed FY 2015 LTCH PPS Standard Federal Rate We continue to believe that the annual update to the LTCH PPS standard Federal rate should be based on the most recent estimate of the increase in the LTCH PPS market basket, including any statutory adjustments. Consistent with our historical practice, for FY 2015, we are proposing to apply the proposed annual update to the LTCH PPS standard Federal rate from the previous year. Furthermore, in determining the proposed standard Federal rate for FY 2015, we also are proposing to make certain regulatory adjustments. Specifically, we are proposing to apply an adjustment factor for the final year of the 3-year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3), as discussed in greater detail in section VII.C.3. of the preamble of this proposed rule. In addition, in determining the proposed FY 2015 standard Federal rate, we are proposing to apply a budget neutrality adjustment factor for the proposed changes related to the area wage adjustment (that is, proposed changes to the wage data, including the proposal to adopt the new OMB delineations, and labor-related share) in accordance with § 412.523(d)(4). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50993 and 50993), we established an annual update to the LTCH PPS standard Federal rate of 1.7 percent for FY 2014 based on the full estimated LTCH PPS market basket increase of 2.5 percent, less the MFP adjustment of 0.5 percentage point consistent with section 1886(m)(3)(A)(i) of the Act and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(x), we established an annual update to the standard Federal rate for FY 2014 of 1.7 percent. That is, we applied an update factor of 1.017 to the FY 2013 Federal rate of $40,607.31 to determine the FY 2014 standard Federal rate. We also adjusted the standard Federal rate for FY 2014 by the one-time prospective adjustment factor for FY 2014 of 0.98734 under § 412.523(d)(3)(ii). Furthermore, for FY 2014, we applied an area wage level budget neutrality factor of 1.0010531 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Consequently, we established a standard Federal rate for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 FY 2014 of $40,607.31 (calculated as $40,397.96 × 1.017 × 0.98734 × 1.0010531). In this proposed rule, we are proposing to establish an annual update to the LTCH PPS standard Federal rate of 2.1 percent (that is, an update factor of 1.021) for FY 2015, based on the full estimated increase in the LTCH PPS market basket of 2.7 percent, less the proposed MFP adjustment of 0.4 percentage point, consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and(m)(4)(E) of the Act. Therefore, under proposed § 412.523(c)(3)(xi), we are proposing to apply a factor of 1.021 to the FY 2014 standard Federal rate of $40,607.31 to determine the proposed FY 2015 standard Federal rate. These proposed factors are based on IGI’s first quarter 2014 forecast, which are the best available data at this time. Consistent with our historical practice of using the best available data, we also are proposing that if more recent data become available to determine the market basket estimate or the MFP adjustment, we would use such data for the final rule, if appropriate. For LTCHs that fail to submit quality reporting data for FY 2015 under the LTCHQR Program, under proposed § 412.523(c)(3)(xi) in conjunction with § 412.523(c)(4), we are proposing to reduce the proposed annual update to the LTCH PPS standard Federal rate by an additional 2 percentage points consistent with section 1886(m)(5) of the Act. Therefore, we are proposing to establish an annual update to the LTCH PPS standard Federal rate of 0.1 percent (that is, 2.1 percent minus 2.0 percentage points = 0.1 percent or an update factor of 1.001) for FY 2015 for LTCHs that fail to submit the required quality reporting data for FY 2015 under the LTCHQR Program. We also are proposing that the standard Federal rate for FY 2015 would be further adjusted by a proposed adjustment factor of 0.98734 for FY 2015 under the final year of the 3-year phase-in of the one-time prospective adjustment at § 412.523(d)(3)(ii). In addition, for FY 2015, we are proposing to apply an area wage level budget neutrality factor of 1.0002034 to the standard Federal rate to ensure that any proposed changes to the area wage level adjustment (that is, the proposed annual update of the wage index values and labor-related share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, we are proposing to establish a standard Federal rate of $40,943.51 (calculated as PO 00000 Frm 00358 Fmt 4701 Sfmt 4702 $40,607.31 × 1.021 × 0.98734 × 1.002034) for FY 2015. The proposed standard Federal rate of $40,943.51 would apply in determining the payments for FY 2015 discharges from LTCHs that submit quality reporting data for FY 2015 in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act. For LTCHs that fail to submit quality reporting data for FY 2015 in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act, we are proposing to establish a standard Federal of $40,141.47 (calculated as $40,607.31 × 1.001 × 0.98734 × 1.002034) for FY 2015. B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2015 1. Background Under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal rate to account for differences in LTCH area wage levels under § 412.525(c). The labor-related share of the LTCH PPS standard Federal rate is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. When we implemented the LTCH PPS, we established a 5-year transition to the full area wage level adjustment. The area wage level adjustment was completely phased-in for cost reporting periods beginning in FY 2007. Therefore, for cost reporting periods beginning on or after October 1, 2006, the applicable LTCH area wage index values are the full LTCH PPS area wage index values calculated based on acute care hospital inpatient wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. For additional information on the phase-in of the area wage level adjustment under the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and the RY 2008 LTCH PPS final rule (72 FR 26891). 2. Proposed Geographic Classifications (Labor Market Areas) Based on the New OMB Delineations In adjusting for the differences in area wage levels under the LTCH PPS, the labor-related portion of an LTCH’s E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Federal prospective payment is adjusted by using an appropriate area wage index based on the geographic classification (labor market area) in which the LTCH is located. Specifically, the application of the LTCH PPS area wage level adjustment under existing § 412.525(c) is made based on the location of the LTCH—either in an ‘‘urban area,’’ or a ‘‘rural area,’’ as defined in § 412.503. Under § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area (MSAs) (which includes a Metropolitan division, where applicable), as defined by the Executive OMB and a ‘‘rural area’’ is defined as any area outside of an urban area. The CBSA-based geographic classification (labor market area) definitions currently used under the LTCH PPS, effective for discharges occurring on or after July 1, 2005, are based on the OMB’s CBSA definitions that were developed based on 2000 U.S. Census data. As discussed in greater detail in section VII.D. of the preamble of this proposed rule, OMB announced revisions to the statistical boundaries of its labor market areas for MSAs, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the uses of the delineations of these areas in OMB Bulletin No. 13–01, issued on February 28, 2013 (referred hereinafter as the ‘‘new OMB delineations’’). As previously stated, at that time, the FY 2014 IPPS/LTCH PPS proposed rule was in the advanced stages of development, and the proposed FY 2014 LTCH PPS area wage indexes had already been developed based on the previous OMB CBSA-based labor market area definitions that are currently used to define CBSA-based labor market areas (referred hereinafter as ‘‘CBSA designations’’) under the LTCH PPS. Therefore, we did not implement changes to the CBSA designations under the LTCH PPS for FY 2014 based on the new OMB labor market areas delineations that were developed based on 2010 Decennial Census data. Rather, to allow for sufficient time to assess the new changes and their ramifications, we stated that we intended to propose to adopt the new OMB delineations, and the corresponding changes to the area wage index values based on those delineations, under the LTCH PPS for FY 2015 through notice and comment rulemaking. This approach was consistent with the approach used under the IPPS. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994 through 50995).) As discussed in sections III.B. and VII.D. of the preamble of this proposed VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 rule, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are proposing to adopt the new OMB delineations beginning in FY 2015. We believe that these new OMB delineations are based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas. We also believe that the new OMB delineations would ensure that the LTCH PPS area wage level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We note that this proposal is consistent with the IPPS proposal discussed in section III.B. of the preamble of this proposed rule. For additional details on our proposal to adopt the new OMB delineations, we refer readers to section VII.D. of the preamble of this proposed rule. 3. Proposed LTCH PPS Labor-Related Share Under the payment adjustment for the differences in area wage levels under § 412.525(c), the labor-related share of an LTCH’s PPS Federal prospective payment is adjusted by the applicable wage index for the labor market area in which the LTCH is located. The LTCH PPS labor-related share currently represents the sum of the labor-related portion of operating costs (Wages and Salaries; Employee Benefits; Professional Fees Labor-Related, Administrative and Business Support Services; and All-Other: Labor-Related Services) and a labor-related portion of capital costs using the applicable LTCH PPS market basket. Additional background information on the historical development of the laborrelated share under the LTCH PPS and the development of the RPL market basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 and 51808). For FY 2013, we revised and rebased the market basket used under the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific market basket. In addition, we determined the labor-related share for FY 2013 as the sum of the FY 2013 relative importance of each labor-related cost category of the FY 2009-based LTCH-specific market basket. For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479). PO 00000 Frm 00359 Fmt 4701 Sfmt 4702 28335 Consistent with our historical practice, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50995 through 50996), we determined the LTCH PPS laborrelated share for FY 2014 based on the FY 2014 relative importance of each labor-related cost category, which reflected the different rates of price change for these cost categories between the base year (FY 2009) and FY 2014. Specifically, based on IGI’s second quarter 2013 forecast of the FY 2009based LTCH-specific market basket, we established a labor-related share under the LTCH PPS for FY 2014 of 62.537 percent. For FY 2015, we are proposing to establish a labor-related share under the LTCH PPS based on IGI’s first quarter 2014 forecast of the FY 2009-based LTCH-specific market basket. Consistent with our historical practice, if more recent data becomes available, we are proposing to use that data to determine the final FY 2015 labor-related share under the LTCH PPS. The table below shows the proposed FY 2015 labor-related share relative importance using IGI’s first quarter 2014 forecast of the FY 2009-based LTCHspecific market basket. The sum of the proposed relative importance for FY 2015 for operating costs (Wages and Salaries; Employee Benefits; Professional Fees Labor-Related, Administrative and Business Support Services; and All Other: Labor-Related Services) is 58.366 percent. We are proposing that the portion of capitalrelated costs that is influenced by the local labor market continue to be estimated to be 46 percent. Because the relative importance for capital-related costs would be 9.142 percent of the FY 2009-based LTCH-specific market basket in FY 2015, we are proposing to take 46 percent of 9.142 percent to determine the proposed labor-related share of capital-related costs for FY 2015, which would result in 4.205 percent (0.46 x 9.142). We are proposing to then add that 4.205 percent for the capital-related cost amount to the 58.366 percent for the operating cost amount to determine the total proposed labor-related share for FY 2015. Therefore, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are proposing to establish a labor-related share under the LTCH PPS in FY 2015 of 62.571 percent. This proposed labor-related share is determined using the same methodology as used in calculating all previous fiscal years LTCH labor-related shares. E:\FR\FM\15MYP2.SGM 15MYP2 28336 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPOSED FY 2015 LABOR-RELATED SHARE RELATIVE IMPORTANCE BASED ON THE FY 2009-BASED LTCH-SPECIFIC MARKET BASKET Proposed FY 2015 labor-related share relative importance Wages and Salaries .................................................................................................................................................................... Employee Benefits ....................................................................................................................................................................... Professional Fees: Labor-Related ............................................................................................................................................... Administrative and Business Support Services ........................................................................................................................... All Other: Labor-Related Services ............................................................................................................................................... 45.034 8.128 2.208 0.502 2.494 Subtotal ................................................................................................................................................................................. Proposed Labor-Related Portion of Capital Costs (46%) ........................................................................................................... 58.366 4.205 Proposed Total Labor-Related Share ........................................................................................................................... 62.571 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Proposed LTCH PPS Wage Index for FY 2015 Historically, we have established LTCH PPS area wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment established under the LTCH PPS is based on an LTCH’s actual location without regard to the ‘‘urban’’ or ‘‘rural’’ designation of any related or affiliated provider. In the FY 2014 LTCH PPS final rule (78 FR 50996 through 50997), we calculated the FY 2014 LTCH PPS area wage index values using the same data used for the FY 2014 acute care hospital IPPS (that is, data from cost reporting periods beginning during FY 2010), without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent complete data available at that time. In that same final rule, we indicated that we computed the FY 2014 LTCH PPS area wage index values consistent with the urban and rural geographic classifications (labor market areas) that were in place at that time, and consistent with the pre-reclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS). As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus (or campuses) are located. We also continued to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. Consistent with our historical methodology, to determine the applicable area wage index values under VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the LTCH PPS for FY 2015, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are proposing to use wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2011, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. We are proposing to use FY 2011 wage data because these data are the most recent complete data available. These are the same data used to compute the proposed FY 2015 acute care hospital inpatient wage index, as discussed in section III. of the preamble of this proposed rule. (For our rationale for using IPPS hospital wage data as a proxy for determining the area wage index values used under the LTCH PPS, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44024 through 44025).) For this proposed rule, the proposed FY 2015 LTCH PPS area wage index values were computed consistent with the proposed ‘‘urban’’ and ‘‘rural’’ geographic classifications (that is, using the new OMB labor market area delineations), as discussed in section VII.D. of the preamble of this proposed rule, and consistent with the prereclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS). As with the IPPS wage index, we are proposing to continue to apportion wage data for multicampus hospitals with campuses located in different labor market areas to each CBSA where the campus or campuses are located, as discussed in section III.G. of the preamble of this proposed rule. Furthermore, in determining the proposed FY 2015 LTCH PPS area wage PO 00000 Frm 00360 Fmt 4701 Sfmt 4702 index values, we are proposing to continue to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. We established this methodology for determining LTCH PPS wage index values for areas that have no IPPS wage data in the RY 2009 LTCH PPS final rule. For more information about this methodology, we refer readers to the RY 2009 LTCH PPS final rule (73 FR 26817 through 26818) for an explanation of and rationale for our policy for determining LTCH PPS wage index values for areas that have no IPPS wage data. There are currently no LTCHs located in labor market areas without IPPS hospital wage data (or IPPS hospitals). However, should an LTCH open in one of these labor market areas, LTCH PPS wage index values for such an area would be calculated using our established methodology. Under our existing methodology, the LTCH PPS wage index value for urban CBSAs with no IPPS wage data is determined by using an average of all of the urban areas within the State, and the LTCH PPS wage index value for rural areas with no IPPS wage data is determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State. Based on the FY 2011 IPPS wage data that we are proposing to use to determine the proposed FY 2015 LTCH PPS area wage index values in this proposed rule, there are no IPPS wage data for the urban area Hinesville, GA (CBSA 25980). Consistent with the methodology discussed above, we calculated the proposed FY 2015 wage index value for CBSA 25980 as the average of the wage index values for all of the other urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown in Table E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 12A, which is listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site). We note that, as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future. Based on FY 2011 IPPS wage data that we are proposing to use to determine the proposed FY 2015 LTCH PPS area wage index values in this proposed rule, there are no proposed rural areas without IPPS hospital wage data. Therefore, it is not necessary to use our established methodology to calculate an LTCH PPS wage index value for proposed rural areas with no IPPS wage data for FY 2015. We note that, as IPPS wage data are dynamic, it is possible that rural areas without IPPS wage data will vary in the future. For FY 2015, we are proposing to use the new OMB delineations under the LTCH PPS, as discussed in greater detail in section VII.D. of the preamble of this proposed rule. Under this proposal, there would be some changes to the current CBSA compositions as a result of the new OMB delineations, which would result in the creation of new CBSAs, ‘‘urban’’ counties that are now ‘‘rural,’’ ‘‘rural’’ counties that are now ‘‘urban,’’ and existing CBSAs that are divided into separate boundaries. Under existing § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area as defined by the Executive OMB, and a ‘‘rural area’’ is defined as any area outside of an urban area. We are not proposing any changes to the current definitions of ‘‘urban area’’ and ‘‘rural area’’ because our proposal to use the new OMB delineations under the LTCH PPS is consistent with the definitions in existing § 412.503. As discussed in sections III.B. and VII.D.2.e. of the preamble of this proposed rule, overall we believe that using the new OMB delineations would result in LTCH PPS area wage index values being more representative of the actual costs of labor in a given area. However, we also recognize that, as a result of our proposal to adopt the new OMB delineations, some LTCHs would experience decreases in area wage index values, while other LTCHs would experience increases in area wage index values. Therefore, to mitigate any shortterm instability in LTCH PPS payments that could result from our proposal to use the new OMB delineations, we are proposing a transitional wage index policy. Under our proposed transitional wage index policy, any LTCH that would experience a decrease in its area wage index solely as a result of the proposal to adopt the new OMB delineations under the LTCH PPS VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 would receive a blended area wage index for FY 2015. That is, for purposes of determining an LTCH’s area wage index for FY 2015, we are proposing to compute LTCH PPS area wage index values using the proposed area wage data discussed above and in section V.B.4. of the Addendum to this proposed rule under both the current (FY 2014) CBSA designations and the proposed new OMB delineations. If the area wage index value under the proposed new OMB delineations would be lower than the proposed are wage index value under the FY 2014 CBSA designations, the LTCH would be paid based on a blended area wage index for FY 2015, which would be computed as the sum of 50 percent of each wage index value (referred to as the proposed 50/50 blended wage index), as described below. Therefore, to determine the applicable area wage index value for each LTCH under this proposed transitional wage index policy that would be effective for discharges occurring on or after October 1, 2014, through September 30, 2015, for this proposed rule, we computed the following two area wage index values: (1) The wage index values calculated using the proposed new OMB delineations; and (2) the wage index values calculated using the current (FY 2014) CBSA designations. The proposed FY 2015 LTCH area wage index values calculated using the new OMB delineations are presented in section VI. of the Addendum to this proposed rule in Table 12A (for urban areas) and Table 12B (for rural areas), which are available via the Internet on the CMS Web site. The proposed FY 2015 LTCH area wage index values calculated using the current (FY 2014) CBSA designations are presented in section VI. of the Addendum to this proposed rule in Table 12C (for urban areas) and Table 12D (for rural areas), which are available via the Internet on the CMS Web site. Where applicable, the wage index values in Tables 12C and 12D would be used to calculate a LTCH’s proposed 50/ 50 blended wage index value under the proposed transitional wage index policy. As explained previously, under our proposed transitional wage index policy, an LTCH would only receive the proposed 50/50 blended area wage index value for FY 2015 if the LTCH’s proposed area wage index value under the new OMB delineations (shown in Table 12A or 12B) would be lower than the proposed area wage index value under the FY 2014 CBSA designations (shown in Tables 12C or 12D). If an LTCH’s proposed area wage index under the new OMB delineations (shown in PO 00000 Frm 00361 Fmt 4701 Sfmt 4702 28337 Tables 12A or 12B) would be higher than the proposed wage index under the FY 2014 CBSA designations (shown in Tables 12C or 12D), we are proposing to pay the LTCH based on 100 percent of the proposed area wage index under the new OMB delineations shown in Tables 12A or 12B (as such the LTCH would not receive the proposed 50/50 blended area wage index). Furthermore, as discussed below and in section VII.D.2.e. of the preamble of this proposed rule, we are proposing to apply this transitional wage index policy in a budget neutral manner. Each LTCH’s proposed labor market area under the new OMB delineations and the current (FY 2014) CBSA-based labor market area designation can be found in the LTCH PPS impact file for this proposed rule, which is available via the Internet on the CMS Web site. 5. Proposed Budget Neutrality Adjustment for Proposed Changes to the Area Wage Level Adjustment Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. Under § 412.525(c)(2), any changes to the area wage index values or labor-related share are to be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage-level adjustment budget neutrality factor that will be applied to the standard Federal rate to ensure that any changes to the area wage-level adjustments are budget neutral such that any changes to the area wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, under § 412.523(d)(4), we apply an area wage-level adjustment budget neutrality factor in determining the standard Federal rate, and we also established a methodology for calculating an area wage-level adjustment budget neutrality factor. (For additional information on the establishment of our budget neutrality policy for changes to the area wage-level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).) For FY 2015, in accordance with § 412.523(d)(4), we are proposing to apply an area wage-level adjustment budget neutrality factor to adjust the standard Federal rate to account for the estimated effect of the proposed adjustments or updates to the area wage- E:\FR\FM\15MYP2.SGM 15MYP2 28338 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments using a methodology that is consistent with the methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). For this proposed rule, in addition to the proposed updates for FY 2015 to the area wage index data and labor-related share discussed above, we are proposing a transitional wage index policy to mitigate the impacts of implementing changes to the LTCH PPS labor market areas (CBSAs) based on new OMB delineations, as discussed above and in section VII.D.2.e. of the preamble of this proposed rule. Because our proposed transitional wage index policy for LTCHs that would experience a decrease in the their area wage index solely as a result of the proposed adoption of the new OMB delineations under the LTCH PPS would result in an increase in estimated aggregate LTCH PPS payments without such changes, we are proposing to include the proposed 50/50 blended area wage index when determining the proposed area wagelevel adjustment budget neutrality factor that we would be applied to the standard Federal rate under § 412.523(d)(4) to ensure that any changes to the area wage-level adjustments are budget neutral. For this proposed rule, using the proposed steps in the proposed methodology described in section VII.D.2.e. of this preamble, we determined a proposed FY 2015 area wage-level adjustment budget neutrality factor of 1.0002034. Accordingly, in section V.A.2. of the Addendum to this proposed rule, to determine the FY 2015 LTCH PPS standard Federal rate, we are proposing to apply a proposed area wage level adjustment budget neutrality factor of 1.0002034, in accordance with § 412.523(d)(4). The proposed FY 2015 LTCH PPS standard Federal rate shown in Table 1E of the Addendum to this proposed rule reflects this adjustment factor. C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii Under § 412.525(b), a cost-of-living adjustment (COLA) is provided for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 taken into account in the adjustment for area wage levels described above. Prior to FY 2014, we used the most recent updated COLA factors obtained from the U.S. Office of Personnel Management (OPM) Web site at https:// www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments for LTCHs located in Alaska and Hawaii. Statutory changes have transitioned the Alaska and Hawaii COLAs to locality pay (phased in over a 3-year period beginning in January 2010, with COLA rates being frozen as of October 28, 2009, and then proportionately reduced to reflect the phase-in of locality pay). For FY 2013, we believed that it was appropriate to use ‘‘frozen’’ COLA factors to adjust payments, while we explored alternatives for updating the COLA factors in the future, and we continued to use the same ‘‘frozen’’ COLA factors used in FY 2012 to adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under § 412.525(b). We also established a methodology to update the COLA factors for Alaska and Hawaii, every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014 (77 FR 53712 through 53713). The methodology we established to update the COLA factors is based on a comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). It also incorporates a 25-percent cap on the CPI-updated COLA factors, which is consistent with a statutorily mandated 25-percent cap that was applied to OPM’s published COLA factors. We believe that determining updated COLA factors using this methodology would appropriately adjust the nonlaborrelated portion of the standard Federal rate for LTCHs located in Alaska and Hawaii. (For additional details on the methodology we established in the FY 2013 IPPS/LTCH PPS final rule to update the COLA factors for Alaska and Hawaii beginning in FY 2014, we refer readers to section VII.D.3. of the preamble of that final rule (77 FR 53481 through 53482).) For FY 2014, we updated the COLA factors published for Alaska and Hawaii by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Under our finalized methodology, we used COLA factors for FY 2014 for the three specified urban areas of Alaska (Anchorage, Fairbanks PO 00000 Frm 00362 Fmt 4701 Sfmt 4702 and Juneau) of 1.23; for the City and County of Honolulu, the County of Kauai, the County of Maui, the County of Kalawao, and ‘‘All other’’ areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For additional details on our policy, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50997through 50998). Under our finalized policy, we update the COLA factors using the methodology described above every 4 years; the first year began in FY 2014 (77 FR 53482). Accordingly, in this proposed rule, for FY 2015, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are proposing to continue to use the COLA factors established in the FY 2014 IPPS/LTCH PPS final rule, which were based on the 2009 OPM COLA factors updated through 2012 by the comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50998) for a discussion of the FY 2014 COLA factors.) Consistent with our historical practice, we are proposing that the proposed COLA factors shown in the table below would adjust the nonlabor-related portion of the proposed standard Federal rate for LTCHs located in Alaska and Hawaii under § 412.525(b). PROPOSED COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS UNDER THE LTCH PPS FOR FY 2015 Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ....................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ....................................... City of Juneau and 80-kilometer (50-mile) radius by road ........ All other areas of Alaska ....... Hawaii: City and County of Honolulu ..... County of Hawaii ....................... County of Kauai ........................ County of Maui and County of Kalawao ................................. 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background Under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of the BIPA, in the regulations at E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules § 412.525(a), we established an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. We refer to these cases as high cost outliers (HCOs). Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be incurred when treating patients who require more costly care and, therefore, reduce the incentives to underserve these patients. We set the outlier threshold before the beginning of the applicable rate year so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. Under § 412.525(a) in the regulations (in conjunction with § 412.503), we make outlier payments for any discharges if the estimated cost of a case exceeds the adjusted LTCH PPS payment for the MS–LTC–DRG plus a fixed-loss amount. Specifically, in accordance with § 412.525(a)(3) (in conjunction with § 412.503), we make an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the patient case and the outlier threshold, which is the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount. The fixed-loss amount is the amount used to limit the loss that a hospital will incur under the outlier policy for a case with unusually high costs. This results in Medicare and the LTCH sharing financial risk in the treatment of extraordinarily costly cases. Under the LTCH PPS HCO policy, the LTCH’s loss is limited to the fixed-loss amount and a fixed percentage of costs above the outlier threshold (adjusted MS–LTC–DRG payment plus the fixedloss amount). The fixed percentage of costs is called the marginal cost factor. We calculate the estimated cost of a case by multiplying the Medicare allowable covered charge by the hospital’s overall hospital cost-to-charge ratio (CCR). Under the LTCH PPS HCO policy at § 412.525(a), we determine a fixed-loss amount, that is, the maximum loss that an LTCH can incur under the LTCH PPS for a case with unusually high costs before the LTCH will receive any additional payments. We calculate the fixed-loss amount by estimating aggregate payments with and without an outlier policy. The fixed-loss amount results in estimated total outlier payments being projected to be equal to 8 percent of projected total LTCH PPS VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 payments. Currently, MedPAR claims data and CCRs based on data from the most recent Provider-Specific File (PSF) (or from the applicable statewide average CCR if an LTCH’s CCR data are faulty or unavailable) are used to establish a fixed-loss threshold amount under the LTCH PPS. 2. Determining LTCH CCRs Under the LTCH PPS a. Background The following is a discussion of CCRs that are used in determining payments for HCO and SSO cases under the LTCH PPS, at § 412.525(a) and § 412.529, respectively. Although this section is specific to HCO cases, because CCRs and the policies and methodologies pertaining to them are used in determining payments for both HCO and SSO cases (to determine the estimated cost of the case at § 412.529(d)(2)), we are discussing the determination of CCRs under the LTCH PPS for both of these types of cases simultaneously. In determining both HCO payments (at § 412.525(a)) and SSO payments (at § 412.529), we calculate the estimated cost of the case by multiplying the LTCH’s overall CCR by the Medicare allowable charges for the case. In general, we use the LTCH’s overall CCR, which is computed based on either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period, in accordance with § 412.525(a)(4)(iv)(B) and § 412.529(f)(4)(ii) for HCOs and SSOs, respectively. (We note that, in some instances, we use an alternative CCR, such as the statewide average CCR in accordance with the regulations at § 412.525(a)(4)(iv)(C) and § 412.529(f)(4)(iii), or a CCR that is specified by CMS or that is requested by the hospital under the provisions of the regulations at § 412.525(a)(4)(iv)(A) and § 412.529(f)(4)(i).) Under the LTCH PPS, a single prospective payment per discharge is made for both inpatient operating and capital-related costs. Therefore, we compute a single ‘‘overall’’ or ‘‘total’’ LTCH-specific CCR based on the sum of LTCH operating and capital costs (as described in Section 150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub. 100–4)) as compared to total charges. Specifically, an LTCH’s CCR is calculated by dividing an LTCH’s total Medicare costs (that is, the sum of its operating and capital inpatient routine and ancillary costs) by its total Medicare charges (that is, the sum of its operating PO 00000 Frm 00363 Fmt 4701 Sfmt 4702 28339 and capital inpatient routine and ancillary charges). b. LTCH Total CCR Ceiling Generally, an LTCH is assigned the applicable statewide average CCR if, among other things, an LTCH’s CCR is found to be in excess of the applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This is because CCRs above this threshold are most likely due to faulty data reporting or entry, and CCRs based on erroneous data should not be used to identify and make payments for outlier cases. Therefore, under our established policy, generally, if an LTCH’s calculated CCR is above the applicable ceiling, the applicable LTCH PPS statewide average CCR is assigned to the LTCH instead of the CCR computed from its most recent (settled or tentatively settled) cost report data. In this proposed rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the December 2013 update of the PSF, we are proposing to establish a total CCR ceiling of 1.341under the LTCH PPS for FY 2015 in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs. Consistent with our historical policy of using the best available data, we also are proposing that if more recent data become available, we would use such data to establish a total CCR ceiling for FY 2015 in the final rule. c. LTCH Statewide Average CCRs Our general methodology established for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling (described above) because it is based on ‘‘total’’ IPPS CCR data. Under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(C) and the SSO policy at § 412.529(f)(4)(iii), the MAC may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for an LTCH in one of the following circumstances: (1) New LTCHs that have not yet submitted their first Medicare cost report (for this purpose, consistent with current policy, a new LTCH is defined as an entity that has not accepted assignment of an existing hospital’s provider agreement in accordance with § 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, missing or faulty data). (Other sources of E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28340 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules data that the MAC may consider in determining an LTCH’s CCR include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as an LTCH (that is, the period of at least 6 months that it was paid as a shortterm, acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.) Consistent with our historical practice of using the best available data, in this proposed rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS ‘‘total CCR’’ data from the December 2013 update of the PSF, we are proposing to establish LTCH PPS statewide average total CCRs for urban and rural hospitals that would be effective for discharges occurring on or after October 1, 2014 through September 20, 2015, in Table 8C listed in section VI. of the Addendum to this proposed rule (and available via the Internet). Consistent with our historical policy of using the best available data, we also are proposing that if more recent data become available, we would use such data to establish statewide average total CCRs for urban and rural LTCHs for FY 2015 in the final rule. Under the proposed changes to the LTCH PPS labor market areas based on the new OMB delineations, all areas in Delaware, the District of Columbia, New Jersey, and Rhode Island would be classified as urban. Therefore, there are no proposed rural statewide average total CCRs listed for those jurisdictions in Table 8C. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the same as the policy applied under the IPPS. In addition, although Connecticut and Massachusetts have areas that are designated as rural, there are no shortterm, acute care IPPS hospitals or LTCHs located in those areas as of December 2013. Therefore, consistent with our existing methodology, we are proposing to use the national average total CCR for rural IPPS hospitals for rural Connecticut and Massachusetts in Table 8C listed in section VI. of the Addendum to this proposed rule (and available via the Internet). In addition, consistent with our existing methodology, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, we are proposing to continue to use, as a proxy, the VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We are proposing to use this proxy because we believe that the CCR data in the PSF for Maryland hospitals may not be entirely accurate (as discussed in greater detail in the FY 2007 IPPS final rule (71 FR 48120)). d. Reconciliation of LTCH HCO and SSO Payments We note that under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at § 412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively, are subject to reconciliation. Specifically, any reconciliation of outlier payments is based on the CCR that is calculated based on a ratio of cost-to-charge data computed from the relevant cost report determined at the time the cost report coinciding with the discharge is settled. For additional information, we refer readers to sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100–4) as added by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821). 3. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for FY 2015 When we implemented the LTCH PPS, as discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad authority of section 123 of the BBRA as amended by section 307(b) of BIPA, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. To determine the fixed-loss amount, we estimate outlier payments and total LTCH PPS payments for each case using claims data from the MedPAR files. Specifically, to determine the outlier payment for each case, we estimate the cost of the case by multiplying the Medicare covered charges from the claim by the LTCH’s CCR. Under § 412.525(a)(3) (in conjunction with § 412.503), if the estimated cost of the case exceeds the outlier threshold, we make an outlier payment equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (that is, the sum of the adjusted Federal prospective payment for the MS–LTC– DRG and the fixed-loss amount). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 53715), we presented our policies regarding the methodology and data we used to establish the fixed-loss amount of $13,314 for FY 2014, which PO 00000 Frm 00364 Fmt 4701 Sfmt 4702 was calculated using our existing methodology to calculate the fixed-loss amount for FY 2014 (based on the data and the rates and policies presented in that final rule) in order to maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments. Consistent with our historical practice of using the best data available, in determining the fixedloss amount for FY 2014, we used the most recent available LTCH claims data and CCR data, that is, LTCH claims data from the March 2013 update of the FY 2012 MedPAR file and CCRs from the March 2013 update of the PSF, as these data were the most recent complete LTCH data available at that time. In this proposed rule, for FY 2015, in general, we are proposing to continue to use our existing methodology to calculate a fixed-loss amount for FY 2015 using the best available data that would maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments (based on the rates and policies presented in this proposed rule). Specifically, for this proposed rule, we are proposing to use LTCH claims data from the December 2013 update of the FY 2013 MedPAR file and CCRs from the December 2013 update of the PSF to determine a fixed-loss amount that would result in estimated outlier payments projected to be equal to 8 percent of total estimated payments in FY 2015 because these data are the most recent complete LTCH data available at this time. We also are proposing that if more recent data become available, we would use such data to determine a fixed-loss amount for FY 2015 in the final rule. (For additional detail on the rationale for setting the HCO payment ‘‘target’’ at 8 percent of total estimated LTCH PPS payments, we refer readers to the FY 2003 LTCH PPS final rule (67 FR 56022 through 56024).) Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are proposing to establish a fixed-loss amount of $15,730 for FY 2015. Therefore, we are proposing to make an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS–LTC–DRG and the proposed fixedloss amount of $15,730). We also note that the proposed fixed-loss amount of $15,730 for FY 2015 is slightly higher than the FY 2014 fixed-loss amount of $13,314. Based on our payment simulations using the most recent available data at this time, the proposed increase in the fixed-loss amount for FY E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 2015 is necessary to maintain the existing requirement that estimated outlier payments equal 8 percent of estimated total LTCH PPS payments. (As noted above, for further information on the existing 8 percent HCO ‘‘target’’ requirement, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56024).) Maintaining the fixed-loss amount at the current level would result in HCO payments that are more than the current regulatory 8-percent requirement because a lower fixed-loss amount would result in more cases qualifying as outlier cases, as well as higher outlier payments for qualifying HCO cases because the maximum loss that an LTCH must incur before receiving an HCO payment (that is, the fixed-loss amount) would be smaller. For these reasons, we believe that proposing to raise the fixed-loss amount is appropriate and necessary to maintain that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments as required under § 412.525(a). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Application of the Outlier Policy to SSO Cases As we discussed in the August 30, 2002 final rule (67 FR 56026), under some rare circumstances, an LTCH discharge could qualify as an SSO case (as defined in the regulations at § 412.529 in conjunction with § 412.503) and also as an HCO case. In this scenario, a patient could be hospitalized for less than five-sixths of the geometric average length of stay for the specific MS–LTC–DRG, and yet incur extraordinarily high treatment costs. If the estimated costs exceeded the HCO threshold (that is, the SSO payment plus the fixed-loss amount), the discharge is eligible for payment as an HCO. Therefore, for an SSO case in FY 2015, the HCO payment would be 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the proposed fixed-loss amount of $15,730 and the amount paid under the SSO policy as specified in § 412.529). E. Proposed Update to the IPPS Comparable/Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology In the FY 2014 IPPS/LTCH PPS final rule, we established a policy for reflecting the changes to the Medicare IPPS DSH payment adjustment methodology provided for by section 3133 of the Affordable Care Act in the calculation of the ‘‘IPPS comparable amount’’ under the SSO policy at VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 § 412.529 and the ‘‘IPPS equivalent amount’’ under the 25-percent threshold payment adjustment policy at § 412.534 and § 412.536. Historically, the determination of both the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ include an amount for inpatient operating costs ‘‘for the costs of serving a disproportionate share of low-income patients.’’ Under the statutory changes to the Medicare DSH payment adjustment methodology that began in FY 2014, in general, eligible IPPS hospitals receive an empirically justified Medicare DSH payment equal to 25 percent of the amount they otherwise would have received under the statutory formula for Medicare DSH payments prior to the amendments made by the Affordable Care Act. The remaining amount, equal to an estimate of 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under the age of 65 who are uninsured, is made available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The additional uncompensated care payments are based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all IPPS hospitals that receive Medicare DSH payments. To reflect the statutory changes to the Medicare DSH payment adjustment methodology in the calculation of the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ under the LTCH PPS, we stated that we will include a reduced Medicare DSH payment amount that reflects the projected percentage of the payment amount calculated based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act that will be paid to eligible IPPS hospitals as empirically justified Medicare DSH payments and uncompensated care payments in that year (that is, a percentage of the operating DSH payment amount that has historically been reflected in the LTCH PPS payments that is based on IPPS rates). We also stated that the projected percentage will be updated annually, consistent with the annual determination of the amount of uncompensated care payments that will be made to eligible IPPS hospitals. As explained in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50766 through 50767), we believe that this approach PO 00000 Frm 00365 Fmt 4701 Sfmt 4702 28341 results in appropriate payments under the LTCH PPS and is consistent with our intention that the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ under the LTCH PPS closely resemble what an IPPS payment would have been for the same episode of care, while recognizing that some features of the IPPS cannot be translated directly into the LTCH PPS. For FY 2014, aggregate Medicare IPPS operating DSH payments are projected to be reduced to 95.7 percent of the amount that would otherwise have been paid under the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act. Accordingly, for FY 2014, the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 includes an applicable operating Medicare DSH payment amount that is equal to 95.7 percent of the operating Medicare DSH payment amount based the current statutory Medicare DSH payment formula (that is, the operating Medicare DSH payment amount historically included in those calculations) (76 FR 50766). As discussed in greater detail in section IV.F.3.d.(2) of the preamble of this proposed rule, our estimate of 75 percent of the amount that would otherwise have been paid as Medicare DSH payments (under the methodology outlined in section 1886(r)(2) of the Act) would be adjusted to 80.35 percent of that amount to reflect the change in the percentage of individuals that are uninsured. The resulting amount is then used to determine the amount of proposed uncompensated care payments that would be made to eligible IPPS hospitals in FY 2015. In other words, Medicare DSH payments prior to the amendments made by the Affordable Care Act are adjusted to 60.26 percent (the product of 75 percent and 80.35 percent) and the resulting amount is used to calculate the proposed uncompensated care payments to eligible hospitals. As a result, for FY 2015, we project that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the proposed payments for uncompensated care under section 1886(r)(2) of the Act, would result in overall Medicare DSH payments of 85.26 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of amendments made by the Affordable Care Act (that is, 25 percent + 60.26 percent = 85.26 percent). Therefore, in this proposed rule, for FY 2015, we are proposing that the calculation of the E:\FR\FM\15MYP2.SGM 15MYP2 28342 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules F. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for FY 2015 multiplying the labor-related share of the standard Federal rate by the applicable LTCH PPS wage index (proposed FY 2015 values are shown in Tables 12A through 12D listed in section VI. of the Addendum of this proposed rule and are available via the Internet). The proposed standard Federal rate is also adjusted to account for the higher costs of LTCHs located in Alaska and Hawaii by the applicable COLA factors (the proposed FY 2015 factors are shown in the chart in section V.C. of this Addendum) in accordance with § 412.525(b). In this proposed rule, we are proposing to establish a standard Federal rate for FY 2015 of $40,943.51 (applicable to discharges from LTCHs that submit the required quality reporting data for FY 2015 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act), as discussed above in section V.A.2. of the Addendum to this proposed rule. We illustrate the methodology to adjust the proposed LTCH PPS Federal standard rate for FY 2015 in the following example: Section 412.525 sets forth the adjustments to the LTCH PPS standard Federal rate. Under § 412.525(c), the standard Federal rate is adjusted to account for differences in area wages by Example: During FY 2015, a Medicare patient is in an LTCH located in Chicago, Illinois (CBSA 16974). The proposed FY 2015 LTCH PPS wage index value for CBSA 16974 is 1.0369 (obtained from Table 12A listed in section VI. of the Addendum of this proposed ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 would include an applicable operating Medicare DSH payment amount that would be equal to 85.26 percent of the operating Medicare DSH payment amount based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act. Consistent with our historical practice of using the best available data, if more recent data become available, for the final rule, we would use such data to determine the percentage of the operating Medicare DSH payment amount based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act used in the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 for FY 2015. rule and available via the Internet on the CMS Web site). The Medicare patient is classified into MS–LTC–DRG 198 (Pulmonary Edema & Respiratory Failure), which has a proposed relative weight for FY 2015 of 0.9122 (obtained from Table 11 listed in section VI. of the Addendum of this proposed rule and available via the Internet on the CMS Web site). The LTCH submitted quality reporting data for FY 2015 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. To calculate the LTCH’s total adjusted proposed Federal prospective payment for this Medicare patient in FY 2015, we compute the wage-adjusted proposed Federal prospective payment amount by multiplying the unadjusted proposed FY 2015 standard Federal rate ($40,943.51, for LTCHs that submit quality reporting data for FY 2015 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act) by the proposed labor-related share (62.571 percent) and the proposed wage index value (1.0369). This wage-adjusted amount is then added to the proposed nonlabor-related portion of the unadjusted proposed standard Federal rate (37.429 percent; adjusted for cost of living, if applicable) to determine the adjusted proposed Federal rate, which is then multiplied by the proposed MS–LTC–DRG relative weight (0.9122) to calculate the total adjusted proposed Federal LTCH PPS prospective payment for FY 2015 ($38,211.00). The table below illustrates the components of the calculations in this example. Unadjusted Proposed Standard Federal Prospective Payment Rate (applicable to discharges from LTCHs that submit the required quality data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act) ................................ Proposed Labor-Related Share ................................................................................................................................................... $40,943.51 × 0.62571 Proposed Labor-Related Portion of the Federal Rate ................................................................................................................ Proposed Wage Index (CBSA 16974) ........................................................................................................................................ = $25,618.76 × 1.0369 Proposed Wage-Adjusted Labor Share of Federal Rate ............................................................................................................ Proposed Nonlabor-Related Portion of the Federal Rate ($40,943.51 × 0.37429) .................................................................... = $26,564.09 + $15,324.75 Adjusted Proposed Federal Rate Amount ................................................................................................................................... Proposed MS–LTC–DRG 198 Relative Weight .......................................................................................................................... = $41,888.84 × 0.9122 Total Adjusted Proposed Federal Prospective Payment ..................................................................................................... = $38,211.00 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 VI. Tables Referenced in This Proposed Rule and Available Only Through the Internet on the CMS Web Site This section lists the tables referred to throughout the preamble of this proposed rule and in this Addendum. In the past, a majority of these tables were published in the Federal Register as part of the annual proposed and final rules. However, similar to FYs 2012 through 2014, for the FY 2015 rulemaking cycle, the IPPS and LTCH tables will not be published as part of the annual IPPS/LTCH PPS proposed and final rulemakings and will be available only through the Internet. Specifically, all IPPS Tables listed below with the exception of IPPS Tables VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E will be available only through the Internet. IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed at the end of this section and will continue to be published in the Federal Register as part of the annual proposed and final rules. As discussed in section II.G.11. and 13. of the preamble of this proposed rule, Tables 6A through 6F will not be issued with this FY 2015 proposed rule because there are no proposed new, revised, or deleted diagnosis or procedure codes for FY 2015. As discussed in section IV.D. of this proposed rule, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April PO 00000 Frm 00366 Fmt 4701 Sfmt 4702 1, 2014, extended, through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015), the temporary changes in the low-volume hospital definition and methodology for determining the payment adjustment originally made by the Affordable Care Act (and extended by subsequent legislation through March 31, 2014). We refer the reader to section IV.D. for complete details on the low-volume hospital payment adjustment. Therefore, Table 14 associated with this proposed rule lists the proposed low-volume payment adjustments. In addition, under section 3008 of the Affordable Care Act, a hospital’s total payment may be reduced by 1 percent if it is in the lowest HAC performance quartile. We E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 refer the reader to section IV.J. for complete details on this adjustment. Therefore, Table 17 contains the FY 2015 proposed proxy list of providers subject to the HAC Reduction Program. Finally, a hospital’s proposed Factor 3 is the proposed proportion of the uncompensated care amount that a DSH will receive under section 3133 of the Affordable Care Act. Factor 3 is the hospital’s estimated number of Medicaid days and Medicare SSI days relative to the estimate of all DSHs’ Medicaid days and Medicare SSI days. Therefore, Table 18 contains the proposed FY 2015 Medicare DSH uncompensated care payment Factor 3 for all hospitals and identifies whether or not a hospital is projected to receive DSH and, therefore, eligible to receive the additional payment for uncompensated care for FY 2015. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified below should contact Michael Treitel at (410) 786–4552. The following IPPS tables for this FY 2015 proposed rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/. Click on the link on the left side of the screen titled, ‘‘FY 2015 IPPS Proposed Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. Table 2–1.—Hospital Average Hourly Wages for Federal Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage Data); and Proposed 3-Year Average of Hospital Average Hourly Wages; Based on CBSA Delineations Used in FY 2014 Table 2–2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2012; Proposed Hospital Wage Indexes for Federal Fiscal Year 2015; Hospital Average Hourly Wages for Federal Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage Data; Based on Proposed FY 2015 CBSA Delineations); and 3-Year Average of Hospital Average Hourly Wages Table 3A–1.—Proposed FY 2015 and 3-Year * Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY 2014 Table 3A–2.—Proposed FY 2015 and 3-Year * Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY 2015 Table 3B–1.—Proposed FY 2015 and 3-Year * Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY 2014 Table 3B–2.—Proposed FY 2015 and 3-Year * Average Hourly Wage for Acute Care VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY 2015 Table 4A–1.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4A–2.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4B–1.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4B–2.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4C–1.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4C–2.—Proposed Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4D–1.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index; Urban Areas with Acute Care Hospitals Receiving the Proposed Statewide Rural Floor or Imputed Floor Wage Index—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4D–2.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index; Urban Areas with Acute Care Hospitals Receiving the Proposed Statewide Rural Floor or Imputed Floor Wage Index—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4E–1.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4E–2.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4F–1.—Proposed Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 4F–2.—Proposed Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 4J.—Proposed Out-Migration Adjustment for Acute Care Hospitals— FY 2015 Table 5.—List of Proposed Medicare Severity Diagnosis-Related Groups (MS–DRGs), PO 00000 Frm 00367 Fmt 4701 Sfmt 4702 28343 Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay—FY 2015 Table 6I.—Proposed Major CC List—FY 2015 Table 6J.—Proposed Complete CC List—FY 2015 Table 6K.—Proposed Complete List of CC Exclusions—FY 2015 Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2013 MedPAR Update— December 2013 GROUPER V31.0 MS– DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2013 MedPAR Update— December 2013 GROUPER V32.0 MS– DRGs Table 8A.—Proposed FY 2015 Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural) Table 8B.—Proposed FY 2015 Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals Table 9A–1.—Hospital Reclassifications and Redesignations—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 9A–2.—Hospital Reclassifications and Redesignations—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 9C–1.—Hospitals Redesignated as Rural Under Section 1886(d)(8)(E) of the Act—FY 2015; Based on CBSA Delineations Used in FY 2014 Table 9C–2.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2015; Based on CBSA Delineations Used in FY 2015 Table 10.—Proposed New Technology AddOn Payment Thresholds 1 2 for Applications for FY 2016 Table 12C.—Proposed LTCH PPS Wage Index for Urban Areas under the Current CBSA Designations for Discharges Occurring From October 1, 2014 through September 30, 2105 Table 12D.—Proposed LTCH PPS Wage Index for Rural Areas Under the Current CBSA Designations for Discharges Occurring From October 1, 2014 Through September 30, 2015 Table 14.—List of Hospitals With Fewer Than 1,600 Medicare Discharges Based on the December 2013 Update of the FY 2013 MedPAR file and Potentially Eligible Hospitals’ FY 2015 Low-Volume Payment Adjustment for Discharges Occurring Before April 1, 2015 (Eligibility for the low-volume payment adjustment is also dependent upon meeting the mileage criteria specified at § 412.101(b)(2)(ii) of the regulations.) Table 15.—Proposed FY 2015 Readmissions Adjustment Factors Table 16.—Proposed Updated Proxy Hospital Inpatient Value-Based Purchasing (VBP) Program Adjustment Factors for FY 2015 Table 17.—FY 2015 Preliminary Analysis of the Hospital-Acquired Conditions Reduction Program Table 18.—Proposed FY 2015 Medicare DSH Uncompensated Care Payment Factor 3 The following LTCH PPS tables for this FY 2015 proposed rule are available only through the Internet on the CMS E:\FR\FM\15MYP2.SGM 15MYP2 28344 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Table 12B.—Proposed LTCH PPS Wage Index for Rural Areas Under the New OMB CBSA Delineations for Discharges Occurring From October 1, 2014 Through September 30, 2015 Table 13A.—Proposed Composition of LowVolume Quintiles for MS–LTC–DRGs— FY 2015 Table 13B.—Proposed No-Volume MS–LTC– DRG Crosswalk for FY 2015 Length of Stay, Short-Stay Outlier (SSO) Threshold, and ‘‘IPPS Comparable Threshold’’ for Discharges Occurring From October 1, 2014 Through September 30, 2015 Under the LTCH PPS Table 12A.—Proposed LTCH PPS Wage Index for Urban Areas Under the New OMB CBSA Delineations for Discharges Occurring From October 1, 2014 Through September 30, 2015 Web site at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/LongTermCareHospitalPPS/ index.html under the list item for Regulation Number CMS–1607–P. Table 8C.—Proposed FY 2015 Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs (Urban and Rural) Table 11.—Proposed MS–LTC–DRGs, Relative Weights, Geometric Average TABLE 1A—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (69.6 PERCENT LABOR SHARE/30.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2015 Hospital submitted quality data and is a meaningful EHR user (Update = 2.1 percent) Hospital did not submit quality data and is a meaningful EHR user (Update = 1.425 percent) Hospital submitted quality data and is NOT a meaningful EHR user (Update = 1.425 percent) Hospital did not submit quality data and is NOT a meaningful EHR user (Update = 0.75 percent) Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor $3,759.46 $1,642.06 $3,734.61 $1,631.20 $3,734.61 $1,631.20 $3,709.75 $1,620.35 TABLE 1B—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2015 Hospital submitted quality data and is a meaningful EHR user (Update = 2.1 percent) Hospital did NOT submit quality data and is a meaningful EHR user (Update = 1.425 percent) Hospital submitted quality data and is NOT a meaningful EHR user (Update = 1.425 percent) Hospital did NOT submit quality data and is NOT a meaningful EHR user (Update = 0.75 percent) Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor $3,348.94 $2,052.58 $3,326.80 $2,039.01 $3,326.80 $2,039.01 $3,304.66 $2,025.44 TABLE 1C—PROPOSED ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR EQUAL TO 1; PUERTO RICO: 63.2 PERCENT LABOR SHARE/36.8 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1 OR 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1—FY 2015 Rates if wage index is greater than 1 Standardized amount Labor National 1 .................................................................................................................................. Puerto Rico .............................................................................................................................. (2) (2) $1,605.07 $934.59 1 For 2 Not Labor Nonlabor $3,348.94 1,574.59 $2,052.58 965.07 FY 2015, there are no CBSAs in Puerto Rico with a national wage index greater than 1. applicable. TABLE 1D—PROPOSED CAPITAL FEDERAL PAYMENT STANDARD RATE—FY 2015 TABLE 1E—PROPOSED LTCH STAND- Appendix A: Economic Analyses ARD FEDERAL PROSPECTIVE PAY- I. Regulatory Impact Analysis MENT RATE—FY 2015 A. Introduction Full update (2.1 percent) Rate National ......................................... Puerto Rico ................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Nonlabor Rates if wage index is less than or equal to 1 $433.01 206.82 Standard Federal Rate ....... Reduced update * (0.1 percent) $40,943.51 $40,141.47 * For LTCHs that fail to submit quality reporting data for FY 2015 in accordance with the LTCH Quality Reporting (LTCHQR) Program, the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 PO 00000 Frm 00368 Fmt 4701 Sfmt 4702 We have examined the impacts of this proposed rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011) the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We have determined that this proposed rule is a major rule as defined in 5 U.S.C. 804(2). We estimate that the proposed changes for FY 2015 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million to acute care hospitals. The applicable percentage increase to the IPPS rates required by the statute, in conjunction with other proposed payment changes in this proposed rule, would result in an estimated $864 million decrease in FY 2015 operating payments (or ¥0.8 percent change) and an estimated $126 million increase in FY 2015 capital payments (or 1.2 percent change). These changes are relative to payments made in FY 2014. The impact analysis of the capital payments can be found in section I.J. of this Appendix. In addition, as described in section I.K. of this Appendix, LTCHs are expected to experience an increase in payments by $44 million in FY 2015 relative to FY 2014. Our operating impact estimate includes the proposed ¥0.8 percent documentation and coding adjustment applied to the IPPS standardized amount, which represents part of the recoupment required under section 631 of the ATRA. In addition, our operating payment impact estimate includes the proposed 2.1 percent hospital update to the standardized amount (which includes the estimated 2.7 percent market basket update less 0.4 percentage point for the proposed multifactor productivity adjustment and less 0.2 percentage point required under the Affordable Care Act). The estimates of proposed IPPS operating payments to acute care hospitals do not reflect any changes in hospital admissions or real case-mix intensity, which will also affect overall payment changes. The analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this proposed rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. This proposed rule would affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. Finally, in accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget has reviewed this proposed rule. B. Statement of Need This proposed rule is necessary in order to make payment and policy changes under the Medicare IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 hospitals and hospital units excluded from the IPPS. This proposed rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS payment system. C. Objectives of the IPPS The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund. We believe that the proposed changes in this proposed rule would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable while avoiding or minimizing unintended adverse consequences. D. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes effective for FY 2014, on various hospital groups. We estimate the effects of individual proposed policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. E. Hospitals Included in and Excluded From the IPPS The prospective payment systems for hospital inpatient operating and capitalrelated costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 32 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short-term, acute care hospitals, hospitals in Maryland are paid in accordance with the Maryland All-Payer Model, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, 5 short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) that receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. As of December 2013, there were 3,468 IPPS acute care hospitals included in our analysis. This represents approximately 57 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There also are approximately 1,332 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS. IPPS-excluded hospitals PO 00000 Frm 00369 Fmt 4701 Sfmt 4702 28345 and units include IPFs, IRFs, LTCHs, RNHCIs, children’s hospitals, 11 cancer hospitals, and 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, which are paid under separate payment systems. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts for these IPPS-excluded hospitals and units are not included in this proposed rule. The impact of the proposed update and proposed policy changes to the LTCH PPS for FY 2015 is discussed in section I.L. of this Appendix. F. Effects on Hospitals and Hospital Units Excluded From the IPPS As of March 2014, there were 97 children’s hospitals, 11 cancer hospitals, 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa, and 18 RNHCIs being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. (In accordance with § 403.752(a) of the regulation, RNHCIs are paid under § 413.40.) Among the remaining providers, 244 rehabilitation hospitals and 896 rehabilitation units, and 432 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 487 psychiatric hospitals and 1,139 psychiatric units are paid the Federal per diem amount under the IPF PPS. As stated above, IRFs and IPFs are not affected by the rate updates discussed in this proposed rule. The impacts of the proposed changes on LTCHs are discussed in section I.K. of this Appendix. For children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNHCIs, the proposed update of the rate-of-increase limit (or target amount) is the estimated FY 2015 percentage increase in the IPPS operating market basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and §§ 403.752(a) and 413.40 of the regulations. As discussed in section IV. of the preamble of the FY 2014 IPPS/LTCH PPS final rule, we rebased the IPPS operating market basket to a FY 2010 base year. Therefore, we are proposing to use the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for FY 2015 and subsequent fiscal years for children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNHCIs that are paid based on reasonable costs subject to the rate-of-increase limits. Consistent with current law, based on IHS Global Insight, Inc.’s 2014 first quarter forecast of the FY 2010-based market basket increase, we are estimating that the proposed FY 2015 update based on the IPPS operating market basket is 2.7 percent (that is, the current estimate of the market basket rate-ofincrease). However, the Affordable Care Act requires an adjustment for multifactor productivity (currently estimated to be 0.4 percentage point for FY 2015) and a 0.2 percentage point reduction to the market E:\FR\FM\15MYP2.SGM 15MYP2 28346 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 basket update resulting in a proposed 2.1 percent applicable percentage increase for IPPS hospitals that submit quality data and are meaningful EHR users, as discussed in section IV.B. of the preamble of this proposed rule. Children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNCHIs that continue to be paid based on reasonable costs subject to rate-ofincrease limits under § 413.40 of the regulations are not subject to the reductions in the applicable percentage increase required under the Affordable Care Act. Therefore, for those hospitals paid under § 413.40 of the regulations, the proposed update would be the percentage increase in the FY 2015 IPPS operating market basket, estimated at 2.7 percent, without the reductions required under the Affordable Care Act. The impact of the proposed update in the rate-of-increase limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded hospitals that have maintained their cost increases at a level below the rateof-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with cost increases above the cumulative update in their rate-of-increase limits, the major effect is the amount of excess costs that will not be paid. We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system and whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus the lesser of: (1) 50 percent of its reasonable costs in excess of 110 percent of the limit, or (2) 10 percent of its limit. In addition, under the various provisions set forth in § 413.40, hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. G. Quantitative Effects of the Proposed Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates In this proposed rule, we are announcing proposed policy changes and payment rate updates for the IPPS for FY 2015 for operating costs of acute care hospitals. The proposed FY 2015 updates to the capital payments to acute care hospitals are discussed in section I.J. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2015 operating payments will decrease by 0.8 percent compared to FY 2014. In addition to the applicable percentage increase, this amount reflects the proposed FY 2015 recoupment adjustment for documentation and coding described in section II.D. of the preamble of this proposed rule of ¥0.8 percent to the IPPS national standardized amounts. The impacts do not reflect changes in the number of hospital admissions or real case-mix intensity, which will also affect overall payment changes. We have prepared separate impact analyses of the proposed changes to each system. This VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 section deals with the proposed changes to the operating inpatient prospective payment system for acute care hospitals. Our payment simulation model relies on the most recent available data to enable us to estimate the impacts on payments per case of certain changes in this proposed rule. However, there are other proposed changes for which we do not have data available that will allow us to estimate the payment impacts using this model. For those proposed changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. The data used in developing the quantitative analyses of changes in payments per case presented below are taken from the FY 2013 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the proposed changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost reports were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change. Third, we use various data sources to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from the different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible. Using cases from the FY 2013 MedPAR file, we simulated proposed payments under the operating IPPS given various combinations of payment parameters. As described above, Indian Health Service hospitals and hospitals in Maryland were excluded from the simulations. The proposed impact of payments under the capital IPPS, or the impact of payments for costs other than inpatient operating costs, are not analyzed in this section. Proposed estimated payment impacts of the capital IPPS for FY 2015 are discussed in section I.J. of this Appendix. We discuss the following proposed changes below: • The effects of the proposed application of the documentation and coding adjustment and the proposed applicable percentage increase (including the market basket update, the multifactor productivity adjustment and the applicable percentage reduction in accordance with the Affordable Care Act) to the standardized amount and hospitalspecific rates. • The effects of the proposed changes to the relative weights and MS–DRG grouper. • The effects of the proposed changes in hospitals’ wage index values reflecting updated wage data from hospitals’ cost reporting periods beginning during FY 2011, compared to the FY 2010 wage data, and the proposed adoption of new OMB labor market area delineations to calculate the FY 2015 wage index. • The combined effects of the proposed recalibration of the MS–DRG relative weights PO 00000 Frm 00370 Fmt 4701 Sfmt 4702 as required by section 1886(d)(4)(C) of the Act and the proposed wage index (including the updated wage data and the proposed adoption of new OMB labor market area delineations), including the proposed wage and recalibration budget neutrality factors. • The effects of the geographic reclassifications by the MGCRB (as of publication of this proposed rule) and the effects of the proposed adoption of new OMB labor market area delineations on these reclassifications, that would be effective for FY 2015. • The effects of the proposed rural floor and imputed floor with the application of the national budget neutrality factor applied to the wage index where the rural floor and imputed floor wage index are calculated based on the proposed adoption of the new OMB labor market area delineations. • The effects of the proposed adoption of the new labor market area delineations announced by OMB in February 2013 on hospital redesignations. • The effects of the proposed 3-year transition for urban hospitals redesignated as rural and the transitional blended wage index for hospitals whose FY 2015 wage indexes will decrease solely as a result of adopting the new OMB delineations. • The effects of the proposed frontier State wage index adjustment under the statutory provision that requires that hospitals located in States that qualify as frontier States to not have a wage index less than 1.0. This provision is not budget neutral. • The effects of the proposed implementation of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in a hospital’s wage index if a threshold percentage of residents of the county where the hospital is located commute to work at hospitals in counties with higher wage indexes. • The effects of the proposed policies for implementation of the Hospital Readmissions Reduction Program under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, that adjusts a hospital’s base operating DRG amount by an adjustment factor to account for a hospital’s excess readmissions. • The effects of the proposed policies for continued implementation of section 3133 of the Affordable Care Act that reduces Medicare DSH payments to 25 percent of what hospitals had been previously paid under section 1886(d)(5)(F) of the Act and establishes an additional payment to be made to hospitals that receive DSH payments for their relative share of the total amount of uncompensated care. • The effects of the proposed FY 2015 implementation of section 1886(o) of the Act, as added by section 3008 of the Affordable Care Act, which establishes payment reductions under the HAC Reduction Program. Hospitals ranked in the lowest 25 percent of performance on HACs are subject to a 1-percent reduction in total IPPS payments. • The total estimated change in payments based on the proposed FY 2015 policies relative to payments based on FY 2014 policies that include the applicable E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules percentage increase of 2.1 percent (or 2.7 percent market basket update with a proposed reduction of 0.4 percentage point for the multifactor productivity adjustment, and a 0.2 percentage point reduction, as required under the Affordable Care Act). The total estimated change in payments for FY 2015 reflects the extension of MDH payment status for the first 6 months of FY 2015, in accordance with the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) enacted on April l, 2014. To illustrate the impact of the proposed FY 2015 changes, our analysis begins with a FY 2014 baseline simulation model using: The proposed FY 2015 applicable percentage increase of 2.1 percent and the proposed documentation and coding recoupment adjustment of 0.8 percent to the Federal standardized amount; the FY 2014 MS–DRG GROUPER (Version 31.0); the current FY 2014 CBSA designations for hospitals based on the OMB delineations; the FY 2014 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total operating MS–DRG and outlier payments for modeling purposes. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Public Law 109– 171, as amended by section 4102(b)(1)(A) of the ARRA (Pub. L. 111–5) and by section 3401(a)(2) of the Affordable Care Act (Pub. L. 111–148), provides that, for FY 2007 and each subsequent year through FY 2014, the update factor will include a reduction of 2.0 percentage points for any subsection (d) hospital that does not submit data on measures in a form and manner and at a time specified by the Secretary. Beginning in FY 2015, the reduction is one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or one-quarter of the market basket update. Therefore, for FY 2015, we are proposing that hospitals that do not submit quality information under rules established by the Secretary and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act will receive an applicable percentage increase of 1.425 percent. At the time that this impact was prepared, 64 hospitals did not receive the full market basket rate-of-increase for FY 2014 because they failed the quality data submission process or did not choose to participate. For purposes of the simulations shown below, we modeled the payment changes for FY 2015 using a reduced update for these 64 hospitals. However, we do not have enough information at this time to determine which hospitals will not receive the full update factor for FY 2015. Beginning in FY 2015, in accordance with section 1886(b)(3)(B)(ix) of the Act, a hospital that has been identifies as not an EHR meaningful user will be subject to a reduction of one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or one-quarter of the market basket update. Therefore, for FY 2015, we are proposing that hospitals that are identified as not EHR meaningful users and do submit quality information under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of 1.425 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 percent. Hospitals that are identified as not EHR meaningful users under section 1886(b)(3)(B)(ix) of the Act and also do not submit quality data under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of 0.75 percent, which reflects a one-quarter reduction of the market basket update for failure to submit quality data and a onequarter reduction of the market basket update for being identified as not an EHR meaningful user. For FY 2015, we have yet to finalize a list of hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. Therefore, we are proposing not to include this adjustment to the standardized amount (for those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for FY 2015. We intend to release a final list of hospitals that are not meaningful EHR user in September 2014. Hospitals identified on this list will be paid based on the applicable proposed standardized amount in Table 1A for discharges occurring in FY 2015. Each proposed policy change, statutory or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2015 model incorporating all of the proposed changes. This simulation allows us to isolate the effects of each proposed change. Our final comparison illustrates the proposed percent change in payments per case from FY 2014 to FY 2015. Three factors not discussed separately have significant impacts here. The first factor is the update to the standardized amount. In accordance with section 1886(b)(3)(B)(i) of the Act, we are updating the standardized amounts for FY 2015 using a proposed applicable percentage increase of 2.1 percent. This includes our forecasted IPPS operating hospital market basket increase of 2.7 percent with a proposed reduction of 0.4 percentage point for the multifactor productivity adjustment and a 0.2 percentage point reduction as required under the Affordable Care Act. (Hospitals that fail to comply with the quality data submission requirements and are meaningful EHR users would receive a proposed update of 1.425 percent. This update includes a reduction of one-quarter of the market basket update for failure to submit these data). We note that hospitals that do comply with the quality data submission requirements but are not meaningful EHR users would receive a proposed update of 1.425 percent, which includes a reduction of one-quarter of the market basket update. Furthermore, hospitals that do not comply with the quality data submission requirements and also are not meaningful EHR users would receive a proposed update of 0.75 percent. However, as discussed earlier, we do not have a list of hospitals that are not meaningful EHR users and have not included this adjustment to the standardized amount (for those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for FY 2015. Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs also are equal to the applicable percentage increase, or 2.1 percent. In addition, we are proposing to update the Puerto Rico-specific amount by an applicable PO 00000 Frm 00371 Fmt 4701 Sfmt 4702 28347 percentage increase of 2.1 percent, if the hospital submits quality data and is a meaningful EHR user. A second significant factor that affects the changes in hospitals’ payments per case from FY 2014 to FY 2015 is the change in hospitals’ geographic reclassification status from one year to the next. That is, payments may be reduced for hospitals reclassified in FY 2014 that are no longer reclassified in FY 2015. Conversely, payments may increase for hospitals not reclassified in FY 2014 that are reclassified in FY 2015. A third significant factor is that we currently estimate that actual outlier payments during FY 2014 will be 5.79 percent of total MS–DRG payments. When the FY 2014 IPS/LTCH PPS final rule was published, we projected FY 2014 outlier payments would be 5.1 percent of total MS– DRG plus outlier payments; the average standardized amounts were offset correspondingly. The effects of the higher than expected outlier payments during FY 2014 (as discussed in the Addendum to this proposed rule) are reflected in the analyses below comparing our current estimates of FY 2014 payments per case to estimated FY 2015 payments per case (with outlier payments projected to equal 5.1 percent of total MS– DRG payments). 2. Analysis of Table I Table I displays the results of our analysis of the proposed changes for FY 2015. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 3,388 acute care hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: All urban, which is further divided into large urban and other urban; and rural. There are 2,542 hospitals located in urban areas included in our analysis. Among these, there are 1,395 hospitals located in large urban areas (populations over 1 million), and 1,147 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 846 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals’ proposed FY 2015 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,558; 1,408; 1,150; and 830, respectively. The next three groupings examine the impacts of the proposed changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive E:\FR\FM\15MYP2.SGM 15MYP2 28348 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Medicare DSH payments, or some combination of these two adjustments. There are 2,352 nonteaching hospitals in our analysis, 792 teaching hospitals with fewer than 100 residents, and 244 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 The next five rows examine the impacts of the proposed changes on rural hospitals by special payment groups (SCHs, RRCs, and MDHs). There were 208 RRCs, 324 SCHs, and 154 MDHs (MDH status is extended through March 31, 2015 only under Pub. L. 113–93), 124 hospitals that are both SCHs and RRCs, and 11 hospitals that are MDHs and RRCs (MDH status is through March 31, 2015 only under Pub. L. 113–93). The next series of groupings are based on the type of ownership and the hospital’s Medicare utilization expressed as a percent of total patient days. These data were taken PO 00000 Frm 00372 Fmt 4701 Sfmt 4702 from the FY 2012 or FY 2011 Medicare cost reports. The next two groupings concern the geographic reclassification status of hospitals. The first grouping displays all urban hospitals that were reclassified by the MGCRB for FY 2015. The second grouping shows the MGCRB rural reclassifications. The final category shows the impact of the proposed policy changes on the 15 cardiac hospitals. E:\FR\FM\15MYP2.SGM 15MYP2 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00373 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 28349 EP15MY14.002</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules VerDate Mar<15>2010 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00374 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 EP15MY14.003</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28350 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00375 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 28351 EP15MY14.004</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules VerDate Mar<15>2010 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00376 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 EP15MY14.005</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28352 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00377 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 28353 EP15MY14.006</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules VerDate Mar<15>2010 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00378 Fmt 4701 Sfmt 4725 E:\FR\FM\15MYP2.SGM 15MYP2 EP15MY14.007</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28354 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules a. Effects of the Proposed Hospital Update and Proposed Documentation and Coding Adjustment (Column 2) As discussed in section II.D. of the preamble of this proposed rule, this column includes the proposed hospital update, including the proposed 2.7 percent market basket update, the proposed reduction of 0.4 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction in accordance with the Affordable Care Act. In addition, this column includes the proposed FY 2015 documentation and coding recoupment adjustment of -0.8 percent on the national standardized amount as part of the recoupment required by section 631 of the ATRA. As a result, we are proposing to make a 1.3 percent update to the national standardized amount. This column also includes the proposed 2.1 percent update to the hospital-specific rates which also includes the proposed 2.7 percent market basket update, the proposed reduction of 0.4 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction in accordance with the Affordable Care Act. Overall, hospitals would experience a 1.3 percent increase in payments primarily due to the effects of the hospital update and documentation and coding adjustment on the national standardized amount. Hospitals that are paid under the hospital-specific rate, namely SCHs, would experience a 2.1 percent increase in payments; therefore, hospital categories with SCHs paid under the hospital-specific rate would experience increases in payments of more than 1.3 percent. b. Effects of the Proposed Changes to the MS– DRG Reclassifications and Relative CostBased Weights With Recalibration Budget Neutrality (Column 3) Column 3 shows the effects of the proposed changes to the MS–DRGs and relative weights with the application of the proposed recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of the Act, we are proposing to calculate a recalibration budget neutrality factor to account for the proposed changes in MS–DRGs and relative weights to ensure that the overall payment impact is budget neutral. As discussed in section II.E. of the preamble of this proposed rule, the FY 2015 MS–DRG relative weights will be 100 percent cost-based and 100 percent MS–DRGs. For FY 2015, the MS–DRGs are calculated using the FY 2013 MedPAR data grouped to the Version 32.0 (FY 2015) MS–DRGs. The proposed methodology to calculate the relative weights and the proposed reclassification changes to the GROUPER are described in more detail in section II.H. of the preamble of this proposed rule. The ‘‘All Hospitals’’ line in Column 3 indicates that changes due to the MS–DRGs and relative weights would result in a 0.0 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 percent change in payments with the application of the proposed recalibration budget neutrality factor of 0.992938 on to the standardized amount. Hospital categories that generally treat more surgical cases than medical cases would experience increases in their payments due to the changes to the relative weight methodology. Rural hospitals would experience a 0.6 percent decrease in payments because rural hospitals tend to treat fewer surgical cases than medical cases, while teaching hospitals with more than 100 residents would experience an increase in payments by 0.3 percent as those hospitals treat more surgical cases than medical cases. c. Effects of the Proposed Wage Index Changes (Column 4) Column 4 shows the impact of updated wage data using FY 2011 cost report data and the proposed new OMB labor market area delineations, with the application of the proposed wage budget neutrality factor. The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core Based Statistical Areas (CBSAs) established by OMB. The current statistical areas used in FY 2014 were based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. In order to implement these changes for the IPPS, it is necessary to identify the new labor market area delineation for each county and hospital in the country. However, because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications needed to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not implement changes to the wage index for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index based on the new OMB delineations in this FY 2015 proposed rule. As discussed below, in this proposed rule, we are proposing to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective beginning with the FY 2015 IPPS wage index. Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for acute care hospitals for FY 2015 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2010 PO 00000 Frm 00379 Fmt 4701 Sfmt 4702 28355 and before October 1, 2011. The estimated impact of the updated wage data using the FY 2011 cost report data and the proposed new OMB labor market area delineations on hospital payments is isolated in Column 4 by holding the other payment parameters constant in this simulation. That is, Column 4 shows the proposed percentage change in payments when going from a model using the FY 2014 wage index, based on FY 2010 wage data, the labor-related share of 69.6 percent, under the new OMB delineations and having a 100-percent occupational mix adjustment applied, to a model using the proposed FY 2015 pre-reclassification wage index based on FY 2011 wage data with the proposed labor-related share of 69.6 percent, under the new OMB delineations, also having a 100percent occupational mix adjustment applied, while holding other payment parameters such as use of the Version 32.0 MS–DRG GROUPER constant). The FY 2015 occupational mix adjustment is based on the CY 2010 occupational mix survey. In addition, the column shows the impact of the application of the proposed wage budget neutrality to the proposed national standardized amount. In FY 2010, we began calculating separate wage budget neutrality and recalibration budget neutrality factors, in accordance with section 1886(d)(3)(E) of the Act, which specifies that budget neutrality to account for wage index changes or updates made under that subparagraph must be made without regard to the 62 percent labor-related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2015, we are proposing to calculate the wage budget neutrality factor to ensure that payments under updated wage data and the proposed labor-related share of 69.6 percent are budget neutral without regard to the lower labor-related share of 62 percent applied to hospitals with a wage index less than or equal to 1.0. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the higher labor-related share of the standardized amount. The proposed wage budget neutrality factor is 1.000578, and the overall payment change is zero percent. Column 4 shows the impacts of updating the wage data using FY 2011 cost reports. Overall, the new wage data and the proposed labor-related share, combined with the proposed wage budget neutrality adjustment, would lead to a 0.0 percent change for all hospitals as shown in Column 4. In looking at the wage data itself, the national average hourly wage increased 1.9 percent compared to FY 2014. Therefore, the only manner in which to maintain or exceed the previous year’s wage index was to match or exceed the national 1.9 percent increase in average hourly wage. Of the 3,373 hospitals with wage data for both FYs 2014 and 2015, 1,644 or 48.7 percent would experience an average hourly wage increase of 1.9 percent or more. The following chart compares the shifts in proposed wage index values for hospitals due to changes in the average hourly wage data for FY 2015 relative to FY 2014. Among urban hospitals, 11 would experience a decrease of more than 10 percent, with no urban hospital experiencing an increase of E:\FR\FM\15MYP2.SGM 15MYP2 28356 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules more than 10 percent. One hundred twentyone urban hospitals would experience an increase or decrease of at least 5 percent or more but less than or equal to 10 percent. Among rural hospitals, none would experience a decrease of more than 5 percent, but 5 rural hospitals would experience an increase of greater than 5 percent but less than or equal to10 percent. However, 803 rural hospitals would experience increases or decreases of less than or equal to 5 percent, while 2,325 urban hospitals would experience increases or decreases of less than or equal to 5 percent. One hundred eight urban and rural hospitals would not experience a change in their wage index. These figures reflect proposed changes in the ‘‘pre-reclassified, occupational mix-adjusted wage index,’’ that is, the proposed wage index before the proposed application of geographic reclassification, the proposed rural and imputed floors, the proposed outmigration adjustment, and other proposed wage index exceptions and adjustments. We note that this analysis was performed by applying the new OMB labor market area delineations to the FY 2015 proposed wage data and also by recomputing the FY 2014 final wage data to reflect the new OMB delineations. (We refer readers to sections III.G.2. through III.I. of the preamble of this proposed rule for a complete discussion of the exceptions and adjustments to the wage index.) We note that the proposed ‘‘postreclassified wage index’’ or ‘‘payment wage index,’’ the proposed wage index that includes all such exceptions and adjustments (as reflected in Tables 2, 4A, 4B, 4C, and 4F of the Addendum to this proposed rule, which are available via the Internet on the CMS Web site) is used to adjust the proposed labor-related share of a hospital’s standardized amount, either 69.6 percent or 62 percent, depending upon whether a hospital’s wage index is greater than 1.0 or less than or equal to 1.0. Therefore, the proposed pre-reclassified wage index figures in the chart below may illustrate a somewhat larger or smaller change than would occur in a hospital’s payment wage index and total payment. The following chart shows the projected impact of changes in the average hourly wage data for urban and rural hospitals. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Percentage change in proposed area wage index values Number of hospitals Urban Increase more than 10 percent .......................... Increase more than 5 percent and less than or equal to 10 percent ....... Increase or decrease less than or equal to 5 percent ............................... Decrease more than 5 percent and less than or equal to 10 percent ....... Decrease more than 10 percent .......................... Unchanged ....................... VerDate Mar<15>2010 20:20 May 14, 2014 Rural 0 0 29 5 2,325 803 92 0 11 76 0 32 Jkt 232001 d. Combined Effects of the Proposed MS– DRG and Wage Index Changes (Column 5) Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS–DRG reclassifications and the relative weights cannot increase or decrease aggregate payments. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. We computed a proposed wage budget neutrality factor of 1.000578 and a proposed recalibration budget neutrality factor of 0.992938 (which is applied to the Puerto Rico-specific standardized amount and the hospital-specific rates). The product of the two proposed budget neutrality factors is the proposed cumulative wage and recalibration budget neutrality factor. The proposed cumulative wage and recalibration budget neutrality adjustment is 0.993512, or approximately 0.65 percent, which is applied to the national standardized amounts. Because the wage budget neutrality and the recalibration budget neutrality are calculated under different methodologies according to the statute, when the two budget neutralities are combined and applied to the standardized amount, the overall payment impact is not necessarily budget neutral. However, in this proposed rule, we are estimating that the proposed changes in the MS–DRG relative weights and updated wage data with wage and budget neutrality applied would result in a 0.0 percent change in payments. e. Effects of Proposed MGCRB Reclassifications (Column 6) Our impact analysis to this point has assumed acute care hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on other bases than where they are geographically located). The changes in Column 6 reflect the per case payment impact of moving from this baseline to a simulation incorporating the proposed MGCRB decisions for FY 2015 and the effects of the proposed adoption of the new OMB labor market area delineations on these reclassifications which affect hospitals’ wage index area assignments. By spring of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital’s reclassification request for the purpose of using another area’s wage index value. Hospitals may appeal denials of MGCRB decisions to the CMS Administrator. Further, hospitals have 45 days from publication of the IPPS proposed rule in the Federal Register to decide whether to withdraw or terminate an approved geographic reclassification for the following year. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, for purposes of this impact analysis, we are proposing to apply an adjustment of 0.991412 to ensure that the effects of the reclassifications under section 1886(d)(10) of the Act are budget neutral (section II.A. of the Addendum to this PO 00000 Frm 00380 Fmt 4701 Sfmt 4702 proposed rule). Geographic reclassification generally benefits hospitals in rural areas. We estimate that the geographic reclassification would increase payments to rural hospitals by an average of 1.8 percent. By region, all the rural hospital categories would experience increases in payments due to MGCRB reclassifications. Table 9A listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site reflects the reclassifications for FY 2015. f. Effects of the Proposed Rural and Imputed Floor, Including Application of Proposed National Budget Neutrality (Column 7) As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the FYs 2011, 2012, 2013 and 2014 IPPS/ LTCH PPS final rules, and this proposed rule, section 4410 of Public Law 105–33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the wage index received by rural hospitals in the same State. We apply a uniform budget neutrality adjustment to the wage index. The imputed floor, which is also included in the calculation of the budget neutrality adjustment to the wage index, was extended in FY 2012 for 2 additional years. In the past, only urban hospitals in New Jersey received the imputed floor. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53369), we established an alternative temporary methodology for the imputed floor, which resulted in an imputed floor for Rhode Island for FY 2013. For FY 2014, we extended the imputed rural floor, as calculated under the original methodology and the alternative methodology. For FY 2015, we are proposing to extend the imputed rural floor, as calculated under the original methodology and the alternative methodology. As a result, under this proposal, New Jersey, Rhode Island, and Delaware would receive an imputed floor, with 12 out of 64 hospitals in New Jersey receiving the imputed floor, 1 out of 6 hospitals in Delaware receiving the imputed floor and 4 out of 11 hospitals in Rhode Island receiving the imputed floor. The Affordable Care Act requires that we apply one rural floor budget neutrality factor to the wage index nationally, and the imputed floor is part of the rural floor budget neutrality factor applied to the wage index nationally. We have calculated a proposed FY 2015 rural floor budget neutrality factor to be applied to the wage index of 0.989455, which would reduce wage indexes by 1.1 percent. Column 7 shows the projected impact of the proposed rural floor and imputed floor with the proposed national rural floor budget neutrality factor applied to the wage index based on the proposed new OMB labor market area delineations. The column compares the proposed post-reclassification FY 2015 wage index of providers before the rural floor and imputed floor adjustment and the proposed post-reclassification FY 2015 wage index of providers with the proposed rural floor and imputed floor adjustment based on the proposed new OMB labor market area delineations. Only urban E:\FR\FM\15MYP2.SGM 15MYP2 28357 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hospitals can benefit from the rural and imputed floors. Because the provision is budget neutral, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) would experience a decrease in payments due to the proposed budget neutrality adjustment that is applied nationally to their wage index. We estimate that 441 hospitals benefit from the proposed rural and imputed floors while the remaining 2,947 IPPS hospitals in our model have their wage index reduced by the proposed rural floor budget neutrality adjustment of 0.989455 (or 1.1 percent). We project that, in aggregate, rural hospitals would experience a 0.3 percent decrease in payments as a result of the application of the proposed rural floor budget neutrality because the rural hospitals do not benefit from the rural floor, but have their wage indexes downwardly adjusted to ensure that the application of the rural floor is budget neutral overall. We project hospitals located in urban areas would experience no change in payments because increases in payments by hospitals benefitting from the rural floor offset decreases in payments by nonrural floor urban hospitals whose wage index is downwardly adjusted by the proposed rural floor budget neutrality factor. Urban hospitals in the New England region can expect a 2.7 percent increase in payments primarily due to the application of the proposed rural floor in Massachusetts and Connecticut. Fifty-one urban providers in Massachusetts are expected to receive the proposed rural floor wage index value, including proposed rural floor budget neutrality, of 1.3383, increasing payments overall to Massachusetts by an estimated $158 million. During most past years, there have been no IPPS hospitals located in rural areas in Massachusetts. There was one urban IPPS hospital that was reclassified to rural Massachusetts (under section 1886(d)(8)(E) of the Act) which established the Massachusetts rural floor, but the wage index resulting from that hospital’s data was not high enough for any urban hospital to benefit from the rural floor policy. However, for the FY 2012 wage index, the rural floor for Massachusetts was established by the conversion of a CAH to an IPPS hospital that is geographically located in rural Massachusetts. The rural floor in Massachusetts continues to be set by the wage index of the hospital in rural Massachusetts that converted from CAH to IPPS status. We estimate that Massachusetts hospitals would receive approximately a 4.9 percent increase in IPPS payments due to the application of the rural floor in FY 2015. Urban Puerto Rico hospitals are expected to experience a 0.0 percent change in payments as a result of the application of a proposed Puerto Rico rural floor with the application of the proposed Puerto Rico rural floor budget neutrality adjustment. We are proposing to apply a rural floor budget neutrality factor to the Puerto Rico-specific wage index of 0.991359 or ¥0.86 percent. The Puerto Rico-specific wage index adjusts the Puerto Rico-specific standardized amount, which represents 25 percent of payments to Puerto Rico hospitals. The increases in payments experienced by the urban Puerto Rico hospitals that benefit from a rural floor are offset by the decreases in payments by the nonrural floor urban Puerto Rico hospitals that have their wage indexes downwardly adjusted by the proposed rural floor budget neutrality adjustment. As a result, overall, urban Puerto Rico hospitals would experience a 0.0 percent change in payments due to the application of the proposed rural floor with rural floor budget neutrality. There are 12 hospitals out of the 64 hospitals in New Jersey that benefit from the extension of the proposed imputed floor and would receive the proposed imputed floor wage index value under the new OMB labor market area delineations, including the proposed rural floor budget neutrality, of 1.0986 which we estimate would increase payments to those imputed floor hospitals by $17 million (the State, overall, would see a decrease in payments of approximately $5 million due the other hospitals in the State experiencing decreases in payments due to the rural floor budget neutrality adjustment). Four Rhode Island hospitals would benefit from the proposed imputed rural floor calculated under the alternative methodology and receive an additional $3.5 million (the State, overall, would receive an additional $1.6 million). One hospital in Delaware would benefit from the extension of the proposed imputed floor and would receive the proposed imputed floor wage index value under the new OMB labor market area delineations, and would receive an additional $25,000 (the State, overall, would experience a decrease in payments of $2.3 million). In response to a public comment addressed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593), we are providing the payment impact of the proposed rural floor and imputed floor with budget neutrality at the State level. Column 1 of the table below displays the number of IPPS hospitals located in each State. Column 2 displays the number of hospitals in each State that would receive the proposed rural floor or imputed floor wage index for FY 2015 based on the proposed new OMB labor market area delineations. Column 3 displays the percentage of total payments each State would receive or contribute to fund the proposed rural floor and imputed floor with national budget neutrality based on the proposed new OMB labor market area delineations. The column compares the proposed post-reclassification FY 2015 wage index of providers before the proposed rural floor and imputed floor adjustment and the proposed post-reclassification FY 2015 wage index of providers with the proposed rural floor and imputed floor adjustment with the wage indexes calculated based on the proposed new OMB labor market area delineations. Column 4 displays the estimated payment amount that each State would gain or lose due to the application of the proposed rural floor and imputed floor with national budget neutrality. We will update our State-by-State rural floor budget neutrality impact analysis for the FY 2015 IPPS/LTCH PPS final rule. FY 2015 IPPS PROPOSED ESTIMATED PAYMENTS DUE TO PROPOSED RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY Number of hospitals mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Percent change in payments due to application of proposed rural floor and imputed floor with budget neutrality Difference (in millions) (1) State Number of hospitals that would receive the proposed rural floor or imputed floor (2) (3) (4) Alabama ....................................................................................................... Alaska .......................................................................................................... Arizona ......................................................................................................... Arkansas ...................................................................................................... California ...................................................................................................... Colorado ...................................................................................................... Connecticut .................................................................................................. Delaware ...................................................................................................... Washington, DC ........................................................................................... Florida .......................................................................................................... Georgia ........................................................................................................ Hawaii .......................................................................................................... Idaho ............................................................................................................ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00381 Fmt 4701 91 6 56 45 308 46 31 6 7 168 106 12 14 Sfmt 4702 E:\FR\FM\15MYP2.SGM 2 4 8 0 184 5 8 1 0 25 0 1 0 15MYP2 ¥0.5 1.8 ¥0.1 ¥0.5 2 ¥0.1 ¥0.3 ¥0.5 ¥0.6 ¥0.3 ¥0.5 ¥0.4 ¥0.4 ¥$8.5 2.6 ¥2.3 ¥5.4 196.3 ¥1.0 ¥4.6 ¥2.3 ¥2.7 ¥19.9 ¥13.1 ¥1.2 ¥1.3 28358 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules FY 2015 IPPS PROPOSED ESTIMATED PAYMENTS DUE TO PROPOSED RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY—Continued Number of hospitals Percent change in payments due to application of proposed rural floor and imputed floor with budget neutrality Difference (in millions) (1) State Number of hospitals that would receive the proposed rural floor or imputed floor (2) (3) (4) Illinois ........................................................................................................... Indiana ......................................................................................................... Iowa ............................................................................................................. Kansas ......................................................................................................... Kentucky ...................................................................................................... Louisiana ...................................................................................................... Maine ........................................................................................................... Massachusetts ............................................................................................. Michigan ....................................................................................................... Minnesota .................................................................................................... Mississippi .................................................................................................... Missouri ........................................................................................................ Montana ....................................................................................................... Nebraska ...................................................................................................... Nevada ......................................................................................................... New Hampshire ........................................................................................... New Jersey .................................................................................................. New Mexico ................................................................................................. New York ..................................................................................................... North Carolina .............................................................................................. North Dakota ................................................................................................ Ohio ............................................................................................................. Oklahoma ..................................................................................................... Oregon ......................................................................................................... Pennsylvania ................................................................................................ Puerto Rico .................................................................................................. Rhode Island ................................................................................................ South Carolina ............................................................................................. South Dakota ............................................................................................... Tennessee ................................................................................................... Texas ........................................................................................................... Utah ............................................................................................................. Vermont ....................................................................................................... Virginia ......................................................................................................... Washington .................................................................................................. West Virginia ................................................................................................ Wisconsin ..................................................................................................... Wyoming ...................................................................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 g. Proposed Impact of the New OMB Delineations (Column 8) Column 8 shows the effects of the proposed new OMB labor market area delineations. This column compares the payments under the proposed rural and imputed floor wage index with rural floor budget neutrality calculated under the new OMB delineations and the payments under the proposed rural and imputed floor wage index with budget neutrality calculated under the current OMB delineations. It does not reflect the proposed 3-year transition for hospitals that are currently located in urban counties that would become rural under the new OMB delineations and the 1-year transition to the new OMB delineations where the wage indexes are blended such that hospitals receive 50 percent of their wage index based on the new OMB delineations, and 50 percent of their wage index based on their current labor market VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 127 91 34 53 65 100 20 61 95 51 64 78 12 23 24 13 64 25 163 87 6 134 86 33 154 52 11 55 19 98 322 32 6 79 49 30 65 11 area. Rather, it shows the proposed impact if the new OMB delineations were to be fully implemented for FY 2015. Approximately 666 hospitals have their wage index impacted due to the new OMB delineations. Urban and rural Middle Atlantic hospitals would experience the largest decreases in payments if the new OMB delineations were fully implemented for FY 2015, with payment decreases of 0.4 and 0.3 percent, respectively. Rural New England hospitals and Lugar hospitals would experience the largest increases in payments if the new OMB delineations were fully implemented for FY 2015 with payment increases of 0.4 percent and 0.6 percent, respectively. h. Proposed Application of the CBSA Transition Wage Index With Budget Neutrality (Column 9) As discussed earlier in this proposed rule, for FY 2015, we are proposing to use the most recent labor market area delineations PO 00000 Frm 00382 Fmt 4701 Sfmt 4702 0 5 0 0 1 3 0 51 0 0 0 0 4 0 19 9 12 0 0 0 1 11 2 0 10 11 4 12 0 21 13 2 0 1 8 2 1 0 ¥0.6 ¥0.6 ¥0.3 ¥0.4 ¥0.5 ¥0.5 ¥0.5 4.9 ¥0.6 ¥0.6 ¥0.5 ¥0.5 ¥0.3 ¥0.5 1.6 0.4 ¥0.1 ¥0.4 ¥0.6 ¥0.5 ¥0.3 ¥0.5 ¥0.5 ¥0.6 ¥0.5 0 0.4 ¥0.1 ¥0.4 ¥0.3 ¥0.5 ¥0.5 ¥0.4 ¥0.5 ¥0.2 ¥0.4 ¥0.5 ¥0.3 ¥28.5 ¥13.1 ¥3.2 ¥4.1 ¥7.9 ¥7.0 ¥2.5 157.8 ¥24.1 ¥10.4 ¥5.5 ¥11.7 ¥0.9 ¥2.8 10.9 1.8 ¥5.0 ¥1.7 ¥48.9 ¥16.7 ¥0.8 ¥17.6 ¥5.8 ¥5.0 ¥22.2 ¥0.1 1.6 ¥0.9 ¥1.2 ¥6.0 ¥31.9 ¥2.3 ¥0.8 ¥12.4 ¥3.0 ¥3.3 ¥8.8 ¥0.4 issued by OMB but are proposing a transition period in certain circumstances. Specifically, we are proposing a 3-year transition for hospitals that are currently located in an urban county that would become rural under the new OMB labor market area delineations under which such hospitals would be assigned the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (that is, for FYs 2015, 2016, and 2017). We also are proposing a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively due to the proposed implementation of the new OMB labor market area delineations. We are proposing that a post-reclassified wage index with the rural and imputed floor applied would be E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another postreclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We are proposing to compare these two wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we are proposing that a blended wage index would be computed, consisting of 50 percent of each of the two wage indexes added together. We are proposing that this blended wage index would be the hospital’s wage index for FY 2015. This proposed adjustment would only apply to hospitals that would experience a drop in their actual payment wage index exclusively due to the proposed implementation of the new OMB labor market area delineations. Hospitals that benefit from the new OMB labor market area delineations would receive their new wage index based on the new OMB labor market area delineations. We refer readers to section III.B. of the preamble to this proposed rule for a complete discussion on the transition wage indexes. Lastly, we are proposing to apply both the 3-year transition and 50/50 blended wage index adjustments in a budget neutral manner. We are proposing to make an adjustment to the standardized amount to ensure that the total payments, including the effect of the transition provisions, would equal what payments would have been if we would not be providing for these transitional wage indexes. Column 9 shows the effects of the proposed adoption of the new OMB labor market area delineations, including the 3year hold harmless provision for hospitals that are currently located in an urban county that would become rural under the new OMB delineations and the proposed 1-year transition to the new OMB delineations where the wage indexes are blended such that hospitals receive 50 percent of their wage index based on the new OMB delineations and 50 percent of their wage index based on their current labor market area. For FY 2015, we are proposing to apply both the 3-year transition and 50/50 blended wage index adjustments in a budget neutral manner, with a proposed budget neutrality factor of 0.998856 (or ¥0.1 percent) applied to the standardized amount to ensure that the total payments, including the effect of the transition provisions, would equal what payments would have been if we would not be providing for these transitional wage indexes. This column shows the payment impact of the proposed transitional wage index. For columns 1 through 8, the payment impacts and budget neutrality factors have been calculated under the new OMB labor market area delineations. Under the proposed 1-year transition to the new OMB delineations, hospitals that would have experienced a decrease in payments if the new OMB delineations had been fully implemented this year now would have those decreases alleviated due to the transition. Urban Middle Atlantic hospitals would experience a 0.4 percent increase in payments due to the proposed application of VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the transitional wage index with budget neutrality, while urban New England, South Atlantic, East North Central, West North Central, West South Central, Mountain and Pacific hospitals would experience a ¥0.1 percent change in payments due to the proposed transitional budget neutrality adjustment of ¥0.1 percent applied to the standard Federal rate. i. Effects of the Application of the Proposed Frontier State Wage Index and Out-Migration Adjustment (Column 8) This column shows the combined effects of the application of section 10324(a) of Affordable Care Act which requires that we establish a minimum post-reclassified wageindex of 1.00 for all hospitals located in ‘‘frontier States,’’ and the effects of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. These two wage index provisions are not budget neutral and increase payments overall by 0.1 percent compared to the provisions not being in effect. The term ‘‘frontier States’’ is defined in the statute as States in which at least 50 percent of counties have a population density less than 6 persons per square mile. Based on these criteria, four States (Montana, North Dakota, South Dakota, and Wyoming) are considered frontier States and 46 hospitals located in those States will receive a frontier wage index of 1.0000. Nevada is also, by definition, a frontier State and was assigned a frontier floor value of 1.0000 for FY 2012, but since then and including in this proposed rule, its rural floor value has been greater than 1.0000 so it has not been subject to the frontier wage index. Overall, this provision is not budget neutral and is estimated to increase IPPS operating payments by approximately $65 million or approximately 0.1 percent. Rural hospitals located in the Mountain region and urban hospitals located in the West North Central region would experience an increase in payments by 0.9 and 0.8 percent, respectively, because many of the hospitals located in this region are frontier State hospitals. In addition, section 1886(d)(13) of the Act, as added by section 505 of Public Law 108– 173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. Hospitals located in counties that qualify for the payment adjustment are to receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, postreclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index. There are an estimated 244 providers that would receive the proposed out-migration wage adjustment in FY 2015. Rural hospitals generally qualify for the adjustment, resulting in a 0.2 percent increase in payments. This PO 00000 Frm 00383 Fmt 4701 Sfmt 4702 28359 provision appears to benefit rural Middle Atlantic hospitals most in that they would experience a 0.2 percent increase in payments. This out-migration wage adjustment is also not budget neutral, and we estimate the impact of these providers receiving the out-migration increase to be approximately $47 million. j. Effects of the Proposed Reductions Under the Hospital Readmissions Reduction Program (Column 11) Column 11 shows our estimates of the effects of the proposed policies for reductions in payments under the Hospital Readmissions Reduction Program, which was established under section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payments to account for excess readmissions, which for FY 2015, is based on a hospital’s risk-adjusted readmission rate during a 3year period for five applicable conditions: acute myocardial infarction, heart failure, pneumonia, total hip and total knee arthroplasty and chronic obstructive pulmonary disease. This provision is not budget neutral. A hospital’s readmission adjustment is the higher of a ratio of the hospital’s aggregate payments for excess readmissions to their aggregate payments for all discharges, or a floor, which has been defined in the statute as 0.97 (or a 3.0 percent reduction) for FY 2015. A hospital’s base operating DRG payment (that is, wageadjusted DRG payment amount, as discussed in section IV.G. of the preamble of this proposed rule) is the portion of the IPPS payment subject to the readmissions payment adjustment (DSH, IME, outliers and lowvolume add-on payments are not subject to the readmissions adjustment). In this proposed rule, we estimate that 2,623 hospitals would have their base operating DRG payments reduced by their hospitalspecific readmissions adjustment, an increase from FY 2014, due to the proposed addition of new readmissions measures in the program. As a result, we estimate that the Hospital Readmissions Reduction Program would result in a 0.4 percent decrease, or approximately $422 million, in payments to hospitals overall for FY 2015 relative to no provision. We estimate that the Hospital Readmissions Reduction Program would result in a 0.2 percent decrease in payments relative to FY 2014. Rural West South Central hospitals and hospitals with high Medicare utilization would experience the highest decreases of 0.8 and 0.7 percent, respectively. Puerto Rico hospitals would show a 0 percent change in payments because they are exempt from the provision. k. Effects of the Proposed Changes to Medicare DSH Payments (Column 12) Column 12 shows the effects of the proposed adjustments to Medicare DSH payments made under section 3133 of the Affordable Care Act. Under section 3133, hospitals that are eligible to receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the former statutory formula for Medicare DSH payments. The remainder, E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28360 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules equal to an estimate of 75 percent of what otherwise formerly would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments, is available to make additional payments to each hospital that qualifies for Medicare DSH payments. Each Medicare DSH hospital will receive an additional payment based on its estimated share of the total amount of uncompensated care for all Medicare DSH hospitals. The reduction to Medicare DSH payments is not budget neutral. For FY 2015, we are proposing that the amount to be distributed on the basis of uncompensated care, which is 75 percent of our estimate of what otherwise would have been paid in Medicare DSH payments (that is, Factor 1), be adjusted to 80.36 percent of that amount to reflect changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments (that is, Factor 1 multiplied by Factor 2). For FY 2014, the uncompensated care payment was 75 percent of what otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 94.3 percent. Assuming DSH payments are constant, the proposed FY 2015 uncompensated care amount is approximately 10 percentage points less than the uncompensated care amount that we distributed for FY 2014. As a result, we project that compared to the empirically justified DSH payments and the uncompensated care payments made last year payments for FY 2015 would be reduced overall by 1.0 percent as compared to Medicare DSH payments made last year under the first year of the implementation of section 3133 of the Affordable Care Act. The proposed uncompensated care payment methodology has redistributive effects based on a Medicare DSH hospital’s low income insured patient days (sum of Medicaid patient days and Medicare SSI patient days) relative to the Medicaid patient days and Medicare SSI patient days for Medicare DSH hospitals, and the payment amount is not tied to a hospital’s discharges. Urban Pacific hospitals would experience no change in DSH and uncompensated care payments relative to last year. Hospitals with low Medicare utilization (Medicare days are less than 25 percent of total inpatient day) would experience the largest decreases in payments compared to last year of ¥2.3 percent. l. Effects of the Proposed Reductions Under the HAC Reduction Program (Column 13) Column 13 shows the estimated effects of the proposed policies for reductions in payments under the HAC Reduction Program, established under section 3008 of the Affordable Care Act. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 effective for discharges beginning on October 1, 2014, and for subsequent program years. Beginning in FY 2015, hospitals scoring in the top quartile for the rate of HAC rate as compared to the national average will have their IPPS payments reduced by 1 percent for all discharges in that Federal fiscal year. We estimate that, under this proposal, 753 hospitals would be subject to the 1-percent reduction, and that overall payments would decrease approximately 0.3 percent or $330 million. Government hospitals and teaching hospitals with more than 100 residents would experience the biggest decrease in payments under the HAC Reduction Program of ¥0.5 percent. Twenty-six percent of the government hospitals are estimated to be subject to the HAC reduction, while 53 percent of teaching hospitals with more than 100 residents are estimated to be subject to the HAC reduction for FY 2015. Puerto Rico hospitals are not included in the HAC Reduction Program; therefore, those hospitals would not experience a change in payments. m. Effects of All Proposed FY 2015 Changes (Column 14) Column 14 shows our estimate of the changes in payments per discharge from FY 2014 and FY 2015, resulting from all proposed changes reflected in this proposed rule for FY 2015. It includes combined effects of the previous columns in the table. The proposed average decrease in payments under the IPPS for all hospitals is approximately 0.8 percent for FY 2015 relative to FY 2014. As discussed in section II.D. of the preamble of this proposed rule, this column includes the proposed FY 2015 documentation and coding recoupment adjustment of -0.8 percent on the national standardized amount as part of the recoupment required under section 631 of the ATRA. In addition, this column includes the proposed annual hospital update of 2.1 percent to the national standardized amount. This proposed annual hospital update includes the proposed 2.7 percent market basket update, the proposed reduction of 0.4 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction under section 3401 of the Affordable Care Act. As described in Column 2, the proposed annual hospital update combined with the proposed documentation and coding recoupment adjustment would result in a 1.3 percent increase in payments in FY 2015 relative to FY 2014. Column 11 shows the estimated 0.4 percent decrease in payments due to the proposed reductions in payments under the Hospital Readmissions Reduction Program, which reduces a hospital’s base operating DRG payments by a readmission adjustment factor based on a hospital’s performance on readmissions for specified conditions, which is an additional 0.2 percent decrease in payments under the Hospital Readmissions Reduction Program relative to FY 2014. PO 00000 Frm 00384 Fmt 4701 Sfmt 4702 Column 12 shows the estimated 1.0 percent decrease in Medicare DSH payments due to the changes made under section 3133 of the Affordable Care Act, which reduces Medicare DSH payments by 75 percent and redistributes the remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, to each hospital that qualifies for Medicare DSH payments as an uncompensated care payment based on the hospital’s relative share of the total amount of uncompensated care. Column 13 shows the impact of the implementation of the HAC Reduction Program which would reduce payments by 0.3 percent overall. The impact of moving from our estimate of FY 2014 outlier payments, 5.79 percent, to the estimate of FY 2015 outlier payments, 5.1 percent, would result in a decrease of 0.7 percent in FY 2015 payments relative to FY 2014. Lastly, this column reflects the extension of MDH payment status for the first half of FY 2015, under Public Law 113–93, enacted on April 1, 2014. There also might be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in Column 14 may not equal the sum of the estimated percentage changes described above. Overall payments to hospitals paid under the IPPS are estimated to decrease by 0.8 percent for FY 2015. Much of the payment changes among the hospital categories is attributed to the proposed reduction in Medicare DSH payments and the redistribution of a portion of the Medicare DSH payments as an additional payment for hospitals’ relative uncompensated care amounts. Hospitals in urban areas would experience a 0.9 percent decrease in payments per discharge in FY 2015 compared to FY 2014. Hospital payments per discharge in rural areas are estimated to decrease by 0.2 percent in FY 2015 due to lesser reductions in Medicare DSH and estimated outlier payments. 3. Impact Analysis of Table II Table II presents the projected impact of the proposed changes for FY 2015 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2014 with the average payments per discharge for FY 2015, as calculated under our models. Therefore, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the proposed changes presented in Table I. The estimated percentage changes shown in the last column of Table II equal the estimated percentage changes in average payments per discharge from Column 14 of Table I. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28361 TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2015 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM [Payments per discharge] Proposed estimated average FY 2015 payment per discharge All proposed FY 2015 changes (1) mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Number of hospitals Estimated average FY 2014 payment per discharge (2) (3) (4) All Hospitals ..................................................................................................... By Geographic Location: Urban hospitals ......................................................................................... Large urban areas .................................................................................... Other urban areas .................................................................................... Rural hospitals .......................................................................................... Bed Size (Urban): 0–99 beds ................................................................................................. 100–199 beds ........................................................................................... 200–299 beds ........................................................................................... 300–499 beds ........................................................................................... 500 or more beds ..................................................................................... Bed Size (Rural): 0–49 beds ................................................................................................. 50–99 beds ............................................................................................... 100–149 beds ........................................................................................... 150–199 beds ........................................................................................... 200 or more beds ..................................................................................... Urban by Region: New England ............................................................................................ Middle Atlantic .......................................................................................... South Atlantic ........................................................................................... East North Central .................................................................................... East South Central ................................................................................... West North Central ................................................................................... West South Central .................................................................................. Mountain ................................................................................................... Pacific ....................................................................................................... Puerto Rico ............................................................................................... Rural by Region: New England ............................................................................................ Middle Atlantic .......................................................................................... South Atlantic ........................................................................................... East North Central .................................................................................... East South Central ................................................................................... West North Central ................................................................................... West South Central .................................................................................. Mountain ................................................................................................... Pacific ....................................................................................................... By Payment Classification: Urban hospitals ......................................................................................... Large urban areas .................................................................................... Other urban areas .................................................................................... Rural areas ............................................................................................... Teaching Status: Nonteaching .............................................................................................. Fewer than 100 residents ......................................................................... 100 or more residents .............................................................................. Urban DSH: Non-DSH .................................................................................................. 100 or more beds ..................................................................................... Less than 100 beds .................................................................................. Rural DSH: SCH .......................................................................................................... RRC .......................................................................................................... 100 or more beds ..................................................................................... Less than 100 beds .................................................................................. Urban teaching and DSH: Both teaching and DSH ............................................................................ Teaching and no DSH .............................................................................. No teaching and DSH .............................................................................. No teaching and no DSH ......................................................................... Special Hospital Types: VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00385 Fmt 4701 Sfmt 4702 3,388 11,237 11,146 ¥0.8 2,542 1,395 1,147 846 11,629 12,398 10,696 8,089 11,529 12,285 10,611 8,073 ¥0.9 ¥0.9 ¥0.8 ¥0.2 655 788 469 417 213 9,026 9,728 10,517 11,998 14,330 8,980 9,654 10,466 11,896 14,157 ¥0.5 ¥0.8 ¥0.5 ¥0.9 ¥1.2 325 298 136 50 37 6,614 7,599 7,951 8,898 9,850 6,562 7,523 7,976 8,891 9,913 ¥0.8 ¥1 0.3 ¥0.1 0.6 120 324 406 397 153 162 385 159 384 52 12,805 12,927 10,454 10,856 10,086 11,373 10,670 11,891 14,704 8,194 12,699 12,855 10,339 10,748 9,935 11,321 10,522 11,797 14,673 7,606 ¥0.8 ¥0.6 ¥1.1 ¥1 ¥1.5 ¥0.5 ¥1.4 ¥0.8 ¥0.2 ¥7.2 22 57 132 115 165 102 168 61 24 11,024 8,118 7,714 8,263 7,483 8,626 7,064 9,111 10,697 11,000 8,070 7,666 8,315 7,397 8,729 6,931 9,245 10,952 ¥0.2 ¥0.6 ¥0.6 0.6 ¥1.1 1.2 ¥1.9 1.5 2.4 2,558 1,408 1,150 830 11,615 12,387 10,669 8,270 11,513 12,273 10,582 8,270 ¥0.9 ¥0.9 ¥0.8 0 2,352 792 244 9,312 10,966 16,538 9,262 10,891 16,317 ¥0.5 ¥0.7 ¥1.3 682 1,591 366 9,870 12,067 8,354 9,899 11,939 8,247 0.3 ¥1.1 ¥1.3 388 212 24 125 7,587 9,035 7,422 6,339 7,597 9,057 7,323 6,261 0.1 0.2 ¥1.3 ¥1.2 842 133 1,115 468 13,293 11,107 9,774 9,287 13,137 11,166 9,692 9,308 ¥1.2 0.5 ¥0.8 0.2 E:\FR\FM\15MYP2.SGM 15MYP2 28362 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2015 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM—Continued [Payments per discharge] Number of hospitals Estimated average FY 2014 payment per discharge Proposed estimated average FY 2015 payment per discharge All proposed FY 2015 changes (1) (2) (3) (4) mstockstill on DSK4VPTVN1PROD with PROPOSALS2 RRC .......................................................................................................... SCH .......................................................................................................... MDH .......................................................................................................... SCH and RRC .......................................................................................... MDH and RRC .......................................................................................... Type of Ownership: Voluntary ................................................................................................... Proprietary ................................................................................................ Government .............................................................................................. Medicare Utilization as a Percent of Inpatient Days: 0–25 .......................................................................................................... 25–50 ........................................................................................................ 50–65 ........................................................................................................ Over 65 ..................................................................................................... FY 2015 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals ......................................................................... Non-Reclassified Hospitals ....................................................................... Urban Hospitals Reclassified .................................................................... Urban Nonreclassified Hospitals, FY 2015 ...................................................... All Rural Hospitals Reclassified FY 2015 ........................................................ Rural Nonreclassified Hospitals FY 2015 ........................................................ All Section 401 Reclassified Hospitals ............................................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) .............................. Specialty Hospitals: Cardiac Specialty Hospitals ...................................................................... H. Effects of Other Proposed Policy Changes In addition to those proposed policy changes discussed above that we are able to model using our IPPS payment simulation model, we are proposing to make various other changes in this proposed rule. Generally, we have limited or no specific data available with which to estimate the impacts of these proposed changes. Our estimates of the likely impacts associated with these other proposed changes are discussed below. 1. Effects of Proposed Policy on MS–DRGs for Preventable HACs, Including Infections In section II.F. of the preamble of this proposed rule, we discuss our implementation of section 1886(d)(4)(D) of the Act, which requires the Secretary to identify conditions that are: (1) High cost, high volume, or both; (2) result in the assignment of a case to an MS–DRG that has a higher payment when present as a secondary diagnosis; and (3) could reasonably have been prevented through application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission, unless, based on data and clinical judgment, it cannot be determined at the time of admission whether a condition is present. That is, the case will be paid as though the VerDate Mar<15>2010 22:06 May 14, 2014 Jkt 232001 208 324 154 124 11 9,507 8,856 6,800 9,933 8,122 9,413 9,035 6,485 10,149 7,641 ¥1 2 ¥4.6 2.2 ¥5.9 1,925 883 540 11,370 10,009 12,259 11,296 9,930 12,058 ¥0.7 ¥0.8 ¥1.6 445 2,004 718 131 15,819 11,358 9,019 7,424 15,431 11,281 9,005 7,317 ¥2.5 ¥0.7 ¥0.1 ¥1.4 804 2,584 533 1,965 271 511 48 66 10,955 11,344 11,600 11,664 8,572 7,511 9,810 7,724 10,894 11,242 11,518 11,557 8,589 7,483 9,825 7,543 ¥0.6 ¥0.9 ¥0.7 ¥0.9 0.2 ¥0.4 0.2 ¥2.3 15 12,351 12,561 1.7 secondary diagnosis were not present. However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing the budget neutrality calculations for MS–DRG reclassifications and recalibration. Therefore, we will perform our budget neutrality calculations as though the payment provision did not apply, but Medicare will make a lower payment to the hospital for the specific case that includes the secondary diagnosis. Thus, the provision results in cost savings to the Medicare program. We note that the provision will only apply when one or more of the selected conditions are the only secondary diagnosis or diagnoses present on the claim that will lead to higher payment. Medicare beneficiaries will generally have multiple secondary diagnoses during a hospital stay, such that beneficiaries having one MCC or CC will frequently have additional conditions that also will generate higher payment. Only a small percentage of the cases will have only one secondary diagnosis that would lead to a higher payment. Therefore, if at least one nonselected secondary diagnosis that leads to higher payment is on the claim, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. In addition, as discussed in section II.F.3. of the preamble of this proposed rule, it is possible to have two PO 00000 Frm 00386 Fmt 4701 Sfmt 4702 severity levels where the HAC does not affect the MS–DRG assignment or for an MS–DRG not to have severity levels. In either of these circumstances, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. The HAC payment provision went into effect on October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: Year FY FY FY FY FY 2015 2016 2017 2018 2019 ............................ ............................ ............................ ............................ ............................ Savings (in millions) $28 30 33 36 38 In section IV.J. of the preamble of this proposed rule, we are proposing changes to the HAC Reduction Program for FY 2015. We refer readers to section I.H.6. of this Appendix A for a discussion of the impact of these proposed changes. 2. Effects of Proposed Policy Relating to New Medical Service and Technology Add-On Payments In section II.I. of the preamble to this proposed rule, we discuss the six applications for add-on payments for new E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules medical services and technologies for FY 2015, as well as the status of the new technologies that were approved to receive new technology add-on payments in FY 2014. As explained in the preamble to this proposed rule, add-on payments for new medical services and technologies under section 1886(d)(5)(K) of the Act are not required to be budget neutral. As discussed in section II.I.4. of the preamble of this proposed rule, we have not yet determined whether any of the six applications we received for consideration for new technology add-on payments for FY 2015 will meet the specified criteria. Consequently, it is premature to estimate the potential payment impact of these six applications for any potential new technology add-on payments for FY 2015. We note that if any of the six applications are found to be eligible for new technology addon payments for FY 2015, in the FY 2015 IPPS/LTCH PPS final rule, we would discuss the estimated payment impact for FY 2015. In the preamble of this proposed rule, we are proposing to discontinue new technology add-on payments for DIFICIDTM for FY 2015 because the technology will have been on the U.S. market for 3 years. We also are proposing to continue making new technology add-on payments for Voraxaze®, the Zenith® F.Graft, KcentraTM, the Argus® II Retinal Prosthesis System, and Zilver® PTX® Drug Eluting Peripheral Stent in FY 2015 because these technologies are still considered new. We note that new technology add-on payments per case are limited to the lesser of (1) 50 percent of the costs of the new technology or (2) 50 percent of the amount by which the costs of the case exceed the standard MS–DRG payment for the case. Because it is difficult to predict the actual new technology add-on payment for each case, our estimates below are based on the increase in add-on payments for FY 2015 as if every claim that would qualify for a new technology add-on payment would receive the maximum add-on payment. For Voraxaze®, based on the applicant’s estimate from FY 2013, we currently estimate that new technology add-on payments for Voraxaze® will increase overall FY 2015 payments by $6,300,000. For the Zenith® F. Graft, based on the applicant’s estimate from FY 2013, we currently estimate that new technology add-on payments for the Zenith® F. Graft will increase overall FY 2014 payments by $4,085,750. For KcentraTM, based on the applicant’s estimate from FY 2014, we currently estimate that new technology add-on payments for KcentraTM will increase overall FY 2015 payments by $5,449,888. For the Argus® II Retinal Prosthesis System, based on the applicant’s estimate from FY 2014, we currently estimate that new technology add-on payments for the Argus® II Retinal Prosthesis System will increase overall FY 2015 payments by $3,601,437. For the Zilver® PTX® Drug Eluting Peripheral Stent, based on the applicant’s estimate from FY 2014, we currently estimate that new technology addon payments for the Zilver® PTX® Drug Eluting Peripheral Stent will increase overall FY 2015 payments by $20,463,000. VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 3. Effects of Proposed Changes to List of MS– DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy In section IV.A. of the preamble of this proposed rule, we discuss proposed changes to the list of MS–DRGs subject to the postacute care transfer and DRG special payment policies. As reflected in Table 5 listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site, using criteria set forth in regulation at § 412.4, we evaluated MS– DRG charge, discharge, and transfer data to determine which MS–DRGs qualify for the postacute care transfer and DRG special pay policies. We note that we are making no proposal to change these payment policies in this FY 2015 proposed rule. We are proposing to change the status of certain MS– DRGs as a result of proposals to revise the MS–DRGs for FY 2015. We are proposing to change the status of five MS–DRGs to qualify for the postacute care transfer policy in FY 2015. One additional MS–DRG that qualified under the policy in FY 2014 does not qualify in FY 2015, and we are proposing to change the status accordingly. Finally, five MS– DRGs now qualify for the MS–DRG special pay policy in FY 2015 after not qualifying in FY 2014, and we are proposing to add them to the list of qualifying MS–DRGs. Column 4 of Table I in this Appendix A shows the effects of the proposed changes to the MS– DRGs and relative payment weights with the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. The analysis and methods determining the proposed changes due to the MS–DRGs and relative payment weights accounts for and includes changes in MS– DRG postacute care transfer and special pay policy statuses. We refer readers to section I.G. of this Appendix for a more detailed discussion of payment impacts due to MS– DRG reclassification policies. 4. Effects of the Proposed Payment Adjustment for Low-Volume Hospitals for FY 2015 In section V.D. of the preamble to this proposed rule, we discuss the provisions of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) that extends for an additional year, through March 31, 2015, the temporary changes to the low-volume hospital definition and the methodology for determining the payment adjustment made by the Affordable Care Act for FYs 2011 and 2012, and extended through FY 2013 by the ATRA, and the first half of FY 2014 by the Pathway for SGR Reform Act (Pub. L. 113– 67). Therefore, to qualify for the low-volume hospital payment adjustment for FY 2015 discharges occurring before April 1, 2015 under section 1886(d)(12) of the Act, a hospital must have less than 1,600 Medicare discharges and be located more than 15 miles from other IPPS hospitals. The payment adjustment for eligible low-volume hospital FY 2015 discharges occurring before April 1, 2015 is a continuous, linear sliding scale PO 00000 Frm 00387 Fmt 4701 Sfmt 4702 28363 adjustment ranging from an additional 25 percent payment adjustment to qualifying hospitals with 200 or fewer Medicare discharges to no additional payment to hospitals with 1,600 or more Medicare discharges. Beginning with FY 2015 discharges occurring on or after April 1, 2015, in accordance with section 1886(d)(12) of the Act, the low-volume hospital definition and payment adjustment methodology revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act as amended by subsequent legislation. Therefore, effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Based on FY 2013 claims data (December 2013 update of the MedPAR file), we estimate that approximately 600 hospitals will qualify as a low-volume hospital in FY 2014 and in FY 2015 for discharges occurring before April 1, 2015. With the statutory changes to the low-volume hospital payment adjustment, for FY 2015 discharges occurring on or after April 1, 2015, we estimate only approximately six hospitals will continue to qualify as a low-volume hospital. We project that the expiration of the temporary changes to the low-volume hospital definition and the payment adjustment methodology originally made by the Affordable Care Act and extended by subsequent legislation will result in a decrease in payments of approximately $343 million in FY 2015 as compared to the low-volume hospital payments in FY 2014. This estimate accounts for our projection of the six IPPS low-volume hospitals in FY 2014 that are expected to continue to receive a low-volume hospital payment adjustment of an additional 25 percent for FY 2015 discharges occurring on or after April 1, 2015. 5. Effects of Proposal Related to IME Medicare Part C Add-On Payments to SCHs Paid According to Their Hospital-Specific Rates In section IV.E.2. of the preamble of this proposed rule, we discuss our proposal related to IME Medicare Part C add-on payments to SCHs that are paid according to their hospital-specific rates. Payments based on the Federal rate are based on the IPPS standardized amount and include all applicable IPPS add-on payments, such as outliers, DSH, and IME, while payments based on the hospital-specific rate include no add-on payments. The hospital-specific rate generally reflects the additional costs incurred by a teaching hospital for its Medicare Part A patients. However, the hospital-specific rate does not reflect the costs associated with Medicare Part C patients and there is no payment mechanism for SCHs paid based on their hospitalspecific rate to receive the IME add-on payment for Medicare Part C patients. Accordingly, we are proposing to provide all SCHs that are subsection (d) teaching E:\FR\FM\15MYP2.SGM 15MYP2 28364 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules hospitals, IME add-on payments for applicable discharges of Medicare Part C patients in accordance with section 1886(d)(11) of the Act, regardless of whether the SCH is paid based on the Federal rate or its hospital-specific rate; and that, for purposes of the comparison of payments based on the Federal rate and payments based on the hospital-specific rate under section 1886(d)(5)(D) of the Act, IME payments under section 1886(d)(11) of the Act for Medicare Part C patients will no longer be included as part of the Federal rate payment. We estimate that the proposals at section IV.E.2. of the preamble of this proposed rule will result in an increase in payments to approximately 50 hospitals that are both SCHs or SCH/RRCs and teaching hospitals of approximately $5 million in FY 2015. 6. Effects of the Extension of the MDH Program for the First Half of FY 2015 In section V.G. of the preamble of this proposed rule, we briefly discuss the statutory extension of the MDH program through March 31, 2015, that is, through the first half of FY 2015, by section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93). Hospitals that qualify as MDHs receive the higher of operating IPPS payments made under the Federal standardized amount or the payments made under the Federal standardized amount plus 75 percent of the amount by which the hospital-specific rate (a hospital-specific cost-based rate) exceeds the Federal standardized amount. Based on the latest available data we have for 165 MDHs, we project that 98 MDHs will receive the blended payment (that is, the Federal standardized amount plus 75 percent of the amount by which the hospital-specific rate exceeds the Federal standardized amount) for the first half of FY 2015 (that is, for discharges occurring through March 31, 2015). We estimate that those hospitals will experience an overall increase in payments of approximately $56 million as compared to our previous estimates of payments to these hospitals for FY 2015 prior to the extension of the MDH program through March 31, 2015, by section 106 of Public Law 113–93. 7. Effects of Proposed Changes Under the FY 2015 Hospital Value-Based Purchasing (VBP) Program Section 1886(o)(1)(B) of the Act directs the Secretary to make value-based incentive payments under the Hospital VBP Program to hospitals that meet performance standards during the performance period for discharges occurring on or after October 1, 2012. These incentive payments will be funded for FY 2015 through a reduction to the FY 2015 base operating DRG payment for each discharge of 1.50 percent, as required by section 1886(o)(7)(B) of the Act. The applicable percentage for FY 2016 is 1.75 percent and for FY 2017 and subsequent years, it is 2 percent. We are required to ensure that the total amount available for value-based incentive payments is equal to the total amount of reduced payments for all hospitals for the fiscal year, as estimated by the Secretary. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 53614), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50677 through 50707), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121) for further explanation of the details of the Hospital VBP Program. We specifically refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50678 through 50679), for discussions of the measures and other policies that we adopted for the FY 2015 and FY 2016 Hospital VBP Programs. In section IV.I. of the preamble of this proposed rule, we estimate the available pool of funds for value-based incentive payments in the FY 2015 Hospital VBP Program, which, in accordance with section 1886(o)(7)(C)(iii) of the Act, will be 1.50 percent of base operating DRG payments, or a total of approximately $1.4 billion. This estimated available pool for FY 2015 is based on the historical pool of hospitals that were eligible to participate in the FY 2014 Hospital VBP Program and the payment information from the December 2013 update to the FY 2013 MedPAR file. We intend to provide an update to this estimate, which will be based on the March 2014 update to the FY 2013 MedPAR file, in the FY 2015 IPPS/LTCH PPS final rule. The estimated impacts of the FY 2015 Hospital VBP Program by hospital characteristic, found in the table below, are based on historical TPSs. We used the FY 2014 Hospital VBP Program TPSs to calculate the proxy adjustment factors used for this impact analysis. These are the most recently available scores that hospitals were given an opportunity to review and correct. The proxy adjustment factors use estimated annual base operating DRG payment amounts derived from the December 2013 update to the FY 2013 MedPAR file. The proxy adjustment factors can be found in Table 16 associated with this proposed rule (available via the Internet on the CMS Web site). The impact analysis shows that, for the FY 2015 Hospital VBP Program, the number of hospitals that would receive an increase in base operating DRG payment amount is slightly lower than the number of hospitals that would receive a decrease. Approximately 42 percent of hospitals would have a change in base operating DRG payment amount that is between ¥0.2 percent and + 0.2 percent. Among urban hospitals, those in the New England, South Atlantic, East North Central, West North Central, and West South Central regions would have an increase, on average, in base operating DRG payment amount, and among rural hospitals, those in the New England and East North Central regions will have an increase, on average in base operating DRG payment amounts. Both urban and rural hospitals in the Middle Atlantic, East South Central, Mountain, and Pacific regions and rural hospitals in the South Atlantic region would receive an average decrease in base operating DRG payment amount. As the percent of DSH payments increases, we see a decrease in base operating DRG payment amount, while as the Medicare utilization (MCR) percent increases, we see an increase in base operating DRG payment amount. Nonteaching and teaching hospitals would have an average decrease in base operating DRG payment amount. IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT CHANGES RESULTING FROM THE FY 2015 HOSPITAL VBP PROGRAM mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Number of hospitals By Geographic Location: All Hospitals ...................................................................................................................................................... Large Urban .............................................................................................................................................. Other Urban ............................................................................................................................................... Rural Area ................................................................................................................................................. Urban hospitals ................................................................................................................................................. 0–99 beds .................................................................................................................................................. 100–199 beds ............................................................................................................................................ 200–299 beds ............................................................................................................................................ 300–499 beds ............................................................................................................................................ 500 or more beds ...................................................................................................................................... Rural hospitals .................................................................................................................................................. 0–49 beds .................................................................................................................................................. 50–99 beds ................................................................................................................................................ 100–149 beds ............................................................................................................................................ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00388 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 2,728 1,113 910 705 2,023 307 677 431 401 207 705 161 296 148 Average (%) ¥0.038 ¥0.021 ¥0.030 ¥0.074 ¥0.025 0.025 ¥0.043 ¥0.032 ¥0.033 ¥0.010 ¥0.074 ¥0.041 ¥0.088 ¥0.074 28365 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT CHANGES RESULTING FROM THE FY 2015 HOSPITAL VBP PROGRAM—Continued Number of hospitals 150–199 beds ............................................................................................................................................ 200 or more beds ...................................................................................................................................... By Region: Urban By Region .............................................................................................................................................. New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ Rural By Region ............................................................................................................................................... New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ By MCR Percent: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. BY DSH Percent: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. BY TEACHING STATUS: Teaching ........................................................................................................................................................... Non-Teaching ................................................................................................................................................... As stated above, we intend to provide an updated impact analysis in the FY 2015 IPPS/LTCH PPS final rule. However, actual FY 2015 Hospital VBP Program TPSs would not be reviewed and corrected by hospitals until after the FY 2015 IPPS/LTCH PPS final rule has been published. Therefore, the same historical universe of eligible hospitals and corresponding TPSs from the FY 2014 Hospital VBP Program will be used for the updated impact analysis. As noted above, the updated impact analysis for the final rule will reflect estimated annual base operating DRG payment amount changes based on the March 2014 update to the FY 2013 MedPAR file. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 8. Effects of Proposed Changes to the HAC Reduction Program for FY 2015 In section IV.J. of the preamble of this proposed rule, we are establishing measures, scoring, and a risk adjustment methodology to implement the FY 2015 payment reduction under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 discharges occurring on October 1, 2014 and for subsequent program years. We note that hospitals will have a payment impact for the first time in FY 2015. For FY 2015, we are presenting the overall impact of the HAC Reduction Program provision along with other IPPS payment provision impacts in section I.G. of this Appendix A. The table and analyses that we are presenting below show the distributional effect of the measures and scoring system for the HAC Reduction Program included in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729). For FY 2015, we note that we finalized a Total HAC Score methodology in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729) that assigns weights for Domain 1 and Domain 2 at 35 percent and 65 percent, respectively. Based on this methodology, the table below presents data on the proportion of hospitals, by structural characteristic, in the worst performing quartile based on the 35/65 weighting scheme. The data for this simulation are derived from the AHRQ PSI results based on Medicare FFS discharges from July 2011 through June 2013, using version 4.5 of the AHRQ software, and CDC measure results were used based on Standard Infection Ratios (SIRs) calculated with data reported to the PO 00000 Frm 00389 Fmt 4701 Sfmt 4702 Average (%) 55 45 ¥0.106 ¥0.067 2,023 112 279 346 350 121 134 248 130 303 705 21 64 136 114 114 82 101 45 28 ¥0.025 0.059 ¥0.076 0.002 0.052 ¥0.043 0.055 0.003 ¥0.085 ¥0.154 ¥0.074 0.044 ¥0.150 ¥0.024 0.036 ¥0.018 ¥0.052 ¥0.177 ¥0.299 ¥0.247 260 1,788 605 46 ¥0.118 ¥0.033 ¥0.016 0.003 1,253 1,220 141 114 0.013 ¥0.063 ¥0.121 ¥0.222 933 1,795 ¥0.041 ¥0.036 National Healthcare Safety Network for infections occurring between July 2012 and June 2013. To analyze the results by hospital characteristic, the FY 2014 impact file were used. Of the 3,337 hospitals included in this analysis, 3,298 hospitals were included for geographic location, region, DSH percent, and teaching status; 3,278 for ownership; and 3,205 for MCR percent. These differences in denominator are due to the source of the hospital characteristic data. This analysis does not include Maryland hospitals as Maryland hospitals are exempt by waiver from the HAC Reduction Program in FY 2015. The percentage of hospitals for each characteristic (column 3) indicates the percent of hospitals in each level of characteristic. For example, with regard to geographic region, 39.4 percent of hospitals (or 1,301 hospitals) are characterized as large urban; 32.7 percent of hospitals (or 1,080 hospitals) are characterized as other urban; and 27.8 percent of hospitals (or 917 hospitals) are characterized as rural. The percentage of hospitals in the worst performing quartile (column 5) indicates the proportion of hospitals for each characteristic that would be penalized. For example, in regards to geographic location, 26.6 percent of hospitals (or 346 hospitals) characterized E:\FR\FM\15MYP2.SGM 15MYP2 28366 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules as large urban would be subject to a payment adjustment; 22.8 percent of hospitals (or 246 hospitals) characterized as other urban would be subject to a payment adjustment; and 17.6 percent of hospitals (or 161 hospitals) characterized as rural would be subject to a payment adjustment. With regard to geographic location of urban hospitals by bed size, 17.3 percent of hospitals (or 101 hospitals) characterized as urban hospitals with bed size of 0–99 beds would be subject to a payment adjustment; 21.1 percent of hospitals (or 152 hospitals) characterized as urban hospitals with bed size of 100–199 beds would be subject to a payment adjustment; 27.1 percent of hospitals (or 122 hospitals) characterized as urban hospitals with bed size of 200–299 beds would be subject to a payment adjustment; 27.1 percent of hospitals (or 71 hospitals) characterized as urban hospitals with bed size of 300–399 beds would be subject to a payment adjustment; 37.7 percent of hospitals (or 58 hospitals) characterized as urban hospitals with bed size of 400–499 beds would be subject to a payment adjustment; and 41.7 percent of hospitals (or 88 hospitals) characterized as urban hospitals with bed size of 500 or more beds would be subject to a payment adjustment. With regard to geographical location of rural hospitals by bed size, 15.5 percent of hospitals (or 53 hospitals) characterized as rural hospitals with bed size of 0–49 beds would be subject to a payment adjustment; 20.6 percent of hospitals (or 66 hospitals) characterized as rural hospitals with bed size of 50–99 beds would be subject to a payment adjustment; 13.9 percent of hospitals (or 21 hospitals) characterized as rural hospitals with bed size of 100–149 beds would be subject to a payment adjustment; 15.3 percent of hospitals (or 9 hospitals) characterized as rural hospitals with bed size of 150–199 beds would be subject to a payment adjustment; and 26.7 percent of hospitals (or 12 hospitals) characterized as rural hospitals with bed size of 200 or more beds would be subject to a payment adjustment. With regard to region of urban hospitals, 26.1 percent of hospitals (or 31 hospitals) characterized as urban in the New England region would be subject to a payment adjustment; 28.2 percent of hospitals (or 87 hospitals) characterized as urban in the MidAtlantic region would be subject to a payment adjustment; 24.0 percent of hospitals (or 89 hospitals) characterized as urban in the South Atlantic region would be subject to a payment adjustment; 23.4 percent of hospitals (or 90 hospitals) characterized as urban in the East North Central region would be subject to a payment adjustment; 22.4 percent of hospitals (or 32 hospitals) characterized as urban in the West South Central region would be subject to a payment adjustment; 20.5 percent of hospitals (or 33 hospitals) characterized as urban in the East North Central region would be subject to a payment adjustment; 19.6 percent of hospitals (or 71 hospitals) characterized as urban in the West South Central region would be subject to a payment adjustment; 35.8 percent of hospitals (or 57 hospitals) characterized as urban in the Mountain region would be subject to a payment adjustment; and 27.4 percent of hospitals (or 102 hospitals) characterized as urban in the Pacific region would be subject to a payment adjustment. With regard to region of rural hospitals, 13.0 percent of hospitals (or 3 hospitals) characterized as rural in the New England region would be subject to a payment adjustment; 25.8 percent of hospitals (or 17 hospitals) characterized as rural in the MidAtlantic region would be subject to a payment adjustment; 15.1 percent of hospitals (or 24 hospitals) characterized as rural in the South Atlantic region would be subject to a payment adjustment; 21.2 percent of hospitals (or 25 hospitals) characterized as rural in the East North Central region would be subject to a payment adjustment; 13.9 percent of hospitals (or 23 hospitals) characterized as rural in the West South Central region would be subject to a payment adjustment; 19.2 percent of hospitals (or 20 hospitals) in the East North Central region would be subject to a payment adjustment; 14.7 percent of hospitals (or 26 hospitals) in the West South Central region would be subject to a payment adjustment; 24.7 percent of hospitals (or 18 hospitals) in the Mountain region would be subject to a payment adjustment; and 16.1 percent of hospitals (or 5 hospitals) in the Pacific region would be subject to a payment adjustment. With regard to the DSH percent characteristic, 19.6 percent of hospitals (or 311 hospitals) characterized in the 0–24 DSH percent would be subject to a payment adjustment; 24.1 percent of hospitals (or 331 hospitals) characterized in the 25–49 DSH percent would be subject to a payment adjustment; 37.6 percent of hospitals (or 68 hospitals) characterized in the 50–64 DSH percent would be subject to a payment adjustment; and 27.2 percent of hospitals (or 43 hospitals) characterized in the 65 and over DSH percent would be subject to a payment adjustment. With regard to the teaching status characteristic, 19.0 percent of hospitals (or 437 hospitals) characterized as nonteaching would be subject to a payment adjustment; 25.0 percent of hospitals (or 191 hospitals) characterized as fewer than 100 residents would be subject to a payment adjustment; and 52.7 percent of hospitals (or 125 hospitals) characterized as 100 or more residents would be subject to a payment adjustment. With regard to the urban teaching and DSH characteristic, 34.2 percent of hospitals (or 277 hospitals) characterized as teaching and DSH would be subject to a payment adjustment; 22.1 percent of hospitals (or 29 hospitals) characterized as teaching and no DSH would be subject to a payment adjustment; 20.4 percent of hospitals (or 206 hospitals) characterized as no teaching and DSH would be subject to a payment adjustment; 18.6 percent of hospitals (or 80 hospitals) characterized as no teaching and no DSH would be subject to a payment adjustment; and 17.6 percent of hospitals (or 161 hospitals) characterized as nonurban would be subject to a payment adjustment. With regard to the type of ownership characteristic, 23.3 percent of hospitals (or 441 hospitals) characterized as voluntary would be subject to a payment adjustment; 19.5 percent of hospitals (or 167 hospitals) characterized as proprietary would be subject to a payment adjustment; and 26.8 percent of hospitals (or 141 hospitals) characterized as government would be subject to a payment adjustment. With regard to the MCR percent characteristic, 37.7 percent of hospitals (or 147 hospitals) characterized in the 0–24 MCR percent would be subject to a payment adjustment; 23.2 percent of hospitals (or 458 hospitals) characterized in the 25–49 MCR percent would be subject to a payment adjustment; 15.9 percent of hospitals (or 113 hospitals) characterized in the 50–64 MCR percent would be subject to a payment adjustment; and 10.8 percent of hospitals (or 14 hospitals) characterized in the 65 and over MCR percent would be subject to a payment adjustment. PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75 PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Hospital characteristic Hospitals in the worst performing quartile Characteristic Number of hospitals Percent * Number of hospitals Percent By Geographic Location: All Hospitals: Large Urban ** ................................................................................... Other Urban ....................................................................................... Rural .................................................................................................. Urban Hospitals: 0–99 beds .......................................................................................... 1,301 1,080 917 ........................ 584 39.4 32.7 27.8 ........................ 24.5 346 246 161 ........................ 101 26.6 22.8 17.6 ........................ 17.3 VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00390 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28367 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75 PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC—Continued Hospital characteristic Hospitals in the worst performing quartile Number of hospitals Characteristic By By By By By mstockstill on DSK4VPTVN1PROD with PROPOSALS2 By 100–199 beds .................................................................................... 200–299 beds .................................................................................... 300–399 beds .................................................................................... 400–499 ............................................................................................. 500 or more beds .............................................................................. Rural Hospitals: 0–49 beds .......................................................................................... 50–99 beds ........................................................................................ 100–149 beds .................................................................................... 150–199 beds .................................................................................... 200 or more beds .............................................................................. Region: Urban by Region: New England ..................................................................................... Mid-Atlantic ........................................................................................ South Atlantic .................................................................................... East North Central ............................................................................. West South Central ........................................................................... East North Central ............................................................................. West South Central ........................................................................... Mountain ............................................................................................ Pacific ................................................................................................ Rural by Region: New England ..................................................................................... Mid-Atlantic ........................................................................................ South Atlantic .................................................................................... East North Central ............................................................................. West South Central ........................................................................... East North Central ............................................................................. West South Central ........................................................................... Mountain ............................................................................................ Pacific ................................................................................................ DSH Percent: 0–24 .......................................................................................................... 25–49 ........................................................................................................ 50–64 ........................................................................................................ 65 and over .............................................................................................. Teaching Status: Non-teaching ............................................................................................ Fewer than 100 residents ......................................................................... 100 or more residents .............................................................................. Urban Teaching and DSH: Teaching and DSH ................................................................................... Teaching and no DSH .............................................................................. No teaching and DSH .............................................................................. No teaching and no DSH ......................................................................... Non-urban ................................................................................................. Type of Ownership: Voluntary ................................................................................................... Proprietary ................................................................................................ Government .............................................................................................. MCR Percent: 0–24 .......................................................................................................... 25–49 ........................................................................................................ 50–64 ........................................................................................................ 65 and over .............................................................................................. Percent * Number of hospitals Percent 720 450 262 154 211 30.2 18.9 11.0 6.5 8.9 152 122 71 58 88 21.1 27.1 27.1 37.7 41.7 341 321 151 59 45 37.2 35.0 16.5 6.4 4.9 53 66 21 9 12 15.5 20.6 13.9 15.3 26.7 119 308 371 385 143 161 363 159 372 3.6 9.3 11.2 11.7 4.3 4.9 11.0 4.8 11.3 31 87 89 90 32 33 71 57 102 26.1 28.2 24.0 23.4 22.4 20.5 19.6 35.8 27.4 23 66 159 118 166 104 177 73 31 0.7 2.0 4.8 3.6 5.0 3.2 5.4 2.2 0.9 3 17 24 25 23 20 26 18 5 13.0 25.8 15.1 21.2 13.9 19.2 14.7 24.7 16.1 1,588 1,371 181 158 48.2 41.6 5.5 4.8 311 331 68 43 19.6 24.1 37.6 27.2 2,297 764 237 69.6 23.2 7.2 437 191 125 19.0 25.0 52.7 811 131 1,010 429 917 24.6 4.0 30.6 13.0 27.8 277 29 206 80 161 34.2 22.1 20.4 18.6 17.6 1,893 858 527 57.7 26.2 16.1 441 167 141 23.3 19.5 26.8 390 1,976 709 130 12.2 61.7 22.1 4.1 147 458 113 14 37.7 23.2 15.9 10.8 * Percents may not sum to 100 due to rounding. ** Large urban hospitals are hospitals located in large urban areas (populations over 1 million). 9. Effects of Proposed Policy Changes Relating to Payments for Direct GME and IME Under section IV.K.2. of the preamble of this proposed rule, we discuss our proposal to simplify and streamline the timing of CMS’s policies related to when the FTE VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 resident caps, the 3-year rolling average, and the IRB ratio cap would become effective for new teaching hospitals, by stating that the FTE resident caps, rolling average, and IRB ratio cap would be effective simultaneously, beginning with the applicable hospital’s cost PO 00000 Frm 00391 Fmt 4701 Sfmt 4702 reporting period that precedes the start of the 6th program year of the first new program started. We are proposing that this policy regarding the effective dates of the FTE residency caps, rolling average, and IRB ratio cap for FTE residents in new programs would E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28368 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules be consistent with the methodology for calculation of the FTE resident caps as described in the FY 2013 IPPS/LTCH PPS final rule, and implemented at 42 CFR 413.79(e)(1) and (3). That is, this proposal is effective for urban hospitals that have not yet had FTE resident caps established under § 413.79(e)(1), and for rural hospitals, on or after October 1, 2012. This proposal would reduce the amount of time that the new programs would be exempt from the FTE resident caps by several months, depending on the cost reporting period of the new teaching hospital. However, depending on the length of new programs started and the point during the 5-year growth period in which new programs are started, there may also be some gain and loss for hospitals in terms of the amount of time that the FTEs in the new programs would be exempt from the rolling average and the IRB ratio cap. In either case, the estimate of possible savings or cost of this proposal is less than $5 million a year and therefore, is negligible. In section IV.K.3.a. of the preamble of this proposed rule, we discuss our proposals related to the effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas. Under existing regulations a new teaching hospital has 5 years from when it first begins training residents in its first new program to grow its cap. If the teaching hospital is a rural teaching hospital, it can continue to receive permanent cap adjustments even after the initial 5-year cap-building period ends if it trains residents in a new program. As a result of OMB redesignations, some teaching hospitals may be redesignated from being located in a rural area to an urban area, thereby losing their ability to increase their caps again after their initial 5-year capbuilding period. If a rural hospital had started training residents in the new program while it was rural and was redesignated as urban before the end of the 5-year capbuilding period, we are proposing that effective for cost reporting periods beginning on or after October 1, 2014, it can continue growing that program(s) for the remainder of the cap-building period and receive a permanent cap adjustment for that new program(s). Once the cap-building period for the new program(s) that was started while the hospital was still rural expires, the teaching hospital that has been redesignated as urban will no longer be able to receive any additional permanent cap adjustments. In section IV.K.3.b. of the preamble of this proposed rule, we discuss our proposal related to a redesignated hospital’s participation in a rural track program. Under existing regulations, if an urban hospital rotates residents to a separately accredited rural track program at a rural site(s) for more than one-half of the duration of the program, the urban hospital may receive an adjustment to its cap for training those FTE residents, referred to as the rural track FTE limitation. We are proposing that any time a rural hospital participating in a rural track is in an area redesignated by OMB as urban after residents started training in the rural track and during the period that is used to calculate the urban hospital’s rural track FTE limitation, the urban hospital may still VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 receive a cap adjustment for that rural track. We also are proposing that if the rural hospital participating in the rural track is in an area redesignated as urban, the redesignated urban hospital can continue to be considered a rural hospital for purposes of the rural track for up to 2 years. However, within those 2 years, either the rural hospital that has been redesignated as urban must reclassify as rural under § 412.103 for purposes of IME payment only, or the urban hospital must find a new geographically rural site to participate as the rural site for purposes of the rural track and must be training FTE residents at that new site, in order for the urban hospital to receive payment under § 413.79(k)(1) or (k)(2) for the rural track program after the 2-year period ends. We estimate that the proposals discussed under IV.K.3.a. and b. of the preamble of this proposed rule would have a very minimal, if any, impact on Medicare expenditures. These proposals would only be applied to, at the most, very few hospitals (if any at all) and would only apply once every 10 years as a result of OMB changes in labor market area delineations due to a recent Census. In sections IV.K.5.a. and b. of the preamble of this proposed rule, we are proposing some changes to the current application process for and awarding of cap slots from closed hospitals under section 5506 of the Affordable Care Act that would be effective for hospital closures announced on or after October 1, 2014. We are proposing an alternative interpretation of the statutory provision at section 5506(d) of the Affordable Care Act, which provides that the Secretary give consideration to the effect of the permanent awarding of slots under section 5506 of the Affordable Care Act to any temporary cap adjustments to a hospital received under § 413.79(h) of the regulations to ensure that there be no duplication of FTE cap slots. Currently, when applying this statutory provision for no duplication of FTE slots, we look at all of the hospitals that are receiving temporary cap adjustments to train displaced residents and all of the hospitals that are applying for a permanent increase in caps under section 5506 when determining the effective date for slots permanently awarded to hospitals under Ranking Criterion One and Ranking Criteria Three through Eight. In this proposed rule, we are proposing to interpret the statutory language at section 5506(d) in a manner that would permit us to apply the concept of ensuring no duplication of FTE resident slots on a hospital-byhospital basis, such that if a hospital is both receiving a temporary cap adjustment under § 413.79(h) and is applying under section 5506 for permanent cap slots, it will not be able to receive a permanent cap adjustment until the displaced residents graduate. However, if a hospital is applying under section 5506 for permanent cap slots and did not receive a temporary cap adjustment under § 413.79(h), that hospital will not have to wait until displaced residents that are training at another hospital graduate to be awarded any permanent cap slots under section 5506. We estimate that this proposal could result in a slight increase in Medicare expenditures in a rare event a section 5506 PO 00000 Frm 00392 Fmt 4701 Sfmt 4702 cap adjustment may be provided to one hospital before a temporary cap adjustment expires at another hospital. However, we are unable to estimate whether this will occur with any future hospital closures where section 5506 is applied because we do not know how many, if any, residents will be displaced. Furthermore, we believe that any temporary duplicate payment would be a rare occurrence as most hospitals that are receiving a temporary cap adjustment under § 413.79(h) will also receive a permanent cap adjustment under section 5506. In this instance the hospital would only be able to receive the permanent cap adjustment once the temporary cap adjustment expires in which case there would be no duplication of FTE resident slots. In addition, under section IV.K.5.c. of the preamble of this proposed rule, we are proposing to revise the ranking criteria used to award slots under section 5506. First, we are proposing to no longer allow hospitals to apply for cap relief, which is included under current Ranking Criterion Eight. This proposed change would mean that hospitals would be awarded slots under section 5506 for taking over a closed hospital’s residency training program, having participated with a closed hospital in a Medicare GME affiliated group, taking over part of a closed hospital’s program, expanding or starting a new geriatrics program, expanding or starting a new primary care or general surgery program, and expanding or starting a new nonprimary care or nongeneral surgery program. Second, Ranking Criterion One currently applies to hospitals that are assuming (or have assumed) an entire program from the hospital that closed. We are proposing to revise this Ranking Criterion to provide priority to a hospital whose FTE resident caps were erroneously reduced by CMS under section 5503 of the Affordable Care Act, contrary to the specific statutory exception at section 1886(h)(8)(A)(i)(I) of the Act, and the CMS Central Office is made aware of the error prior to the posting of this proposed rule. We do not believe there is any cost associated with these proposals because we would be assigning all of the closed hospital’s slots, only the specific hospital awarded the slots may change. 10. Effects of Implementation of Rural Community Hospital Demonstration Program In section IV.L. of the preamble of this proposed rule, we discuss our implementation of section 410A of Public Law 108–173, as amended, which requires the Secretary to conduct a demonstration that would modify reimbursement for inpatient services for up to 30 rural community hospitals. Section 410A(c)(2) requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ As discussed in section IV.L. of the preamble of this proposed rule, in the IPPS final rules for each of the previous 10 fiscal years, we have estimated the additional payments made by the program for each of the participating hospitals as a result of the demonstration. In E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules order to achieve budget neutrality, we are proposing to adjust the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In other words, we are proposing to apply budget neutrality across the payment system as a whole rather than across the participants of this demonstration. The language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration . . . was not implemented’’ but does not identify the range across which aggregate payments must be held equal. We are proposing to adjust the national IPPS rates according to the methodology set forth elsewhere in this proposed rule. The proposed adjustment to the national IPPS rates to account for estimated demonstration cost for FY 2014 for the 7 ‘‘pre-expansion’’ participating hospitals that are currently participating in the demonstration and the 15 additional hospitals participating as a result of the expansion of the demonstration under the Affordable Care Act is $53,673,008. In addition, in this proposed rule, we are proposing to add to the adjustment of the national IPPS rates the amount by which the actual costs of the demonstration for FY 2008 (as shown in the finalized cost reports for cost reporting periods beginning in FY 2008 for the hospitals that participated in the demonstration during FY 2008) exceed the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule ($10,389,771). Thus, we are proposing that the resulting total ($64,062,779) would be the amount for which an adjustment to inpatient rates for FY 2015 would be calculated. We also are proposing that if settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (FY 2009, 2010, or 2011), are made available prior to the FY 2015 IPPS/LTCH PPS final rule, we would incorporate into the FY 2015 budget neutrality offset amount any additional amounts by which the final settled costs of the demonstration for the year (FY 2009, 2010, or 2011) exceeded the budget neutrality offset amount applicable to such year as finalized in the respective year’s IPPS final rule. 11. Effects of Proposed Changes Related to Reclassification as Rural for CAHs In section VI.C.2. of the preamble of this proposed rule, we discuss our proposals relating to reclassifications of CAHs as a result of the proposed adoption of the new OMB labor market area delineations. A facility is eligible for designation as a CAH only if it is either physically located in a rural area or has been reclassified as rural under 42 CFR 412.103. CAHs can be affected by the recent OMB labor market area delineations because facilities that are currently participating as CAHs that were previously located in rural areas may now be located in urban areas as a result of the new delineations. Previously, in both in the FY 2005 IPPS final rule and the FY 2010 IPPS/ LTCH PPS final rule, we revised the regulations to give currently participating VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 CAHs 2 years, from the effective date of the earlier OMB designations, to reclassify as rural facilities. However, these regulation changes were specific to a particular timeframe. As we are proposing implementation of the latest OMB labor market area delineations in this proposed rule, we are proposing that, effective October 1, 2014, currently participating CAHs that are located in an area that has been redesignated from rural to urban under the new delineations will again be treated as rural for 2 years from the date the new OMB delineations are implemented. An affected CAH would have 2 years from the date the redesignation becomes effective to reclassify as rural and thereby retain its CAH status. If a CAH fails to reclassify within those 2 years, it can no longer participate in Medicare as a CAH. However, unlike in previous years when the regulation changes were specific to a particular timeframe, the change that we are proposing to the regulations is not specific to a particular timeframe but would also apply to future OMB labor market area delineations. We estimate that this proposal will have little or no impact on Medicare expenditures because we expect that virtually all of the affected CAHs will be granted rural status by the State in which they are located and, therefore, will be able to apply for reclassification as rural under § 412.103 in order to retain their CAH status. 12. Effects of Proposed Revision of the Requirements for Physician Certification of CAH Inpatient Services In section VI.C.3. of the preamble of this proposed rule, we discuss the statutory requirement for physician certification of CAH inpatient services. For inpatient CAH services to be payable under Medicare Part A, section 1814(a)(8) of the Act requires that a physician certify that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH. These statutory requirements are addressed in the regulations at 42 CFR 424.15. In order to provide CAHs with greater flexibility in meeting this certification requirement, we are proposing to amend the regulations governing the timing of the 96-hour certification requirement at § 424.15(b) such that physician certification is required no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. We also are proposing to revise § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient’’. We do not believe there is any significant impact on Medicare expenditures associated with these proposed changes because we are simply proposing to provide CAHs with additional flexibility in meeting the statutory requirement. The underlying statutory requirement itself is unchanged. 13. Effects of Proposed Changes Relating to Administrative Appeals by Providers and Judicial Review for Appropriate Claims in Provider Cost Reports In section VIII. of the preamble to this proposed rule, we discuss our proposal to require a provider to include an appropriate claim for an item in its Medicare cost report with the penalty for the failure to do so being PO 00000 Frm 00393 Fmt 4701 Sfmt 4702 28369 the preclusion of payment for the item in the notice of program reimbursement (NPR) issued by the fiscal intermediary and in any decision or order issued by a reviewing entity in an administrative appeal filed by the provider. The proposal also would revise the Medicare provider appeals regulations by eliminating the requirement that a provider must include an appropriate claim for an item in its Medicare cost report in order to meet the dissatisfaction requirement for Provider Reimbursement Review Board jurisdiction and would make technical corrections to the provider reimbursement appeals regulations to conform the regulations to the statute. There is no impact to the provider resulting from these proposed provisions. I. Effects of Proposed Update to the Reasonable Compensation Equivalent (RCE) Limits for Compensation for Physician Services Provided in Providers In section VI.B. of the preamble of this proposed rule, we discuss our proposal to update and revise the methodology used to calculate the reasonable compensation equivalent (RCE) limits for compensation for physician services provided in providers, in accordance with our regulations at 42 CFR 415.70(f)(2). For CY 2015, we estimate that 59 cancer and children’s hospitals and 46 IPPS teaching hospitals would be subject to the RCE limits. We estimate the costs associated with the updated RCE limits for CY 2015 to be approximately $40 million. We do not expect this proposed RCE limit update to impact a significant number of small, rural entities; therefore, a full impact analysis is not required. J. Effects of Proposed Changes in the Capital IPPS 1. General Considerations For the impact analysis presented below, we used data from the December 2013 update of the FY 2013 MedPAR file and the December 2013 update of the ProviderSpecific File (PSF) that is used for payment purposes. Although the analyses of the proposed changes to the capital prospective payment system do not incorporate cost data, we used the December 2013 update of the most recently available hospital cost report data (FYs 2011 and 2012) to categorize hospitals. Our analysis has several qualifications. We use the best data available and make assumptions about case-mix and beneficiary enrollment as described below. Due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each proposed change. In addition, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, it is possible that some individual hospitals are placed in the wrong category. Using cases from the December 2013 update of the FY 2013 MedPAR file, we simulated payments under the capital IPPS for FY 2014 and FY 2015 for a comparison E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28370 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules of total payments per case. Any short-term, acute care hospitals not paid under the general IPPS (for example, Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. The methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating capital IPPS payments in FY 2015 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME adjustment factor, if applicable). In addition to the other adjustments, hospitals may also receive outlier payments for those cases that qualify under the threshold established for each fiscal year. We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital’s case-mix. We then added estimated payments for indirect medical education, disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions: • We estimate that the Medicare case-mix index will increase by 0.5 percent in both FYs 2014 and 2015. • We estimate that Medicare discharges will be approximately 12.2 million in FY 2014 and 12.6 million in FY 2015. • The capital Federal rate was updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.1.a. of the Addendum to this proposed rule, the proposed update is 1.5 percent for FY 2015. • In addition to the proposed FY 2015 update factor, the proposed FY 2015 capital Federal rate was calculated based on a proposed GAF/DRG budget neutrality adjustment factor of 0.9957 and a proposed outlier adjustment factor of 0.9374. As discussed in section VI.C. of the preamble of this proposed rule, we are not proposing to make an additional MS–DRG documentation and coding adjustment to the capital IPPS Federal rates for FY 2015. 2. Results We used the actuarial model described above to estimate the potential impact of our proposed changes for FY 2015 on total capital payments per case, using a universe of 3,388 hospitals. As described above, the individual hospital payment parameters are taken from the best available data, including the December 2013 update of the FY 2013 MedPAR file, the December 2013 update to the PSF, and the most recent cost report data from the December 2013 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 2014 and estimated total payments per case for FY 2015 based on the proposed FY 2015 payment policies. Column 2 shows estimates of payments per case under our model for FY 2014. Column 3 shows estimates of payments per case under our model for FY 2015. Column 4 shows the total percentage change in payments from FY 2014 to FY 2015. The change represented in Column 4 includes the proposed 1.5 percent update to the capital Federal rate and other proposed changes in the adjustments to the capital Federal rate. The comparisons are provided by: (1) Geographic location; (2) region; and (3) payment classification. The simulation results show that, on average, capital payments per case in FY 2015 are expected to increase as compared to capital payments per case in FY 2014. This expected increase is due primarily to the approximately 0.9 percent increase in the proposed capital Federal rate for FY 2015 as compared to the FY 2014 capital Federal rate. Overall, across all hospitals, the proposed changes to the GAFs are expected to have no net effect on capital payments. However, regionally, the effects of the proposed changes to the GAFs on capital payments are consistent with the projected changes in payments due to proposed changes in the wage index (and proposed policies affecting the wage index) as shown in Table I in section I.G. of this Appendix. Overall, there is an increase in capital payments per case due to the effects of proposed changes to the MS–DRG reclassifications and recalibrations, with more of this increase expected for urban hospitals. However, this increase is offset by projected changes in outlier payments, with rural areas expected to experience more of this offset. The net impact of these proposed changes is an estimated 1.2 percent change in capital payments per case from FY 2014 to FY 2015 for all hospitals (as shown below in Table III). The geographic comparison shows that, on average, with the exception of hospitals in the Rural Mountain area, most hospitals are expected to experience an increase in capital IPPS payments per case in FY 2015 as compared to FY 2014. As we stated above, these expected increases are primarily due to the proposed increase in the capital Federal rate. Capital IPPS payments per case for hospitals in ‘‘large urban areas’’ are expected to have an estimated increase of 1.4 percent, while hospitals in rural areas, on average, are expected to experience a 0.7 percent increase in capital payments per case from FY 2014 to FY 2015. Capital IPPS payments per case for ‘‘other urban hospitals’’ are estimated to increase 1.2 percent. The primary factor contributing to the difference in the proposed projected increase in capital IPPS payments per case for urban hospitals as compared to rural hospitals is the proposed increase in PO 00000 Frm 00394 Fmt 4701 Sfmt 4702 capital payments to urban hospitals due to proposed changes to the MS–DRG relative weights. This projected increase is slightly lower for rural hospitals. The comparisons by region show that the estimated increases in capital payments per case from FY 2014 to FY 2015 in urban areas range from a 2.0 percent increase for the Pacific urban region to a 0.8 percent increase for the East South Central urban region, and a 0.6 percent increase for the Puerto Rico urban region. For rural regions, the Pacific rural region is expected to experience the largest increase in capital IPPS payments per case of 1.9 percent, while the Mountain rural region is the only region projected to have a decrease in capital payments per case, 0.1 percent, compared to FY 2014 payments per case. Unlike most other urban and rural regions where proposed changes in the GAFs contribute to a projected decrease in capital payments, the proposed changes in the GAFs contribute to an expected increase in capital IPPS payments per case for the Pacific urban and rural regions. A larger than average decrease in capital payments per case for the Mountain rural area due to the proposed change in outliers offset the projected increases to that area’s capital payments per case in FY 2015 compared to FY 2014. Hospitals of all types of ownership (that is, voluntary hospitals, government hospitals, and proprietary hospitals) are estimated to experience an increase in capital payments per case from FY 2014 to FY 2015. The proposed increase in capital payments for proprietary hospitals is estimated at 1.2 percent; for voluntary hospitals, at 1.3 percent. Government hospitals are estimated to experience a 1.1 percent increase in capital payments per case from FY 2014 to FY 2015. Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2015. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified as of the publication of this proposed rule for FY 2015, we show the average capital payments per case for reclassified hospitals for FY 2015. Urban reclassified hospitals are expected to experience an increase in capital payments of 1.5 percent, whereas for urban nonreclassified hospitals, the expected increase is 1.2 percent. The estimated percentage increase for rural reclassified hospitals is 0.7 percent, and for rural nonreclassified hospitals, the estimated percentage increase is 0.3 percent. Other reclassified hospitals (that is, hospitals reclassified under section 1886(d)(8)(B) of the Act) are expected to experience the largest increase (2.2 percent) in capital payments from FY 2014 to FY 2015. E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules 28371 TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE [FY 2014 payments compared to FY 2015 payments] mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Number of hospitals VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 PO 00000 Frm 00395 848 936 859 948 1.2 1.4 1,147 846 2,542 655 788 469 417 213 846 325 298 136 50 37 817 577 882 728 761 810 902 1,056 577 470 534 575 640 704 827 581 893 732 770 821 915 1,070 581 473 537 579 645 711 1.2 0.7 1.3 0.5 1.2 1.4 1.4 1.3 0.7 0.6 0.5 0.7 0.8 0.9 2,542 120 324 406 397 153 162 385 159 384 52 846 22 57 132 115 165 102 168 61 24 0 882 974 946 796 848 758 876 816 906 1,111 406 577 802 562 550 601 530 613 511 651 742 0 893 985 963 805 856 764 887 824 916 1,133 408 581 812 569 551 606 534 617 513 650 756 0 1.3 1.2 1.7 1.1 0.9 0.8 1.3 0.9 1.1 2.0 0.6 0.7 1.2 1.3 0.2 0.8 0.7 0.6 0.5 ¥0.1 1.9 0.0 3,388 794 1,764 830 848 879 882 588 859 889 894 591 1.2 1.1 1.4 0.5 2,352 792 244 722 831 1,196 730 841 1,213 1.1 1.3 1.4 1,591 366 902 635 914 639 1.3 0.8 388 212 521 649 524 653 0.6 0.6 24 125 548 459 546 461 ¥0.3 0.4 842 133 1,115 468 980 884 754 791 993 897 763 798 1.3 1.6 1.3 0.9 2,576 197 325 125 Fmt 4701 Average FY 2015 payments/case 3,388 1,395 By Geographic Location: All hospitals ...................................................................... Large urban areas (populations over 1 million) ........ Other urban areas (populations of 1 million or fewer) ..................................................................... Rural areas ................................................................ Urban hospitals ................................................................. 0–99 beds .................................................................. 100–199 beds ............................................................ 200–299 beds ............................................................ 300–499 beds ............................................................ 500 or more beds ...................................................... Rural hospitals .................................................................. 0–49 beds .................................................................. 50–99 beds ................................................................ 100–149 beds ............................................................ 150–199 beds ............................................................ 200 or more beds ...................................................... By Region: Urban by Region .............................................................. New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ Puerto Rico ................................................................ Rural by Region ................................................................ New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ Puerto Rico ................................................................ By Payment Classification: All hospitals ...................................................................... Large urban areas (populations over 1 million) ............... Other urban areas (populations of 1 million or fewer) ..... Rural areas ....................................................................... Teaching Status: Non-teaching .................................................................... Fewer than 100 Residents ............................................... 100 or more Residents ..................................................... Urban DSH: 100 or more beds ............................................................. Less than 100 beds .......................................................... Rural DSH: Sole Community (SCH/EACH) ......................................... Referral Center (RRC/EACH) ........................................... Other Rural: 100 or more beds ............................................................. Less than 100 beds .......................................................... Urban teaching and DSH: Both teaching and DSH .................................................... Teaching and no DSH ...................................................... No teaching and DSH ...................................................... No teaching and no DSH ................................................. Rural Hospital Types: Non special status hospitals ............................................. RRC/EACH ....................................................................... SCH/EACH ....................................................................... SCH, RRC and EACH ...................................................... Average FY 2014 payments/case 882 717 619 704 893 730 624 710 1.2 1.8 0.8 0.9 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 Change 28372 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2014 payments compared to FY 2015 payments] Number of hospitals mstockstill on DSK4VPTVN1PROD with PROPOSALS2 K. Effects of Proposed Payment Rate Changes and Policy Changes Under the LTCH PPS 1. Introduction and General Considerations In section VII. of the preamble of this proposed rule and section V. of the Addendum to this proposed rule, we set forth the proposed annual update to the payment rates for the LTCH PPS for FY 2015. In the preamble of this proposed rule, we specify the statutory authority for the proposed provisions that are presented, identify those proposed policies, and present rationales for our proposed decisions as well as alternatives that were considered. In this section of Appendix A to this proposed rule, we discuss the impact of the proposed changes to the payment rate, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this proposed rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs. Currently, there are 422 LTCHs included in this impacts analysis, which includes data for 91 nonprofit (voluntary ownership control) LTCHs, 288 proprietary LTCHs, and 43 LTCHs that are government-owned and operated. (We note that although there are currently approximately 435 LTCHs, for purposes of this impact analysis, we excluded the data of all inclusive rate providers and the LTCHs that are paid in accordance with demonstration projects, consistent with the development of the proposed FY 2015 MS–LTC–DRG relative weights (discussed in section VII.B.3.c. of the preamble of this proposed rule)). In the impact analysis, we used the proposed payment rate, factors, and policies presented in this proposed rule, including the proposed 2.1 percent annual update for LTCHs that submit quality data in accordance with section 1886(m)(5)(C) of the Act, which is based on the full estimated increase of the LTCH PPS market basket and the reductions required by sections 1886(m)(3) and (m)(4) of the Act, the proposed final year of the phasein of a one-time prospective adjustment factor of 0.98734 (approximately ¥1.3 percent), the proposed update to the MS– VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Average FY 2015 payments/case 533 1,858 271 379 60 883 890 615 541 574 896 901 620 543 587 1.5 1.2 0.7 0.3 2.2 1,925 883 540 861 770 886 872 779 895 1.3 1.2 1.1 445 2,004 718 131 Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY2015 Reclassifications: All Urban Reclassified ...................................................... All Urban Non-Reclassified .............................................. All Rural Reclassified ....................................................... All Rural Non-Reclassified ................................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) ...... Type of Ownership: Voluntary ........................................................................... Proprietary ........................................................................ Government ...................................................................... Medicare Utilization as a Percent of Inpatient Days: 0–25 .................................................................................. 25–50 ................................................................................ 50–65 ................................................................................ Over 65 ............................................................................. Average FY 2014 payments/case 1,069 865 704 560 1,082 876 713 565 1.3 1.3 1.2 0.9 LTC–DRG classifications and relative weights, the proposed update to the wage index values, including the proposed implementation of the new OMB delineations, and labor-related share, and the best available claims and CCR data to estimate the change in payments for FY 2015. (As discussed in section VII.C. of the preamble of this proposed rule, in accordance with section 1886(m)(5)(C) of the Act, for LTCHs that fail to submit quality data, the proposed annual update to the LTCH PPS standard Federal rate is reduced by 2.0 percentage points in FY 2015.) The standard Federal rate for FY 2014 is $40,607.31 for LTCHs that submit quality data in accordance with the requirements of section 1886(m)(5)(C) of the Act. For FY 2015, we are proposing to establish a standard Federal rate of $40,943.51 for LTCHs that submit quality data in accordance with the requirements of section 1886(m)(5)(C) of the Act, which reflects the proposed 2.1 percent annual update to the standard Federal rate, and the proposed area wage budget neutrality factor of 1.0002034 to ensure that the proposed changes in the wage index, including the proposed implementation of the new OMB delineations, and labor-related share do not influence aggregate payments, and the proposed final year of the phase-in of a onetime prospective adjustment factor of 0.98734. For LTCHs that fail to submit data for the LTCHQR Program, in accordance with section 1886(m)(5)(C) of the Act, we are proposing to establish a standard Federal rate of $40,141.47. This reduced standard Federal rate reflects the proposed updates described above in addition to a 2.0 percentage point to the annual update for failure to submit data to the LTCHQR Program. We note that the proposed factors described above to determine the proposed FY 2015 standard Federal rate are applied to the FY 2014 Federal standard rate set forth under § 412.523(c)(3)(ix)(A) (that is, $40,607.31). Based on the best available data for the 422 LTCHs in our database, we estimate that the proposed annual update to the standard PO 00000 Frm 00396 Fmt 4701 Sfmt 4702 Change Federal rate for FY 2015, including the reduced updated for LTCHs that fail to submit quality data in accordance with the requirements of the LTCHQR Program (discussed in section V.A.2. of the Addendum to this proposed rule) and the proposed changes to the area wage adjustment for FY 2015 (discussed in section V.B. of the Addendum to this proposed rule), in addition to an estimated decrease in HCO payments would result in an increase in estimated payments from FY 2014 of approximately $44 million. Based on the 422 LTCHs in our database, we estimate that the FY 2015 LTCH PPS payments would be approximately $5.594 billion, as compared to estimated FY 2014 LTCH PPS payments of approximately $5.550 billion. Because the combined distributional effects and estimated changes to the Medicare program payments are over approximately $100 million, this proposed rule is considered a major economic rule, as defined in this section. We note that the approximate $44 million for the projected increase in estimated aggregate proposed LTCH PPS payments from FY 2014 to FY 2015 does not reflect changes in LTCH admissions or casemix intensity in estimated LTCH PPS payments, which also will affect overall payment changes. The projected 0.8 percent increase in estimated proposed payments per discharge from FY 2014 to FY 2015 is attributable to several factors, including the proposed 2.1 percent annual update to the standard Federal rate (or 0.1 percent annual update for LTCHs that failed to submit data under the requirements of the LTCHQR Program), a proposed one-time prospective adjustment factor for FY 2015 of 0.98734 (approximately ¥1.3 percent), and projected decreases in estimated HCO payments. Although the net effect of the proposed 2.1 percent annual update and the approximate ¥1.3 percent proposed one-time prospective adjustment factor is approximately 0.8 percent (that is, 2.1 percent ¥1.3 percent = 0.8 percent), Table IV (column 6) shows the estimated change attributable solely to the proposed E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules annual update to the standard Federal rate (2.1 percent for LTCHs that submit quality data under the requirements of the LTCHQR Program and 0.1 percent for LTCHs that failed submit quality data under the requirements of the LTCHQR Program), including a proposed one-time prospective adjustment factor for FY 2015 under the final year of the phase-in (approximately 1.3 percent), is projected to result in an increase of 0.7 percent in payments per discharge from FY 2014 to FY 2015, on average, for all LTCHs. In addition to the proposed 2.1 percent annual update for FY 2015 (or 0.1 percent annual update for LTCHs that failed to submit data under the LTCHQR Program), and a proposed ¥1.3 percent one-time prospective adjustment factor for FY 2015, this estimated increase in aggregate LTCH PPS payments of 0.7 percent shown in column 6 of Table IV also includes estimated payments for SSO cases that are paid using special methodologies that are not affected by the annual update to the standard Federal rate. Therefore, for some hospital categories, the projected increase in payments based on the proposed standard Federal rate is slightly less than the net effect of the proposed 2.1 percent annual update and the approximate ¥1.3 percent proposed one-time prospective adjustment factor (or 0.8 percent) for FY 2015. Because we are proposing to apply an area wage level budget neutrality factor to the standard Federal rate, the proposed annual update to the wage data, including the proposed implementation of the new OMB delineations, and labor-related share does not impact the increase in aggregate payments. As discussed in section V.B. of the Addendum to this proposed rule, we are proposing to update the wage index values for FY 2015 based on the most recent available data and the proposed adoption of the new OMB labor market area delineations. Under our proposal to adopt the new OMB delineations, we are proposing a transitional blended wage index for FY 2015 for LTCH’s that would have a lower wage index value under those delineations, as discussed in section VII.D.2. of the preamble of this proposed rule. Therefore, this column reflects the proposed blended wage index that is calculated as a 50/50 blend of the wage index under the current CBSA designations and the wage index under the new OMB delineations under our proposed transitional wage index policy. In addition, we are proposing a slight increase to the labor-related share from 62.537 percent to 62.571 percent under the LTCH PPS for FY 2015, based on the most recent available data on the relative importance of the laborrelated share of operating and capital costs based on the FY 2009-based LTCH-specific market basket. We also are proposing to apply an area wage level budget neutrality factor of 1.0002034, which increases the proposed standard Federal rate by approximately 0.02 percent. Therefore, the proposed changes to the wage data, including the proposed adoption of the new OMB delineations, and labor-related share do not result in a change in estimated aggregate LTCH PPS payments. Table IV below shows the impact of the proposed payment rate and the proposed VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 policy changes on LTCH PPS payments for FY 2015 presented in this proposed rule by comparing estimated FY 2014 payments to estimated FY 2015 payments. The projected increase in payments from FY 2014 to FY 2015 of 0.8 percent is attributable to the impacts of the proposed change to the standard Federal rate (0.7 percent in Column 6) and the effect of the estimated slight decrease in proposed payments for HCO cases (0.1 percent) and an estimated increase in payments for SSO cases (0.2 percent). We currently estimate total HCO payments are projected to decrease slightly from FY 2014 to FY 2015 in order to ensure that the estimated HCO payments would be 8 percent of the total estimated LTCH PPS payments in FY 2015. An analysis of the most recent available LTCH PPS claims data (that is, FY 2013 claims data from the December 2013 update of the MedPAR file) indicates that the FY 2014 HCO threshold of $13,314 (as established in the FY 2014 IPPS/LTCH PPS final rule) may result in HCO payments in FY 2015 that are slightly above the estimated 8 percent. Specifically, we currently estimate that HCO payments would be approximately 8.1 percent of the estimated total LTCH PPS payments in FY 2014. We estimate that the impact of the slight decrease in HCO payments would result in approximately a 0.1 percent decrease in estimated payments from FY 2014 to FY 2015, on average, for all LTCHs. Furthermore, in calculating the estimated HCO payments for FYs 2014 and 2015, we increased estimated costs by the applicable market basket percentage increase as projected by our actuaries. This increase in estimated costs also results in a projected increase in SSO payments of approximately 0.2 percent relative to last year. The net result of these projected changes in HCO and SSO payments in FY 2015 is an estimated change in aggregate payments of 0.1 percent. We note that estimated payments for all SSO cases comprise approximately 12 percent of the estimated total LTCH PPS payments, and estimated payments for HCO cases comprise approximately 8 percent of the estimated total FY 2015 LTCH PPS payments. Payments for HCO cases are based on 80 percent of the estimated cost of the case above the HCO threshold, while the majority of the payments for SSO cases (approximately 60 percent) are based on the estimated cost of the case. In addition to the projected increase in LTCH PPS payments per discharge of approximately $44 million (0.8 percent) from FY 2014 to FY 2015, as shown in Table IV below, we also estimate that the net effect of the projected impact of certain other proposed LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25-percent policy’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the proposed revision of the ‘‘greater than 3day interruption of stay’’ policy; the proposed revocation of on-site discharges and readmissions policy; and the proposed payment adjustment for ‘‘subclause (II)’’ LTCHs) would result in a $14 million decrease in aggregate LTCH PPS payments in FY 2015. The individual impact of these PO 00000 Frm 00397 Fmt 4701 Sfmt 4702 28373 proposed policy changes are discussed in greater detail below in section I.K.3.b. of this Appendix. As we discuss in detail throughout this proposed rule, based on the most recent available data, we believe that the provisions of this proposed rule relating to the LTCH PPS would result in an increase in estimated aggregate LTCH PPS payments and that the resulting LTCH PPS payment amounts would result in appropriate Medicare payments. 2. Impact on Rural Hospitals For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. As shown in Table IV, we are projecting a 0.7 percent increase in estimated payments per discharge for FY 2015 as compared to FY 2014 for rural LTCHs that would result from the proposed changes presented in this proposed rule, as well as the effect of estimated changes to HCO and SSO payments. This estimated impact is based on the data for the 22 rural LTCHs in our database (out of 422 LTCHs) for which complete data were available. The estimated increase in LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs (0.7 percent) is slightly less than the national average increase (0.8 percent). The estimated increase in LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs is primarily due to the proposed increase to the standard Federal rate. However, rural LTCHs are experiencing slightly lower increases than the national average due to decreases in their wage index for FY 2015 compared to FY 2014. 3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes and Policy Changes a. Budgetary Impact Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs ‘‘maintain budget neutrality.’’ We believe that the statute’s mandate for budget neutrality applies only to the first year of the implementation of the LTCH PPS (that is, FY 2003). Therefore, in calculating the FY 2003 standard Federal rate under § 412.523(d)(2), we set total estimated payments for FY 2003 under the LTCH PPS so that estimated aggregate payments under the LTCH PPS were estimated to equal the amount that would have been paid if the LTCH PPS had not been implemented. As discussed above in section I.K.1. of this Appendix, we project an increase in aggregate LTCH PPS payments per discharge in FY 2015 relative to FY 2014 of approximately $44 million based on the 422 LTCHs in our database. In addition, as discussed below in section I.K.3.b. of this Appendix, we also estimate that the net effect of the projected impact of certain other proposed LTCH PPS policy changes would result in a $14 million decrease in aggregate LTCH PPS payments in FY 2015. b. Impact of Certain Proposed LTCH PPS Policy Changes (1) Proposed Reinstatement of the Moratorium on the Full Implementation of the ‘‘25-Percent Policy’’ Payment Adjustment (§ 412.534 and § 412.536) and Proposed Reinstatement of the Moratorium on the E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 28374 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Development of New LTCHs and LTCH Satellites and Additional LTCH beds (§ 412.23(e) and §§ 412.23(e)(6) and (7)) Section 1206(b) of Public Law 113–67 provides for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment (referred to as the ‘‘25-percent policy’’ payment adjustment) established under section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act. As discussed in section VII.E. of the preamble of this proposed rule, we are proposing to reinstate this payment adjustment retroactively for LTCH cost reporting periods beginning on or after July 1, 2013 or October 1, 2013, as applicable under the regulations at § 412.534 and § 412.536. Section 1206(b)(2) of Public Law 113–67, as amended by section 112(b) of the Protecting Access to Medicare Act of 2–14 (Pub. L. 113–93), provides for moratoria on the establishment of new LTCHs and LTCH satellite facilities and on bed increases in LTCHs effective for the period beginning April 1, 2014, and ending September 30, 2017. This statutory provision also provides specific exceptions to the moratorium on the establishment of new LTCHs and LTCH satellites. We are proposing to implement this policy under the regulations at § 412.23(e) and §§ 412.23(e)(6) and (7), respectively. For additional details, refer to section VII.G. of the preamble of this proposed rule. Our Office of the Actuary projects that the reinstatement of ‘‘25-percent policy’’ adjustment policy would result in approximately a $120 million increase in aggregate LTCH PPS payments in FY 2015. In addition, our Office of the Actuary projects that the portion of the moratoria on the establishment of new LTCHs and LTCH satellite facilities and additional LTCH beds that would occur during FY 2015 is estimated to result in approximately a $30 million reduction in aggregate LTCH PPS payments in FY 2015. Therefore, we project our proposed implementation of both of these statutory provisions would result in approximately a $90 million increase in aggregate LTCH PPS payments in FY 2015. (2) Proposed Revision of the ‘‘Greater than 3Day Interruption of Stay’’ Policy (§ 412.531) and Proposed Revocation of On-Site Discharges and Readmissions Policy (§ 412.532) The LTCH greater than 3-day interruption of stay policy under § 412.531 is a payment adjustment that is applied when during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by readmittance to the same LTCH. Specifically, under this policy, we established specific fixed-day thresholds, which apply to the days away from the LTCH, depending upon the intervening provider. If the stay is an ‘‘interrupted stay,’’ that is, the patient returned to the LTCH within the threshold number of days, payment for both ‘‘halves’’ VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 of the LTCH discharge is ‘‘bundled,’’ and Medicare makes one payment based on the second date of discharge. As discussed in section VII.F. of the preamble of this proposed rule, we are proposing to revise the fixed-day thresholds under the ‘‘greater than 3-day interruption of stay policy’’ to apply a uniform 30-day threshold as an ‘‘acceptable standard’’ for determining a linkage between an index discharge and a readmission. As also discussed in section VII.F. of the preamble of this proposed rule, we also are proposing to remove the discharge and readmission requirement specified in the regulations under § 412.532 (referred to as the ‘‘5-percent payment threshold’’). Under the ‘‘5-percent payment threshold’’ policy, if an LTCH (or a LTCH satellite facility) directly readmits more than 5 percent of its total Medicare inpatients discharged from an ‘‘onsite facility’’ (for example, a co-located acute care hospital, an IRF, or a SNF, or a in the case of a LTCH satellite facility, that is colocated with an LTCH), all such discharges to the co-located ‘‘on-site facility’’ and the readmissions to the LTCH are treated as one discharge for that cost reporting period, and, as such, one LTCH PPS payment is made on the basis of each patient’s initial principal diagnosis. We estimate that the proposed revision to the greater than 3-day interruption of stay policy under § 412.531 would result in a reduction in aggregate LTCH PPS payments of approximately $130 million for FY 2015, if the proposal to apply a uniform 30-day threshold is finalized. We also estimate that the proposed discontinuation of the ‘‘5percent payment threshold’’ policy would result in an increase of approximately $20 million in aggregate LTCH PPS payments in FY 2015. Accordingly, our Office of the Actuary projects that, together, these proposed policy revisions are estimated to decrease aggregate LTCH PPS payments in FY 2015 by approximately $110 million. (3) Proposed Payment Adjustment for ‘‘Subclause (II)’’ LTCHs (proposed § 412.526) Section 1206(d) of Public Law 113–67 requires the Secretary to evaluate payments and regulations governing ‘‘hospitals which are classified under subclause (II) of subsection (d)(1)(B)(iv)’’. In addition, based on the result of such evaluations, the statute authorizes the Secretary to adjust the payment rates for this type of hospital and to adjust regulations governing a subclause (II) LTCH that otherwise apply to subclause (I) LTCHs. As discussed in section VII.H. of the preamble of this proposed rule, under new § 412.526, we are proposing to apply a payment adjustment under the LTCH PPS to a subclause (II) LTCH beginning in FY 2015 that would result in payments to this type of LTCH resembling those under the reasonable cost TEFRA payment system model. Our Office of the Actuary projects that, if the proposed payment adjustment for ‘‘subclause (II)’’ LTCHs is finalized, it would increase aggregate LTCH PPS payments in FY 2015 by approximately $6 million. c. Impact on Providers The basic methodology for determining a per discharge LTCH PPS payment is set forth under § 412.515 through § 412.536. In PO 00000 Frm 00398 Fmt 4701 Sfmt 4702 addition to the basic MS–LTC–DRG payment (the standard Federal rate multiplied by the MS–LTC–DRG relative weight), we make adjustments for differences in area wage levels, a COLA for LTCHs located in Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO payments for those cases that qualify based on the threshold established each year. To understand the impact of the proposed changes to the LTCH PPS payments presented in this proposed rule on different categories of LTCHs for FY 2015, it is necessary to estimate payments per discharge for FY 2014 using the rates, factors (including the FY 2014 GROUPER (Version 31.0), and relative weights and the policies established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50753 through 50760 and 51002). It is also necessary to estimate the payments per discharge that would be made under the proposed LTCH PPS rates and factors, and GROUPER (proposed Version 32.0) for FY 2015 (as discussed in section VII. of the preamble of this proposed rule and section V. of the Addendum to this proposed rule). These estimates of FY 2014 and FY 2015 LTCH PPS payments are based on the best available LTCH claims data and other factors, such as the application of inflation factors to estimate costs for SSO and HCO cases in each year. We also evaluated the proposed change in estimated FY 2014 payments to estimated FY 2015 payments (on a per discharge basis) for each category of LTCHs. We are proposing to establish a standard Federal rate for FY 2015 of $40,943.51 (for LTCHs that submit quality data under the requirements of the LTCHQR Program), which includes the proposed 2.1 percent annual update, the proposed area wage budget neutrality factor of 1.0002304, and a proposed one-time prospective adjustment to the standard Federal rate for FY 2015 of 0.98734 (approximately -1.3 percent). For LTCHs that fail to submit data to the LTCH Quality Reporting Program, we are proposing to establish a standard Federal rate for FY 2015 of $40,141.47 that includes a 2.0 percentage point reduction applied to the proposed annual update under the requirements of section 1886(m)(5)(C) of the Act in addition to the other proposed adjustments noted above. Hospital groups were based on characteristics provided in the OSCAR data, FY 2010 through FY 2012 cost report data in HCRIS, and PSF data. Hospital groups included the following: • Location: large urban/other urban/rural. • Participation date. • Ownership control. • Census region. • Bed size. To estimate the impacts of the proposed payment rates and policy changes among the various categories of existing providers, we used LTCH cases from the FY 2013 MedPAR file to estimate payments for FY 2014 and to estimate payments for FY 2015 for 422 LTCHs. We believe that the discharges based on the FY 2013 MedPAR data for the 422 LTCHs in our database, which includes 288 proprietary LTCHs, provide sufficient representation in the MS–LTC–DRGs containing discharges for patients who E:\FR\FM\15MYP2.SGM 15MYP2 28375 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules received LTCH care for the most commonly treated LTCH patients’ diagnoses. d. Calculation of Prospective Payments For purposes of this impact analysis, to estimate per discharge payments under the LTCH PPS, we simulated payments on a case-by-case basis using LTCH claims from the FY 2013 MedPAR files. For modeling estimated LTCH PPS payments for FY 2014, we used the FY 2014 standard Federal rate (that is, $40,607.31 for LTCHs that submit quality data under the requirements of the LTCHQR Program and $39,808.74 for LTCHs that failed to submit quality data under the requirements of the LTCHQR Program) used to make payments for LTCH discharges occurring on or after October 1, 2013 through September 30, 2014). For modeling estimated proposed LTCH PPS payments for FY 2015, we used the proposed FY 2015 standard Federal rate of $40,943.51 (for LTCHs that submit quality data under the requirements of the LTCHQR Program), which includes a proposed onetime prospective adjustment of 0.98734 for FY 2015 for the final year of the 3-year phasein. For LTCHs that we project to have failed to submit the requisite quality data for FY 2015 under the LTCH Quality Reporting Program, we used the proposed FY 2015 standard Federal rate of $40,141.47, which reflects the 2.0 percentage points reduction required by section 1886(m)(5)(C)of the Act. The proposed FY 2015 standard Federal rates also include the proposed application of an area wage level budget neutrality factor of 1.0002034 (as discussed in section V.B.5. of the Addendum to this proposed rule). Furthermore, in modeling estimated LTCH PPS payments for both FY 2014 and FY 2015 in this impact analysis, we applied the FY 2014 and the proposed FY 2015 adjustments for area wage levels and the proposed COLA for LTCHs located in Alaska and Hawaii. Specifically, we adjusted for differences in area wage levels in determining estimated FY 2014 payments using the current LTCH PPS labor-related share of 62.537 percent (78 FR 50995 through 50996) and the wage index values established in the Tables 12A and 12B listed in the Addendum to the FY 2014 IPPS/ LTCH PPS final rule (which are available via the Internet on the CMS Web site. We also applied the FY 2014 COLA factors shown in the table in section V.C. of the Addendum to that final rule (78 FR 50997 through 50998) to adjust the FY 2014 nonlabor-related share (37.463 percent) for LTCHs located in Alaska and Hawaii. Similarly, we adjusted for differences in area wage levels in determining the estimated FY 2015 payments using the proposed FY 2015 LTCH PPS laborrelated share of 62.571 percent and the proposed FY 2015 wage index values, including the proposed 50/50 blended wage index, determined from the proposed wage index values presented in Tables 12A through 12D listed in section VI. of the Addendum to this proposed rule (and available via the Internet). We also applied the proposed FY 2015 COLA factors shown in the table in section V.C. of the Addendum to this proposed rule to the proposed FY 2015 nonlabor-related share (37.429 percent) for LTCHs located in Alaska and Hawaii. As discussed above, our impact analysis reflects an estimated change in payments for SSO cases, as well as an estimated increase in payments for HCO cases (as described in section V.D. of the Addendum to this proposed rule). In modeling proposed payments for SSO and HCO cases in FY 2015, we applied an inflation factor of 4.7 percent (determined by OACT) to estimate the costs of each case using the charges reported on the claims in the FY 2013 MedPAR files and the best available CCRs from the December 2013 update of the PSF. Furthermore, in modeling estimated LTCH PPS payments for FY 2015 in this impact analysis, we used the proposed FY 2015 fixed-loss amount of $15,730 (as discussed in section V.D. of the Addendum to this proposed rule). These impacts reflect the estimated ‘‘losses’’ or ‘‘gains’’ among the various classifications of LTCHs from FY 2014 to FY 2015 based on the proposed payment rates and policy changes presented in this proposed rule. Table IV illustrates the estimated aggregate impact of the LTCH PPS among various classifications of LTCHs. • The first column, LTCH Classification, identifies the type of LTCH. • The second column lists the number of LTCHs of each classification type. • The third column identifies the number of LTCH cases. • The fourth column shows the estimated payment per discharge for FY 2014 (as described above). • The fifth column shows the estimated payment per discharge for FY 2015 (as described above). • The sixth column shows the percentage change in estimated payments per discharge from FY 2014 to FY 2015 due to the proposed annual update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this proposed rule), including the proposed 2.0 percentage point reduction to the update to the standard Federal rate for LTCHs that fail to submit data to the LTCHQR Program and the final year of the phase-in of a one-time prospective adjustment factor for FY 2015. • The seventh column shows the percentage change in estimated payments per discharge from FY 2014 to FY 2015 for proposed changes to the area wage level adjustment (that is, the proposed wage indexes, including the proposed implementation of the new OMB delineations, and proposed labor-related share), including the proposed application of an area wage level budget neutrality factor, (as discussed in section V.B. of the Addendum to this proposed rule. This column includes the proposed wage index calculated as a 50/50 blend of the wage index under the current CBSA designations and the wage index under the new OMB delineations under our proposed transitional wage index policy for the proposed implementation of the new OMB delineations. • The eighth column shows the percentage change in estimated payments per discharge from FY 2014 (Column 4) to FY 2015 (Column 5) for all proposed changes (and includes the effect of estimated proposed changes to HCO and SSO payments). TABLE IV—IMPACT OF PROPOSED PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2015 [Estimated FY 2014 Payments Compared to Estimated FY 2015 Payments] mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Number of LTCHs Number of LTCH PPS cases Average FY 2014 LTCH PPS payment per case Average FY 2015 LTCH PPS payment per case 1 (1) (2) (3) (4) (5) Percent change in estimated payments per discharge from FY 2014 to FY 2015 for proposed changes to the area wage level adjustment with proposed budget neutrality 3 Percent change in payments per discharge from FY 2014 to FY 2015 for all proposed changes 4 (7) LTCH classification Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the proposed annual update to the federal rate 2 (8) (6) ALL PROVIDERS ........ BY LOCATION: RURAL .................. URBAN ................. LARGE .................. OTHER ................. VerDate Mar<15>2010 20:20 May 14, 2014 422 137,897 $40,247.74 $40,567.74 0.7 0 0.8 22 400 200 200 5,691 132,206 76,347 55,859 35,633.63 40,446.36 42,694 37,375 35,893.55 40,768.95 43,082 37,608 0.8 0.7 0.7 0.7 ¥0.2 0 0.1 ¥0.2 0.7 0.8 0.9 0.6 Jkt 232001 PO 00000 Frm 00399 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28376 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules TABLE IV—IMPACT OF PROPOSED PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2015— Continued [Estimated FY 2014 Payments Compared to Estimated FY 2015 Payments] Number of LTCHs Number of LTCH PPS cases Average FY 2014 LTCH PPS payment per case Average FY 2015 LTCH PPS payment per case 1 (1) (2) (3) (4) (5) Percent change in estimated payments per discharge from FY 2014 to FY 2015 for proposed changes to the area wage level adjustment with proposed budget neutrality 3 Percent change in payments per discharge from FY 2014 to FY 2015 for all proposed changes 4 (7) LTCH classification Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the proposed annual update to the federal rate 2 (8) (6) BY PARTICIPATION DATE: BEFORE OCT. 1983 .................. OCT. 1983–SEPT. 1993 .................. OCT. 1993–SEPT. 2002 .................. OCTOBER 2002 and AFTER ....... BY OWNERSHIP TYPE: VOLUNTARY ........ PROPRIETARY .... GOVERNMENT .... BY REGION: NEW ENGLAND ... MIDDLE ATLANTIC ..................... SOUTH ATLANTIC EAST NORTH CENTRAL .......... EAST SOUTH CENTRAL .......... WEST NORTH CENTRAL .......... WEST SOUTH CENTRAL .......... MOUNTAIN ........... PACIFIC ................ BY BED SIZE: BEDS: 0–24 .......... BEDS: 25–49 ........ BEDS: 50–74 ........ BEDS: 75–124 ...... BEDS: 125–199 .... BEDS: 200 + ......... 16 5,200 37,560.33 38,297.27 0.7 0.8 2 44 16,796 43,706.56 44,005.21 0.7 ¥0.2 0.7 181 62,686 39,413.76 39,694.92 0.7 ¥0.1 0.7 181 53,215 40,401.05 40,732.81 0.7 0.1 0.8 91 288 43 21,887 104,450 11,560 41,091.65 39,975.38 41,110.80 41,428.06 40,291.47 41,435.10 0.7 0.7 0.7 0.1 0 0.1 0.8 0.8 0.8 14 6,948 36,681.66 37,478.17 0.7 1.1 2.2 29 61 8,522 18,561 42,608.78 42,577.65 43,311.85 42,756.02 0.7 0.7 1.1 ¥0.3 1.7 0.4 70 20,072 42,055.63 42,256.47 0.7 ¥0.1 0.5 31 8,940 39,632.87 39,809.48 0.7 ¥0.5 0.4 26 6,446 39,279.06 39,620.34 0.7 0.1 0.9 134 32 25 48,191 6,775 13,442 35,731.94 43,403.32 50,149.94 36,001.75 43,675.91 50,643.35 0.7 0.7 0.7 ¥0.2 ¥0.1 0.1 0.8 0.6 1 24 200 117 45 22 14 2,593 47,183 37,486 22,044 15,353 13,238 35,165.11 39,176.76 40,905.58 42,299.43 39,223.11 40,969.52 35,370.96 39,479.06 41,253.12 42,677.61 39,498.04 41,252.44 0.8 0.7 0.7 0.7 0.7 0.7 ¥0.2 0 0.1 0.2 ¥0.1 ¥0.2 0.6 0.8 0.8 0.9 0.7 0.7 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 1 Estimated FY 2015 LTCH PPS payments based on the proposed payment rate and factor changes presented in the preamble of and the Addendum to this proposed rule. 2 Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the proposed annual update to the standard Federal rate and the proposed one-time prospective adjustment factor for FY 2015 as discussed in section V.A.2. of the Addendum to this proposed rule. 3 Percent change in estimated payments per discharge from FY 2014 to FY 2015 for proposed changes to the area wage level adjustment under § 412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule). 4 Percent change in estimated payments per discharge from FY 2014 LTCH PPS (shown in Column 4) to FY 2015 LTCH PPS (shown in Column 5), including all of the proposed changes to the rates and factors presented in the preamble of and the Addendum to this proposed rule. Note, this column, which shows the percent change in estimated payments per discharge for all proposed changes, does not equal the sum of the percent changes in estimated payments per discharge for the proposed annual update to the standard Federal rate (column 6) and the proposed changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated proposed changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated. e. Results Based on the most recent available data for 422 LTCHs, we have prepared the following summary of the impact (as shown above in Table IV) of the proposed LTCH PPS payment rate and policy changes presented in this proposed rule. The impact analysis in Table IV shows that estimated payments per VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 discharge are expected to increase 0.8 percent, on average, for all LTCHs from FY 2014 to FY 2015 as a result of the proposed payment rate and policy changes presented in this proposed rule, including an estimated slight decrease in HCO payments. This estimated 0.8 percent increase in LTCH PPS payments per discharge from the FY 2014 to PO 00000 Frm 00400 Fmt 4701 Sfmt 4702 FY 2015 for all LTCHs (as shown in Table IV) was determined by comparing estimated FY 2015 LTCH PPS payments (using the proposed payment rates and factors discussed in this proposed rule) to estimated FY 2014 LTCH PPS payments (as described above in section I.L.1. of this Appendix). E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules We are proposing to establish a standard Federal rate of $40,943.51 (or a standard Federal rate of $40,141.47 for LTCHs that failed to submit data under the requirements of the LTCHQR Program) for FY 2015. Specifically, we are proposing to update the standard Federal rate for FY 2015 by 2.1 percent, which is based on the latest estimate of the proposed LTCH PPS market basket increase (2.7 percent), the proposed reduction of 0.4 percentage point for the MFP adjustment, and the 0.2 percentage point reduction consistent with sections 1886(m)(3) and (m)(4) of the Act. For LTCHs that fail to submit quality data under the requirements of the LTCHQR Program, as required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point reduction is applied to the proposed annual update to the standard Federal rate. In addition, we are proposing to apply a one-time prospective adjustment factor for FY 2015 of 0.98734 (approximately ¥1.3 percent) to the standard Federal rate for the final year of the 3-year phase-in. We noted earlier in this section that, for most categories of LTCHs, as shown in Table IV (Column 6), the payment increase due to the proposed 2.1 percent annual update to the standard Federal rate and the proposed application of a one-time prospective adjustment for FY 2015 of approximately ¥1.3 percent for the final year of the 3-year phase-in is projected to result in approximately a 0.7 percent decrease in estimated payments per discharge for all LTCHs from FY 2014 to FY 2015. In addition, our estimate of the proposed changes in payments due to the proposed update to the standard Federal rate also reflects estimated payments for SSO cases that are paid using special methodologies that are not affected by the update to the standard Federal rate. For these reasons, we estimate that payments may increase by less than 0.8 percent for certain hospital categories due to the proposed annual update to the standard Federal rate and the proposed application of the final phase of the one-time prospective adjustment for FY 2015. (1) Location Based on the most recent available data, the vast majority of LTCHs are located in urban areas. Only approximately 5 percent of the LTCHs are identified as being located in a rural area, and approximately 4 percent of all LTCH cases are treated in these rural hospitals. The impact analysis presented in Table IV shows that the average percent increase in estimated payments per discharge from FY 2014 to FY 2015 for all hospitals is 0.8 percent for all proposed changes. For rural LTCHs, the percent change for all proposed changes is estimated to be a 0.7 percent increase, while for urban LTCHs, we estimate the increase would be 0.8 percent. Large urban LTCHs are projected to experience an increase of 0.9 percent in estimated payments per discharge from FY 2014 to FY 2015, while other urban LTCHs are projected to experience an increase of 0.6 percent in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. (2) Participation Date LTCHs are grouped by participation date into four categories: (1) Before October 1983; VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) October 2002 and after. Based on the most recent available data, the categories of LTCHs with the largest percentage of LTCH cases (approximately 45 percent) are in hospitals that began participating in the Medicare program between October 1993 and September 2002, and they are projected to experience a 0.7 percent increase in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. Approximately 4 percent of LTCHs began participating in the Medicare program before October 1983, and these LTCHs are projected to experience a higher than average percent increase (2.0 percent) in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. Approximately 10 percent of LTCHs began participating in the Medicare program between October 1983 and September 1993. These LTCHs are projected to experience a 0.7 percent increase in estimated payments from FY 2014 to FY 2015. LTCHs that began participating in the Medicare program after October 1, 2002, which treat approximately 39 percent of all LTCH cases, are projected to experience a 0.8 percent increase in estimated payments from FY 2014 to FY 2015. (3) Ownership Control LTCHs are grouped into three categories based on ownership control type: Voluntary, proprietary, and government. Based on the most recent available data, approximately 22 percent of LTCHs are identified as voluntary (Table IV). The majority (nearly 68 percent) of LTCHs are identified as proprietary while government-owned and operated LTCHs represent about 10 percent of LTCHs. Based on ownership type, each category of LTCHs is expected to experience the average increase in payments of 0.8 percent in estimated payments per discharge from FY 2014 to FY 2015. (4) Census Region Estimated payments per discharge for FY 2015 are projected to increase for LTCHs located in all regions in comparison to FY 2014. Of the 9 census regions, we project that the increase in estimated payments per discharge would have the largest positive impact on LTCHs in the New England and Middle Atlantic regions (2.2 percent and 1.7 percent, respectively as shown in Table IV). The estimated percent increase in payments per discharge from FY 2014 to FY 2015 for those regions is largely attributable to the proposed changes in the area wage level adjustment. In contrast, LTCHs located in the South Atlantic and East South Central regions are projected to experience the smallest increase in estimated payments per discharge from FY 2014 to FY 2015. The lower than national average estimated increase in payments of 0.4 percent is primarily due to estimated decreases in payments associated with the proposed changes to the area wage level adjustment. (5) Bed Size LTCHs are grouped into six categories based on bed size: 0–24 beds; 25–49 beds; PO 00000 Frm 00401 Fmt 4701 Sfmt 4702 28377 50–74 beds; 75–124 beds; 125–199 beds; and greater than 200 beds. Most bed size categories are projected to receive either a slightly higher or slightly lower than average increase in estimated payments per discharge from FY 2014 to FY 2015. We project that small LTCHs (0–24 beds) would experience a 0.6 percent increase in payments, mostly due to decreases in the area wage level adjustment, while large LTCHs (200+ beds) would experience a 0.7 percent increase in payments. LTCHs with between 75 and 124 beds are expected to experience an above average increase in payments per discharge from FY 2014 to FY 2015 (0.9 percent). 4. Effect on the Medicare Program As noted previously, we project that the provisions of this proposed rule would result in an increase in estimated aggregate LTCH PPS payments in FY 2015 relative to FY 2014 of approximately $44 million (or approximately 0.8 percent) for the 422 LTCHs in our database. 5. Effect on Medicare Beneficiaries Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. L. Effects of Proposed Requirements for Hospital Inpatient Quality Reporting (IQR) Program In section IX.A. of the preamble of this proposed rule, we discuss our proposed requirements for hospitals to report quality data under the Hospital IQR Program in order to receive the full annual percentage increase for the FY 2017 payment determination. We are proposing to remove a total of 20 measures from the Hospital IQR Program for the FY 2016 payment determination and subsequent years, which begins in the CY 2015 reporting period. The first five measures are: (1) AMI–1 Aspirin at arrival (NQF #0132); (2) AMI–3 ACEI/ARB for left ventricular systolic dysfunction (NQF #0137); (3) AMI–5 Beta-blocker prescribed at discharge (NQF #0160); (4) SCIP INF–6 Appropriate Hair Removal; and (5) Participation in a systematic database for cardiac surgery (NQF #0113). Of those, the first four measures are currently suspended. The fifth measure was recommended by the MAP for removal because it is ‘‘topped-out.’’ We believe that an additional 15 chartabstracted measures are ‘‘topped out,’’ based on the previously adopted criteria, and we are proposing to remove them from the FY 2017 payment determination and subsequent years measure set. However, we are proposing to retain the electronic clinical quality measure version of 10 of these chartabstracted measures for Hospital IQR Program reporting as discussed in section IX.A.7.f. of the preamble of this proposed rule. We also are proposing to add one chartabstracted measure in this proposed rule: Severe sepsis and septic shock: management bundle (NQF #0500). E:\FR\FM\15MYP2.SGM 15MYP2 28378 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules We are proposing to incorporate refinements for several measures for the FY 2017 payment determination and subsequent years that were previously adopted in the Hospital IQR Program. These refinements have either arisen out of the NQF endorsement maintenance process, or during our internal efforts to harmonize measure approaches. The measure refinements include the following: (1) Refining the planned readmission algorithm for all seven readmission measures included in the Hospital IQR Program; (2) modifying the hip/ knee readmission and complication measure cohorts to exclude index admissions with a secondary fracture diagnosis; and (3) modifying the hip/knee complication measure to not count as complications coded as ‘‘present on admission’’ (POA) during the index admission. We do not anticipate any hospital burden associated with these revisions, as each is based on claims submitted by hospitals for payment purposes. Information is not available to determine the precise number of hospitals that would not meet the requirements to receive the full annual percentage increase for the FY 2017 payment determination. Historically, an average of 100 hospitals that participate in the Hospital IQR Program do not receive the full annual percentage increase in any fiscal year. We anticipate that because of the new requirements we are proposing for reporting for the FY 2017 payment determination, the number of hospitals not receiving the full annual percentage increase may be higher than average. The highest number of hospitals failing to meet program requirements was approximately 200 after the introduction of new NHSN reporting requirements. If the number of hospitals failing does increase because of proposed new requirements, we anticipate that over the long run, this number will decline as hospitals gain more experience with these requirements. As discussed in section XIII.B.6. of the preamble of this proposed rule, we estimate that our proposals for the adoption and removal of measures will result in an overall decrease of 5.86 million hours or 1,775 hours per hospital. The table below describes the hospital burden associated with the Hospital IQR Program requirements. BURDEN IMPACT OF PROPOSED HOSPITAL IQR PROGRAM REQUIREMENTS FOR FY 2017 Burden per hospital for previously finalized requirements Burden per hospital for all requirements as proposed (continuing, removed, added) Net change in burden per hospital Chart-abstracted and structural measures, forms ............. Review reports for claims-based measures ...................... Reporting of voluntary electronic clinical quality measures (E–CQM) in place of chart-abstracted measures. Validation templates ........................................................... E–CQM validation test ....................................................... Validation charts photocopying .......................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Hospital IQR program requirement Number of hospitals impacted 3,300 ....................... 3,300 ....................... Unknown ................. 1,291 hours ............. 4 hours .................... ¥570 hours ............ 963 hours ................ 4 hours .................... ¥554 hours ............ ¥328 hours. 0. 16 hours. Up to 600 ................ Up to 100 ................ Up to 600 ................ 144 hours ................ 0 .............................. $8,640 ..................... 144 hours ................ 16 hours .................. $8,496 ..................... 0. 16 hours. $¥144. We estimate that the total burden associated with the proposed voluntary electronic clinical quality measure reporting option will be similar to the burden outlined for hospitals in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). However, by allowing hospitals to submit data for a maximum of 16 measures that could be used to satisfy partial requirements for both programs, each hospital that participates in the voluntary electronic quality measure reporting option could realize a reduction in burden of up to approximately 554 hours. To achieve a savings of 554 hours, we made the following assumptions. We assumed an average annual collection burden for 164 chart-abstracted measures (in Stroke, VTE, ED, and PC–01 topic areas) to be a combined 582 hours annually per hospital over 4 quarters. We estimate that each quarter, each hospital will need approximately 2 hours and 40 minutes (10 minutes per measure) to process and submit measures results electronically per quarter. This equates to 10 hours and 40 minutes annually. Because the remaining 12 electronic clinical quality measures submitted to the Hospital IQR Program would not replace any chart-abstracted reporting requirements, there would be an extra 2 hours per quarter per hospital in burden (8 hours total), with no commensurate savings. In the FY 2014 IPPS/LTCH PPS final rule, hospitals were permitted to meet Hospital IQR program requirements for these 16 measures by submitting data electronically for a single quarter (78 FR 50811 through 50819) for the FY 2016 payment determination. Moreover, there were no VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 options for submitting 12 additional measures. Therefore, we estimate that savings for hospitals choosing to submit all optional measures electronically for the FY 2016 payment determination would have been about 579 hours (582 hours minus 2 hours and 40 minutes). The net burden of the proposal for the FY 2017 payment determination compared with the policy finalized for the FY 2016 payment determination is an additional 16 hours for a hospital choosing to submit all possible required and optional measures electronically. M. Effects of Proposed Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2017 In section IX.B. of the preamble of this proposed rule, we discuss our proposed policies for the quality data reporting program for PPS-exempt cancer hospitals (PCHs), which we refer to as the PCHQR Program. The PCHQR Program is authorized under section 1866(k) of the Act, which was added by section 3005 of the Affordable Care Act. In this proposed rule, we are proposing that PCHs submit data on one additional measure beginning with the FY 2017 program which, if finalized, would increase the total number of measures in the FY 2017 PCHQR measure set to 19 measures. We also are proposing to update the specifications for the five previously finalized clinical process/ oncology care measures to require PCHs to report all-patient data for each of these measures, and to adopt a new sampling methodology that PCHs can use to report these measures. Furthermore, we are PO 00000 Frm 00402 Fmt 4701 Sfmt 4702 proposing to require PCHs to submit population and sample size counts for these measures. We also are proposing to give PCHs a choice of one of two reporting options to report the clinical process/ oncology care, SCIP, and clinical process/ cancer specific treatment measures. The impact of the proposed requirements for the PCHQR program is expected to be minimal overall because some PCHs are already submitting previously adopted quality measure data to CMS. As a result, these PCHs are familiar with our IT infrastructure and programmatic operations. In addition to fostering transparency and facilitating public reporting, we believe our proposed requirements introduce minimal burden while increasing quality of care. We further believe that these requirements outweigh any burden. One expected effect of the PCHQR Program is to keep the public informed of the quality of care provided by PCHs. We will publicly display quality measure data collected under the PCHQR Program as required under the Act. These data will be displayed on the Hospital Compare Web site. The goals of making these data available to the public in a user-friendly and relevant format, include, but are not limited to: (1) Allowing the public to compare PCHs in order to make informed health care decisions regarding care setting; and (2) providing information about current trends in health care. Furthermore, PCHs can use their own health care quality data for many purposes such as in risk management programs, health care acquired infection prevention programs, and research and development activities, among others. E:\FR\FM\15MYP2.SGM 15MYP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules N. Effects of Proposed Requirements for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2018 In section IX.C. of the preamble of this proposed rule, we discuss the implementation of section 1886(m)(5) of the Act, which was added by section 3004(a) of the Affordable Care Act. Section 1886(m)(5) of the Act provides that, for rate year 2014 and each subsequent year, any LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act shall receive a 2-percentage point reduction to the annual update to the standard Federal rate for discharges for the hospital during the applicable fiscal year. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51839 through 51840), we estimated that only a few LTCHs would not receive the full annual percentage increase in any fiscal year as a result of failure to submit data under the LTCHQR Program. Information is not available to determine the precise number of LTCHs that would not meet the requirements to receive the full annual percentage increase for the FY 2016 payment determination. At the time that this analysis was prepared, 8 of the 442 active Medicare-certified LTCHs did not receive the full annual percentage increase for the FY 2014 payment determination. We believe that a majority of LTCHs will continue to collect and submit data for the FY 2015 payment determination and subsequent years because they will continue to view the LTCHQR Program as an important step in improving the quality of care patients receive in the LTCHs. We believe that the burden associated with the LTCHQR Program is the time and effort associated with data collection. There are approximately 442 LTCHs currently reporting quality data to CMS. In this proposed rule, we are retaining seven previously finalized measures, proposing revisions to two previously finalized measures, and are proposing three additional quality measures for inclusion in the LTCHQR Program. In section IX.C.7. of the preamble of this proposed rule, we are proposing three new quality measures for inclusion in the LTCHQR Program affecting the FY 2018 payment determination and subsequent years: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; (2) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and (3) National Healthcare Safety Network (NHSN) Ventilator-Associate Event (VAE) Outcome Measure. Six of the previously adopted and newly proposed measures either will or would be collected via the NHSN. In section IX.C.7.b. of the preamble of this proposed rule, we are proposing to collect the NHSN VAE Outcome Measure. Normally, we would only discuss the burden associated with those measures that are being proposed in any given rule. Because we have access to information that now indicates our previous calculations for the CAUTI, CLABSI, MRSA, and CDI were incorrect (we estimated in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50959 through VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 28379 50964) that LTCHs would submit six infection events per month for each of these measures), we offer below the recalculation of the associated burden. Based on submissions to the NHSN, we now estimate that each LTCH will execute approximately 7 NHSN submissions per month; 1 MRSA event; 1 CDI event; 2 CLABSI events; 3 CAUTI events (84 events per LTCH annually). This equates to a total of approximately 37,128 submissions of events to the NHSN from all LTCHs per year (includes CAUTI, CLABSI, MRSA, and CDI). The CDC estimated the public reporting burden of the collection of information for each measure to include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. MRSA and CDI events are estimated to require an average of 15 minutes per response (10 minutes of clinical (RN) time, and 5 minutes of clerical (Medical Record or Healthcare Information Technician). CAUTI is estimated to require an average of 29 minutes per response, and CLABSI events are estimated to require an average of 32 minutes per response. In addition, each LTCH must also complete a Patient Safety Monthly Reporting Plan estimated at 35 minutes per Plan and a Denominator for Specialty Care Area, which is estimated at 5 hours per month. Based on this estimate, we expect each LTCH would expend 8.6 hours per month for each LTCH, 103.2 hours annually for each LTCH, or 45,614.4 annually for all LTCHs reporting to the NHSN. In addition, each LTCH must submit the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), which the CDC estimates will take 10 minutes annually per LTCH, or an additional 73.66 hours for all LTCH annually. In total, the burden we have recalculated for all previously finalized measures (including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) will equal 103.4 hours annually per LTCH or 45,072.8 hours for all LTCHs annually. For the newly proposed VAE measure, which will also be reported by LTCHs through the CDC’s NHSN, the CDC estimates that each LTCH will submit 1 VAE per month, which will require approximately 22 minutes of clinical time per response. This equates to 22 minutes per LTCH monthly, 4.4 hours per LTCH annually, and 1,944.8 hours for all LTCHs annually. According to the US Bureau of Labor and Statistics, the mean hourly wage for a registered nurse (RN) is $33.1 191; the mean hourly wage for a medical records and health information technician is $16.81. However, in order to account for overhead and fringe benefits, we have double the mean hourly wage, making it $66.26 for an RN, and $33.62 for a Medical Record or Health Information Technician. We estimate that the annual cost per each LTCH for the previously finalized measures, for which we have recalculated burden (including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) to be $6,770.10 and that the total yearly cost to all LTCHs for the submission of data to NHSN would be $2,992,384.20. We estimate that the total cost for the newly proposed VAE measure would be $291.54 per LTCH annually, or $128,860.68 for all LTCHs annually. The All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals is a Medicare claims-based measure; because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe there will be no additional impact. The remaining five measures will be collected utilizing the LTCH CARE Data Set. The burden estimates associated with OMB control number 0938–1163 estimate that each LTCH has an impact data collection burden of 243.24 hours or $6,755.84 associated with collection of the LTCH CARE Data Set, which includes the following three measures: Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (NQF #0678); Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (NQF #0680), and the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). We also are proposing to use the LTCH CARE Data Set to report the two additional proposed measures, Functional Outcome Measure: Change in Mobility among LongTerm Care Hospital Patients Requiring Ventilator Support; and Percent of LongTerm Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function for the FY 2018 payment determination and subsequent years. In addition, the LTCH CARE Data Set will be used to report the previously finalized measure. We estimate the additional elements for two newly proposed measures will take 13.5 minutes of nursing/clinical staff time to report data for Admission assessment and 13 minutes of nursing/ clinical staff time to report data for Discharge assessment, for a total of 26.5 minutes. In accordance with OMB control number 0920– 0666, we estimate 202,050 discharges from all LTCHs annually, with an additional burden of 26.5 minutes. This would equate to 89,238.75 total hours or 201.9 hours per LTCH. We believe this work will be completed by RN staff. As previously noted, per the US Bureau of Labor and Statistics, the mean hourly wage for a registered nurse (RN) is $33.13.192 However, in order to account for 191 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/ healthcare/registered-nurses.htm. Fringe benefits are calculated at a rate of 36.25 percent in accordance with OMB Circular A–76, Attachment C, Table C.1. After adding the fringe benefits, the total hourly cost for an RN is $42.89. 192 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/ healthcare/registered-nurses.htm. Fringe benefits are calculated at a rate of 36.25 percent in accordance with OMB Circular A–76, Attachment C, Table C.1. After adding the fringe benefits, the total hourly cost for an RN is $42.89. PO 00000 Frm 00403 Fmt 4701 Sfmt 4702 E:\FR\FM\15MYP2.SGM 15MYP2 28380 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 overhead and fringe benefits, we have double the mean hourly wage, making it $66.26 for an RN. The total cost related to the two newly proposed functional status measures referenced above is estimated at $13,377.89 per LTCH annually, or $5,913,027.38 for all LTCHs annually. Lastly, we are proposing to validate data submitted on the LTCH CARE Data Set by requesting portions of 1,300 patient charts from 260 LTCHs submitted during CY 2015 be copied and mailed to a CMS validation contractor. We estimate the total submission for each chart to be no more than 270 pages in length. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53269), we estimated the appropriate cost for sending charts under the Hospital IQR Program to be 12 cents per page in accordance with our photocopying payment methodology (68 FR 67955). We believe that the costs would be the same under the LTCHQR Program because we would use the same photocopying payment methodology. Each chart also will require approximately $4.00 shipping. Two hundred seventy pages at a rate of $0.12 per page with a $4.00 shipping cost would be $36.40 per chart. We estimate the total cost of sending charts selected for validation to be $36.40 multiplied by 1,300 charts for a total of $47,320. In summary, the total cost for all previously finalized HAI and vaccination measures (CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) reported through the CDC’s NHSN, that we have recalculated based on new information regarding the number of infection events reported by LTCHs per month, is $6,770.10 per LTCH annually, or $2,992,384.20 for all LTCHs annually. The total cost per LTCH for the three newly proposed measures in this proposed rule (Functional Outcome Measure: Change in Mobility among Inpatients requiring Ventilator Support, Percent of LTCH Inpatients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function, and Ventilator-Associated Events) is $13,669.43 per LTCH annually, or $6,041,886.06 for all LTCHs annually. The total cost for the 260 LTCHs selected under our newly proposed data accuracy validation policy is $47,320, which would be paid by CMS. O. Effects of Proposals Regarding Electronic Health Record (EHR) Incentive Program and Hospital IQR Program In sections IX.D. of the preamble of this proposed rule, we discuss proposed requirements for the EHR Incentive Program. We are proposing to align the Medicare EHR Incentive Program reporting and submission timelines for clinical quality measures for eligible hospitals and CAHs with the Hospital IQR Program’s reporting and submission timelines. We have determined that the electronic submission of aggregate-level data using QRDA–III will not be feasible in 2015 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. We are proposing to continue, for FY 2015, the policy we adopted for FY 2014 for eligible hospitals and CAHs submitting CQMs under VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 the Medicare EHR Incentive Program. For FY 2015, eligible hospitals and CAHs would be able to electronically submit using a method similar to the 2012 and 2013 EHR Incentive Program electronic reporting pilot for eligible hospitals and CAHs, which used QRDA–I (patient-level data). Eligible hospitals and CAHs that are beyond their first year of meaningful use may continue to report aggregate CQM results through attestation. We also are clarifying our policy on zero denominators and the case threshold exemption for clinical quality measures. We do not believe that our proposals to align the Medicare EHR Incentive program reporting and submission timelines for clinical quality measures with the Hospital IQR Program’s reporting and submission timelines and to allow the electronic submission of QRDA–I (patient-level data) for eligible hospitals and CAHs to electronic submit CQMs under the Medicare EHR Incentive Program will have a significant impact. P. Effects of Proposed Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data Under section X. of the preamble of this proposed rule, we are proposing to revise the existing regulations at § 422.310(f) to broaden the specified uses of risk adjustment data in order to strengthen program management and increase transparency in the MA program and to specify the conditions for release of risk adjustment data to entities outside of CMS. We are proposing to revise the regulations to specify four additional purposes for which CMS may use or release risk adjustment data submitted by MA organizations: (1) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related research; (2) for activities to support the administration of the Medicare program; (3) for activities conducted to support program integrity; and (4) for purposes explicitly permitted by other laws. In addition, the existing regulations do not specify conditions for release by CMS of risk adjustment data submitted by MA organizations. Therefore, we are proposing to add regulatory language to address CMS’ release of such data to non-CMS entities. We have determined that the proposed regulatory amendments do not impose any mandatory costs on entities that may choose, under this proposal, to request data files from CMS for their research analyses or other purposes listed in the proposal. Requesting data from CMS is at the discretion of the requester. Therefore, we have determined that there are not any economically significant effects of the proposed provisions. We also have determined that the proposed regulatory amendments would not impose a burden on the entity requesting data files. Q. Effects of Proposed Changes to Enforcement Provisions for Organ Transplant Centers Under section XI. of the preamble of this proposed rule, we discuss our proposals to expand and clarify the current organ transplant regulation as it relates to a PO 00000 Frm 00404 Fmt 4701 Sfmt 4702 transplant program’s ability to request approval for participation in Medicare based on mitigating factors, the timelines for such review, and potential System Improvement Agreements that may allow a transplant program to improve outcomes and avert Medicare termination when outcomes have not met CMS requirements. Our proposals also would allow for consideration of factors such as innovative practice in the field of organ transplantation, and for potential mitigating factors consideration of a transplant program’s outcomes using Bayesian methodology for calculating outcomes for patient death and graft failure. These proposals will not have a significant effect on Medicare and Medicaid programs as it will allow organ transplant programs to continue to participate in Medicare if approved based on mitigating factors or during the time established in the Systems Improvement Agreement. There is an added benefit to patients who receive transplants, and to the Medicare program, when a transplant program improves patient and graft survival through completion of a system Improvement Agreement. However, sufficient data are not currently available to quantify the added benefit of System Improvement Agreements or innovative practices. Therefore, we project only that the cost impact of the proposals to the Medicare and Medicaid programs would be negligible. Historical data reflect that between the date the transplant regulation was codified in 2007 and August 2013, CMS rendered a final determination for 129 organ transplant programs that applied for Medicare approval based on mitigating factors. Of the 129 transplant programs, 20 terminated Medicare participation. An additional 33 transplant programs averted Medicare termination by successful completion of a Systems Improvement Agreement and resulting substantial improvement in patient and graft survival. The remaining programs were approved for mitigating factors based on improved outcomes (without needing a System Improvement Agreement), special circumstances, or came into compliance with CMS requirements during the mitigating factors review period. We estimate the cost associated with the application for mitigating factors at $10,000. This is based on the salary for the transplant administrator to prepare the documents for the application during the 30-day timeframe allotted. The cost does not represent any increase from what is anticipated in the existing transplant regulation related to mitigating factors. For transplant programs that enter into a Systems Improvement Agreement, the estimated cost to the transplant program is $200,000 to $250,000 based on reports from programs that have completed such Agreements in the past. Both a mitigating factors review and completion of a System Improvement Agreement are voluntary acts on the part of a hospital that maintains a transplant program. Since the 2007 effective date of the CMS regulation, only one hospital has elected not to file a mitigating factors review after being cited by CMS for a condition-level deficiency for patient outcomes or clinical experience, and few hospitals have declined a CMS offer to complete a System E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules Improvement Agreement. Therefore, we conclude that the costs involved in these activities are much lower for the hospital compared with other alternatives, such as filing an appeal and incurring the legal costs of that appeal. Our proposals would not have a significant impact on a substantial number of small businesses or other small entities. Nor would they have a significant impact on small rural hospitals. II. Alternatives Considered This proposed rule contains a range of proposed policies. It also provides descriptions of the statutory provisions that are addressed, identifies the proposed policies, and presents rationales for our decisions and, where relevant, alternatives that were considered. III. Overall Conclusion 1. Acute Care Hospitals Table I of section I.G. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for the proposed MS–DRG and wage index changes, and for the wage index reclassifications under the MGCRB. Table I also shows an overall decrease of 0.8 percent in operating payments. As discussed in section I.G. of this Appendix, we estimate that proposed operating payments will decrease by approximately $864 million in FY 2015 relative to FY 2014. However, when we account for the impact of the changes in Medicare DSH payments and the impact of the new additional payments based on uncompensated care in accordance with section 3133 of the Affordable Care Act, based on estimates provided by the CMS Office of the Actuary, consistent with our policy discussed in section IV.F. of the preamble of this proposed rule, we estimate that operating payments would decrease by approximately $30 million relative to FY 2014. In addition, we estimate a savings of $28 million associated with the proposed HACs policies in FY 2015, which is an additional $2 million in savings as compared to FY 2014. We estimate that the expiration of the expansion of low-volume hospital payments for discharges beginning on April 1, 2015, under the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) will result in a decrease in payments of approximately $343 million relative to FY 2014. We estimate that the continuation of certain new technology add-on payments for FY 2015 will increase spending by approximately $7 million. Finally, we estimate that the proposed policies related to validation, including submission of and payment for secure electronic versions of medical information for validation for the FY 2017 payment determination and subsequent years, as described in the ICRs for the Hospital IQR Program in section XII.B.6. of the preamble of this proposed rule, will result in a cost savings to CMS of approximately $0.5 million. These estimates, combined with our estimated decrease in FY 2015 operating payment of ¥$30 million, result in an estimated decrease of approximately $367 million for FY 2015. We estimate that hospitals will experience a 1.2 percent increase in capital payments per case, as shown in Table III of section I.I. of this Appendix. We project that there will be a $126 million increase in capital payments in FY 2015 compared to FY 2014. The proposed cumulative operating and capital payments would result in a net decrease of approximately $241 million to IPPS providers. The discussions presented in the previous pages, in combination with the rest of this proposed rule, constitute a regulatory impact analysis. 2. LTCHs Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2015. In the impact analysis, we are using the proposed rates, factors, and policies presented in this proposed rule, including proposed updated wage index values and relative weights, and the best available claims and CCR data to estimate the change in payments under the LTCH PPS for FY 2015. Accordingly, based on the best available data for the 423 LTCHs in our database, we estimate that FY 2015 LTCH PPS payments will increase approximately $44 million relative to FY 2014 as a result of the proposed payment rates and factors presented in this proposed rule. In addition, we estimate that net effect of the projected impact of certain other proposed LTCH PPS 28381 policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25 percent threshold’’ payment adjustment as discussed in section VII.E. of the preamble of this proposed rule; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds as discussed in section VII.G. of the preamble of this proposed rule; the proposed revision of the ‘‘greater than 3-day interruption of stay’’ policy as discussed in section VII.F. of the preamble of this proposed rule; the proposed revocation of onsite discharges and readmissions policy as discussed in section VII.H. of the preamble of this proposed rule; and the proposed payment adjustment for ‘‘subclause (II)’’ LTCHs as discussed in section VII.I. of the preamble of this proposed rule) is estimated to result in a reduction in LTCH PPS payments of approximately $14 million. The impact analysis of the proposed payment rates and factors presented in this proposed rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other proposed LTCH PPS policy changes would result in a net increase of $30 million to LTCH providers. Additionally, we present the costs to LTCHs associated with the completion of the proposed data for the LTCHQR Program at $6.08 million or approximately $3.11 million more than FY 2014. IV. Accounting Statements and Tables A. Acute Care Hospitals As required by OMB Circular A–4 (available at https://www.whitehouse.gov/ omb/circulars/a004/a-4.pdf), in Table V below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule as they relate to acute care hospitals. This table provides our best estimate of the change in Medicare payments to providers as a result of the proposed changes to the IPPS presented in this proposed rule. All expenditures are classified as transfers to Medicare providers. The savings to the Federal Government associated with the policies in this proposed rule are estimated at $241 million. TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF PROPOSED ESTIMATED EXPENDITURES UNDER THE IPPS FROM FY 2014 TO FY 2015 Category Transfers Annualized Monetized Transfers ....................................................................................... From Whom to Whom ....................................................................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 B. LTCHs As discussed in section I.L. of this Appendix, the impact analysis of the proposed payment rates and factors presented in this proposed rule under the LTCH PPS, As discussed in section I.L. of this Appendix, the impact analysis of the proposed payment rates and factors presented in this proposed rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other proposed VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 ¥$241 million. Federal Government to IPPS Medicare Providers. LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25-percent threshold’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and increase in the number of LTCH beds; the proposed revision of the ‘‘greater than 3-day interruption of stay’’ policy; the proposed revocation of onsite discharges and readmissions policy; and the PO 00000 Frm 00405 Fmt 4701 Sfmt 4702 proposed payment adjustment for ‘‘subclause (II)’’ LTCHs), is projected to result in an increase in estimated aggregate LTCH PPS payments in FY 2015 relative to FY 2014 of approximately $30 million based on the data for 423 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A– 4 (available at https://www.whitehouse.gov/ omb/circulars/a004/a-4.pdf), in Table VI below, we have prepared an accounting E:\FR\FM\15MYP2.SGM 15MYP2 28382 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules statement showing the classification of the expenditures associated with the provisions of this proposed rule as they relate to the proposed changes to the LTCH PPS. Table VI provides our best estimate of the estimated increase in Medicare payments under the LTCH PPS as a result of the proposed payment rates and factors and other provisions presented in this proposed rule based on the data for the 423 LTCHs in our database. All expenditures are classified as transfers to Medicare providers (that is, LTCHs). Lastly, we present the costs to LTCHs associated with the completion of the proposed data for the LTCHQR Program at $6.08 million or approximately $3.11 million more than FY 2014. The cost to the Federal Government associated with the proposed policies for LTCHs in this proposed rule is estimated at $30 million. TABLE VI—ACCOUNTING STATEMENT: CLASSIFICATION OF PROPOSED ESTIMATED EXPENDITURES FROM THE FY 2014 LTCH PPS TO THE FY 2015 LTCH PPS Category Transfers Annualized Monetized Transfers .............................................................. From Whom to Whom .............................................................................. $30 million. Federal Government to LTCH Medicare Providers. Category Costs mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Annualized Monetized Costs for LTCHs to Submit Quality Data ............ V. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the SBA definition of a small business (having revenues of less than $7.0 million to $35.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 36 of the Table of Small Business Size Standards for NAIC 622 found on the SBA Web site at: https://www.sba.gov/ sites/default/files/files/ Size_Standards_Table.pdf.) For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this proposed rule relating to acute care hospitals would have a significant impact on small entities as explained in this Appendix. Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section I.L. of this Appendix. MACs are not considered to be small entities. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this proposed rule constitutes our regulatory flexibility analysis. In this proposed rule, we are soliciting public comments on our estimates and analysis of the impact of our proposals on those small entities. Any public comments that we receive and our responses will be presented in the final rule. VI. Impact on Small Rural Hospitals Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 $3.11 million. rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the proposed policy changes under the IPPS for operating costs.) VII. Unfunded Mandates Reform Act Analysis Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2014, that threshold level is approximately $141 million. This proposed rule will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs. VIII. Executive Order 12866 In accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget reviewed this proposed rule. Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors PO 00000 Frm 00406 Fmt 4701 Sfmt 4702 recommended by the Secretary in the proposed and final IPPS rules, respectively. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the Puerto Rico-specific standardized amount, the hospital-specific rate for SCHs and MDHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs. In prior years, we have made a recommendation in the IPPS proposed rule and final rule for the update factors for the payment rates for IRFs and IPFs. However, for FY 2015, we plan to include the Secretary’s recommendation for the update factors for IRFs and IPFs in separate Federal Register documents at the time that we announce the annual updates for IRFs and IPFs. We also discuss our response to MedPAC’s recommended update factors for inpatient hospital services. II. Inpatient Hospital Update for FY 2015 A. Proposed FY 2015 Inpatient Hospital Update As discussed in section IV.B of the preamble to this proposed rule, for FY 2015, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a 331⁄3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful electronic health record (EHR) users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment E:\FR\FM\15MYP2.SGM 15MYP2 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.2 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2015 adjustment of 0.2 percentage point may result in the applicable percentage increase being less than zero. Based on the most recent data available for this FY 2015 proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we are proposing to base the proposed FY 2015 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Insight, Inc.’s (IGI’s) first quarter 2014 forecast of the FY 2010-based IPPS market basket rate-of-increase with historical data through fourth quarter 2013, which is estimated to be 2.7 percent. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B.1. of the preamble of this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing a multifactor productivity (MFP) adjustment (the 10-year moving average of MFP for the period ending FY 2015) of 0.4 percent. Therefore, based on IGI’s first quarter 2014 forecast of the FY Hospital submitted quality data and is a meaningful EHR user FY 2015 Proposed Applicable Percentage Increase Applied to Standardized Amount .................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Market Basket Rate-of-Increase ...................................................... Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ........................................................ Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ................................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ... B. Proposed Update for SCHs and MDHs for FY 2015 Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2015 applicable percentage increase in the hospital-specific rate for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). As discussed in section IV.G. of the preamble of this proposed rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Prior to the enactment of Public Law 113–67, the MDH program was to be in effect through the end of FY 2013 only. The MDH program expires for discharges beginning on April 1, 2015, under current law. Accordingly, the proposed update of the hospital-specific rates for FY 2015 for MDHs will apply in determining payments for FY 2015 discharges occurring before April 1, 2015. As mentioned above, the update to the hospital specific rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, depending on whether a hospital submits quality data and is a meaningful EHR user, we are proposing the same four possible VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.7 2.7 2.7 0.0 0.0 ¥0.675 ¥0.675 0.0 ¥0.4 ¥0.2 ¥0.675 ¥0.4 ¥0.2 0.0 ¥0.4 ¥0.2 ¥0.675 ¥0.4 ¥0.2 2.1 1.425 1.425 0.75 D. Proposed Update for Hospitals Excluded From the IPPS for FY 2015 Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children’s hospitals, cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, short-term acute care hospitals located in the Fmt 4701 Hospital did NOT submit quality data and is a meaningful EHR user 2.7 C. Proposed FY 2015 Puerto Rico Hospital Update Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are proposing an applicable percentage increase to the Puerto Rico-specific standardized amount of 2.1 percent. Frm 00407 2010-based IPPS market basket, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the standardized amount. Below we provide a table summarizing the four proposed applicable percentage increases. Hospital submitted quality data and is NOT a meaningful EHR user applicable percentage increases in the table above to the hospital-specific rate applicable to SCHs and MDHs. PO 00000 28383 Sfmt 4702 U.S. Virgin Islands, Guam, the Northern Mariana Islands, and America Samoa). Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, RNHCIs are paid under the provisions of § 413.40, which also use section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits. Currently, children’s hospitals, PPSexcluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa are among the remaining types of hospitals still paid under the reasonable cost methodology, subject to the rate-of-increase limits. We are proposing that the FY 2015 rate-of-increase percentage to be applied to the target amount for children’s hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa would be the percentage increase in the IPPS operating market basket. For this proposed rule, the current estimate of the FY 2015 IPPS operating market basket percentage increase is 2.7 percent. E. Proposed Update for LTCHs for FY 2015 Section 123 of Public Law 106–113, as amended by section 307(b) of Public Law 106–554 (and codified at section 1886(m)(1) of the Act), provides the statutory authority for updating payment rates under the LTCH PPS. As discussed in section V.A. of the Addendum to this proposed rule, we are proposing to establish an update to the LTCH E:\FR\FM\15MYP2.SGM 15MYP2 28384 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 PPS standard Federal rate for FY 2015 based on the full LTCH PPS market basket increase estimate (for this proposed rule, estimated to be 2.7 percent), subject to an adjustment based on changes in economy-wide productivity and an additional reduction required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we are proposing to reduce the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points for failure of a LTCH to submit the required quality data. The MFP adjustment described in section 1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to be 0.4 percent for FY 2015. In addition, section 1886(m)(3)(A)(ii) of the Act requires that any annual update for FY 2015 be reduced by the ‘‘other adjustment’’ at section 1886(m)(4)(E) of the Act, which is 0.2 percentage point. Therefore, based on IGI’s first quarter 2014 forecast of the FY 2015 LTCH PPS market basket increase, we are proposing an annual update to the LTCH PPS standard Federal rate of 2.1 percent (that is, the current proposed FY 2015 estimate of the market basket rate-ofincrease of 2.7 percent less an adjustment of 0.4 percentage point for MFP and less 0.2 percentage point). Accordingly, we are proposing to apply an update factor of 1.021 in determining the LTCH PPS standard Federal rate for FY 2015. For LTCHs that fail to submit quality data for FY 2015, we are proposing an annual update to the LTCH PPS standard Federal rate of 0.1 percent (that is, the proposed annual update for FY 2015 of 2.1 percent less 2.0 percentage points for failure to submit the required quality data in accordance with section 1886(m)(5)(C) of the Act and our rules) by applying an update factor of 1.001 in determining the LTCH PPS standard Federal rate for FY 2015. Furthermore, we are proposing an adjustment for the final year of the 3-year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3) by applying a factor of 0.98734 (or VerDate Mar<15>2010 20:20 May 14, 2014 Jkt 232001 approximately –1.3 percent) in FY 2015, consistent with current law. and less 0.2 percentage point) to the LTCH PPS standard Federal rate. III. Secretary’s Recommendations IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare MedPAC is recommending an inpatient hospital update equal to 3.25 percent for FY 2015. MedPAC’s rationale for this update recommendation is described in more detail below. As mentioned above, section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Consistent with current law, depending on whether a hospital submits quality data and is a meaningful EHR user, we are recommending the four possible applicable percentage increases to the standardized amount listed in the table under section II. of this Appendix B. We are recommending that the same applicable percentage increases apply to SCHs and MDHs. For the Puerto Rico-specific standardized amount, we are recommending an update of 2.1 percent. In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for certain other types of hospitals excluded from the IPPS. Consistent with our policies for these facilities, we are recommending an update to the target amounts for children’s hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa of 2.7 percent. For FY 2015, consistent with policy set forth in section VII. of the preamble of this proposed rule, we are recommending an update of 2.1 percent (that is, the current FY 2015 estimate of the LTCH PPS market basket rate-of-increase of 2.7 percent less a proposed adjustment of 0.4 percentage point for MFP PO 00000 Frm 00408 Fmt 4701 Sfmt 9990 In its March 2014 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates equal to 3.25 percent concurrent with changes to the outpatient prospective payment system and with initiating change to the LTCH PPS. We refer the reader to the March 2014 MedPAC report, which is available for download at www.medpac.gov for a complete discussion on this recommendation. MedPAC expects Medicare margins to remain low in 2014. At the same time, MedPAC’s analysis finds that efficient hospitals have been able to maintain positive Medicare margins while maintaining a relatively high quality of care. Response: With regard to MedPAC’s recommendation of an update to the hospital inpatient rates equal to 3.25 percent, for FY 2015, as discussed above, sections 3401(a) and 10319(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act. Section 1886(b)(3)(B) of the Act, as amended by these sections, sets the requirements for the FY 2015 applicable percentage increase. Therefore, we are proposing an applicable percentage increase for FY 2015 of 2.1 percent, provided the hospital submits quality data and is a meaningful EHR user, consistent with these statutory requirements. We note that, because the operating and capital prospective payment systems remain separate, we are continuing to use separate updates for operating and capital payments. The proposed update to the capital rate is discussed in section III. of the Addendum to this proposed rule. [FR Doc. 2014–10067 Filed 4–30–14; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\15MYP2.SGM 15MYP2

Agencies

[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Proposed Rules]
[Pages 27977-28384]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10067]

[[Page 27977]]

Vol. 79

Thursday,

No. 94

May 15, 2014

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 412, 413, et al.

Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting
Requirements for Specific Providers; Reasonable Compensation
Equivalents for Physician Services in Excluded Teaching Hospitals;
Provider Administrative Appeals and Judicial Review; Enforcement
Provisions for Organ Transplant Centers; and Electronic Health Record
(EHR) Incentive Program; Proposed Rule

Federal Register / Vol. 79 , No. 94 / Thursday, May 15, 2014 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488

[CMS-1607-P] RIN 0938-AS11

Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting
Requirements for Specific Providers; Reasonable Compensation
Equivalents for Physician Services in Excluded Teaching Hospitals;
Provider Administrative Appeals and Judicial Review; Enforcement
Provisions for Organ Transplant Centers; and Electronic Health Record
(EHR) Incentive Program

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

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals to implement changes arising from our
continuing experience with these systems. Some of the proposed changes
implement certain statutory provisions contained in the Patient
Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010 (collectively known as the Affordable Care
Act), the Protecting Access to Medicare Act of 2014, and other
legislation. These proposed changes would be applicable to discharges
occurring on or after October 1, 2014, unless otherwise specified in
this proposed rule. We also are proposing to update the rate-of-
increase limits for certain hospitals excluded from the IPPS that are
paid on a reasonable cost basis subject to these limits. The proposed
updated rate-of-increase limits would be effective for cost reporting
periods beginning on or after October 1, 2014.
We also are proposing to update the payment policies and the annual
payment rates for the Medicare prospective payment system (PPS) for
inpatient hospital services provided by long-term care hospitals
(LTCHs) and to implement certain statutory changes to the LTCH PPS
under the Affordable Care Act and the Pathway for Sustainable Growth
Rate (SGR) Reform Act of 2013 and the Protecting Access to Medicare Act
of 2014. In addition we are proposing to revise the interruption of
stay policy for LTCHs and to retire the ``5 percent'' payment
adjustment for co-located LTCHs. While many of the statutory mandates
of the Pathway for SGR Reform Act will apply to discharges occurring on
or after October 1, 2014, others will not begin to apply until 2016 and
beyond. However, in light of the degree of forthcoming change, we
discuss changes infra and request public feedback to inform our
proposals for FY 2016 in this proposed rule as well.
In addition, we are proposing to make a number of changes relating
to direct graduate medical education (GME) and indirect medical
education (IME) payments. We are proposing to establish new
requirements or revise requirements for quality reporting by specific
providers (acute care hospitals, PPS-exempt cancer hospitals, and
LTCHs) that are participating in Medicare.
We are proposing to update policies relating to the Hospital Value-
Based Purchasing (VBP) Program, the Hospital Readmissions Reduction
Program, and the Hospital-Acquired Condition (HAC) Reduction Program.
In addition, we are proposing changes to the regulations governing
provider administrative appeals and judicial review relating to
appropriate claims in provider cost reports; updates to the reasonable
compensation equivalent (RCE) limits for services furnished by
physicians to teaching hospitals excluded from the IPPS; regulatory
revisions to broaden the specified uses of risk adjustment data and to
specify the conditions for release of risk adjustment data to entities
outside of CMS; and changes to the enforcement procedures for organ
transplant centers.
We are proposing to align the reporting and submission timelines
for clinical quality measures for the Medicare EHR Incentive Program
for eligible hospitals and critical access hospitals (CAHs) with the
reporting and submission timelines for the Hospital IQR Program. In
addition, we provide guidance and clarification of certain policies for
eligible hospitals and CAHs such as our policy for reporting zero
denominators on clinical quality measures and our policy for case
threshold exemptions.

DATES: Comment Period: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
EDT on June 30, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1607-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to https://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1607-P, P.O. Box 8011,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1607-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-7195 in advance to schedule
your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, we refer readers to the

[[Page 27979]]

beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Donald Thompson, (410) 786-4487, and Tiffany Swygert, (410) 786-
4465, Operating Prospective Payment, MS-DRGs, Hospital-Acquired
Conditions (HAC), Wage Index, New Medical Service and Technology Add-On
Payments, Hospital Geographic Reclassifications, Graduate Medical
Education, Capital Prospective Payment, Excluded Hospitals, and
Medicare Disproportionate Share Hospital (DSH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting
and Hospital Value-Based Purchasing--Program Administration,
Validation, and Reconsideration Issues.
Karen Nakano, (410) 786-6889, Hospital Inpatient Quality
Reporting--Measures Issues Except Hospital Consumer Assessment of
Healthcare Providers and Systems Issues; and Readmission Measures for
Hospitals Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Kellie Shannon, (410) 786-0416, Appropriate Claims in Provider Cost
Reports; Administrative Appeals by Providers and Judicial Review
Issues.
Amelia Citerone, (410) 786-3901, and Robert Kuhl (410) 786-4597,
Reasonable Compensation Equivalent (RCE) Limits for Physician Services
Provided in Providers.
Ann Hornsby, (410) 786-1181, and Jennifer Harlow, (410) 786-4549,
Medicare Advantage Encounter Data Issues.
Thomas Hamilton, (410) 786-6763, Organ Transplant Center Issues.
Jennifer Phillips, (410) 786-1023, 2-Midnight Rule Benchmark
Issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All public comments received before
the close of the comment period are available for viewing by the
public, including any personally identifiable or confidential business
information that is included in a comment. We post all public comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.

Electronic Access

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

Tables Available Only Through the Internet on the CMS Web Site

In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to the proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of the IPPS tables
and LTCH PPS tables are no longer published in the Federal Register.
Instead, these tables are available only through the Internet. The IPPS
tables for this proposed rule are available only through the Internet
on the CMS Web site at: https://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Click on the link on
the left side of the screen titled, ``FY 2015 IPPS Proposed Rule Home
Page'' or ``Acute Inpatient--Files for Download''. The LTCH PPS tables
for this FY 2015 proposed rule are available only through the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item
for Regulation Number CMS-1607-P. For complete details on the
availability of the tables referenced in this proposed rule, we refer
readers to section VI. of the Addendum to this proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile (C. difficile)
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronis obstructive pulmonary disease

[[Page 27980]]

CPI Consumer price index
CQM Clinical quality measure
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External Bean Radiotherapy
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
IBR Intern- and Resident-to-Bed Ratio
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991,
Public Law 104-113
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QRDA Quality Reporting Data Architecture
RCE Reasonable compensation equivalent
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standardized mortality rate
RSRR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/Total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI

[[Page 27981]]

[Qualifying Individuals] Programs Extension Act of 2007, Public Law
110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UMRA Unfunded Mandate Reform Act, Public Law 104-4
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded From the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Summary of Provisions of Recent Legislation Discussed in This
Proposed Rule
1. Patient Protection and Affordable Care Act (Pub. L. 111-148)
and the Health Care and Education Reconciliation Act of 2010 (Pub.
L. 111-152)
2. American Taxpayer Relief Act of 2012 (Pub. L. 112-240)
3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013
(Pub. L. 113-67)
4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
D. Summary of the Provisions of This Proposed Rule
II. Proposed Changes to Medicare Severity Diagnosis-Related Group
(MS-DRG) Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. Proposed FY 2015 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Adjustment to the Average Standardized Amounts Required by
Public Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of
Public Law 110-90
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
5. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Public Law 110-90
6. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA)
7. Prospective Adjustment for the MS-DRG Documentation and
Coding Effect Through FY 2010
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion for FY 2015
F. Proposed Adjustment to MS-DRGs for Preventable Hospital-
Acquired Conditions (HACs), Including Infections
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in Preparation for Transition to ICD-
10-CM and ICD-10-PCS
5. Proposal Regarding Current HACs and Previously Considered
Candidate HACs
6. RTI Program Evaluation
7. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
G. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed
MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Edition (ICD-10)
b. Basis for FY 2015 MS-DRG Updates
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Intracerebral Therapies: Gliadel[supreg] Wafer
b. Endovascular Embolization or Occlusion of Head and Neck
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat): Avery Breathing Pacemaker System
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Exclusion of Left Atrial Appendage
b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
c. Endovascular Cardiac Valve Replacement Procedures
d. Abdominal Aorta Graft
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Shoulder Replacement Procedures
b. Ankle Replacement Procedures
c. Back and Neck Procedures
6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and
Disorders): Disorders of Porphyria Metabolism
7. MDC 15 (Newborns and Other Neonates With Conditions
Originating in the Perinatal Period)
8. Proposed Medicare Code Editor (MCE) Changes
9. Proposed Changes to Surgical Hierarchies
10. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2015
a. Major Complications or Comorbidities (MCCs) and Complications
or Comorbidities (CCs) Severity Levels for FY 2015
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
11. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
b. Proposed CC Exclusions List for FY 2015
12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
c. Adding Diagnosis or Procedure Codes to MDCs
13. Proposed Changes to the ICD-9-CM Coding System
a. ICD-10 Coordination and Maintenance Committee
b. Code Freeze
H. Recalibration of the Proposed FY 2015 MS-DRG Relative Weights
1. Data Sources for Developing the Proposed Relative Weights
2. Methodology for Calculation of the Proposed Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
I. Proposed Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2015 Status of Technologies Approved for FY 2014 Add-On
Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
b. DIFICID^TM (Fidaxomicin) Tablets
c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
d. Kcentra^TM
e. Argus[supreg] II Retinal Prosthesis System
f. Zilver[supreg] PTX[supreg] Drug Eluting Stent
4. FY 2015 Applications for New Technology Add-On Payments
a. Dalbavancin (Durata Therapeutics, Inc.)
b. Heli-FX^TM EndoAnchor System (Aptus Endosystems,
Inc.)
c. WATCHMAN[supreg] Left Atrial Appendage Closure Technology
d. CardioMEMS^TM HF (Heart Failure) System
e. MitraClip[supreg] System
f. Responsive Neurostimulator (RNS[supreg]) System
III. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
A. Background
B. Proposed Core-Based Statistical Areas for the Hospital Wage
Index
1. Background
2. Proposed Implementation of New Labor Market Area Delineations
a. Micropolitan Statistical Areas
b. Urban Counties That Would Become Rural Under the New OMB
Delineations
c. Rural Counties That Would Become Urban Under the New OMB
Delineations
d. Urban Counties That Would Move to a Different Urban CBSA
Under the New OMB Delineations
e. Proposed Transition Period
C. Worksheet S-3 Wage Data for the Proposed FY 2015 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals Under the IPPS
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the Proposed FY 2015 Unadjusted Wage
Index

[[Page 27982]]

F. Proposed Occupational Mix Adjustment to the Proposed FY 2015
Wage Index
1. Development of Data for the Proposed FY 2015 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
3. Calculation of the Proposed Occupational Mix Adjustment for
FY 2015
G. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2015 Occupational Mix Adjusted Wage
Index
1. Analysis of the Proposed Occupational Mix Adjustment and the
Proposed Occupational Mix Adjusted Wage Index
2. Proposed Application of the Rural, Imputed, and Frontier
Floors
a. Proposed Rural Floor
b. Proposed Imputed Floor and Alternative, Temporary Methodology
for Computing the Rural Floor for FY 2015
c. Proposed Frontier Floor
3. Proposed FY 2015 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification and
Redesignation
2. FY 2015 MGCRB Reclassifications
a. FY 2015 Reclassification Requirements and Approvals
b. Effects of Implementation of New OMB Labor Market Area
Delineations on Reclassified Hospitals
c. Applications for Reclassifications for FY 2016
3. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
a. Proposed New Lugar Areas for FY 2015
b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
c. Rural Counties No Longer Meeting the Criteria To Be
Redesignated as Lugar
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
5. Update of Application of Urban to Rural Reclassification
Criteria
I. Proposed FY 2015 Wage Index Adjustment Based on Commuting
Patterns of Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Notice of Change to Wage Index Development Timetable
L. Labor-Related Share for the Proposed FY 2015 Wage Index
IV. Other Decisions and Proposed Changes to the IPPS for Operating
Costs and Graduate Medical Education (GME) Costs
A. Proposed Changes to MS-DRGs Subject to the Postacute Care
Transfer Policy (Sec. 412.4)
B. Proposed Changes in the Inpatient Hospital Updates for FY
2015 (Sec. Sec. 412.64(d) and 412.211(c))
1. Proposed FY 2015 Inpatient Hospital Update
2. Proposed FY 2015 Puerto Rico Hospital Update
C. Rural Referral Centers (RRCs): Proposed Annual Updates to
Case-Mix Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
D. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.
412.101)
1. Background
2. Provisions of the Protecting Access to Medicare Act of 2014
3. Low-Volume Hospital Definition and Payment Adjustment for FY
2015
E. Indirect Medical Education (IME) Payment Adjustment (Sec.
412.105)
1. IME Adjustment Factor for FY 2015
2. Proposed IME Medicare Part C Add-On Payments to Sole
Community Hospitals (SCHs) That Are Paid According to Their
Hospital-Specific Rates and Proposed Change in Methodology in
Determining Payment to SCHs
3. Other Proposed Policy Changes Affecting IME
F. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) (Sec. 412.106)
1. Background
2. Impact on Medicare DSH Payment Adjustment of Proposed
Implementation of New OMB Labor Market Area Delineations
3. Payment Adjustment Methodology for Medicare Disproportionate
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
(Sec. 412.106)
a. General Discussion
b. Eligibility for Empirically Justified Medicare DSH Payments
and Uncompensated Care Payments
c. Empirically Justified Medicare DSH Payments
d. Uncompensated Care Payments
e. Limitations on Review
G. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background
2. Provisions of Public Law 113-93 for FY 2015
3. Expiration of the MDH Program
H. Hospital Readmissions Reduction Program: Proposed Changes for
FY 2015 Through FY 2017 (Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Regulatory Background
3. Overview of Proposals and Policies for the FY 2015 Hospital
Readmissions Reduction Program
4. Proposed Refinement of the Readmissions Measures and Related
Methodology for FY 2015 and Subsequent Years Payment Determinations
a. Proposed Refinement of Planned Readmission Algorithm for
Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia
(PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip
Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day
Readmission Measures
b. Proposed Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort
c. Anticipated Effect of Proposed Refinements on Measures
5. No Proposed Expansion of the Applicable Conditions for FY
2016
6. Proposed Expansion of the Applicable Conditions for FY 2017
To Include Patients Readmitted Following Coronary Artery Bypass
Graft (CABG) Surgery Measure
a. Background
b. Overview of the Proposed CABG Readmissions Measure: Hospital-
Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary
Artery Bypass Graft (CABG) Surgery
c. Proposed Methodology for the CABG Measure: Hospital-Level,
30-Day, All-Cause, Unplanned Readmission Following Coronary Artery
Bypass Graft (CABG) Surgery
7. Maintenance of Technical Specifications for Quality Measures
8. Waiver From the Hospital Readmissions Reduction Program for
Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (Sec.
412.152 and Sec. 412.154(d))
9. Floor Adjustment Factor for FY 2015 (Sec. 412.154(c)(2))
10. Applicable Period for FY 2015
11. Proposed Inclusion of THA/TKA and COPD Readmissions Measures
To Calculate Aggregate Payments for Excess Readmissions Beginning in
FY 2015
12. Hospital Readmissions Reduction Program Extraordinary
Circumstances Exceptions
I. Hospital Value-Based Purchasing (VBP) Program
1. Statutory Background
2. Overview of Previous Hospital VBP Program Rulemaking
3. FY 2015 Payment Details
a. Payment Adjustments
b. Base Operating DRG Payment Amount Definition for Medicare-
Dependent Small Rural Hospitals (MDHs)
4. Measures for the FY 2017 Hospital VBP Program
a. Measures Previously Adopted
b. Proposed Changes Affecting Topped-Out Measures
c. Proposed New Measures for the FY 2017 Hospital VBP Program
d. Proposed Adoption of the Current CLABSI Measure (NQF
0139) for the FY 2017 Hospital VBP Program
e. Summary of Previously Adopted and Proposed New Measures for
the FY 2017 Hospital VBP Program
5. Proposed Additional Measures for the FY 2019 Hospital VBP
Program
a. Hospital-Level Risk-Standardized Complication Rate (RSCR)
Following Elective Primary Total Hip Arthroplasty (THA) and Total
Knee Arthroplasty (TKA)
b. PSI-90 Measure
6. Possible Measure Topics for Future Program Years
a. Care Transition Measure (CTM-3) Items for HCAHPS Survey
b. Possible Future Efficiency and Cost Reduction Domain Measure
Topics
7. Previously Adopted and Proposed Performance Periods and
Baseline Periods for the FY 2017 Hospital VBP Program
a. Background
b. Previously Adopted Baseline and Performance Periods for the
FY 2017 Hospital VBP Program

[[Page 27983]]

c. Proposed Clinical Care--Process Domain Performance Period and
Baseline Period for the FY 2017 Hospital VBP Program
d. Proposed Patient and Caregiver-Centered Experience of Care/
Care Coordination Domain Performance Period and Baseline Period for
the FY 2017 Hospital VBP Program
e. Proposed Safety Domain Performance Period and Baseline Period
for NHSN Measures for the FY 2017 Hospital VBP Program
f. Proposed Efficiency and Cost Reduction Domain Performance
Period and Baseline Period for the FY 2017 Hospital VBP Program
g. Summary of Previously Adopted and Proposed Performance
Periods and Baseline Periods for the FY 2017 Hospital VBP Program
8. Previously Adopted and Proposed Performance Periods and
Baseline Periods for Certain Measures for the FY 2019 Hospital VBP
Program
a. Previously Adopted and Proposed Performance Period and
Baseline Period for the FY 2019 Hospital VBP Program for Clinical
Care--Outcomes Domain Measures
b. Proposed Performance Period and Baseline Period for the PSI-
90 Safety Domain Measure for the FY 2019 Hospital VBP Program
c. Summary of Previously Adopted and Proposed Performance
Periods and Baseline Periods for Certain Measures for the FY 2019
Hospital VBP Program
9. Proposed Performance Period and Baseline Period for the
Clinical Care--Outcomes Domain for the FY 2020 Hospital VBP Program
10. Proposed Performance Standards for the Hospital VBP Program
a. Background
b. Performance Standards for the FY 2016 Hospital VBP Program
c. Previously Adopted Performance Standards for the FY 2017, FY
2018, and FY 2019 Hospital VBP Programs
d. Proposed Additional Performance Standards for the FY 2017
Hospital VBP Program
e. Proposed Performance Standards for the FY 2019 and FY 2020
Hospital VBP Programs
f. Proposed Technical Updates Policy for Performance Standards
g. Request for Public Comments on ICD-10-CM/PCS Transition
11. Proposed FY 2017 Hospital VBP Program Scoring Methodology
a. Proposed General Hospital VBP Program Scoring Methodology
b. Proposed Domain Weighting for the FY 2017 Hospital VBP
Program for Hospitals That Receive a Score on All Domains
c. Proposed Domain Weighting for the FY 2017 Hospital VBP
Program for Hospitals Receiving Scores on Fewer than Four Domains
12. Proposed Minimum Numbers of Cases and Measures for the FY
2016 and FY 2017 Hospital VBP Program's Quality Domains
a. Previously Adopted Minimum Numbers of Cases and FY 2016
Proposed Minimum Numbers of Cases
b. Proposed Minimum Number of Measures--Safety Domain
c. Proposed Minimum Number of Measures--Clinical Care Domain
d. Proposed Minimum Number of Measures--Efficiency and Cost
Reduction Domain
e. Proposed Minimum Number of Measures--Patient and Caregiver
Centered Experience of Care/Care Coordination (PEC/CC) Domain
13. Applicability of the Hospital VBP Program to Maryland
Hospitals
14. Disaster/Extraordinary Circumstance Exception Under the
Hospital VBP Program
J. Hospital-Acquired Condition (HAC) Reduction Program
1. Background
2. Statutory Basis for the HAC Reduction Program
3. Implementation of the HAC Reduction Program for FY 2015
a. Overview
b. Payment Adjustment Under the HAC Reduction Program, Including
Exemptions
c. Measure Selection and Conditions, Including Risk Adjustment
Scoring Methodology
d. Criteria for Applicable Hospitals and Performance Scoring
Policy
e. Reporting Hospital-Specific Information, Including the Review
and Correction of Information
f. Limitation on Administrative and Judicial Review
4. Proposed Maintenance of Technical Specifications for Quality
Measures
5. Extraordinary Circumstances Exceptions/Exemptions
6. Implementation of the HAC Reduction Program for FY 2016
a. Measure Selection and Conditions, Including a Risk-Adjustment
Scoring Methodology
b. Criteria for Applicable Hospitals and Performance Scoring
7. Future Consideration for the Use of Electronically Specified
Measures
K. Payments for Indirect and Direct Graduate Medical Education
(GME) Costs (Sec. Sec. 412.105 and 413.75 Through 413.83)
1. Background
2. Proposed Changes in the Effective Date of the FTE Resident
Cap, 3-Year Rolling Average, and Interim- and Resident-to-Bed (IRB)
Ratio Cap for New Programs in Teaching Hospitals
3. Proposed Changes to IME and Direct GME Policies as a Result
of New OMB Labor Market Area Delineations
a. New Program FTE Cap Adjustment for Rural Hospitals
Redesignated as Urban
b. Participation of Redesignated Hospitals in Rural Training
Track
4. Proposed Clarification of Policies on Counting Resident Time
in Nonprovider Settings Under Section 5504 of the Affordable Care
Act
5. Proposed Changes to the Review and Award Process for Resident
Slots Under Section 5506 of the Affordable Care Act
a. Effective Date of Slots Awarded Under Section 5506 of the
Affordable Care Act
b. Proposal To Remove Seamless Requirement
c. Proposed Revisions to Ranking Criteria One, Seven, and Eight
for Applications Under Section 5506
d. Clarification to Ranking Criterion Two Regarding Emergency
Medicare GME Affiliation Agreements
6. Proposed Regulatory Clarification Applicable To Direct GME
Payments to Federally Qualified Health Centers (FQHCs) and Rural
Health Clinics (RHCs) for Training Residents in Approved Programs
L. Rural Community Hospital Demonstration Program
1. Background
2. Proposed FY 2015 Budget Neutrality Offset Amount
M. Requirement for Transparency of Hospital Charges Under the
Affordable Care Act
1. Overview
2. Transparency Requirement Under the Affordable Care Act
N. Medicare Payment for Short Inpatient Hospital Stays
O. Suggested Exceptions to the 2-Midnight Benchmark
V. Proposed Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Proposed Annual Update for FY 2015
VI. Proposed Changes for Hospitals Excluded From the IPPS
A. Proposed Rate-of-Increase in Payments to Excluded Hospitals
for FY 2015
B. Proposed Updates to the Reasonable Compensation Equivalent
(RCE) Limits on Compensation for Physician Services Provided in
Providers (Sec. 415.70)
1. Background
2. Overview of the Current RCE Limits
a. Application of the RCE Limits
b. Exceptions to the RCE Limits
c. Methodology for Establishing the RCE Limits
3. Proposed Changes to the RCE Limits
C. Critical Access Hospitals (CAHs
1. Background
2. Proposed Changes Related to Reclassifications as Rural for
CAHs
3. Proposed Revision of the Requirements for Physician
Certification of CAH Inpatient Services
VII. Proposed Changes to the Long-Term Care Hospital Prospective
Payment System (LTCH PPS) for FY 2015
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
b. Hospitals Excluded From the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Proposed Medicare Severity Long-Term Care Diagnosis-Related
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2015

[[Page 27984]]

1. Background
2. Patient Classifications Into MS-LTC-DRGs
a. Background
b. Proposed Changes to the MS-LTC-DRGs for FY 2015
3. Development of the Proposed FY 2015 MS-LTC-DRG Relative
Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Proposed Development of the MS-LTC-DRG Relative Weights for
FY 2015
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the Proposed MS-
LTC-DRG Relative Weights
f. Proposed Low-Volume MS-LTC-DRGs
g. Steps for Determining the Proposed FY 2015 MS-LTC-DRG
Relative Weights
C. Proposed LTCH PPS Payment Rates for FY 2015
1. Overview of Development of the LTCH Payment Rates
2. Proposed FY 2015 LTCH PPS Annual Market Basket Update
a. Overview
b. Proposed Revision of Certain Market Basket Updates as
Required by the Affordable Care Act
c. Proposed Adjustment to the Annual Update to the LTCH PPS
Standard Federal Rate Under the Long-Term Care Hospital Quality
Reporting (LTCHQR) Program
1. Background
2. Proposed Reduction to the Annual Update to the LTCH PPS
Standard Federal Rate Under the LTCHQR Program
d. Proposed Market Basket Under the LTCH PPS for FY 2015
e. Proposed Annual Market Basket Update for LTCHs for FY 2015
3. Proposed Adjustment for the Final Year of the Phase-In of the
One-Time Prospective Adjustment to the Standard Federal Rate Under
Sec. 412.523(d)(3)
D. Proposed Revision of LTCH PPS Geographic Classifications
1. Background
2. Proposed Use of New OMB Labor Market Area Delineations (``New
OMB Delineations'')
a. Micropolitan Statistical Areas
b. Urban Counties That Became Rural Under the New OMB Labor
Market Area Delineations
c. Rural Counties That Became Urban Under the New OMB Labor
Market Area Delineations
d. Urban Counties Moved to a Different Urban CBSA Under the New
OMB Labor Market Area Delineations
e. Proposed Transition Period
E. Reinstatement and Extension of Certain Payment Rules for LTCH
Services--The 25-Percent Threshold Payment Adjustment
1. Background
2. Proposed Implementation of Section 1206(b)(1) of Public Law
113-67
F. Proposed Changes to the Fixed-Day Thresholds Under the
Greater Than 3-Day Interruption of Stay Policy Under the LTCH PPS
1. Background
2. Thresholds Used in Recent Statutory Programs
3. Proposed Changes to the Greater Than 3-Day Interruption of
Stay Policy
G. Moratoria on the Establishment of LTCHs and LTCH Satellite
Facilities and on the Increase in the Number of Beds in Existing
LTCHs or LTCH Satellite Facilities
H. Evaluation and Proposed Treatment of LTCHs Classified Under
Section 1886(d)(1)(B)(iv)(II) of the Act
I. Description of Statutory Framework for Patient-Level
Criteria-Based Payment Adjustment Under the LTCH PPS Under Public
Law 113-67
1. Overview
2. Provisions of Section 1206(a) of Public Law 113-67
3. Additional LTCH PPS Issues
J. Proposed Technical Change
VIII. Appropriate Claims in Provider Cost Reports; Administrative
Appeals by Providers and Judicial Review
A. Background
1. Payment and Cost Reporting Requirements
2. Administrative Appeals by Providers and Judicial Review
3. Appropriate Claims in Provider Cost Reports
B. Proposed Changes Regarding the Claims Required in Provider
Cost Reports and for Provider Administrative Appeals
1. Proposed Addition to the Cost Reporting Regulations of the
Substantive Reimbursement Requirement of an Appropriate Cost Report
Claim
2. Proposed Revisions to the Provider Reimbursement Appeal
Regulations
C. Proposed Conforming Changes to the Board Appeal Regulations
and Corresponding Revisions to the Contractor Hearing Regulations
1. Technical Corrections and Conforming Changes to Sec. Sec.
405.1801 and 405.1803
2. Technical Corrections and Conforming Changes to Sec. Sec.
405.1811, 405.1813, and 405.1814
3. Proposed New Sec. 405.1832
4. Proposed Revisions to Sec. 405.1834
5. Technical Corrections and Conforming Changes to Sec. Sec.
405.1836, 405.1837, and 405.1839
6. Technical Corrections to 42 CFR Part 405, Subpart R and All
Subparts of 42 CFR Part 413
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital
IQR Program
b. Proposed Removal of Hospital IQR Program Measures for the FY
2017 Payment Determination and Subsequent Years
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
4. Additional Considerations in Expanding and Updating Quality
Measures Under the Hospital IQR Program
5. Previously Adopted Hospital IQR Program Measures for the FY
2016 Payment Determination and Subsequent Years
6. Proposed Refinements to Existing Measures in the Hospital IQR
Program
a. Proposed Refinement of Planned Readmission Algorithm for 30-
Day Readmission Measures
b. Proposed Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures
c. Anticipated Effect of Proposed Refinements to Existing
Measures
7. Proposed Additional Hospital IQR Program Measures for the FY
2017 Payment Determination and Subsequent Years
a. Proposed Hospital 30-Day, All-Cause, Unplanned, Risk-
Standardized Readmission Rate (RSRR) Following Coronary Artery
Bypass Graft (CABG) Surgery
b. Proposed Hospital 30-Day, All-Cause, Risk-Standardized
Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG)
Surgery
c. Proposed Hospital-level, Risk-Standardized 30-Day Episode-of-
Care Payment Measure for Pneumonia
d. Proposed Hospital-Level, Risk-Standardized 30-Day Episode-of-
Care Payment Measure for Heart Failure
e. Proposed Severe Sepsis and Septic Shock: Management Bundle
Measure (NQF 0500)
f. Electronic Health Record-Based Voluntary Measures
g. Proposed Readoption of Measures as Voluntarily Reported
Electronic Clinical Quality Measures
h. Electronic Clinical Quality Measures
8. Possible New Quality Measures and Measure Topics for Future
Years
a. Mandatory Electronic Clinical Quality Measure Reporting for
FY 2018 Payment Determination
b. Possible Future Electronic Clinical Quality Measures
9. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2017 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Alignment of the EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures with Hospital IQR
Program Reporting and Submission Timelines
e. Sampling and Case Thresholds for the FY 2017 Payment
Determination and Subsequent Years
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
g. Data Submission Requirements for Structural Measures for the
FY 2017

[[Page 27985]]

Payment Determination and Subsequent Years
h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
10. Submission and Access of HAI Measures Data Through the CDC's
NHSN Web site
11. Proposed Modifications to the Existing Processes for
Validation of Chart-abstracted Hospital IQR Program Data
a. Eligibility Criteria for Hospitals Selected for Validation
b. Number of Charts to be Submitted per Hospital for Validation
c. Combining Scores for HAI and Clinical Process of Care Topic
Areas
d. Processes To Submit Patient Medical Records for Chart-
abstracted Measures
e. Plans To Validate Electronic Clinical Quality Measure Data
12. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2017 Payment Determination and Subsequent Years
13. Public Display Requirements for the FY 2017 Payment
Determination and Subsequent Years
14. Reconsideration and Appeal Procedures for the FY 2017
Payment Determination and Subsequent Years
15. Hospital IQR Program Extraordinary Circumstances Extensions
or Exemptions
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Previously Finalized PCHQR Program Quality Measures
4. Proposed Update to the Clinical Process/Oncology Care
Measures Beginning With the 2016 Program
5. Proposed New Quality Measures Beginning With the FY 2017
Program
a. Considerations in the Selection of Quality Measures
b. Proposed New Quality Measure Beginning With the FY 2017
Program
6. Possible New Quality Measure Topics for Future Years
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements Beginning With the FY 2014
Program
9. Form, Manner, and Timing of Data Submission Beginning With
the FY 2017 Program
a. Background
b. Proposed Reporting Requirements for the Proposed New Measure:
External Beam Radiotherapy for Bone Metastases (NQF 1822)
Beginning With the FY 2017 Program
c. Proposed Reporting Options for the Clinical Process/Cancer
Specific Treatment Measures Beginning With the FY 2015 Program and
the SCIP and Clinical Process/Oncology Care Measures Beginning With
the FY 2016 Program
d. Proposed New Sampling Methodology for the Clinical Process/
Oncology Care Measures Beginning With the FY 2016 Program
10. Exceptions From Program Requirements
C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Background
2. General Considerations Used for Selection of Quality Measures
for the LTCHQR Program
3. Policy for Retention of LTCHQR Program Measures Adopted for
Previous Payment Determinations
4. Policy for Adopting Changes to LTCHQR Program Measures
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY
2016 Payment Determinations and Subsequent Years
b. Previously Adopted Quality Measures for the FY 2017 and FY
2018 Payment Determinations and Subsequent Years
6. Proposed Revision to Data Collection Timelines and Submission
Deadlines for Previously Adopted Quality Measures
a. Proposed Revisions to Data Collection Timelines and
Submission Deadlines for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short Stay) (NQF 0680)
b. Proposed Revisions to Data Collection Timelines and
Submission Deadlines for the Application of Percent of Residents
Experiencing One or More Falls With Major Injury (Long Stay) (NQF
0674)
7. Proposed New LTCHQR Program Quality Measures for the FY 2018
Payment Determination and Subsequent Years
a. Proposed New LTCHQR Program Functional Status Quality
Measures for the FY 2018 Payment Determination and Subsequent Years
b. Proposed Quality Measure: National Healthcare Safety Network
(NHSN) Ventilator-Associated Event (VAE) Outcome Measure
8. LTCHQR Program Quality Measures and Concepts Under
Consideration for Future Years
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2016 Payment Determinations and Subsequent Years
a. Background
b. Finalized Timeline for Data Submission Under the LTCHQR
Program for the FY 2016 and FY 2017 Payment Determinations (Except
NQF 0680 and NQF 0431)
c. Proposed Revision to the Previously Adopted Data Collection
Timelines and Submission Deadlines for Percent of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short-Stay) (NQF -680) for the FY 2016
Payment Determination and Subsequent Years
d. Proposed Data Submission Mechanisms for the FY 2018 Payment
Determination and Subsequent Years for Proposed New LTCHQR Program
Quality Measures and for Proposed Revision to Previously Adopted
Quality Measure
e. Proposed Data Collection Timelines and Submission Deadlines
Under the LTCHQR Program for the FY 2018 Payment Determination
f. Proposed Data Collection Timelines and Submission Deadlines
for the Application of Percent of Residents Experiencing One or More
Falls With Major Injury (Long Stay) (NQF 0674) Measure for
the FY 2018 Payment Determination and Subsequent Years
g. Proposed Data Collection Timelines and Submission Deadlines
Under the LTCHQR Program for the FY 2019 Payment Determination
10. Proposed LTCHQR Program Data Completion Threshold for the FY
2016 Payment Adjustment and Subsequent Years
a. Overview
b. Proposed LTCHQR Program Data Completion Threshold for the
Required LTCH CARE Data Set (LCDS) Data Items
c. LTCHQR Program Data Completion Threshold for Measures
Submitted Using the Centers for Disease Control and Prevention (CDC)
National Healthcare Safety Network (NHSN)
d. Application of the 2 Percentage Point Reduction for LTCHs
That Fail To Meet the Proposed Data Completion Thresholds
11. Proposed Data Validation Process for the FY 2016 Payment
Determination and Subsequent Years
a. Proposed Data Validation Process
b. Application of the 2 Percentage Point Reduction for LTCHs
That Fail To Meet the Proposed Data Accuracy Threshold
12. Public Display of Quality Measure Data for the LTCHQR
Program
13. Proposed LTCHQR Program Submission Exception and Extension
Requirements for the FY 2017 Payment Determination and Subsequent
Years
14. Proposed LTCHQR Program Reconsideration and Appeals
Procedures for the FY 2016 Payment Determination and Subsequent
Years
a. Previously Finalized LTCHQR Program Reconsideration and
Appeals Procedures for the FY 2014 and FY 2015 Payment
Determinations
b. Proposed LTCHQR Program Reconsideration and Appeals
Procedures for the FY 2016 Payment Determination and Subsequent
Years
15. Electronic Health Records (EHR) and Health Information
Exchange (HIE)
D. Electronic Health Record (EHR) Incentive Program and
Meaningful Use (MU)
1. Background
2. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures With Hospital IQR
Program Reporting and Submission Timelines
3. Quality Reporting Data Architecture Category III (QRDA-III)
Option in 2015
4. Electronically Specified Clinical Quality Measures (CQMs)
Reporting for 2015
5. Clarification Regarding Reporting Zero Denominators
6. Case Threshold Exemption Policy; Clarification for 2014 and
Proposed Change for 2015
X. Proposed Revision of Regulations Governing Use and Release of
Medicare Advantage Risk Adjustment Data
A. Background

[[Page 27986]]

B. Proposed Regulatory Changes
1. Proposed Expansion of Uses and Reasons for Disclosure of Risk
Adjustment Data
2. Proposed Conditions for CMS Release of Data
3. Proposed Technical Change
XI. Proposed Changes to Enforcement Provisions for Organ Transplant
Centers
A. Background
B. Basis for Proposals in This Proposed Rule
1. Proposed Expansion of Mitigating Factors Based on CMS'
Experience
2. Coordination With Efforts of the Organ Procurement and
Transplantation Network (OPTN) and Health Resources and Services
Administration
C. Provisions of the Proposed Changes
1. Proposed Expansion of Mitigating Factors List
2. Content and Timeframe for Mitigating Factors Requests
3. System Improvement Agreements (SIAs)
a. Purpose and Intent of an SIA
b. Description and Contents of an SIA
c. Effective Period for an SIA
XII. MedPAC Recommendations
XIII. Other Required Information
A. Requests for Data From the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the Proposed FY
2015 Wage Index (Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICR Regarding Electronic Health Record (EHR) Incentive
Program and Meaningful Use (MU)
11. ICR Regarding Proposed Revision of Regulations Governing Use
and Release of Medicare Advantage (MA) Risk Adjustment Data (Sec.
422.310(f))
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts, Update Factors,
and Rate-of-Increase Percentages Effective With Cost Reporting
Periods Beginning on or After October 1, 2014 and Payment Rates for
LTCHs Effective With Discharges Occurring on or After October 1,
2014
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2015
A. Calculation of the Adjusted Standardized Amount
B. Proposed Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2015
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Proposed Inpatient Capital-Related
Prospective Payments for FY 2015
C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-
of-Increase Percentages for FY 2015
V. Proposed Updates to the Payment Rates for the LTCH PPS for FY
2015
A. Proposed LTCH PPS Standard Federal Rate for FY 2015
1. Background
2. Development of the Proposed FY 2015 LTCH PPS Standard Federal
Rate
B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS
for FY 2015
1. Background
2. Proposed Geographic Classifications Based on the New OMB
Delineations
3. Proposed LTCH PPS Labor-Related Share
4. Proposed LTCH PPS Wage Index for FY 2015
5. Proposed Budget Neutrality Adjustment for Proposed Changes to
the Area Wage Level Adjustment
C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs
Located in Alaska and Hawaii
D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO)
Cases
1. Background
2. Determining LTCH CCRs Under the LTCH PPS
3. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for
FY 2015
4. Application of the Outlier Policy to SSO Cases
E. Proposed Update to the IPPS Comparable/Equivalent Amounts To
Reflect the Statutory Changes to the IPPS DSH Payment Adjustment
Methodology
F. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for FY 2015
VI. Tables Referenced in This Proposed Rule and Available Through
the Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Proposed Policy Changes Under the
IPPS for Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Proposed Policy Changes
1. Effects of Proposed Policy on MS-DRGs for Preventable HACs,
Including Infections
2. Effects of Proposed Policy Relating to New Medical Service
and Technology Add-On Payments
3. Effects of Proposed Changes to List of MS-DRGs Subject to
Postacute Care Transfer and DRG Special Pay Policy
4. Effects of Proposed Payment Adjustment for Low-Volume
Hospitals for FY 2015
5. Effects of Proposal Related to IME Medicare Part C Add-On
Payments to SCHs Paid According to Their Hospital-Specific Rates
6. Effects of the Extension of the MDH Program for the First
Half of FY 2015
7. Effects of Proposed Changes Under the FY 2015 Hospital Value-
Based Purchasing (VBP) Program
8. Effects of the Proposed Changes to the HAC Reduction Program
for FY 2015
9. Effects of Proposed Policy Changes Relating to Payments for
Direct GME and IME
10. Effects of Implementation of Rural Community Hospital
Demonstration Program
11. Effects of Proposed Changes Related to Reclassifications as
Rural for CAHs
12. Effects of Proposed Revision of the Requirements for
Physician Certification of CAH Inpatient Services
13. Effects of Proposed Changes Relating to Administrative
Appeals by Providers and Judicial Review for Appropriate Claims in
Provider Cost Reports
I. Effects of Proposed Changes to Updates to the Reasonable
Compensation Equivalent (RCE) Limits for Physician Services Provided
to Providers
J. Effects of Proposed Changes in the Capital IPPS
1. General Considerations
2. Results
K. Effects of Proposed Payment Rate Changes and Policy Changes
Under the LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes
and Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
L. Effects of Proposed Requirements for Hospital Inpatient
Quality Reporting (IQR) Program
M. Effects of Proposed Requirements for the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program for FY 2015
N. Effects of Proposed Requirements for the LTCH Quality
Reporting (LTCHQR) Program for FY 2015 Through FY 2019
O. Effects of Proposals Regarding Electronic Health Record (EHR)
Incentive Program and Hospital IQR Program
P. Effects of Proposed Revision of Regulations Governing Use and
Release of Medicare Advantage Risk Adjustment Data
Q. Effects of Proposed Changes to Enforcement Provisions for
Organ Transplant Centers
II. Alternatives Considered
III. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs

[[Page 27987]]

IV. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2015
A. Proposed FY 2015 Inpatient Hospital Update
B. Proposed Update for SCHs for FY 2015
C. Proposed FY 2015 Puerto Rico Hospital Update
D. Proposed Update for Hospitals Excluded From the IPPS for FY
2015
E. Proposed Update for LTCHs for FY 2015
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
This proposed rule would make payment and policy changes under the
Medicare inpatient prospective payment systems (IPPS) for operating and
capital-related costs of acute care hospitals as well as for certain
hospitals and hospital units excluded from the IPPS. In addition, it
would make payment and policy changes for inpatient hospital services
provided by long-term care hospitals (LTCHs) under the long-term care
hospital prospective payment system (LTCH PPS). It also would make
policy changes to programs associated with Medicare IPPS hospitals,
IPPS-excluded hospitals, and LTCHs.
Under various statutory authorities, we are proposing to make
changes to the Medicare IPPS, to the LTCH PPS, and to other related
payment methodologies and programs for FY 2015 and subsequent fiscal
years. These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; and short-term acute care hospitals located in the Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa.
Religious nonmedical health care institutions (RNHCIs) are also
excluded from the IPPS.
Sections 123(a) and (c) of Public Law 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-Exempt Cancer Hospitals.''
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act. A payment for indirect
medical education (IME) is made under section 1886(d)(5)(B) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase in payments to a
subsection (d) hospital for a fiscal year if the hospital does not
submit data on measures in a form and manner, and at a time, specified
by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes an adjustment to hospital
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share payments under section 1886(d)(5)(F) of the Act
and for a new uncompensated care payment to eligible hospitals.
Specifically, section 1886(r) of the Act now requires that, for
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d)
hospitals'' that would otherwise receive a ``disproportionate share
payment . . . made under subsection (d)(5)(F)'' will receive two
separate payments: (1) 25 percent of the amount they previously would
have received under subsection (d)(5)(F) for DSH (``the empirically
justified amount''), and (2) an additional payment for the DSH
hospital's proportion of uncompensated care, determined as the product
of three factors. These three factors are: (1) 75

[[Page 27988]]

percent of the payments that would otherwise be made under subsection
(d)(5)(F); (2) 1 minus the percent change in the percent of individuals
under the age of 65 who are uninsured (minus 0.1 percentage points for
FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017);
and (3) a hospital's uncompensated care amount relative to the
uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for SGR Reform Act of 2013, which provided
for the establishment of patient criteria for payment under the LTCH
PPS for implementation beginning in FY 2016.
Section 1206(b)(1) of the Pathway for SGR Reform Act of
2013, which further amended section 114(c) of the MMSEA, as amended by
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the
Affordable Care Act, by retroactively reestablishing and extending the
statutory moratorium on the full implementation of the 25-percent
threshold payment adjustment policy under the LTCH PPS so that the
policy will be in effect for 9 years (except for ``grandfathered''
hospital-within-hospitals (HwHs), which are permanently exempt from
this policy); and section 1206(b)(2) (as amended by section 112(b) of
the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)), which
together further amended section 114(d) of the MMSEA, as amended by
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the
Affordable Care Act to establish a new moratoria (subject to certain
defined exceptions) on the development of new LTCHs and LTCH satellite
facilities and a new moratorium on increases in the number of beds in
existing LTCHs and LTCH satellite facilities beginning January 1, 2015
and ending on September 30, 2017; and section 1206(d), which instructs
the Secretary to evaluate payments to LTCHs classified under section
1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015
or FY 2016 under the LTCH PPS, as appropriate, based upon the
evaluation findings.
Section 1886(m)(5)(D)(iv) of the Act, as added by section
1206(c) of the Pathway for SGR Reform Act of 2013, which provides for
the establishment, no later than October 1, 2015, of a functional
status quality measure under the LTCHQR Program for change in mobility
among inpatients requiring ventilator support.
To conform regulations to the statutory requirements of the
Provider Reimbursement Review Board (Board) appeals based on untimely
determinations of the Medicare Administrative Contractor (MAC), in this
proposed rule, we are proposing to amend the regulations to eliminate
the provider dissatisfaction requirement as a condition for Board
jurisdiction over such appeals. We are proposing a similar amendment to
the regulations for appeals to MAC hearing officers, to maintain
consistency between the regulations for MAC and Board appeals. We also
are proposing to codify in the cost reporting regulations our existing
policy, implemented in section 115 of the Provider Reimbursement
Manual, requiring providers to include an appropriate claim for an item
in its cost report. In addition, we are proposing that providers'
failure to include an appropriate claim for an item in its cost report
will result in foreclosure of payment in the notice of program
reimbursement and in any decision or order issued by a reviewing entity
in an administrative appeal filed by the provider.
We are proposing to align the reporting and submission timelines
for clinical quality measures for the Medicare EHR Incentive Program
for eligible hospitals and critical access hospitals (CAHs) with the
reporting and submission timelines for the Hospital IQR Program. In
addition, we provide guidance and clarification of certain policies for
eligible hospitals and CAHs such as our policy for reporting zero
denominators on clinical quality measures and our policy for case
threshold exemptions.
In addition, this proposed rule contains several proposals that are
not directly related to these Medicare payment systems, such as
regulatory revisions to broaden the specified uses and reasons for
disclosure of risk adjustment data and to specify the conditions for
release of risk adjustment data to entities outside of CMS and changes
to the enforcement procedures for organ transplant centers. The
specific statutory authority for these other proposals is discussed in
the relevant sections below.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. This adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimated that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014,
it is often our practice to delay or phase in rate adjustments over
more than one year, in order to moderate the effects on rates in any
one year. Therefore, consistent with the policies that we have adopted
in many similar cases, we made a -0.8 percent recoupment adjustment to
the standardized amount in FY 2014. We are proposing to make an
additional -0.8 percent recoupment adjustment to the standardized
amount in FY 2015.
b. Reduction of Hospital Payments for Excess Readmissions
We are proposing changes in policies to the Hospital Readmissions
Reduction Program, which is established under section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payment to account for excess readmissions of
selected applicable conditions. For FYs 2013 and 2014, these conditions
are acute myocardial infarction, heart failure, and pneumonia. For FY
2014, we established additional exclusions to the three existing
readmission measures (that is, the excess readmission ratio) to account
for additional planned readmissions. We also established additional
readmissions measures, Chronic Obstructive Pulmonary Disease (COPD),
and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be
used in the Hospital Readmissions Reduction Program for FY 2015 and
future years. We are proposing to expand the readmissions measures for
FY 2017 and future years by adding a measure of patients readmitted
following coronary artery bypass graft (CABG) surgery. We also are
proposing to refine the readmission measures and related methodology
for FY 2015 and subsequent years payment determinations. In addition,
we are proposing that the readmissions payment adjustment factors for
FY 2015

[[Page 27989]]

can be no more than a 3-percent reduction in accordance with the
statute. We also are proposing to revise the calculation of aggregate
payments for excess readmissions to include THA/TKA and COPD
readmissions measures beginning in FY 2015.
c. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital Value-Based Purchasing (VBP) Program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
In this proposed rule, we are proposing to adopt quality measures
for the FY 2017, FY 2019, and FY 2020 Hospital VBP Program years and to
establish performance periods and performance standards for measures to
be adopted for those fiscal years. We also are proposing to adopt
additional policies related to performance standards and to revise the
domain weighting previously adopted for the FY 2017 Hospital VBP
Program.
d. Hospital-Acquired Condition (HAC) Reduction Program
In this proposed rule, we are proposing a change in the scoring
methodology with the addition of a previously finalized measure for the
FY 2016 payment adjustment under the HAC Reduction Program. Section
1886(p) of the Act, as added under section 3008(a) of the Affordable
Care Act, establishes an adjustment to hospital payments for HACs, or a
HAC Reduction program, under which payments to applicable hospitals are
adjusted to provide an incentive to reduce HACs, effective for
discharges beginning on October 1, 2014 and for subsequent program
years. This 1-percent payment reduction applies to a hospital whose
ranking is in the top quartile (25 percent) of all applicable
hospitals, relative to the national average, of conditions acquired
during the applicable period and on all of the hospital's discharges
for the specified fiscal year. The amount of payment shall be equal to
99 percent of the amount of payment that would otherwise apply to such
discharges under section 1886(d) or 1814(b)(3) of the Act, as
applicable.
e. Proposed Changes to the DSH Payment Adjustment and the Provision of
Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Under section 1886(r) of the Act, which was added by section
3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive
25 percent of the amount they previously would have received under the
current statutory formula for Medicare DSH payments. The remaining
amount, equal to 75 percent of what otherwise would have been paid as
Medicare DSH payments, will be paid as additional payments after the
amount is reduced for changes in the percentage of individuals that are
uninsured. Each Medicare DSH hospital will receive its additional
amount based on its share of the total amount of uncompensated care for
all Medicare DSH hospitals for a given time period. In this proposed
rule, we are proposing updates to the uncompensated care amount to be
distributed for FY 2015, and we are proposing changes to the
methodology to calculate the uncompensated care payment amounts to be
distributed such that we combine uncompensated care data for hospitals
that have underwent a merger in order to calculate their relative share
of uncompensated care.
f. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, hospitals are
required to report data on measures selected by the Secretary for the
Hospital IQR Program in order to receive the full annual percentage
increase. In past rules, we have established measures for reporting and
the process for submittal and validation of the data.
In this proposed rule, we are proposing to add nine new measures
for the Hospital IQR Program for the FY 2017 payment determination and
subsequent years. We are proposing to remove five measures for the FY
2016 payment determination and subsequent years. We also are proposing
to remove 15 chart-abstracted measures from the FY 2016 payment
determination's measure set. However, we are proposing to retain an
electronic clinical quality measure version of 10 of those chart-
abstracted measures for the program.
g. Proposed Changes to the LTCH PPS
Section 1206(b) of the Pathway for SGR Reform Act provides for the
retroactive reinstatement and extension, for an additional 4 years, of
the moratorium on the full implementation of the 25-percent threshold
payment adjustment under the LTCH PPS established under section 114(c)
of the MMSEA, as further amended by subsequent legislation. In keeping
with this mandate, we are proposing to reinstate this payment
adjustment retroactively for LTCH cost reporting periods beginning on
or after July 1, 2013 or October 1, 2013.
Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by
section 112(b) of the Protecting Access to Medicare Act of 2014,
provides for new statutory moratoria on the establishment of new LTCHs
and LTCH satellite facilities (subject to certain defined exceptions)
and a new statutory moratorium on bed increases in existing LTCHs
effective for the period beginning April 1, 2014 and ending September
30, 2017.
In accordance with section 1206(d) of the Pathway for SGR Reform
Act of 2013, we are proposing to apply a payment adjustment under the
LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that would result
in payments to this type of LTCH resembling reasonable cost payments
under the TEFRA payment system model.
We also are proposing to make changes to the LTCH interruption of
stay policy, which is a payment adjustment that is applied when, during
the course of an LTCH hospitalization, a patient is discharged to an
inpatient acute care hospital, an IRF, or a SNF for treatment or
services not available at the LTCH for a specified period followed by
readmittance to the same LTCH.
3. Summary of Costs and Benefits
Proposed Adjustment for MS-DRG Documentation and Coding
Changes. We are proposing a -0.8 percent recoupment adjustment to the
standardized amount for FY 2015 to implement, in part, the requirement
of section 631 of the ATRA that the Secretary make an adjustment
totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and
2017. This recoupment adjustment represent the amount of the increase
in aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimated that a -9.3 percent recoupment
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by

[[Page 27990]]

section 631 of the ATRA in FY 2014, it is often our practice to delay
or phase in rate adjustments over more than one year, in order to
moderate the effects on rates in any one year. Therefore, consistent
with the policies that we have adopted in many similar cases and the
adjustment we made for FY 2014, we are proposing to make a -0.8 percent
recoupment adjustment to the standardized amount in FY 2015. We
estimated that this level of adjustment, combined with leaving the -0.8
percent adjustment made for FY 2014 in place, will recover up to $2
billion in FY 2015. Taking into account the approximately $1 billion
recovered in FY 2014, this will leave approximately $8 billion
remaining to be recovered by FY 2017.
Reduction to Hospital Payments for Excess Readmissions.
The provisions of section 1886(q) of the Act which establishes the
Hospital Readmissions Reduction Program are not budget neutral. For FY
2015, a hospital's readmissions payment adjustment factor is the higher
of a ratio of a hospital's aggregate payments for excess readmissions
to its aggregate payments for all discharges, or 0.97 (that is, or a 3-
percent reduction). In this proposed rule, we estimate that the
reduction to a hospital's base operating DRG payment amount to account
for excess readmissions of selected applicable conditions under the
Hospital Readmissions Reduction Program will result in a 0.2 percent
decrease in payments to hospitals for FY 2015 relative to FY 2014.
Value-Based Incentive Payments Under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net
financial impact to the Hospital VBP Program for FY 2015 in the
aggregate because, by law, the amount available for value-based
incentive payments under the program in a given fiscal year must be
equal to the total amount of base operating DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating DRG payment amount reductions for FY 2015, and
therefore the estimated amount available for value-based incentive
payments for FY 2015 discharges, is approximately $1.4 billion. We
believe that the program's benefits will be seen in improved patient
outcomes, safety, and in the patient's experience of care. However, we
cannot estimate these benefits in actual dollar and patient terms.
Proposed Payment Adjustment Under the HAC Reduction
Program for FY 2015. Under section 1886(p) of the Act, (as added by
section 3008 of the Affordable Care Act), the incentive to reduce
hospital-acquired conditions with a payment adjustment to applicable
hospitals under the HAC Reduction Program is made beginning FY 2015. We
estimate that, under this proposal, 753 hospitals would be subject to
the 1-percent reduction, and that overall payments will decrease
approximately 0.3 percent or $330 million.
Proposed Changes Relating to the Medicare DSH Payment
Adjustment and Provision of Additional Payment for Uncompensated Care.
Under section 1886(r) of the Act (as added by section 3313 of the
Affordable Care Act), disproportionate share payments to hospitals
under section 1886(d)(5)(F) of the Act are reduced and an additional
payment to eligible hospitals is made beginning in FY 2014. Hospitals
that receive Medicare DSH payments will receive 25 percent of the
amount they previously would have received under the current statutory
formula for Medicare DSH payments. The remainder, equal to 75 percent
of what otherwise would have been paid as Medicare DSH payments, will
be the basis for additional payments after the amount is reduced for
changes in the percentage of individuals that are uninsured and
additional statutory adjustments. Each hospital that receives Medicare
DSH payments will receive an additional payment based on its share of
the total uncompensated care amount reported by Medicare DSHs. The
reduction to Medicare DSH payments is not budget neutral.
For FY 2015, we are proposing that the 75 percent of what otherwise
would have been paid for Medicare DSH is adjusted to approximately 80.4
percent of the amount for changes in the percentage of individuals that
are uninsured and additional statutory adjustments. In other words,
Medicare DSH payments prior to the application of section 3133 of the
Affordable Care Act are adjusted to approximately 60.3 percent (the
product of 75 percent and 80.4 percent) and that resulting payment
amount is used to create an additional payment for a hospital's
relative uncompensated care. As a result, we project that the proposed
reduction of Medicare DSH payments and the inclusion of the additional
payments for uncompensated care will reduced payments overall by 1.1
percent as compared to the Medicare DSH payments and uncompensated care
payments distributed in FY 2014. The proposed additional payments have
redistributive effects based on a hospital's uncompensated care amount
relative to the uncompensated care amount to all hospitals that are
estimated to receive Medicare DSH payments, and the payment amount is
not tied to a hospital's discharges.
Hospital Inpatient Quality Reporting (IQR) Program. In
this proposed rule, we are proposing to add nine new measures for the
FY 2017 payment determination and subsequent years. We are proposing to
remove five measures from the hospital IQR Program for the FY 2016
payment determination and subsequent years. We also are proposing to
remove 15 chart-abstracted from the FY 2016 payment determination's
measure set, but we are proposing to retain an electronic clinical
quality measure version of 10 of those measures for the program. We
estimate that our proposals for the adoption and removal of measures
will decrease hospital costs by $39.8 million.
Proposed Update to the LTCH PPS Standard Federal Rate and
Other Payment Factors. Based on the best available data for the 423
LTCHs in our database, we estimate that the proposed changes to the
payment rates and factors we are presenting in the preamble and
Addendum of this proposed rule, including the proposed update to the
standard Federal rate for FY 2015, the proposed changes to the area
wage adjustment for FY 2015, and the expected changes to short-stay
outliers and high-cost outliers, would result in an increase in
estimated payments from FY 2014 of approximately $44 million (or 0.8
percent). In addition, we estimate that net effect of the projected
impact of certain other proposed LTCH PPS policy changes (that is, the
reinstatement of the moratorium on the full implementation of the ``25
percent threshold'' payment adjustment; the reinstatement of the
moratorium on the development of new LTCHs and LTCH satellite
facilities and additional LTCH beds; the proposed revision of the
``greater than 3-day interruption of stay'' policy; the proposed
revocation of onsite discharges and readmissions policy; and the
proposed payment adjustment for ``subclause (II)'' LTCHs) is estimated
to result in a reduction in LTCH PPS payments of approximately $14
million.
The impact analysis of the proposed payment rates and factors
presented in this proposed rule under the LTCH PPS, in conjunction with
the estimated payment impacts of certain other proposed LTCH PPS policy
changes would result in a net increase of $30 million to LTCH
providers. Additionally, we estimate that the costs to LTCHs associated
with the completion of the proposed data for the LTCHQR Program at
$3.96 million or approximately $1 million more than FY 2014.

[[Page 27991]]

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for
hospital inpatient operating and capital-related costs is made at
predetermined, specific rates for each hospital discharge. Discharges
are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations. The Affordable Care Act revised
the Medicare DSH payment methodology and provides for a new additional
Medicare payment that considers the amount of uncompensated care
beginning on October 1, 2013.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before April 1, 2015, an MDH will receive
the higher of the Federal rate or the Federal rate plus 75 percent of
the amount by which the Federal rate is exceeded by the highest of its
FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the
statutory provision for payments to MDHs expires on March 31, 2015,
under current law.) SCHs are the sole source of care in their areas,
and MDHs are a major source of care for Medicare beneficiaries in their
areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an
SCH as a hospital that is located more than 35 road miles from another
hospital or that, by reason of factors such as isolated location,
weather conditions, travel conditions, or absence of other like
hospitals (as determined by the Secretary), is the sole source of
hospital inpatient services reasonably available to Medicare
beneficiaries. In addition, certain rural hospitals previously
designated by the Secretary as essential access community hospitals are
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as
a hospital that is located in a rural area, has not more than 100 beds,
is not an SCH, and has a high percentage of Medicare discharges (not
less than 60 percent of its inpatient days or discharges in its cost
reporting year beginning in FY 1987 or in two of its three most
recently settled Medicare cost reporting years). Both of these
categories of hospitals are afforded this special payment protection in
order to maintain access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; certain cancer hospitals; and short-tern acute care
hospitals located in Guam, the U.S. Virgin Islands, the Northern
Mariana Islands, and American Samoa. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, certain cancer
hospitals, short-tern acute care hospitals

[[Page 27992]]

located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands,
and American Samoa, and RNHCIs continue to be paid solely under a
reasonable cost-based system subject to a rate-of-increase ceiling on
inpatient operating costs, as updated annually by the percentage
increase in the IPPS operating market basket.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of section 123 of the BBRA
and section 307(b) of the BIPA (as codified under section 1886(m)(1) of
the Act). During the 5-year (optional) transition period, a LTCH's
payment under the PPS was based on an increasing proportion of the LTCH
Federal rate with a corresponding decreasing proportion based on
reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. The existing regulations governing payment under
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with
FY 2009, annual updates to the LTCH PPS are published in the same
documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR Part 413.

C. Summary of Provisions of Recent Legislation Discussed in This
Proposed Rule

The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, the Health Care and Education Reconciliation
Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010, made a number
of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111-148 and
Pub. L. 111-152 are collectively referred to as the ``Affordable Care
Act.'') A number of the provisions of the Affordable Care Act affect
the updates to the IPPS and the LTCH PPS and providers and suppliers.
The provisions of the Affordable Care Act that were applicable to the
IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in
the June 2, 2010 Federal Register notice (75 FR 31118), the FY 2011
IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51476).
The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
enacted on January 2, 2013, also made a number of changes that affect
the IPPS. We announced changes related to certain IPPS provisions for
FY 2013 in accordance with sections 605 and 606 of Public Law 112-240
in a notice issued in the Federal Register on March 7, 2013 (78 FR
14689).
The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on
December 26, 2013, also made a number of changes that affect the IPPS
and the LTCH PPS. We implemented changes related to the low-volume
hospital payment adjustment and MDH provisions for FY 2014 in
accordance with sections 1105 and 1106 of Public Law 113-67 in an
interim final rule with comment period that appeared in the Federal
Register on March 18, 2014 (79 FR 15022).
The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93),
enacted on April 1, 2014, also made a number of changes that affect the
IPPS and LTCH PPS.
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
In this proposed rule, we are proposing policy changes to implement
(or, as applicable, continuing to implement in FY 2015) the following
provisions (or portions of the following provisions) of the Affordable
Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt
cancer hospitals for FY 2015:
Section 3001(a) of Public Law 111-148, which requires the
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments are made in a fiscal year to
hospitals that meet performance standards for the performance period
for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data by LTCHs in order for them to receive the
full annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals beginning with FY 2014, and for subsequent program years.
Section 3008 of Public Law 111-148, which establishes the
Hospital-Acquired Condition (HAC) Reduction Program and requires the
Secretary to make an adjustment to hospital payments for applicable
hospitals, effective for discharges beginning on October 1, 2014, and
for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3133 of Public Law 111-148, as amended by section
10316 of Public Law 111-148 and section 1104 of Public Law 111-152,
which modifies the methodologies for determining Medicare DSH payments
and creates a new additional payment for uncompensated care effective
for discharges beginning on or after October 1, 2013.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2015.

[[Page 27993]]

Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
In this proposed rule, we are proposing policy changes to implement
section 631 of the American Taxpayer Relief Act of 2012 that are
applicable to the IPPS for FY 2015, which amended section 7(b)(1)(B) of
Public Law 110-90 and requires a recoupment adjustment to the
standardized amounts under section 1886(d) of the Act based upon the
Secretary's estimates for discharges occurring in FY 2014 through FY
2017 to fully offset $11 billion (which represents the amount of the
increase in aggregate payments from FYs 2008 through 2013 for which an
adjustment was not previously applied).
3. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
In this proposed rule, we are proposing policy changes to
implement, or the need for future policy changes, to carry out
provisions under section 1206 of the Pathway for SGR Reform Act of
2013. These include:
Section 1206(a), which provides the establishment of
patient criteria for ``site neutral'' payment rates under the LTCH PPS,
portions of which will begin to be implemented in FY 2016.
Section 1206(b)(1), which further amended section 114(c)
of the MMSEA, as amended by section 4302(a) of the ARRA and sections
3106(c) and 10312(a) of the Affordable Care Act by retroactively
reestablishing, and extending, the statutory moratorium on the full
implementation of the 25-percent threshold payment adjustment policy
under the LTCH PPS so that the policy will be in effect for 9 years
(except for grandfathered HwHs, which are permanently exempt from this
policy).
Section 1206(b)(2), which amended section 114(d) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c)
and 10312(a) of the Affordable Care Act to establish new moratoria
(subject to certain defined exceptions) on the development of new LTCHs
and LTCH satellite facilities and a new moratorium on increases in the
number of beds in existing LTCHs and LTCH satellite facilities.
Section 1206(d), which instructs the Secretary to evaluate
payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the
Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS,
as appropriate, based upon the evaluation findings.
4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
In this proposed rule, we are proposing policy changes to
implement, or make conforming changes to regulations in accordance
with, the following provisions (or portions of the following
provisions) of the Protecting Access to Medicare Act of 2014 that are
applicable to the IPPS and the LTCH PPS for FY 2015:
Section 105, which extends the temporary changes to the
Medicare inpatient hospital payment adjustment for low-volume
subsection (d) hospitals through March 31, 2015.
Section 106, which extends the MDH program through March
31, 2015.
Section 112, which makes certain changes to Medicare LTCH
provisions, including modifications to the statutory moratoria on the
establishment of new LTCHs and LTCH satellite facilities and on
increases in bed size in LTCH and LTCH satellite facilities.
Section 212, which prohibits the Secretary from requiring
implementation of ICD-10 code sets before October 1, 2015.

D. Summary of the Provisions of This Proposed Rule

In this proposed rule, we are setting forth proposed changes to the
Medicare IPPS for operating costs and for capital-related costs of
acute care hospitals for FY 2015. We also are setting forth proposed
changes relating to payments for IME and GME costs and payments to
certain hospitals that continue to be excluded from the IPPS and paid
on a reasonable cost basis. In addition, in this proposed rule, we are
setting forth proposed changes to the payment rates, factors, and other
payment rate policies under the LTCH PPS for FY 2015.
Below is a summary of the major changes that we are proposing to
make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include--
Proposed changes to MS-DRG classifications based on our
yearly review, including a discussion of the conversion of MS-DRGs to
ICD-10 and the status of the implementation of the ICD-10-CM and ICD-
10-PCS systems.
Proposed application of the documentation and coding
adjustment for FY 2015 resulting from implementation of the MS-DRG
system.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2015.
A discussion of the FY 2015 status of new technologies
approved for add-on payments for FY 2014 and a presentation of our
evaluation and analysis of the FY 2015 applicants for add-on payments
for high-cost new medical services and technologies (including public
input, as directed by Pub. L. 108-173, obtained in a town hall
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to this proposed rule, we are
proposing revisions to the wage index for acute care hospitals and the
annual update of the wage data. Specific issues addressed include the
following:
Proposed changes in CBSAs as a result of new OMB labor
market area delineations and proposed policies related to the proposed
changes in CBSAs.
The proposed FY 2015 wage index update using wage data
from cost reporting periods beginning in FY 2011.
Analysis and implementation of the proposed FY 2015
occupational mix adjustment to the wage index for acute care hospitals,
including the proposed application of the rural floor, the proposed
imputed rural floor, and the proposed frontier State floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2015 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2015 hospital wage index and proposed
revisions to that timetable.
Determination of the labor-related share for the proposed
FY 2015 wage index.

[[Page 27994]]

3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section IV. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412 and 413, including the following:
Proposed changes in postacute care transfer policies as a
result of proposed new MS-DRGs.
Proposed changes to the inpatient hospital updates for FY
2015, including incorporation of the adjustment for hospitals that are
not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2015.
The statutorily required IME adjustment factor for FY 2015
and proposed IME Medicare Part C payments to SCHs that are paid
according to their hospital-specific rates.
Effect of expiration of the MDH program on April 1, 2015.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Proposed changes to the measures and payment adjustments
under the Hospital Readmissions Reduction Program.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2015.
Proposed IME and direct GME policy changes regarding the
effective date of the FTE resident cap, 3-year rolling average, and IRB
ratio cap in new programs in teaching hospitals; effect of new OMB
labor market area delineations on certain teaching hospitals training
residents in rural areas; clarification of effective date of provisions
on counting resident time in nonprovider settings; proposed changes to
the process for reviewing applications for and awarding slots made
available under section 5506 of the Affordable Care Act by teaching
hospitals that close; and clarification regarding direct GME payment to
FQHCs and RHCs that train residents in approved programs.
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Discussion of the requirements for transparency of
hospital charges under the Affordable Care Act.
Discussion of and solicitation of comments on an
alternative payment methodology under the Medicare program for short
inpatient hospital stays.
Discussion of the process for submitting suggested
exceptions to the 2-midnight benchmark.
4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs
In section V. of the preamble to this proposed rule, we discuss the
proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2015 and other related proposed
policy changes.
5. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VI. of the preamble of this proposed rule, we discuss--
Proposed changes to payments to certain excluded hospitals
for FY 2015.
Proposed updates to the RCE limits for services furnished
by physicians to excluded hospitals.
Proposed CAH related changes regarding reclassifications
as rural.
Proposed changes to the physician certification
requirements for services furnished in CAHs.
6. Proposed Changes to the LTCH PPS
In section VII. of the preamble of this proposed rule, we set
forth--
Proposed changes to the payment rates, factors, and other
payment rate policies under the LTCH PPS for FY 2015.
Proposed revisions to the LTCH PPS geographic
classifications based on the new OMB delineations.
Proposals to implement section 1206(b)(1) of the Pathway
for SGR Reform Act, which provides for the retroactive reinstatement
and extension, for an additional 4 years, of the statutory moratorium
on the full implementation of the 25-percent threshold payment
adjustment established under section 114(c) of the MMSEA, as further
amended by subsequent legislation.
Proposals to implement section 1206(b)(2) of the Pathway
for SGR Reform Act, as amended by section 112(b) of the Protecting
Access to Medicare Act of 2014, which provides for moratoria (subject
to certain defined exceptions) on the establishment of new LTCHs and
LTCH satellite facilities and a moratorium on bed increases in LTCHs
effective for the period beginning April 1, 2014, and ending September
30, 2017.
Proposed changes to the LTCH interruption of stay policy
by revising the fixed-day thresholds under the ``greater than 3-day
interruption of stay policy'' to apply a uniform 30-day threshold as an
``acceptable standard'' for determining a linkage between an index
discharge and a readmission.
Proposal to remove the discharge and readmission
requirement, ``Special Payment Provisions for Patients Who Are
Transferred to Onsite Providers and Readmitted to an LTCH'' (the ``5
percent payment threshold'') beginning in FY 2015.
Proposal to apply a payment adjustment under the LTCH PPS
to subclause (II) LTCHs beginning in FY 2015 that would result in
payments to this type of LTCH resembling reasonable cost payment under
the TEFRA payment system model, consistent with the provisions of
section 1206(d) of the Pathway for SGR Reform Act of 2013.
7. Proposed Changes to Regulations Governing Administrative Appeals by
Providers and Judicial Review of Provider Claims
In section VIII. of the preamble of this proposed rule, we set
forth proposals to revise the regulations governing administrative
appeals and judicial review of provider claims in Medicare cost
reports.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of this proposed rule, we address--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting (LTCHQR) Program.
9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data
In section X. of the preamble of this proposed rule, we set forth
proposed regulatory revisions to broaden the specified uses of risk
adjustment data and to specify the conditions for release of risk
adjustment data to entities outside of CMS.

[[Page 27995]]

10. Proposed Changes to Enforcement Provisions for Organ Transplant
Centers
In section XI. of the preamble of this proposed rule, we are
proposing to revise the regulations governing organ transplant centers
that request approval, based on mitigating factors for initial approval
and re-approval, for participation in Medicare when the centers have
not met one or more of the conditions of participation.
11. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2015
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We also are proposing to establish the
threshold amounts for outlier cases. In addition, we addressed the
proposed update factors for determining the rate-of-increase limits for
cost reporting periods beginning in FY 2015 for certain hospitals
excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2015
LTCH PPS standard Federal rate. We are proposing to establish the
adjustments for wage levels (including proposed changes to the LTCH PPS
labor market area delineations based on the new OMB delineations), the
labor-related share, the cost-of-living adjustment, and high-cost
outliers, including the fixed-loss amount, and the LTCH cost-to-charge
ratios (CCRs) under the LTCH PPS.
13. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact that the proposed changes would have on affected acute care
hospitals, LTCHs, and PCHs.
14. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2015 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
15. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2014 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of this proposed rule.
For further information relating specifically to the MedPAC March 2014
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: https://www.medpac.gov.

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

A. Background

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

B. MS-DRG Reclassifications

For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485
through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), and
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50512).

C. Adoption of the MS-DRGs in FY 2008

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

D. Proposed FY 2015 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (In FY 2014, there are
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries

[[Page 27996]]

estimated that maintaining budget neutrality required an adjustment of
-4.8 percent to the national standardized amount. We provided for
phasing in this -4.8 percent adjustment over 3 years. Specifically, we
established prospective documentation and coding adjustments of -1.2
percent for FY 2008, -1.8 percent for FY 2009, and -1.8 percent for FY
2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment
through rulemaking, effective October 1, 2007 (72 FR 66886).
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking effective October 1, 2008 (73 FR
48447). The documentation and coding adjustments established in the FY
2008 IPPS final rule with comment period, which reflected the
amendments made by section 7(a) of Public Law 110-90, are cumulative.
As a result, the -0.9 percent documentation and coding adjustment for
FY 2009 was in addition to the -0.6 percent adjustment for FY 2008,
yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public
Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law
110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
matched the changes that occurred in those years. Public Law 110-90
requires that the Secretary only make these recoupment or repayment
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011 IPPS/
LTCH PPS proposed and final rules, and subsequent evaluations in FY
2012, supported that the 5.4 percent estimate accurately reflected the
FY 2009 increases in documentation and coding under the MS-DRG system.
We were persuaded by both MedPAC's analysis (as discussed in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the CMS Web site at:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-
Hospital (National). This CMS Web page describes the file and provides
directions and further detailed instructions for how to order.
Persons placing an order must send the following: A Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check (refer to
the Web site for the required payment amount) to:
Mailing address if using the U.S. Postal Service: Centers for
Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O.
Box 7520, Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare &
Medicaid Services, OFM/Division of Accounting--RDDC, 7500 Security
Boulevard, C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through

[[Page 27997]]

50073), we found a total prospective documentation and coding effect of
5.4 percent. After accounting for the -0.6 percent and the -0.9 percent
documentation and coding adjustments in FYs 2008 and 2009, we found a
remaining documentation and coding effect of 3.9 percent. As we have
discussed, an additional cumulative adjustment of -3.9 percent would be
necessary to meet the requirements of section 7(b)(1)(A) of Public Law
110-90 to make an adjustment to the average standardized amounts in
order to eliminate the full effect of the documentation and coding
changes that do not reflect real changes in case-mix on future
payments. Unlike section 7(b)(1)(B) of Public Law 110-90, section
7(b)(1)(A) does not specify when we must apply the prospective
adjustment, but merely requires us to make an ``appropriate''
adjustment. Therefore, as we stated in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50061), we believed the law provided some discretion as to
the manner in which we applied the prospective adjustment of -3.9
percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final
rule, it has been our practice to moderate payment adjustments when
necessary to mitigate the effects of significant downward adjustments
on hospitals, to avoid what could be widespread, disruptive effects of
such adjustments on hospitals. Therefore, we stated that we believed it
was appropriate to not implement the -3.9 percent prospective
adjustment in FY 2011 because we finalized a -2.9 percent recoupment
adjustment for that fiscal year. Accordingly, we did not propose a
prospective adjustment under section 7(b)(1)(A) of Public Law 110-90
for FY 2011 (75 FR 23868 through 23870). We noted that, as a result,
payments in FY 2011 (and in each future fiscal year until we
implemented the requisite adjustment) would be higher than they would
have been if we had implemented an adjustment under section 7(b)(1)(A)
of Public Law 110-90.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that, because further delay of this prospective adjustment
would result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment to the standardized
amount instead of the full -3.9 percent.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through
53276), we completed the prospective portion of the adjustment required
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9
percent adjustment to the standardized amount for FY 2013. We stated
that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009. We believed that it was
imperative to implement the full remaining adjustment, as any further
delay would result in an overstated standardized amount in FY 2013 and
any future fiscal years until a full adjustment was made.
We noted again that delaying full implementation of the prospective
portion of the adjustment required under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY
2012 being overstated. These overpayments could not be recovered by CMS
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Public Law 110-90
Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to
make an adjustment to the standardized amounts under section 1886(d) of
the Act to offset the estimated increase or decrease in aggregate
payments for FY 2008 and FY 2009 (including interest) resulting from
the difference between the estimated actual documentation and coding
effect and the documentation and coding adjustments applied under
section 7(a) of Public Law 110-90. This determination must be based on
a retrospective evaluation of claims data. Our actuaries estimated that
there was a 5.8 percentage point difference resulting in an increase in
aggregate payments of approximately $6.9 billion. Therefore, as
discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through
50067), we determined that an aggregate adjustment of -5.8 percent in
FYs 2011 and 2012 would be necessary in order to meet the requirements
of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized
amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to
offset the estimated amount of the increase in aggregate payments
(including interest) in FYs 2008 and 2009.
It is often our practice to phase in payment rate adjustments over
more than one year in order to moderate the effect on payment rates in
any one year. Therefore, consistent with the policies that we have
adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule,
we made an adjustment to the standardized amount of -2.9 percent,
representing approximately half of the aggregate adjustment required
under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An
adjustment of this magnitude allowed us to moderate the effects on
hospitals in one year while simultaneously making it possible to
implement the entire adjustment within the timeframe required under
section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY
2012). For FY 2012, in accordance with the timeframes set forth by
section 7(b)(1)(B) of Public Law 110-90, and consistent with the
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the
recoupment adjustment by implementing the remaining -2.9 percent
adjustment, in addition to removing the effect of the -2.9 percent
adjustment to the standardized amount finalized for FY 2011 (76 FR
51489 and 51498). Because these adjustments, in effect, balanced out,
there was no year-to-year change in the standardized amount due to this
recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53276), we made a final +2.9 percent adjustment to the
standardized amount, completing the recoupment portion of section
7(b)(1)(B) of Public Law 110-90. We note that with this positive
adjustment, according to our estimates, all overpayments made in FY
2008 and FY 2009 have been fully recaptured with appropriate interest,
and the standardized amount has been returned to the appropriate
baseline.
6. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier,
this delay in implementation resulted in overstated payment rates in
FYs 2010, 2011, and 2012. The resulting overpayments could not have
been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA is a one-time recoupment of a prior overpayment, not

[[Page 27998]]

a permanent reduction to payment rates. Therefore, any adjustment made
to reduce payment rates in one year would eventually be offset by a
positive adjustment, once the necessary amount of overpayment is
recovered.
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515
through 50517), our actuaries estimate that a -9.3 percent adjustment
to the standardized amount would be necessary if CMS were to fully
recover the $11 billion recoupment required by section 631 of the ATRA
in FY 2014. It is often our practice to phase in payment rate
adjustments over more than one year, in order to moderate the effect on
payment rates in any one year. Therefore, consistent with the policies
that we have adopted in many similar cases, and after consideration of
the public comments we received, in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50515 through 50517), we implemented a -0.8 percent
recoupment adjustment to the standardized amount in FY 2014. We stated
that if adjustments of approximately -0.8 percent are implemented in
FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we
estimate that the entire $11 billion will be accounted for by the end
of the statutory 4-year timeline. As estimates of any future
adjustments are subject to slight variations in total savings, we did
not provide for specific adjustments for FYs 2015, 2016, or 2017 at
that time. We stated that we believed that this level of adjustment for
FY 2014 was a reasonable and fair approach that satisfies the
requirements of the statute while mitigating extreme annual
fluctuations in payment rates. In addition, we again noted that this -
0.8 percent recoupment adjustment, and future adjustments under this
authority, will be eventually offset by an equivalent positive
adjustment once the full $11 billion recoupment requirement has been
realized.
Consistent with the approach discussed in the FY 2014 rulemaking
for recouping the $11 billion required by section 631 of the ATRA, we
are proposing an additional -0.8 percent recoupment adjustment to the
standardized amount for FY 2015. We estimated that this level of
adjustment, combined with leaving the -0.8 percent adjustment made for
FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into
account the approximately $1 billion recovered in FY 2014, this will
leave approximately $8 billion remaining to be recovered by FY 2017. We
continue to believe that if adjustments of approximately -0.8 percent
are implemented in FYs 2014, 2015, 2016, and 2017, using standard
inflation factors, the entire $11 billion will be accounted for by the
end of the statutory 4-year timeline. As we explained in the FY 2014
rulemaking, estimates of any future adjustments are subject to slight
variations in total savings; therefore, we are not proposing specific
adjustments for FY 2016 and FY 2017 at this time. We continue to
believe that our proposed -0.8 percent adjustment for FY 2015 is a
reasonable and fair approach that will help satisfy the requirements of
the statute while mitigating extreme annual fluctuations in payment
rates. In addition, we again note that this -0.8 percent recoupment
adjustment, and future adjustments under this authority, will be
eventually offset by an equivalent positive adjustment once the full
$11 billion recoupment requirement has been realized.
7. Prospective Adjustment for the MS-DRG Documentation and Coding
Effect Through FY 2010
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through
50517), we discussed the possibility of applying an additional
prospective adjustment to account for the cumulative MS-DRG
documentation and coding effect through FY 2010. In that final rule, we
stated that if we were to apply such an adjustment, we believe the most
appropriate additional adjustment is -0.55 percent. However, we decided
not to apply such an adjustment in FY 2014, in light of the need to
make the retrospective adjustments required by the ATRA. We continue to
believe that if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation and coding effect through FY
2010, the most appropriate additional adjustment is -0.55 percent.
However, we are not proposing such an adjustment in FY 2015, in light
of the ongoing recoupment required by the ATRA. We will consider
whether such an additional adjustment is appropriate in future years'
rulemaking.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public
commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single CCR is applied
to items of widely varying costs in the same cost center. To address
this concern, in August 2006, we awarded a contract to the Research
Triangle Institute, International (RTI) to study the effects of charge
compression in calculating the relative weights and to consider methods
to reduce the variation in the cost-to-charge ratios (CCRs) across
services within cost centers. For a detailed summary of RTI's findings,
recommendations, and public comments that we received on the report, we
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452
through 48453). In addition, we refer readers to RTI's July 2008 final
report titled ``Refining Cost to Charge Ratios for Calculating APC and
MS-DRG Relative Payment Weights'' (https://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in
response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS final rule, we focused on the CCR for
Medical Supplies and Equipment because RTI found that the largest
impact on the MS-DRG relative weights could result from correcting
charge compression for devices and implants. In determining the items
that should be reported in these respective cost centers, we adopted
the commenters' recommendations that hospitals should use revenue codes
established by the AHA's National Uniform Billing Committee to
determine the items that should be reported in the ``Medical Supplies
Charged to Patients'' and the ``Implantable Devices Charged to

[[Page 27999]]

Patients'' cost centers. Accordingly, a new subscripted line for
``Implantable Devices Charged to Patients'' was created in July 2009.
This new subscripted cost center has been available for use for cost
reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRIs, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized our proposal to create
standard cost centers for CT scans, MRIs, and cardiac catheterization,
and to require that hospitals report the costs and charges for these
services under new cost centers on the revised Medicare cost report
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080) for a detailed discussion of the
reasons for the creation of standard cost centers for CT scans, MRIs,
and cardiac catheterization.) The new standard cost centers for CT
scans, MRIs, and cardiac catheterization are effective for cost
reporting periods beginning on or after May 1, 2010, on the revised
cost report Form CMS-2552-10.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for ``Implantable Devices
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43782), due to delays in the issuance of the revised cost report
Form CMS 2552-10, we determined that a new CCR for ``Implantable
Devices Charged to Patients'' might not be available before FY 2013.
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS
final rule to add new cost centers for CT scans, MRIs, and cardiac
catheterization, we explained that data from any new cost centers that
may be created will not be available until at least 3 years after they
are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH
PPS rulemaking, we checked the availability of data in the
``Implantable Devices Charged to Patients'' cost center on the FY 2009
cost reports, but we did not believe that there was a sufficient amount
of data from which to generate a meaningful analysis in this particular
situation. Therefore, we did not propose to use data from the
``Implantable Devices Charged to Patients'' cost center to create a
distinct CCR for ``Implantable Devices Charged to Patients'' for use in
calculating the MS-DRG relative weights for FY 2012. We indicated that
we would reassess the availability of data for the ``Implantable
Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS
rulemaking cycle and, if appropriate, we would propose to create a
distinct CCR at that time.
During the development of the FY 2013 IPPS/LTCH PPS proposed and
final rules, hospitals were still in the process of transitioning from
the previous cost report Form CMS-2552-96 to the new cost report Form
CMS-2552-10. Therefore, we were able to access only those cost reports
in the FY 2010 HCRIS with fiscal year begin dates on or after October
1, 2009, and before May 1, 2010; that is, those cost reports on Form
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not
available because cost reports filed on the Form CMS-2552-10 were not
accessible in the HCRIS. Further complicating matters was that, due to
additional unforeseen technical difficulties, the corresponding
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to continue computing the
relative weights with the current CCR that combines the costs and
charges for supplies and implantable devices. We stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do
have the necessary data for supplies and implantable devices on the
claims in the MedPAR file to create distinct CCRs for the respective
cost centers for supplies and implantable devices, we hoped that we
would also have data for an analysis of creating distinct CCRs for CT
scans, MRIs, and cardiac catheterization, which could then be finalized
through rulemaking. In the FY 2013 IPPS/LTCH PPS final rule (77 FR
53281), we stated that prior to proposing to create these CCRs, we
would first thoroughly analyze and determine the impacts of the data,
and that distinct CCRs for these new cost centers would be used in the
calculation of the relative weights only if they were first finalized
through rulemaking.
At the time of the development of the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27506 through 27507), we had a substantial number
of hospitals completing all, or some, of these new cost centers on the
FY 2011 Medicare cost reports, compared to prior years. We stated that
we believed that the analytic findings described using the FY 2011 cost
report data and FY 2012 claims data supported our original decision to
break out and create new cost centers for implantable devices, MRIs, CT
scans, and cardiac catheterization, and we saw no reason to further
delay proposing to implement the CCRs of each of these cost centers.
Therefore, beginning in FY 2014, we proposed to calculate the MS-DRG
relative weights using 19 CCRs, creating distinct CCRs from cost report
data for implantable devices, MRIs, CT scans, and cardiac
catheterization (78 FR 27509).
We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27507 through 27509) and final rule (78 FR 50518 through 50523) in
which we presented data analyses using distinct CCRs for implantable
devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/
LTCH PPS final rule also set forth our responses to public comments we
received on our proposal to implement these CCRs. As explained in more
detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our
proposal to use 19 CCRs to calculate MS-DRG relative weights beginning
in FY 2014--the then existing 15 cost centers and the 4 new CCRs for
implantable devices, MRIs, CT scans, and cardiac catheterization.
Therefore, beginning in FY 2014, we calculated the IPPS MS-DRG relative
weights using 19 CCRs, creating distinct CCRs for implantable devices,
MRIs, CT scans, and cardiac catheterization.
2. Discussion for FY 2015
To calculate the proposed MS-DRG relative weights for FY 2015, we
use two data sources: the MedPAR file as the

[[Page 28000]]

claims data source and the HCRIS as the cost report data source. We
adjust the charges from the claims to costs by applying the 19 national
average CCRs developed from the cost reports. The description of the
calculation of the proposed 19 CCRs and the proposed MS-DRG relative
weights for FY 2015 is included in section II.H. of the preamble of
this proposed rule.

F. Proposed Adjustment to MS-DRGs for Preventable Hospital-Acquired
Conditions (HACs), Including Infections for FY 2015

1. Background
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is
part of an array of Medicare tools that we are using to promote
increased quality and efficiency of care. Under the IPPS, hospitals are
encouraged to treat patients efficiently because they receive the same
DRG payment for stays that vary in length and in the services provided,
which gives hospitals an incentive to avoid unnecessary costs in the
delivery of care. In some cases, conditions acquired in the hospital do
not generate higher payments than the hospital would otherwise receive
for cases without these conditions. To this extent, the IPPS encourages
hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRG system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a complication or comorbidity (CC)
or a major complication or comorbidity (MCC). The presence of a CC or
an MCC generally results in a higher payment.
Section 1886(d)(4)(D) of the Act specifies that, by October 1,
2007, the Secretary was required to select, in consultation with the
Centers for Disease Control and Prevention (CDC), at least two
conditions that: (a) Are high cost, high volume, or both; (b) are
assigned to a higher paying MS-DRG when present as a secondary
diagnosis (that is, conditions under the MS-DRG system that are CCs or
MCCs); and (c) could reasonably have been prevented through the
application of evidence-based guidelines. Section 1886(d)(4)(D) of the
Act also specifies that the list of conditions may be revised, again in
consultation with the CDC, from time to time as long as the list
contains at least two conditions.
Effective for discharges occurring on or after October 1, 2008,
under the authority of section 1886(d)(4)(D) of the Act, Medicare no
longer assigns an inpatient hospital discharge to a higher paying MS-
DRG if a selected condition is not present on admission (POA). Thus, if
a selected condition that was not POA manifests during the hospital
stay, it is considered a HAC and the case is paid as though the
secondary diagnosis was not present. However, even if a HAC manifests
during the hospital stay, if any nonselected CC or MCC appears on the
claim, the claim will be paid at the higher MS-DRG rate. In addition,
Medicare continues to assign a discharge to a higher paying MS-DRG if a
selected condition is POA. When a HAC is not POA, payment can be
affected in a manner shown in the diagram below.
[GRAPHIC] [TIFF OMITTED] TP15MY14.000

2. HAC Selection
Beginning in FY 2007, we have set forth proposals, and solicited
and responded to public comments, to implement section 1886(d)(4)(D) of
the Act through the IPPS annual rulemaking process. For specific
policies addressed in each rulemaking cycle, including a detailed
discussion of the collaborative interdepartmental process and public
input regarding selected and potential candidate HACs, we refer readers
to the following rules: the FY 2007 IPPS proposed rule (71 FR 24100)
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed
rule (72 FR 24716 through 24726) and final rule with comment period (72
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547)
and final rule (73 FR 48471); the FY 2010 IPPS/

[[Page 28001]]

RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR
43782); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and final
rule (75 FR 50080); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25810 through 25816) and final rule (76 FR 51504 through 51522); the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and final
rule (77 FR 53283 through 53303); and the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27509 through 27512) and final rule (78 FR 50523
through 50527). A complete list of the 11 current categories of HACs is
included on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
Currently, as we have discussed in the prior rulemaking cited under
section II.I.2. of the preamble of this proposed rule, the POA
indicator reporting requirement only applies to IPPS hospitals because
they are subject to this HAC provision. Non-IPPS hospitals, including
CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals,
RNHCIs, and the Department of Veterans Affairs/Department of Defense
hospitals, are exempt from POA reporting.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we noted
that hospitals in Maryland operating under a statutory waiver are not
paid under the IPPS, but rather were paid under the provisions of
section 1814(b)(3) of the Act and therefore exempt from reporting POA
indicators. However, we believed it was appropriate to require them to
use POA indicator reporting on their claims so that we can include
their data and have as complete a dataset as possible when we analyze
trends and make further payment policy determinations, such as those
authorized under section 1886(p) of the Act. Therefore, in the FY 2014
IPPS/LTCH PPS final rule, we finalized our policy that hospitals in
Maryland that formerly operated under section 1814(b)(3) of the Act
were no longer exempted from the POA indicator reporting requirement
beginning with claims submitted on or after October 1, 2013, including
all claims for discharges on or after October 1, 2013. We note that,
while this requirement was not effective until October 1, 2013,
hospitals in Maryland could submit data with POA indicators before that
date with the expectation that these data will be accepted by
Medicare's claims processing systems. (We refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50707 through 50712) for a discussion
of our FY 2014 final policies to implement section 1886(p) of the Act
that are applicable to Maryland hospitals.)
Subsequent to our FY 2014 rulemaking, the State of Maryland entered
into an agreement with CMS, effective January 1, 2014, to participate
in CMS' new Maryland All-Payer Model, a 5-year hospital payment model.
This model is being implemented under section 1115A of the Act, as
added by section 3021 of the Affordable Care Act, which authorizes the
testing of innovative payment and service delivery models, including
models that allow States to ``test and evaluate systems of all-payer
payment reform for the medical care of residents of the State,
including dual eligible individuals.'' Section 1115A of the Act
authorizes the Secretary to waive such requirements of titles XI and
XVIII of the Act as may be necessary solely for purposes of carrying
out section 1115A of the Act with respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare make payments to Maryland hospitals in
accordance with section 1814(b)(3) of the Act. Maryland also
represented that it is no longer in continuous operation of a
demonstration project reimbursement system since July 1, 1977, as
specified under section 1814(b)(3) of the Act. Because Maryland
hospitals are no longer paid under section 1814(b)(3) of the Act, they
are no longer subject to those provisions of the Act and related
implementing regulations that are specific to section 1814(b)(3)
hospitals. Although CMS has waived certain provisions of the Act for
Maryland hospitals, as set forth in the agreement between CMS and
Maryland and subject to Maryland's compliance with the terms of the
agreement, CMS has not waived the POA indicator reporting requirement.
In other words, the changes to the status of Maryland hospitals under
section 1814(b)(3) of the Act as described above do not in any way
change the POA indicator reporting requirement for Maryland hospitals.
There are currently four POA indicator reporting options, ``Y'',
``W'', ``N'', and ``U'', as defined by the ICD-9-CM Official Guidelines
for Coding and Reporting. We note that prior to January 1, 2011, we
also used a POA indicator reporting option ``1''. However, beginning on
or after January 1, 2011, hospitals were required to begin reporting
POA indicators using the 5010 electronic transmittal standards format.
The 5010 format removes the need to report a POA indicator of ``1'' for
codes that are exempt from POA reporting. We issued CMS instructions on
this reporting change as a One-Time Notification, Pub. No. 100-20,
Transmittal No. 756, Change Request 7024, effective on August 13, 2010,
which can be located at the following link on the CMS Web site: https://www.cms.gov/manuals/downloads/Pub100_20.pdf.) The POA indicator
reporting process will not change when ICD-10-CM and ICD-10-PCS are
implemented on October 1, 2014. The current POA indicators and their
descriptors are shown in the chart below:

------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y................................. Indicates that the condition was
present on admission.
W................................. Affirms that the hospital has
determined that, based on data and
clinical judgment, it is not
possible to document when the onset
of the condition occurred.
N................................. Indicates that the condition was not
present on admission.
U................................. Indicates that the documentation is
insufficient to determine if the
condition was present at the time
of admission.
------------------------------------------------------------------------

[[Page 28002]]

Under the HAC payment policy, we treat HACs coded with ``Y'' and
``W'' indicators as POA and allow the condition on its own to cause an
increased payment at the CC and MCC level. We treat HACs coded with
``N'' and ``U'' indicators as Not Present on Admission (NPOA) and do
not allow the condition on its own to cause an increased payment at the
CC and MCC level. We refer readers to the following rules for a
detailed discussion of POA indicator reporting: The FY 2009 IPPS
proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487);
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final
rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through
50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through
25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77
FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525).
In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53324), the 5010 format allows the reporting and,
effective January 1, 2011, the processing of up to 25 diagnoses and 25
procedure codes. As such, it is necessary to report a valid POA
indicator for each diagnosis code, including the principal diagnosis
and all secondary diagnoses up to 25.
4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM
and ICD-10-PCS
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in
preparation for the transition to the ICD-10-CM and ICD-10-PCS code
sets, we indicated that further information regarding the use of the
POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they
pertain to the HAC policy would be discussed in future rulemaking.
At the March 5, 2012 and the September 19, 2012 meetings of the
ICD-9-CM Coordination and Maintenance Committee, an announcement was
made with regard to the availability of the ICD-9-CM HAC list
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were
informed that the list of the ICD-9-CM selected HACs has been
translated into codes using the ICD-10-CM and ICD-10-PCS classification
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the selected HACs available on the
CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under the
link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of
Contents--Full Titles--HTML Version in Appendix I--Hospital Acquired
Conditions (HACs).'' This CMS Web site regarding the ICD-10-MS-DRG
Conversion Project is also available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encouraged the public to submit comments on these
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC
Translation Feedback Mailbox that was set up for this purpose under the
Related Links section titled ``CMS HAC Feedback.''
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated
that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-
PCS would be subject to formal rulemaking. We encouraged readers to
review the educational materials and draft code sets available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: https://www.cms.gov/ICD10/. In
addition, we stated that the draft ICD-10-CM/ICD-10-PCS Coding
Guidelines could be viewed on the CDC Web site at: https://www.cdc.gov/nchs/icd/icd10cm.htm.
The HACs code translation list from ICM-9-CM to ICD-10-CM/ICD-10-
PCS is available to the public on the CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We note that Appendix I of the ICD-10 MS-DRGs Version
31.0-R file posted on the Web site contains the DRA HACs translated to
ICD-10.
We note that section 212 of the Protecting Access to Medicare Act
of 2014 (Pub. L. 113-93), enacted on April 1, 2014, delayed the
transition from the ICD-9-CM to the ICD-10 code set.
5. Proposals Regarding Current HACs and Previously Considered Candidate
HACs
In this FY 2015 IPPS/LTCH PPS proposed rule, we are not proposing
to add or remove categories of the HACs. However, we continue to
encourage public dialogue about refinements to the HAC list by written
stakeholder comments about both previously selected and potential
candidate HACs. We refer readers to section II.F.6. of the FY 2008 IPPS
final rule with comment period (72 FR 47202 through 47218) and to
section II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through
48491) for detailed discussion supporting our determination regarding
each of these conditions. We also refer readers to section II.F.5. of
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898),
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for
the HAC policy for FY 2013, and the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27509 through 27512) and the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50523 through 50527) for the HAC policy for FY 2014.
6. RTI Program Evaluation
On September 30, 2009, a contract was awarded to RTI to evaluate
the impact of the Hospital-Acquired Condition-Present on Admission
(HAC-POA) provisions on the changes in the incidence of selected
conditions, effects on Medicare payments, impacts on coding accuracy,
unintended consequences, and infection and event rates. This was an
intra-agency project with funding and technical support from CMS, OPHS,
AHRQ, and CDC. The evaluation also examined the implementation of the
program and evaluated additional conditions for future selection. The
contract with RTI ended on November 30, 2012. Summary reports of RTI's
analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-
POA program evaluation were included in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53292 through 53302). Summary and detailed data also were made
publicly available on the CMS Web site at: https://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: https://www.rti.org/reports/cms/.
In addition to the evaluation of HAC and POA MedPAR claims data,
RTI also conducted analyses on readmissions due to HACs, the
incremental costs of HACs to the health care system, a study of
spillover effects and unintended consequences, as well as an updated
analysis of the evidence-based guidelines for selected and previously
considered HACs. Reports on these analyses have been made publicly
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/.
7. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes a report that provides
references for all evidence-based guidelines available for

[[Page 28003]]

each of the selected and previously considered candidate HACs that
provide recommendations for the prevention of the corresponding
conditions. Guidelines were primarily identified using the AHRQ
National Guidelines Clearing House (NGCH) and the CDC, along with
relevant professional societies. Guidelines published in the United
States were used, if available. In the absence of U.S. guidelines for a
specific condition, international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the
selected conditions. In addition, evidence-based guidelines also were
found for the previously considered candidate conditions. RTI prepared
a final report to summarize its findings regarding evidence-based
guidelines. This report can be found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf. Subsequent to this final
report, RTI was awarded an FY 2014 Evidence-Based Guidelines Monitoring
contract. Under the contract, RTI will provide a summary report of all
evidence-based guidelines available for each of the selected and
previously considered candidate HACs that provide recommendations for
the prevention of the corresponding conditions. This report is usually
delivered to CMS annually in a May/June timeframe. Updates to the
guidelines will be made available to the public.

G. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed MS-DRG
Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
Providers use the code sets under the ICD-9-CM coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system. The ICD-10 coding system includes the
International Classification of Diseases, 10th Revision, Clinical
Modification (ICD-10-CM) for diagnosis coding and the International
Classification of Diseases, 10th Revision, Procedure Coding System
(ICD-10-PCS) for inpatient hospital procedure coding, as well as the
Official ICD-10-CM and ICD-10-PCS Guidelines for Coding and Reporting.
The ICD-10 coding system was initially adopted for transactions
conducted on or after October 1, 2013, as described in the Health
Insurance Portability and Accountability Act of 1996 (HIPAA)
Administrative Simplification: Modifications to Medical Data Code Set
Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the
Federal Register on January 16, 2009 (74 FR 3328 through 3362)
(hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final
rule''). However, the Secretary of Health and Human Services issued a
final rule that delays the compliance date for ICD-10 from October 1,
2013, to October 1, 2014. That final rule, entitled ``Administrative
Simplification: Adoption of a Standard for a Unique Health Plan
Identifier; Addition to the National Provider Identifier Requirements;
and a Change to the Compliance Date for ICD-10-CM and ICD-10-PCS
Medical Data Code Sets,'' CMS-0040-F, was published in the Federal
Register on September 5, 2012 (77 FR 54664) and is available for
viewing on the Internet at: https://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare
Act of 2014 (Pub. L. 113-93) was enacted. Section 212 of Public Law
113-93, titled ``Delay in Transition from ICD-9 to ICD-10 Code Sets,''
provides that ``[t]he Secretary of Health and Human Services may not,
prior to October 1, 2015, adopt ICD-10 code sets as the standard for
code sets under section 1173(c) of the Social Security Act (42 U.S.C.
1320d-2(c)) and section 162.1002 of title 45, Code of Federal
Regulations.'' As of now, the Secretary has not implemented this
provision under HIPPA.
The anticipated move to ICD-10 necessitated the development of an
ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to
convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to
the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on
the creation of the ICD-10 version of the MS-DRGs, which will be
implemented at the same time as ICD-10 (75 FR 50127 and 50128). While
we did not propose an ICD-10 version of the MS-DRGs in the FY 2011
IPPS/LTCH PPS proposed rule, we noted that we have been actively
involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10
codes and sharing this information through the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee. We undertook this early
conversion project to assist other payers and providers in
understanding how to implement their own conversion projects. We posted
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also
posted a paper that describes how CMS went about completing this
project and suggestions for other payers and providers to follow.
Information on the ICD-10 MS-DRG conversion project can be found on the
ICD-10 MS-DRG Conversion Project Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have
continued to keep the public updated on our maintenance efforts for
ICD-10-CM and ICD-10-PCS coding systems, as well as the General
Equivalence Mappings that assist in conversion through the ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee.
Information on these committee meetings can be found on the CMS Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion Project
Web site. To make the review of Version 28-R1 updates easier for the
public, we also made available pilot software on a CD ROM that could be
ordered through the National Technical Information Service (NTIS). A
link to the NTIS ordering page was provided on the CMS ICD-10 MS-DRGs
Web page. We stated that we believed that, by providing the ICD-10 MS-
DRGs Version 28-R1 Pilot Software (distributed on CD ROM), the public
would be able to more easily review and provide feedback on updates to
the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs Version 28-
R1 at the September 14, 2011 ICD-9-CM Coordination and Maintenance

[[Page 28004]]

Committee meeting. We encouraged the public to continue to review and
provide comments on the ICD-10 MS-DRGs so that CMS could continue to
update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We
also prepared a document that describes changes made from Version 28.0
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting on March 5, 2012. Information was provided on the types of
updates made. Once again the public was encouraged to review and
comment on the most recent update to the ICD-10 MS-DRGs.
CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site. We also
prepared a document that describes changes made from Version 29.0 to
Version 30.0 to facilitate a review. We produced mainframe and computer
software for Version 30.0, which was made available to the public in
February 2013. Information on ordering the mainframe and computer
software through NTIS was posted on the ICD-10 MS-DRG Conversion
Project Web site. The ICD-10 MS-DRGs Version 30.0 computer software
facilitated additional review of the ICD-10 MS-DRGs conversion.
We provided information on a study conducted on the impact of
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10
MS-DRGs Conversion Project Web site and was distributed and discussed
at the September 15, 2010 ICD-9-CM Coordination and Maintenance
Committee meeting. The paper described CMS' approach to the conversion
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) which was
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the
impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The impact of the conversion from ICD-9-CM
to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY
2009 Medicare claims data. The study found a hospital payment increase
of 0.05 percent using the ICD-10 MS-DRGs Version 27.0.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting. This presentation followed presentations on the creation of
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be
found on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/. At this March 2012 meeting, CMS
announced that it would produce an update on this impact study based on
an updated version of the ICD-10 MS-DRGs. This update of the impact
study was presented at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. The study found that moving from an ICD-
9-CM-based system to an ICD-10 MS-DRG replicated system would lead to
DRG reassignments on only 1 percent of the 10 million MedPAR sample
records used in the study. Ninety-nine percent of the records did not
shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1
percent of the records that shifted, 45 percent of the shifts were to a
higher weighted MS-DRG, while 55 percent of the shifts were to lower
weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by
4/10000 or minus 4 pennies per $100. The updated paper is posted on the
CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section.
Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance
Committee meeting can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-
10 MS-DRG Version 30.0 software provided additional information to the
public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-
DRGs.
CMS prepared the ICD-10 MS-DRGs Version 31.0 based on the FY 2014
MS-DRGs (Version 31.0) that we finalized in the FY 2014 IPPS/LTCH PPS
final rule. In November 2013, we posted a Definitions Manual of the
ICD-10 MS-DRGs Version 31.0 on the ICD-10 MS-DRG Conversion Project Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described
changes made from Version 30.0 to Version 31.0 to facilitate a review.
We produced mainframe and computer software for Version 31.0, which was
made available to the public in December 2013. Information on ordering
the mainframe and computer software through NTIS was posted on the CMS
Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 31.0 computer software facilitated additional review
of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to
CMS any comments on areas where they believed the ICD-10 MS-DRGs did
not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs
Version 31.0.
We reviewed comments received and developed an update of ICD-10 MS-
DRGs Version 31.0, which we called ICD-10 MS-DRGs Version 31.0-R. We
have posted a Definitions Manual of the ICD-10 MS-DRGs Version 31.0-R
on the ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made
from Version 31.0 to Version 31.0-R to facilitate a review. We will
continue to share ICD-10-MS-DRG conversion activities with the public
through this Web site.
b. Basis for FY 2015 MS-DRG Updates
CMS encourages input from our stakeholders concerning the annual
IPPS updates when that input is made available to us by December 7 of
the year prior to the next annual proposed rule update. For example, to
be considered for any updates or changes in FY 2016, comments and
suggestions should be submitted by December 7, 2014. The comments that
were submitted in a timely manner for FY 2015 are discussed below in
this section.
Following are the changes we are proposing to the MS-DRGs. We are
inviting public comment on each of the MS-DRG classification proposed
changes described below, as well as our proposals to maintain certain
existing MS-DRG classifications, which also are discussed below. In
some cases, we are proposing changes to the MS-DRG classifications
based on our analysis of claims data. In other cases, we are proposing
to maintain the existing MS-DRG classification based on our analysis of
claims data. For this FY 2015 proposed rule, our MS-DRG analysis is
based on claims data from the December

[[Page 28005]]

2013 update of the FY 2013 MedPAR file, which contains hospital bills
received through September 30, 2013, for discharges occurring through
September 30, 2013. In our discussion of the proposed MS-DRG
reclassification changes that follows, we refer to our analysis of
claims data from the ``December 2013 update of the FY 2013 MedPAR
file.'' For the FY 2015 final rule, we intend to calculate the final
relative weights on claims data from the March 2014 update of the FY
2013 MedPAR file, which will contain hospital bills received through
December 31, 2013, for discharges occurring through December 31, 2013.
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modification to the MS-DRGs for
particular circumstances brought to our attention, we considered
whether the resource consumption and clinical characteristics of the
patients with a given set of conditions are significantly different
than the remaining patients in the MS-DRG. We evaluated patient care
costs using average costs and lengths of stay and relied on the
judgment of our clinical advisors to decide whether patients are
clinically distinct or similar to other patients in the MS-DRG. In
evaluating resource costs, we considered both the absolute and
percentage differences in average costs between the cases we selected
for review and the remainder of cases in the MS-DRG. We also considered
variation in costs within these groups; that is, whether observed
average differences were consistent across patients or attributable to
cases that were extreme in terms of costs or length of stay, or both.
Further, we considered the number of patients who will have a given set
of characteristics and generally preferred not to create a new MS-DRG
unless it would include a substantial number of cases.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Intracerebral Therapies: Gliadel[supreg] Wafer
During the comment period for the FY 2014 IPPS/LTCH PPS proposed
rule, we received a public comment that we considered to be outside the
scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50550) that we would consider this issue in future
rulemaking as part of our annual review process. The commenter
requested that a new MS-DRG be created for intracerebral therapies,
including implantation of chemotherapeutic agents. Specifically, the
commenter referred to the Gliadel[supreg] Wafer for the treatment of
High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors
originating in the brain.
The Gliadel[supreg] Wafer has been discussed in prior rulemaking,
including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule
(68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005
IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR
48957 through 48971); and the FY 2008 IPPS/LTCH PPS final rule (72 FR
47252 through 47253). We refer readers to these prior discussions for
further background information regarding the Gliadel[supreg] Wafer.
Effective October 1, 2002, ICD-9-CM procedure code 00.10
(Implantation of chemotherapeutic agent) was created to identify and
describe insertion of the Gliadel[supreg] Wafer. This procedure code is
assigned to MS-DRG 023 (Craniotomy with Major Device Implant/Acute
Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in
MDC 1. According to the commenter, this current MS-DRG assignment does
not compensate providers adequately for the expenses incurred to
perform the surgery and implantation of the wafer device. The commenter
noted that MS-DRG 023 has a national average payment rate of
approximately $28,016. However, the commenter stated, ``the acquisition
cost for 1 box of the Gliadel[supreg] Wafer alone (typical utilization
per procedure is 8 wafers or 1 box) is $29,035.''
We conducted an analysis using claims data from the December 2013
update of the FY 2013 MedPAR file. Our findings are shown in the table
below.

As shown in the table above, there were a total of 5,383 cases in
MS-DRG 023 with an average length of stay of 10.98 days and average
costs of $36,982. The number of cases reporting procedure code 00.10 in
MS-DRG 023 totaled 158, with an average length of stay of 7.0 days and
average costs of $34,027.
The data clearly demonstrate that the volume of cases reporting
procedure code 00.10 within MS-DRG 023 have a shorter average length of
stay and are lower in average costs in comparison to all the cases in
the MS-DRG. Given the low volume of cases, shorter average length of
stay, and lower average costs, the data do not support the creation of
a new MS-DRG for cases utilizing the Gliadel[supreg] Wafer. In
addition, our clinical advisors determined that cases reporting
procedure code 00.10 are appropriately assigned within MS-DRG 023. As
discussed in the FY 2005 IPPS final rule (69 FR 48959), Gliadel[supreg]
Wafer cases were assigned to a new DRG that was clinically coherent and
reflected the resources used to treat those cases, which appropriately
addressed the concerns of commenters who raised questions regarding DRG
assignment for those cases at that time. Subsequently, with the
adoption of the MS-DRGs, in the FY 2008 IPPS/LTCH PPS final rule (72 FR
47252 through 47253), we assigned all cases utilizing the
Gliadel[supreg] Wafer technology to MS-DRG 023, the higher severity
level, and revised the title of this MS-DRG in recognition of the
complexity and costs associated with the implantation. Our clinical
advisors continue to support this assignment for these same reasons.
Therefore, we are not proposing to create a new MS-DRG for FY 2015 for
cases where ICD-9-CM procedure code 00.10 is reported. We are inviting
public comments on our proposal to maintain the current MS-DRG
structure.
b. Endovascular Embolization or Occlusion of Head and Neck
We received a request to change the MS-DRG assignment for the
following three ICD-9-CM procedure codes representing endovascular
embolization or occlusion procedures of the head and neck:
39.72 (Endovascular (total) embolization or occlusion of
head and neck vessels);
39.75 (Endovascular embolization or occlusion of vessel(s)
of head or neck using bare coils); and
39.76 (Endovascular embolization or occlusion of vessel(s)
of head or neck using bioactive coils).
These three procedure codes are currently assigned to the following
eight

[[Page 28006]]

MS-DRGs under MDC 1. Cases assigned to MS-DRGs 020, 021, and 022
require a principal diagnosis of hemorrhage. Cases assigned to MS-DRGs
023 and 024 require the insertion of a major implant or an acute
complex central nervous system (CNS) principal diagnosis. Cases
assigned to MS-DRGs 025, 026, and 027 do not have a principal diagnosis
of hemorrhage, an acute complex CNS principal diagnosis, or a major
device implant.
MS-DRG 020 (Intracranial Vascular Procedures with
Principal Diagnosis of Hemorrhage with MCC)
MS-DRG 021 (Intracranial Vascular Procedures with
Principal Diagnosis of Hemorrhage with CC)
MS-DRG 022 (Intracranial Vascular Procedures with
Principal Diagnosis of Hemorrhage without CC/MCC)
MS-DRG 023 (Craniotomy with Major Device Implant/Acute
Complex CNS Principal Diagnosis with MCC or Chemo Implant)
MS-DRG 024 (Craniotomy with Major Device Implant/Acute
Complex CNS Principal Diagnosis without MCC)
MS-DRG 025 (Craniotomy & Endovascular Intracranial
Procedures with MCC)
MS-DRG 026 (Craniotomy & Endovascular Intracranial
Procedures with CC)
MS-DRG 027 (Craniotomy & Endovascular Intracranial
Procedures without CC/MCC)
The requestor recommended that cases with procedure codes 39.72,
39.75, and 39.76 be moved from MS-DRGs 025, 026, and 027 to MS-DRGs 023
and 024, even when there is no reported acute complex CNS principal
diagnosis or a major device implant. The requestor stated that
unruptured aneurysms can be treated by a minimally invasive technique
utilizing endovascular coiling. The requester noted that a
microcatheter is inserted into a groin artery and navigated through the
vascular system to the location of the aneurysm. The coils are inserted
through the microcatheter into the aneurysm in order to occlude (fill)
the aneurysm from inside the blood vessel. Once the coils are
implanted, the blood flow pattern within the aneurysm is altered. The
requestor stated that these cases do not have a principal diagnosis of
hemorrhage because the treatment is for an unruptured aneurysm which
has not hemorrhaged. Furthermore, the requestor stated that only a few
of these cases without hemorrhage have a complex CNS principal
diagnosis. Therefore, the requester believed that most of the cases
should be assigned to MS-DRGs 025, 026, and 027.
The requestor stated that the average costs of coil cases captured
by procedure codes 39.72, 39.75, and 39.76 are significantly higher
than other cases within MS-DRGs 025, 026, and 027 where most of the
coil cases are assigned. As stated earlier, the requester recommended
that cases with procedure codes 39.72, 39.75, and 39.76 be moved to MS-
DRGs 023 and 024, even when there is not an acute complex CNS principal
diagnosis or a major device implant reported.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for cases of endovascular embolization or occlusion of
head and neck. The table below shows our findings. For MS-DRGs 025,
026, and 027, the cases identified by procedure code 39.72, 39.75, or
39.76 (endovascular embolization or occlusion of head and neck) have
higher average costs and shorter lengths of stay in comparison to all
the cases within each of those respective MS-DRGs. The average costs of
cases in MS-DRG 024 are $4,049 higher than the average costs of the
1,731 endovascular embolization or occlusion of head and neck
procedures cases in MS-DRG 027 ($26,250 versus $22,201). The findings
also show that the 524 cases with procedure code 39.72, 39.75, or 39.76
with average costs of $41,030 in MS-DRG 025 are closer to the average
costs of $36,982 for cases in MS-DRG 023. Lastly, we found that the 721
endovascular embolization or occlusion of head and neck procedure cases
in MS-DRG 026 have average costs of $27,998 compared to average costs
of $26,250 for cases in MS-DRG 024.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 23--All cases............................................ 5,383 10.98 $36,982
MS-DRG 24--All cases............................................ 1,745 6.30 26,250
MS-DRG 25--All cases............................................ 15,937 9.68 29,722
MS-DRG 25--Cases with procedure code 39.72, 39.75, or 39.76..... 524 7.97 41,030
MS-DRG 26--All cases............................................ 8,520 6.16 21,194
MS-DRG 26--Cases with procedure code 39.72, 39.75, or 39.76..... 721 3.14 27,998
MS-DRG 27--All cases............................................ 10,326 3.30 16,389
MS-DRG 27--Cases with procedure code 39.72, 39.75, or 39.76..... 1,731 1.66 22,201
----------------------------------------------------------------------------------------------------------------

Our clinical advisors reviewed the results of our examination and
determined that the endovascular embolization or occlusion of head and
neck procedures are appropriately classified within MS-DRGs 025, 026,
and 027 because they do not have an acute complex CNS principal
diagnosis or a major device implant which would add to their clinical
complexity. Cases in MS-DRG 024 have average costs that are $4,049
higher than cases in MS-DRG 027 with procedure code 39.72, 39.75, or
39.76. We acknowledge that the 1,245 cases with procedure code 39.72,
39.75, or 39.76 in MS-DRGs 025 and 026 have average costs that are
closer to those in MS-DRGs 024 and 025. However, these cases are 1,245
of the total 2,976 cases that would be involved if we moved all MS-DRGs
025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to
MS-DRGs 024 and 025, even if they did not have an acute complex CNS
principal diagnosis or a major device implant. Based on these findings
and the recommendations from our clinical advisors, we have determined
that proposing to move endovascular embolization or occlusion of head
and neck procedures from MS-DRGs 025, 026, and 027 to MS-DRGs 023 and
024 is not warranted. Therefore, we are proposing to maintain the
current MS-DRG assignments for endovascular embolization or occlusion
of head and neck procedures. We are inviting public comments on our
proposal.
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat):
Avery Breathing Pacemaker System
We received a request to create a new MS-DRG for the Avery
Breathing Pacemaker System. This system is also called a diaphragmatic
pacemaker and is captured by ICD-9-CM procedure code 34.85
(Implantation of diaphragmatic pacemaker). The requestor stated that
the diaphragmatic pacemaker is indicated for adult and

[[Page 28007]]

pediatric patients with chronic respiratory insufficiency that would
otherwise be dependent on ventilator support. The procedure consists of
surgically implanted receivers and electrodes mated to an external
transmitter by antennas worn over the implanted receivers. The external
transmitter and antennas send radiofrequency energy to the implanted
receivers under the skin. The receivers then convert the radio waves
into stimulating pulses sent down the electrodes to the phrenic nerves,
causing the diaphragm to contract. The requestor stated that this
normal pattern is superior to mechanical ventilators that force air
into the chest. The requestor also stated that the system is expensive;
the device cost is approximately $57,000. According to the requestor,
given the cost of the device, hospitals are reluctant to use it. The
requestor did not make a specific MS-DRG reassignment request.
When used for a respiratory failure patient, procedure code 34.85
is assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with
MCC, with CC, and without CC/MCC, respectively).
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for diaphragmatic pacemaker cases. The following table
shows our findings.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases........................................... 11,766 13.13 $34,308
MS-DRG 163--Cases with procedure code 34.85..................... 13 2.23 29,406
MS-DRG 164--All cases........................................... 16,087 6.58 18,352
MS-DRG 164--Cases with procedure code 34.85..................... 34 1.71 23,406
MS-DRG 165--All cases........................................... 9,207 3.91 13,081
MS-DRG 165--Cases with procedure code 34.85..................... 1 1.00 22,977
----------------------------------------------------------------------------------------------------------------

There were only 48 cases of diaphragmatic pacemakers within MS-DRGs
163, 164, and 165. The average costs of these diaphragmatic pacemaker
cases ranged from $22,977 for the single case in MS-DRG 165 to $29,406
for the cases in MS-DRG 163, compared to the average costs for all
cases in MS-DRGs 163, 164, and 165, which range from $13,081 to
$34,308. The average cost for diaphragmatic pacemaker cases in MS-DRG
163 was lower than that for all cases in MS-DRG 163, $29,406 compared
to $34,308 for all cases. The average cost for diaphragmatic pacemaker
cases was higher for MS-DRG 164, $23,406 compared to $18,352 for all
cases. While the average cost for the single diaphragmatic pacemaker
case was significantly higher for MS-DRG 165, $22,977 compared to
$13,081, we were unable to determine if additional factors might have
impacted the higher cost for this single case.
Given the small number of diaphragmatic pacemaker cases that we
found, we do not believe that there is justification for creating a new
MS-DRG. Basing a new MS-DRG on such a small number of cases could lead
to distortions in the relative payment weights for the MS-DRG because
several expensive cases could impact the overall relative payment
weight. Having larger clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights. We note that, as discussed in section II.G.4.c. of the
preamble of this proposed rule, one of the criteria we apply in
evaluating whether to create new severity subgroups within an MS-DRG is
whether there are at least 500 cases in the CC or MCC subgroup. While
this criterion is used to evaluate whether to create a severity
subgroup within an MS-DRG, applying it here suggests that creating a
new MS-DRG for only 48 cases would not be appropriate. Although the
average costs of these diaphragmatic pacemaker cases are higher than
the average costs of all cases in MS-DRGs 163 and 164, we believe the
current MS-DRG assignment is appropriate and that the data do not
support creating an MS-DRG because there are so few cases.
Our clinical advisors reviewed this issue and determined that the
diaphragmatic pacemaker cases are appropriately classified within MS-
DRGs 163, 164, and 165 because they are clinically similar to other
cases of patients with major chest procedures within MS-DRGs 163, 164,
and 165. Our clinical advisors did not support creating a new MS-DRG
for such a small number of cases.
Based on the results of the examination of the claims data, the
recommendations from our clinical advisors, and the small number of
diaphragmatic pacemaker cases, we are not proposing to create a new MS-
DRG for diaphragmatic pacemaker cases at this time. We are proposing to
maintain the current MS-DRG assignments for diaphragmatic pacemaker
cases. We are inviting public comments on our proposal.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Exclusion of Left Atrial Appendage
We received a request to move the exclusion of the left atrial
appendage procedure, which is a non-O.R. procedure and captured by ICD-
9-CM procedure code 37.36 (Excision, destruction or exclusion of left
atrial appendage (LAA)), from MS-DRGs 250 (Percutaneous Cardiovascular
without Coronary Artery Stent with MCC) and 251 (Percutaneous
Cardiovascular without Coronary Artery Stent without MCC) to MS-DRGs
237 (Major Cardiovascular Procedures with MCC) and 238 (Major
Cardiovascular Procedures without MCC). The requestor stated that the
exclusion of the left atrial appendage procedure code 37.36 is not
clinically coherent with the other procedures in MS-DRGs 250 and 251
and that this current assignment to MS-DRGs 250 and 251 does not
compensate providers adequately for the expenses incurred to perform
this procedure and placement of the device.
The exclusion of the left atrial appendage procedure involves a
percutaneous placement of a snare/suture around the left atrial
appendage to close it off. The exclusion of the left atrial appendage
procedure takes place in the cardiac catheterization laboratory under
general anesthesia and is a catheter based closed-chest procedure
instead of an open heart surgical technique to treat the same clinical
condition, with the same intended results. The procedure can be
performed by either an interventional cardiologist or an
electrophysiologist.
We analyzed claims data from the December 2013 update of the FY
2013 MedPAR file for cases assigned to MS-DRGs 250 and 251 and MS-DRGs
237 and 238. Our findings are shown in the table below.

[[Page 28008]]

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250--All cases........................................... 9,174 6.90 $21,319
MS-DRG 250--Cases with procedure code 37.36..................... 61 7.21 29,637
MS-DRG 251--All cases........................................... 26,331 3.01 14,614
MS-DRG 251--Cases with procedure code 37.36..................... 341 3.01 18,298
MS-DRG 237--All cases........................................... 17,813 9.66 35,642
MS-DRG 238--All cases........................................... 33,644 3.73 24,511
----------------------------------------------------------------------------------------------------------------

The data in the table above show that, while the average costs of
the atrial appendage exclusion procedures are higher ($29,637) than
those for all cases ($21,319) within MS-DRG 250 and are higher
($18,298) than for all cases ($14,614) within MS-DRG 251, they are
lower than those in MS-DRGs 237 ($35,642) and 238 ($24,511). Our
clinical advisors reviewed this issue and recommended not moving these
stand-alone percutaneous cases to MS-DRGs 237 and 238 because they do
not consider them to be major cardiovascular procedures. Our clinical
advisors stated that cases reporting ICD-9-CM procedure code 37.36 are
appropriately assigned within MS-DRG 250 and 251 because they are
percutaneous cardiovascular procedures and are clinically similar to
other procedures within the MS-DRG. Therefore, we are not proposing to
reassign exclusion of atrial appendage procedure cases from MS-DRGs 250
and 251 to MS-DRGs 237 and 238 for FY 2015. We are inviting public
comments on our proposal to maintain the current MS-DRG structure for
the exclusion of the left atrial appendage.
b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
The MitraClip[supreg] System (hereafter referred to as
MitraClip[supreg]) for transcatheter mitral valve repair has been
discussed in extensive detail in previous rulemaking, including the FY
2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR
51528 through 51529) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27902 through 27903) and final rule (77 FR 53308 through 53310), in
response to requests for MS-DRG reclassification, as well as, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552) under the
new technology add-on payment policy. In the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50575), the application for a new technology add-on
payment for MitraClip[supreg] was unable to be considered further due
to lack of FDA approval by the July 1, 2013 deadline.
Subsequently, on October 24, 2013, MitraClip[supreg] received FDA
approval. As a result, the manufacturer has submitted new requests for
both an MS-DRG reclassification and new technology add-on payment for
FY 2015. We refer readers to section II.I. of the preamble of this
proposed rule for discussion regarding the application for
MitraClip[supreg] under the new technology add-on payment policy. Below
we discuss the MS-DRG reclassification request.
The manufacturer's request for MS-DRG reclassification involves two
components. The first component consists of reassigning cases reporting
a transcatheter mitral valve repair using the MitraClip[supreg] from
MS-DRGs 250 and 251(Percutaneous Cardiovascular Procedure without
Coronary Artery Stent with MCC and without MCC, respectively) to MS-
DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with
Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC),
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC). The second component of the manufacturer's request was for CMS to
examine the creation of a new base MS-DRG for transcatheter valve
therapies.
Effective October 1, 2010, ICD-9-CM procedure code 35.97
(Percutaneous mitral valve repair with implant) was created to identify
and describe the MitraClip[supreg] technology.
To address the first component of the manufacturer's request, we
conducted an analysis of claims data from the December 2013 update of
the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS-
DRGs 250 and 251. The table below shows our findings.

As displayed in the table above, the data demonstrate that, for MS-
DRG 250, there were a total of 9,174 cases with an average length of
stay of 6.90 days and average costs of $21,319. The number of cases
reporting the ICD-9-CM procedure code 35.97 in MS-DRG 250 totaled 67
with an average length of stay of 8.48 days and average costs of
$39,103. For MS-DRG 251, there were a total of 26,331 cases with an
average length of stay of 3.01 days and average costs of $14,614. There
were 127 cases found in MS-DRG 251 reporting the procedure code 35.97
with an average length of stay of 3.94 days and average costs of
$25,635. We recognize that the cases reporting procedure code 35.97
have a longer length of stay and higher average costs in comparison to
all the cases within MS-DRGs 250 and 251. However, as stated in prior
rulemaking (77 FR 53309), it is a fundamental principle of an averaged
payment system that half of the procedures in a group will have above
average costs. It is expected that there will be higher cost and lower
cost subsets, especially when a subset has low numbers.
We also evaluated the claims data from the December 2013 update of
the FY 2013 MedPAR file for MS-DRGs 216

[[Page 28009]]

through 221. Our findings are shown in the table below.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases........................................... 10,131 15.41 $65,478
MS-DRG 217--All cases........................................... 5,374 9.51 44,695
MS-DRG 218--All cases........................................... 882 6.88 39,470
MS-DRG 219--All cases........................................... 17,856 11.63 54,590
MS-DRG 220--All cases........................................... 21,059 7.13 38,137
MS-DRG 221--All cases........................................... 4,586 5.32 34,310
----------------------------------------------------------------------------------------------------------------

The data in our findings do not warrant reassignment of cases
reporting use of the MitraClip[supreg]. If we were to propose
reassignment of cases reporting procedure code 35.97 to MS-DRGs 216
through 221, they would be significantly overpaid, as the average costs
range from $34,310 to $65,478 for those MS-DRGs. In addition, our
clinical advisors do not support reassigning these cases. They noted
that the current MS-DRG assignment is appropriate for the reasons
stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53309). To
reiterate, our clinical advisors note that the current MS-DRG
assignment is reasonable because the operating room resource
utilizations of percutaneous procedures, such as those found in MS-DRGs
250 and 251, tend to group together, and are generally less costly than
open procedures, such as those found in MS-DRGs 216 through 221.
Percutaneous procedures by organ system represent groups that are
reasonably clinically coherent. More significantly, our clinical
advisors state that postoperative resource utilization is significantly
higher for open procedures with much greater morbidity and consequent
recovery needs. Because the equipment, technique, staff, patient
populations, and physician specialty all tend to group by type of
procedure (percutaneous or open), separately grouping percutaneous
procedures and open procedures is more clinically consistent.
Therefore, we are not proposing to modify the current MS-DRG assignment
for cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to
MS-DRGs 216 through 221 for FY 2015. We are inviting public comments on
our proposal to not make any modifications to the current MS-DRG logic
for these cases.
As indicated above, the second component of the manufacturer's
request involved the creation of a new base MS-DRG for transcatheter
valve therapies. We also received a similar request from another
manufacturer recommending that we create a new MS-DRG for procedures
referred to as endovascular cardiac valve replacement procedures. We
reviewed each of these requests using the same data analysis, as set
forth below. The discussion for endovascular cardiac valve replacement
procedures is included in section II.G.4.c. of the preamble of this
proposed rule and includes findings from the analysis and our proposals
for each of these similar, but distinct requests.
c. Endovascular Cardiac Valve Replacement Procedures
As noted in the previous section related to the MitraClip[supreg]
technology, we received two requests to create a new base MS-DRG for
what was referred to as ``transcatheter valve therapies'' by one
manufacturer and ``endovascular cardiac valve replacement'' procedures
by another manufacturer. Below we summarize the details of each request
and review results of the data analysis that was performed.
Transcatheter Valve Therapies
The request related to transcatheter valve therapies consisted of
creating a new MS-DRG that would include the MitraClip[supreg]
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve
repair with implant)), along with the following list of ICD-9-CM
procedure codes that identify the various types of valve replacements
performed by an endovascular or transcatheter technique:
35.05 (Endovascular replacement of aortic valve);
35.06 (Transapical replacement of aortic valve);
35.07 (Endovascular replacement of pulmonary valve);
35.08 (Transapical replacement of pulmonary valve); and
35.09 (Endovascular replacement of unspecified valve).
We performed analysis of claims data from the December 2013 update
of the FY 2013 MedPAR file for both the percutaneous mitral valve
repair and the transcatheter/endovascular cardiac valve replacement
codes in their respective MS-DRGs. The percutaneous mitral valve repair
with implant (MitraClip[supreg]) procedure code is currently assigned
to MS-DRGs 250 and 251, while the transcatheter/endovascular cardiac
valve replacement procedure codes are currently assigned to MS-DRGs
216, 217, 218, 219, 220, and 221. As illustrated in the table below,
the data demonstrate that, for MS-DRGs 250 and 251, there were a total
of 194 cases reporting procedure code 35.97, with an average length of
stay of 5.5 days and average costs of $30,286.

Upon analysis of cases in MS-DRGs 216 through 221 reporting the
cardiac valve replacement procedure codes, we found a total of 7,287
cases with an average length of stay of 8.1 days and average costs of
$53,802, as shown in the table below.

[[Page 28010]]

The data clearly demonstrate that the volume of cases for the
transcatheter/endovascular cardiac valve replacement procedures are
much higher in comparison to the volume of cases for the percutaneous
mitral valve repair (MitraClip[supreg]) procedure (7,287 compared to
194). In addition, the average costs of the transcatheter/endovascular
cardiac valve replacement procedures are significantly higher than the
average costs of the percutaneous mitral valve repair with implant
($53,802 compared to $30,286).
Our clinical advisors do not support grouping a percutaneous valve
repair procedure with transcatheter/endovascular valve replacement
procedures. They do not believe that these procedures are clinically
coherent or similar in terms of resource consumption because the
MitraClip[supreg] technology identified by procedure code 35.97 is
utilized for a percutaneous mitral valve repair, while the other
technologies, identified by procedure codes 35.05 through 35.09, are
utilized for transcatheter/endovascular cardiac valve replacements.
Consequently, the data analysis and our clinical advisors do not
support the creation of a new MS-DRG. Therefore, for FY 2015, we are
not proposing to create a new MS-DRG to group cases reporting the
percutaneous mitral valve repair (MitraClip[supreg]) procedure with
transcatheter/endovascular cardiac valve replacement procedures. We are
inviting public comments on our proposal.
Endovascular Cardiac Valve Replacement
The similar but separate request relating to endovascular cardiac
valve replacement procedures consisted of creating a new MS-DRG that
would only include the various types of cardiac valve replacements
performed by an endovascular or transcatheter technique. In other
words, this request specifically did not include the MitraClip[supreg]
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve
repair with implant)) and only included the list of ICD-9-CM procedure
codes that identify the various types of valve replacements performed
by an endovascular or transcatheter technique (ICD-9-CM procedure codes
35.05 through 35.09) as described earlier in this section.
The human heart contains four major valves--the aortic, mitral,
pulmonary, and tricuspid valves. These valves function to keep blood
flowing through the heart. When conditions such as stenosis or
insufficiency/regurgitation occur in one or more of these valves,
valvular heart disease may result. Cardiac valve replacement surgery is
performed in an effort to correct these diseased or damaged heart
valves. The endovascular or transcatheter technique presents a viable
option for high-risk patients who are not candidates for the
traditional open surgical approach.
We reviewed the claims data from the December 2013 update of the FY
2013 MedPAR file for cases in MS-DRGs 216 through 221. Our findings are
shown in the chart below. The data analysis shows that cardiac valve
replacements performed by an endovascular or transcatheter technique
represent a total of 7,287 of the cases in MS-DRGs 216 through 221,
with an average length of stay of 8.1 days and higher average costs
($53,802 compared to $47,177) in comparison to all of the cases in MS-
DRGs 216 through 221.

As the data appear to indicate support for the creation of a new
base MS-DRG, based on our evaluation of resource consumption, patient
characteristics, volume, and costs between the cardiac valve
replacements performed by an endovascular or transcatheter technique
and the open surgical technique, we then applied our established
criteria to determine if these cases would meet the requirements to
create subgroups. We use five criteria established in the FY 2008 IPPS
final rule (72 FR 47169) to review requests involving the creation of a
new CC or an MCC subgroup within a base MS-DRG. As outlined in the FY
2012 IPPS proposed rule (76 FR 25819), the original criteria were based
on average charges but were later converted to average costs. In order
to warrant creation of a CC or an MCC subgroup within a base MS-DRG,
this subgroup must meet all of the following five criteria:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or the MCC subgroup.
At least 500 cases are in the CC or the MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
In applying the five criteria, we found that the data support the
creation of a new MS-DRG subdivided into two severity levels. We also
consulted with our clinical advisors. Our clinical advisors stated that
patients receiving endovascular cardiac valve replacements are
significantly different from those patients who undergo an open chest
cardiac valve replacement. They noted that patients receiving
endovascular cardiac valve replacements are not eligible for open chest
cardiac valve procedures because of a variety of health constraints.
This highlights the fact that peri-operative complications and post-
operative morbidity have significantly different profiles for open
chest procedures compared with endovascular interventions. This is also
substantiated by the different average lengths of stay

[[Page 28011]]

demonstrated by the two cohorts. Our clinical advisors further noted
that separately grouping these endovascular valve replacement
procedures provides greater clinical cohesion for this subset of high-
risk patients.
We are proposing to create the following MS-DRGs for endovascular
cardiac valve replacements:
Proposed new MS-DRG 266 (Endovascular Cardiac Valve
Replacement with MCC); and
Proposed new MS-DRG 267 (Endovascular Cardiac Valve
Replacement without MCC).

----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs for endovascular cardiac valve replacement cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 266 with MCC................................ 3,516 10.6 $61,891
Proposed New MS-DRG 267 without MCC............................. 3,771 5.7 46,259
----------------------------------------------------------------------------------------------------------------

We are inviting public comments on our proposal to create these new
MS-DRGs for FY 2015.
d. Abdominal Aorta Graft
We received a request that we change the MS-DRG assignment for
procedure code 39.71 (Endovascular implantation of other graft in
abdominal aorta), which is assigned to MS-DRGs 237 and 238 (Major
Cardiovascular Procedures with MCC and without MCC, respectively). The
requestor asked that we reassign procedure code 39.71 to MS-DRGs 228,
229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and
without CC/MCC, respectively). The requestor stated that the average
cost of endovascular abdominal aorta graft implantation cases is
significantly higher than other cases in MS-DRGs 237 and 238. The
requestor stated that the average cost of endovascular abdominal aorta
graft implantation cases is closer to those in MS-DRGs 228, 229, and
230.
The requestor stated that the goal of endovascular repair for
abdominal aneurysm is to isolate the diseased, aneurismal portion of
the aorta and common iliac arteries from continued exposure to systemic
blood pressure. The procedure involves the delivery and deployment of
endovascular prostheses, also referred to as a graft, as required to
isolate the aneurysm above and below the extent of the disease. The
requestor stated that this significantly reduces patient morbidity and
death caused by leakage and/or sudden rupture of an untreated aneurysm.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for cases of endovascular abdominal aorta graft
implantations. The following table shows our findings.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases........................................... 17,813 9.66 $35,642
MS-DRG 237--Cases with procedure code 39.71..................... 2,093 8.30 44,898
MS-DRG 238--All cases........................................... 33,644 3.73 24,511
MS-DRG 238--Cases with procedure code 39.71..................... 15,483 2.30 28,484
MS-DRG 228--All cases........................................... 1,543 13.48 52,315
MS-DRG 229--All cases........................................... 2,003 7.47 32,070
MS-DRG 230--All cases........................................... 493 4.95 29,281
----------------------------------------------------------------------------------------------------------------

As this table shows, endovascular abdominal aorta graft
implantation cases have higher average costs and shorter lengths of
stay than all cases within MS-DRGs 237 and 238. The average cost for
endovascular abdominal aorta graft implantation cases in MS-DRG 237 is
$9,256 greater than that for all cases in MS-DRG 237 ($44,898 compared
to $35,642). The average cost for endovascular abdominal aorta graft
implantation cases in MS-DRG 238 is $3,973 higher than that for all
cases in MS-DRG 238 ($28,484 compared to $24,511). Cases in MS-DRG 228
have average costs that are $7,417 higher than the endovascular
abdominal aorta graft implantation cases in MS-DRG 237 ($52,315
compared to $44,898). MS-DRG 228 and MS-DRG 237 both contain cases with
MCCs. Cases in MS-DRG 229, which contain a CC, have average costs that
are $3,586 higher than average costs of the endovascular abdominal
aorta graft implantation cases in MS-DRG 238, which do not contain an
MCC ($32,070 compared to $28,484). Cases in MS-DRG 230, which have
neither an MCC nor a CC, have average costs that are $797 higher than
the endovascular abdominal aorta graft implantation cases in MS-DRG 238
($29,281 compared to $28,484). While the average costs were higher for
endovascular abdominal aorta graft implantation cases compared to all
cases within MS-DRGs 237 and 238, each MS-DRG has some cases that are
higher and some cases that are lower than the average costs for the
entire MS-DRG. MS-DRGs were developed to capture cases that are
clinically consistent with similar overall average resource
requirements. This results in some cases within an MS-DRG having costs
that are higher than the overall average and other cases having costs
that are lower than the overall average. This may be due to specific
types of cases included within the MS-DRGs or to the fact that some
cases will simply require additional resources on a specific admission.
However, taken as a whole, the hospital will be paid an appropriate
amount for the group of cases that are assigned to the MS-DRG. We
believe the endovascular abdominal aorta graft implantation cases are
appropriately grouped with other procedures within MS-DRGs 237 and 238.
Our clinical advisors reviewed this issue and determined that the
endovascular abdominal aorta graft implantation cases are appropriately
classified within MS-DRGs 237 and 238 because they are clinically
similar to the other procedures in MS-DRGs 237 and 238, which include
other procedures on the aorta. While the endovascular abdominal aorta
graft implantation cases have higher average costs than the average for
all cases within MS-DRGs 237 and 238, our clinical advisors do not
believe this justifies moving the cases to MS-DRGs 228, 229 and 230,
which involve a different set of cardiothoracic surgeries.
Based on the results of examination of the claims data and the
recommendations of our clinical advisors, we do not believe that

[[Page 28012]]

proposing to reclassify endovascular abdominal aorta graft implantation
cases from MS-DRGs 237 and 238 is warranted. We are proposing to
maintain the current MS-DRG assignments for endovascular abdominal
aorta graft implantation cases. We are inviting public comments on our
proposal.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Shoulder Replacement Procedures
We received a request to change the MS-DRG assignment for shoulder
replacement procedures. This request involved the following two
procedure codes:
81.88 (Reverse total shoulder replacement); and
81.97 (Revision of joint replacement of upper extremity).
With respect to procedure code 81.88, the requestor asked that
reverse total shoulder replacements be reassigned from MS-DRGs 483 and
484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with
CC/MCC and without CC/MCC, respectively) to MS-DRG 483 only. The
reassignment of procedure code 81.88 from MS-DRGs 483 and 484 was
discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50534 through 50536). The result of reassigning reverse shoulder
replacements from MS-DRGs 483 and 484 to MS-DRG 483 only would be that
this procedure would be assigned to MS-DRG 483 whether or not the case
had a CC or an MCC. The requestor stated that reverse shoulder
replacement procedures are more clinically cohesive with higher
severity MS-DRGs due to the complexity and resource consumption of
these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50534 through 50536) for a discussion of the reverse total
shoulder replacement.
The requestor also recommended that we reassign what it described
as another shoulder procedure involving procedure code 81.97, which is
assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and
Connective Tissue O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively), to MS-DRG 483. We point out that MS-DRG 483
contains upper joint replacements, including shoulder replacements. MS-
DRG 483 does not contain any joint revision procedures. Similar to the
request for reassignment of procedure code 81.88, this would mean that
procedure code 81.97 would be assigned to MS-DRG 483 whether or not the
case had a CC or an MCC. If CMS did not support this recommendation for
moving procedure code 81.97 to MS-DRG 483, the requestor recommended an
alternative reassignment to MS-DRG 515 (Other Musculoskeletal System
and Connective Tissue O.R. procedures with MCC) even if the case had no
MCC.
We point out that, while the requestor refers to procedure code
81.97 as a shoulder procedure, the code description actually includes
revisions of joint replacements of a variety of upper extremity joints,
including those in the elbow, hand, shoulder, and wrist.
As stated earlier, reverse shoulder replacements are assigned to
MS-DRGs 483 and 484. Revisions of upper joint replacements are assigned
to MS-DRGs 515, 516, and 517. We examined claims data from the December
2013 update of the FY 2013 MedPAR file for MS-DRGs 483 and 484. The
following table shows our findings of cases of reverse shoulder
replacement.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 483--All cases........................................... 14,220 3.20 $18,807
MS-DRG 483--Cases with procedure code 81.88..................... 7,086 3.19 20,699
MS-DRG 484--All cases........................................... 23,183 1.95 16,354
MS-DRG 484--Cases with procedure code 81.88..................... 9,633 2.03 18,719
Proposed Revised MS-DRG 483 with all severity levels included... 37,403 2.4 17,287
----------------------------------------------------------------------------------------------------------------

As the above table shows, MS-DRG 484 reverse shoulder replacement
cases have similar average costs to those in MS-DRG 483 ($18,719 for
reverse shoulder replacements in MS-DRG 484 compared to $18,807 for all
cases in MS-DRG 483). However, in reviewing the data, we observed that
the claims data no longer support two severity levels for MS-DRGs 483
and 484.
We use the five criteria established in FY 2008 (72 FR 47169) to
review requests involving the creation of a new CC or MCC subgroup
within a base MS-DRG. As outlined in the FY 2012 IPPS/LTCH PPS proposed
rule (76 FR 25819), the original criteria were based on average charges
but were later converted to average costs. In order to warrant creation
of a CC or an MCC subgroup within a base MS-DRG, the subgroup must meet
all of the following five criteria:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
We found through our examination of the claims data from the
December 2013 update of the FY 2013 MedPAR file that the two severity
subgroups of MS-DRG 483 and 484 no longer meet the fourth criterion of
at least a 20-percent difference in average costs between subgroups. We
found that there is a $2,453 difference in average costs between MS-DRG
483 and MS-DRG 484. The difference in average costs would need to be
$3,761 to meet the fourth criterion. Therefore, our claims data support
collapsing MS-DRGs 483 and 484 into a single MS-DRG. Our clinical
advisors reviewed this issue and agree that there is no longer enough
difference between the two severity levels to justify separate severity
subgroups for MS-DRGs 483 and 484, which include a variety of upper
joint replacements. Therefore, our clinical advisors support our
recommendation to collapse MS-DRGs 483 and 484 into a single MS-DRG.
Based on the results of examination of the claims data and the
advice of our clinical advisors, we are proposing to collapse MS-DRGs
483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising
the title of MS-DRG 483 to read ``Major Joint/Limb Reattachment
Procedure of Upper Extremities''.
The following table shows our findings of cases of revisions of
upper joint replacement from the December 2013 update of the FY 2013
MedPAR file.

[[Page 28013]]

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases........................................... 3,407 9.22 $22,191
MS-DRG 515--Cases with procedure code 81.97..................... 88 5.66 22,085
MS-DRG 516--All cases........................................... 8,502 5.34 14,356
MS-DRG 516--Cases with procedure code 81.97..................... 799 2.84 18,214
MS-DRG 517--All cases........................................... 5,794 3.28 12,172
MS-DRG 517--Cases with procedure code 81.97..................... 1,256 2.07 15,920
MS-DRG 483--All cases........................................... 14,220 3.20 18,807
----------------------------------------------------------------------------------------------------------------

Cases identified by code 81.97 in MS-DRGs 515, 516, and 517 have
lower average costs and shorter lengths of stay than all cases in MS-
DRG 515. The average costs of cases in MS-DRG 515 are $3,977 higher
than the average costs of the cases with procedure code 81.97 in MS-DRG
516 ($22,191 compared to $18,214). The average costs of cases in MS-DRG
515 are $6,271 higher than cases with procedure code 81.97 in MS-DRG
517 ($22,191 compared to $15,920).
The table above shows that the average costs of cases in MS-DRG 483
are $3,278 lower than the average costs of cases with procedure code
81.97 in MS-DRG 515 ($18,807 compared to $22,085). The average costs of
cases in MS-DRG 483 are $593 higher than the average costs of cases
with procedure code 81.97 in MS-DRG 516 ($18,807 compared to $18,214).
The average costs of cases in MS-DRG 483 are $2,887 higher than the
average costs of cases with procedure code 81.97 in MS-DRG 517 ($18,807
compared to $15,920).
The claims data do not support moving all procedure code 81.97
cases to MS-DRG 515 or MS-DRG 483, whether or not there is a CC or an
MCC. We also point out once again that procedure code 81.97 is a
nonspecific code that captures revisions to not only the shoulder, but
also a variety of upper extremity joints including those in the elbow,
hand, shoulder, and wrist. Therefore, we have no way of determining how
many cases reporting procedure code 81.97 were actually shoulder
procedures as opposed to procedures on the elbow, hand, or wrist.
Our clinical advisors reviewed this issue and determined that the
revisions of upper joint replacement procedures are appropriately
classified within MS-DRGs 515, 516, and 517, which include other joint
revision procedures. They do not support moving revisions of upper
joint replacement procedures to MS-DRG 515, whether or not there is an
MCC. They support the current classification, which bases the severity
level on the presence of a CC or an MCC. They also do not support
moving revisions of upper joint replacement procedures to MS-DRG 483,
whether or not there is a CC or an MCC, because these revisions are not
joint replacements. Based on the results of our examination and the
advice of our clinical advisors, we are not proposing moving revisions
of upper joint replacement procedures to MS-DRG 515 or MS-DRG 483,
whether or not there is a CC or an MCC.
In summation, we are proposing to collapse MS-DRGs 483 and 484 into
a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG
483 to read ``Major Joint/Limb Reattachment Procedure of Upper
Extremities''. We are proposing to maintain the current MS-DRG
assignments for revisions of upper joint replacement procedures in MS-
DRGs 515, 516, and 517. We are inviting public comments on our
proposals.
b. Ankle Replacement Procedures
We received a request to change the MS-DRG assignment for two ankle
replacement procedures. The request involved the following two
procedure codes:
81.56 (Total ankle replacement); and
81.59 (Revision of joint replacement of lower extremity,
not elsewhere classified).
The reassignment of procedure code 81.56 from MS-DRGs 469 and 470
(Major Joint Replacement or Reattachment of Lower Extremity with CC and
without MCC, respectively) to a new MS-DRG or, alternatively, to MS-DRG
469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50536
through 50537). We refer readers to this final rule for a discussion of
ankle replacement procedures. The requestor asked that we again
evaluate reassigning total ankle replacement procedures. The requestor
also asked that we reassign what it referred to as another ankle
replacement revision procedure captured by procedure code 81.59
(Revision of joint replacement of lower extremity, not elsewhere
classified), which is assigned to MS-DRGs 515, 516, and 517 (Other
Musculoskeletal System and Connective Tissue O.R. Procedures with MCC,
with CC, and without CC/MCC, respectively).
The requestor asked that we reassign procedure code 81.56 from MS-
DRGs 469 and 470 to MS-DRG 483 (Major Joint/Limb Reattachment Procedure
of Upper Extremities with CC/MCC) and rename the MS-DRG to better
capture the additional lower extremity cases. The requestor stated that
the result would be assignment of lower joint procedures to an MS-DRG
that currently captures only upper extremity cases and assignment to
the highest severity level even if the case did not have a CC or an
MCC. If CMS did not find this acceptable, the requestor made an
alternative recommendation of assigning procedure code 81.56 to MS-DRG
469 and renaming the MS-DRG to better capture the additional cases.
Cases would be assigned to the highest severity level whether or not
the case had an MCC.
The requestor also recommended that procedure code 81.59, which is
assigned to MS-DRGs 515, 516, and 517 be reassigned to MS-DRG 483 and
that the MS-DRG be given a new title to better capture the additional
lower extremity cases. The requestor stated that the result would be
assignment of lower joint procedures to an MS-DRG that currently
captures only upper extremity cases and assignment to the highest
severity level even if the patient did not have a CC or an MCC. If CMS
did not support this recommendation, the requestor suggested two
additional recommendations. One involves moving procedure code 81.59 to
MS-DRG 515 even when the case had no MCC. The other recommendation was
to move procedure code 81.59 to MS-DRG 469, whether or not the case had
a MCC.
We point out that while the requestor refers to procedure code
81.59 as a revision of an ankle replacement, the code actually includes
revisions of joint replacements of a variety of lower extremity joints
including the ankle, foot, and toe.
The following table shows the number of total ankle replacement
cases, average length of stay, and average costs for procedure code
81.56 in MS-DRGs 469 and 470 found in claims data from the December
2013 update of the FY 2013

[[Page 28014]]

MedPAR file compared to all cases within MS-DRGs 469, 470, and 483.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,916 722 $22,548
MS-DRG 469--Cases with procedure code 81.56..................... 32 6.19 27,419
MS-DRG 470--All cases........................................... 406,344 3.25 15,119
MS-DRG 470--Cases with procedure code 81.56..................... 1,379 2.13 19,332
MS-DRG 483...................................................... 14,220 3.20 18,807
----------------------------------------------------------------------------------------------------------------

In summary, the requestor asked us to reassign procedure code 81.56
in MS-DRGs 469 and 470 to one of the following two options: MS-DRG 483
(highest severity level); or MS-DRG 469 (highest severity level).
As the table for total ankle replacement above shows, the average
cost of cases with procedure code 81.56 in MS-DRG 469 is $27,419 and
$19,332 in MS-DRG 470. This compares with the average costs of all
cases in MS-DRGs 469 and 470 of $22,548 and $15,119, respectively.
While the average cost of cases reporting procedure code 81.56 in MS-
DRG 469 is $4,871 higher than the average cost for all cases in MS-DRG
469, we point out that there were only 32 cases. The relatively small
number of cases may have been impacted by other factors such as
complications or comorbidities. Several expensive cases could impact
the average costs for a very small number of patients. The average cost
of cases reporting procedure code 81.56 in MS-DRG 470 is $4,213 higher
than the average cost for all cases in MS-DRG 470. While the average
costs are higher, within all MS-DRGs, some cases have higher and some
cases have lower average costs. MS-DRGs are groups of clinically
similar cases that have similar overall costs. Within a group of cases,
one would expect that some cases have costs that are higher than the
overall average and some cases have costs that are lower than the
overall average.
MS-DRG 469 ankle replacement cases have average costs that are
$8,612 higher than the average costs of all cases in MS-DRG 483
($27,419 compared to $18,807). Moving these cases (procedure code
81.56) to MS-DRG 483 would result in payment below average costs
compared to the current MS-DRG assignment in MS-DRG 469. Furthermore,
as noted earlier, moving total ankle replacement cases to MS-DRG 483
would result in a lower extremity procedure being added to what is now
an upper extremity MS-DRG. This would significantly disrupt the
clinical cohesion of MS-DRG 483.
The average costs of all cases in MS-DRG 469 are $3,216 higher than
the average costs of those cases with procedure code 81.56 in MS-DRG
470 ($22,548 compared to $19,332) The data do not support moving
procedure code 81.56 cases to MS-DRG 483 or 469 because it would not
result in payments that more accurately reflect their current average
costs. Our clinical advisors reviewed this issue and determined that
the ankle replacement cases are appropriately classified within MS-DRGs
469 and 470 with the severity level leading to the MS-DRG assignment.
They do not support moving these cases to MS-DRG 483 because ankle
replacements, which are lower joint procedures, are not clinically
similar to upper joint replacement procedures. Based on the results of
examination of the claims data, the issue of clinical cohesion, and the
recommendations from our clinical advisors, we are not proposing to
move total ankle procedures to MS-DRG 483 or MS-DRG 469 when there is
no MCC. We are proposing to maintain the current MS-DRG assignments for
ankle replacement cases. We are inviting public comments on our
proposal.
The following table shows our findings from examination of the
claims data from the December 2013 update of the FY 2013 MedPAR file
for the number of cases reporting procedure code 81.59 in MS-DRGs 515,
516, and 517 (revision of joint replacement of lower extremity) and
their average length of stay and average costs as compared to all cases
within MS-DRGs 515, 516, and 517 (where procedure code 81.59 is
currently assigned), as well as data for MS-DRGs 469 and 483.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases........................................... 3,407 9.22 $22,191
MS-DRG 515--Cases with procedure code 81.59..................... 5 6.00 16,988
MS-DRG 516--All cases........................................... 8,502 5.34 14,356
MS-DRG 516--Cases with procedure code 81.59..................... 16 3.00 16,998
MS-DRG 517--All cases........................................... 5,794 3.28 12,172
MS-DRG 517--Cases with procedure code 81.59..................... 40 1.80 13,704
MS-DRG 483--All cases........................................... 25,916 722 22,548
MS- DRG 469--All cases.......................................... 14,220 3.20 18,807
----------------------------------------------------------------------------------------------------------------

The requestor asked that all cases with procedure code 81.59 in MS-
DRGs 515, 516, and 517 be assigned to one of the following three
choices:
MS-DRG 483 (highest severity level);
MS-DRG 515 (highest severity level) whether or not there
is an MCC; or
MS-DRG 469 (highest severity level).
Our review of data from the above revision of joint replacement of
lower extremity table shows that cases in MS-DRG 483 have average costs
that are $5,560 higher than the average costs of cases with procedure
code 81.59 in MS-DRG 515; $5,550 greater than those in MS-DRG 516; and
$8,844 greater than those in MS-DRG 517 ($22,548 compared to $16,988;
$22,548 compared to $16,998, and $22,548 compared to $13,704,
respectively). As mentioned earlier, MS-DRG 483 is currently composed
of only upper extremity procedures. Moving lower extremity procedures
into this MS-DRG would disrupt the clinical cohesiveness of MS-DRG 483.

[[Page 28015]]

The average costs of all cases in MS-DRG 469 are $18,807, compared
to average costs of $16,988, $16,998, and $13,703 for procedure code
81.59 cases in MS-DRGs 515, 516, and 517, respectively. The data do not
support moving all procedure code 81.59 cases to MS-DRG 469 even when
there is no MCC. We also point out that moving cases with procedure
code 81.59 to MS-DRG 469 would disrupt the clinical cohesiveness of MS-
DRG 469, which currently captures major joint replacement or
reattachment procedures of the lower extremity. Procedure code 81.59
includes revisions of joint replacements of a variety of lower
extremity joints including the ankle, foot, and toe. This nonspecific
code would not be considered a major joint procedure. The code captures
revisions of an ankle replacement as well as a more minor revision of
the toe.
Our clinical advisors reviewed this issue and determined that the
revision of joint replacement of lower extremity cases are
appropriately classified within MS-DRGs 515, 516, and 517 where
revisions of other joint replacements are captured. They support the
current severity levels in MS-DRGs 515, 516, and 517, which allow the
presence of a CC or an MCC to determine the severity level assignment.
They do not support moving these cases to MS-DRG 483, which is applied
to upper extremity procedures because these procedures are not
clinically consistent with revisions of lower joint procedures. They
also do not support moving these cases to MS-DRG 469 when there is no
MCC because these procedures are not joint replacement procedures.
Based on the findings of our examination of the claims data, the issue
of clinical cohesion, and the recommendations from our clinical
advisors, we are not proposing to move the revision of joint
replacement of lower extremity cases to MS-DRGs 483 or 469, whether or
not there is an MCC. We are proposing to maintain the current MS-DRG
assignments for revision of joint replacement of lower extremity cases.
In summary, we are proposing to maintain the current MS-DRG
assignment for total ankle replacements in MS-DRGs 469 and 470 and
revision of joint replacement of lower extremity procedures in MS-DRGs
515, 516, and 517. We are inviting public comments on our proposals.
c. Back and Neck Procedures
We received a request to reassign cases identified with a
complication or comorbidity (CC) in MS-DRG 490 (Back & Neck Procedures
Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) to MS-
DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or
Disc Device/Neurostimulator). The requester suggested that we create a
new MS-DRG that would be subdivided based solely on the ``with MCC or
Disc Device/Neurostimulator'' and the ``without MCC'' (and no device)
criteria.
For the FY 2008 rulemaking cycle, we performed a comprehensive
analysis of all the spinal DRGs as we proposed (72 FR 24731 through
24735) and finalized (72 FR 47226 through 47232) adoption of the MS-
DRGs. With the revised spinal MS-DRGs, we were better able to identify
a patient's level of severity, complexity of service, and utilization
of resources. This was primarily attributed to the new structure for
the severity level designations of ``with MCC,'' ``with CC,'' and
``non-CC'' (or without CC/MCC). Another contributing factor was that we
incorporated specific procedures and technologies into the GROUPER
logic for some of those spinal MS-DRGs. Specifically, as noted above,
in the title of MS-DRG 490, we accounted for disc devices and
neurostimulators because the data demonstrated that the procedures
utilizing those technologies were more complex and required greater
utilization of resources.
According to the requester, since that time, concerns have been
expressed in the provider community regarding inadequate payment for
MS-DRG 490 when these technologies are utilized. An analysis conducted
by the requester alleged that the subset of patients identified in the
``with MCC or disc device/neurostimulator'' group are different with
regard to resource use from the ``without CC/MCC'' (and no device)
patient group.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for MS-DRGs 490 and 491. The table below shows our
findings.

As shown in the table above, there were a total of 16,930 cases in
MS-DRG 490 with an average length of stay of 4.53 days and average
costs of $13,727. For MS-DRG 491, there were a total of 25,778 cases
with an average length of stay of 2.20 days and average costs of
$8,151.
We then analyzed the data for MS-DRGs 490 and 491 by subdividing
cases based on the ``with MCC or Disc Device/Neurostimulator'' and the
``without MCC'' (and no device) criteria. We found a total of 3,379
cases with an average length of stay of 6.6 days and average costs of
$21,493 in the ``with MCC or Disc Device/Neurostimulator'' group and a
total of 39,329 cases with an average length of stay of 2.8 days and
average costs of $9,405 in the ``without MCC'' and no device group. Due
to the wide range in the volume of cases, length of stay, and average
costs between these two subgroups, we concluded that further analysis
of the data using a separate ``with CC'' (and no device) subset of
patients was warranted.
Therefore, we evaluated the data using a three-way severity level
split that consisted of the three subgroups shown in the table below.

Additional Analysis for Back & Neck Procedures Except Spinal Fusion: Disc Device/Neurostimulator
----------------------------------------------------------------------------------------------------------------
Number of Average length
Severity level split cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
--With MCC or disc device/neurostimulator....................... 3,379 6.6 $21,493
--With CC....................................................... 13,551 3.9 11,791
--Without CC/MCC................................................ 25,778 2.2 8,151
----------------------------------------------------------------------------------------------------------------

[[Page 28016]]

For the first subgroup, ``with MCC or Disc Device/
Neurostimulator,'' we found a total of 3,379 cases with an average
length of stay of 6.6 days and average costs of $21,493. In the second
subgroup, ``with CC'' (no device), we found a total of 13,551 cases
with an average length of stay of 3.9 days and average costs of
$11,791. In the third subgroup, ``without CC/MCC'' (no device), we
found a total of 25,778 cases with an average length of stay of 2.2
days and average costs of $8,151.
The results of this additional data analysis demonstrate a better
distribution of cases with regard to length of stay and average costs.
Our clinical advisors agree that a patient's severity of illness is
captured more appropriately with this subdivision. The data also meet
the established criteria for creating subgroups within a base MS-DRG as
discussed earlier in this proposed rule.
As the subdivision of the claims data based on these subgroups
better captures a patient's severity level and utilization of resources
and is supported by our clinical advisors, we are proposing to create
three new MS-DRGs and to delete MS-DRGs 490 and 491. These proposed new
MS-DRGs would be titled as follows and would be effective as of October
1, 2014:
Proposed new MS-DRG 518 (Back & Neck Procedures Except
Spinal Fusion with MCC or Disc Device/Neurostimulator);
Proposed new MS-DRG 519 (Back & Neck Procedures Except
Spinal Fusion with CC); and
Proposed new MS-DRG 520 (Back & Neck Procedures Except
Spinal Fusion without CC/MCC).
We are inviting public comments on our proposal to create these
proposed new MS-DRGs for FY 2015.
6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and
Disorders): Disorders of Porphyrin Metabolism
We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule
that we considered out of scope for the proposed rule. We stated in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider
this issue in future rulemaking as part of our annual review process.
The request was for the creation of a new MS-DRG to better identify
cases where patients with disorders of porphyrin metabolism exist, to
recognize the resource requirements in caring for these patients, to
ensure appropriate payment for these cases, and to preserve patient
access to necessary treatments. This issue has been discussed
previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and
27905) and final rule (77 FR 53311 through 53313).
Porphyria is defined as a group of rare disorders (``porphyrias'')
that interfere with the production of hemoglobin that is needed for red
blood cells. While some of these disorders are genetic (inborn) and
others can be acquired, they all result in the abnormal accumulation of
hemoglobin building blocks, called porphyrins, which can be deposited
in the tissues where they particularly interfere with the functioning
of the nervous system and the skin. Treatment for patients suffering
from disorders of porphyrin metabolism consists of an intravenous
injection of Panhematin[supreg] (hemin for injection). In 1984, this
pharmaceutical agent became the first approved drug for a rare disease
to be designated under the Orphan Drug Act. The requestor stated that
it is the only FDA-approved prescription treatment for acute
intermittent porphyria. ICD-9-CM diagnosis code 277.1 (Disorders of
porphyrin metabolism) describes these cases, which are currently
assigned to MS-DRG 642 (Inborn and Other Disorders of Metabolism).
We analyzed claims data from the December 2013 update of the FY
2013 MedPAR file for cases assigned to MS-DRG 642. Our findings are
shown in the table below.

As shown in the table above, we found a total of 1,486 cases in MS-
DRG 642, with an average length of stay of 4.61 days and average costs
of $8,151. We then analyzed the data for cases reporting diagnosis code
277.1 as the principal diagnosis in this same MS-DRG. We found a total
of 299 cases, with an average length of stay of 5.98 days and average
costs of $13,303.
While the data show that the average costs for the 299 cases
reporting a principal diagnosis code of 277.1 were higher than the
average costs for all cases in MS-DRG 642 ($13,303 compared to $8,151),
the number of cases is small. Given the small number of porphyria
cases, we do not believe there is justification for creating a new MS-
DRG. Basing a new MS-DRG on such a small number of cases could lead to
distortions in the relative payment weights for the MS-DRG because
several expensive cases could impact the overall relative payment
weight. Having larger clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights. In addition, as discussed earlier, one of the criteria we
apply in evaluating whether to create new severity subgroups within an
MS-DRG is whether there are at least 500 cases in the CC or MCC
subgroup. While this criterion is used to evaluate whether to create a
severity subgroup within an MS-DRG, applying it here suggests that
creating a new MS-DRG for cases reporting a principal diagnosis of code
277.1 would not be appropriate. Our clinical advisors reviewed this
issue and recommended no MS-DRG change for porphyria cases because they
fit clinically within MS-DRG 642.
In summary, we are not proposing to create a new MS-DRG for
porphyria cases. We are inviting public comments on our proposal to
maintain porphyria cases in MS-DRG 642.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
We received a request to evaluate the MS-DRG assignment of seven
ICD-9-CM diagnosis codes in MS-DRG 794 (Neonate With Other Significant
Problems) under MDC 15. The requestor stated that these codes have no
bearing on the infant, and are not representative of a neonate with a
significant problem. The requestor recommended that we change the MS-
DRG logic so that the following seven ICD-9-CM codes would not lead to
assignment of MS-DRG 794. The requestor recommended that the diagnoses
be added to the ``only secondary diagnosis'' list under MS-DRG 795
(Normal newborn) so that the case would be assigned to MS-DRG 795
(Normal newborn).

V17.0 (Family history of psychiatric condition)
V17.2 (Family history of other neurological Diseases)

[[Page 28017]]

V17.49 (Family history of other cardiovascular diseases)
V18.0 (Family history of diabetes mellitus)
V18.19 (Family history of other endocrine and metabolic
diseases)
V18.8 (Family history of infectious and parasitic diseases)
V50.3 (Ear piercing)

In the case of a newborn with one of these diagnosis codes reported
as a secondary diagnosis, the case would be assigned to MS-DRG 794. The
commenter believed that any of these seven diagnosis codes (noted
above), when reported as a secondary diagnosis for a newborn case,
should be assigned to MS-DRG 795 instead of MS-DRG 794.
Our clinical advisors reviewed this request and concur with the
commenter that the seven ICD-9-CM diagnosis codes noted above should
not continue to be assigned to MS-DRG 794, as there is no clinically
usable information reported in those codes identifying significant
problems. Therefore, for FY 2015, we are proposing to reassign these
following seven diagnoses to the ``only secondary diagnosis list''
under MS-DRG 795 so that the case would be assigned to MS-DRG 795.

V17.0 (Family history of psychiatric condition)
V17.2 (Family history of other neurological diseases)
V17.49 (Family history of other cardiovascular diseases)
V18.0 (Family history of diabetes mellitus)
V18.19 (Family history of other endocrine and metabolic
diseases)
V18.8 (Family history of infectious and parasitic diseases)
V50.3 (Ear piercing)

We are inviting public comments on this proposal.
8. Proposed Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
As discussed in section II.G.1.a. of the preamble of this proposed
rule, we developed an ICD-10 version of the current MS-DRGs, which are
based on ICD-9-CM codes. We refer to this version of the MS-DRGs as the
ICD-10 MS-DRGs Version 31.0-R. In November 2013, we also posted a
Definitions of Medicare Code Edits Manual of the ICD-10 MCE Version
31.0 on the ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We produced mainframe and computer software for Version
31.0 of the MS-DRG GROUPER with Medicare Code Editor, which was made
available to the public in December 2013. Information on ordering the
mainframe and computer software through NTIS was posted on the CMS Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRG GROUPER with Medicare Code Editor Version 31.0 computer
software facilitated additional review of the ICD-10 MS-DRGs
conversion. We encouraged the public to submit to CMS any comments on
areas where they believed the ICD-10 MS-DRG GROUPER and MCE did not
accurately reflect the logic and edits found in the ICD-9-CM MS-DRG
GROUPER and MCE Version 31.0.
We also have posted an ICD-10 version of the current MCE, which is
based on ICD-9-CM codes, and refer to that version of the MCE as the
ICD-10 MCE Version 31.0-R. Both of these documents are posted on our
ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We will
continue to share ICD-10 MS-DRG and MCE conversion activities with the
public through this Web site.
For FY 2015, we are proposing to remove extracranial-intracranial
(EC-IC) bypass surgery from the ``Noncovered Procedure'' edit code list
for Version 32.0 of the MCE. This procedure is identified by ICD-9-CM
procedure code 39.28 (Extracranial-intracranial (EC-IC) vascular
bypass).
Because of the complexity of appropriately classifying the
circumstances under which the EC-IC bypass surgery may, or may not, be
considered reasonable and necessary for certain conditions, we are
proposing to remove the MCE ``Noncovered Procedure'' edit for EC-IC
bypass surgery from the ``Noncovered Procedure'' edit code list for
Version 32.0 of the MCE. We are inviting public comments on this
proposal.
9. Proposed Changes to Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2015, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed
below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical

[[Page 28018]]

hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
Based on the changes that we are proposing to make for FY 2015, as
discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the
preamble of this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing
to revise the surgical hierarchy for MDC 5 (Diseases and Disorders of
the Circulatory System) and MDC 8 (Diseases and Disorders of the
Musculoskeletal System and Connective Tissue) as follows:
In MDC 5, we are proposing to sequence proposed new MS-DRG 266
(Endovascular Cardiac Valve Replacement with MCC) and proposed new MS-
DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS-
DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization
with AMI/HF/Shock with MCC).
In MDC 8, we are proposing to delete MS-DRGs 490 (Back & Neck
Procedures Except Spinal Fusion with CC/MCC or Disc Device/
Neurostimulator) and MS-DRG 491 (Back & Neck Procedures Except Spinal
Fusion without CC/MCC or Disc Device/Neurostimulator) from the surgical
hierarchy. We are proposing to sequence proposed new MS-DRG 518 (Back &
Neck Procedure Except Spinal Fusion with MCC or Disc Device/
Neurostimulator), proposed new MS-DRG 519 (Back & Neck Procedure Except
Spinal Fusion with CC), and proposed new MS-DRG 520 (Back & Neck
Procedure Except Spinal Fusion without CC/MCC) above MS-DRG 492 (Lower
Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC).
We are inviting public comments on our proposals.
10. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2015
a. Major Complications or Comorbidities (MCCs) and Complications or
Comorbidities (CC) Severity Levels for FY 2015
A complete updated MCC, CC, and Non-CC Exclusion List is available
via the Internet on the CMS Web site at: https://cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/ as
follows:
Table 6I (Complete MCC list);
Table 6J (Complete CC list); and
Table 6K (Complete list of CC Exclusions).
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
We received a request that we change the severity level for ICD-9-
CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified
coronary lesion) from a non-CC to an MCC. This issue was previously
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50542).
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for ICD-9-CM diagnosis code 414.4. The following chart
shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Code Diagnosis description CC Level Cnt 1 Cnt 1 Impact Cnt 2 Cnt 2 Impact Cnt 3 Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.4.................. Coronary Non-CC.............. 1,796 1.16 3,056 2.18 2,835 3.01
atherosclerosis due
to calcified lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------

We ran the above data as described in the FY 2008 IPPS final rule
with comment period (72 FR 47158 through 47161). The C1 value reflects
a patient with no other secondary diagnosis or with all other secondary
diagnoses that are non-CCs. The C2 value reflects a patient with at
least one other secondary diagnosis that is a CC, but none that is an
MCC. The C3 value reflects a patient with at least one other secondary
diagnosis that is an MCC.
The chart above shows that the C1 finding is 1.16. A value close to
1.0 in the C1 field suggests that the diagnosis produces the same
expected value as a non-CC. A value close to 2.0 suggests the condition
is more like a CC than a non-CC, but not as significant in resource
usage as an MCC. A value close to 3.0 suggests the condition is
expected to consume resources more similar to an MCC than a CC or a
non-CC. The C2 finding was 2.18. A C2 value close to 2.0 suggests the
condition is more like a CC than a non-CC, but not as significant in
resource usage as an MCC when there is at least one other secondary
diagnosis that is a CC but none that is an MCC. While the C1 value of
1.16 is above the 1.0 value for a non-CC, it does not support
reclassification to an MCC. As stated earlier, a value close to 3.0
suggests the condition is expected to consume resources more similar to
an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not
support reclassifying this diagnosis code to an MCC. Our clinical
advisors reviewed the data and evaluated this condition. They
recommended that we not change the severity level of diagnosis code
414.4 from a non-CC to an MCC. They do not believe that this diagnosis
would increase the severity level of patients. They pointed out that a
similar code, diagnosis code 414.2 (Chronic total occlusion of coronary
artery), is a non-CC. Our clinical advisors believe that diagnosis code
414.4 represents patients who are less severe than diagnosis code
414.2. Considering the C1 and C2 ratings and the input from our
clinical advisors, we are not proposing to reclassify diagnosis code
414.4 to an MCC; the diagnosis code would continue to be considered a
non-CC.
Therefore, based on the data and clinical analysis, we are
proposing to maintain diagnosis code 414.4 as a non-

[[Page 28019]]

CC. We are inviting public comments on our proposal.
11. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length of stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY 2008 IPPS final rule with comment period for a discussion of
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008
(72 FR 47152 through 47171).
b. Proposed CC Exclusions List for FY 2015
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\1\
---------------------------------------------------------------------------

\1\ We refer readers to the FY 1989 final rule (53 FR 38485,
September 30, 1988) for the revision made for the discharges
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR
36126, September 4, 1990) for the FY 1991 revision; the FY 1992
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision;
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY
1993 revision; the FY 1994 final rule (58 FR 46278, September 1,
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996
final rule (60 FR 45782, September 1, 1995) for the FY 1996
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR
51542); the FY 2013 final rule (77 FR 53315); and the FY 2014 final
rule (78 FR 50541). In the FY 2000 final rule (64 FR 41490, July 30,
1999), we did not modify the CC Exclusions List because we did not
make any changes to the ICD-9-CM codes for FY 2000.
---------------------------------------------------------------------------

For FY 2015, we are not proposing any changes to the CC Exclusion
List. Therefore, we are not developing or publishing Tables 6G
(Additions to the CC Exclusion List) or Table 6H (Deletions from the CC
Exclusion List). We have developed Table 6K (Complete List of CC
Exclusions), which is available only via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Because of the length of Table 6K, we are
not publishing it in the Addendum to this proposed rule. Each of these
principal diagnosis codes for which there is a CC exclusion is shown
with an asterisk and the conditions that will not count as a CC are
provided in an indented column immediately following the affected
principal diagnosis. Beginning with discharges on or after October 1 of
each year, the indented diagnoses are not recognized by the GROUPER as
valid CCs for the asterisked principal diagnoses.
A complete updated MCC, CC, and Non-CC Exclusions List is available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.
Because there are no proposed new, revised, or deleted diagnosis or
procedure codes for FY 2015, we are not developing Table 6A (New
Diagnosis Codes), Table 6B (New Procedure Codes), Table 6C (Invalid
Diagnosis Codes), Table 6D (Invalid Procedure Codes), Table 6E (Revised
Diagnosis Code Titles), and Table 6F (Revised Procedure Codes) to this
proposed rule and they are not published as part of this proposed rule.
We are proposing no additions or deletions to the MS-DRG MCC List
for FY 2015 and no additions or deletions to the MS-DRG CC List for FY
2015. Therefore, we are not developing Tables 6I.1 (Additions to the
MCC List), 6I.2 (Deletions to the MCC List), 6J.1 (Additions to the CC
List), and 6J.2 (Deletions to the CC List), and they are not published
as part of this proposed rule.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 31.0, is available on a CD
for $225.00. This manual may be obtained by writing 3M/HIS at the
following address: 100 Barnes Road, Wallingford, CT 06492; or by
calling (203) 949-0303, or by obtaining an order form at the Web site:
https://www.3MHIS.com. Please specify the revision or revisions
requested. Version

[[Page 28020]]

32.0 of this manual, which will include the final FY 2015 MS-DRG
changes, will be available after publication of the FY 2015 final rule
on a CD for $225.00. This manual may be obtained by writing 3M/HIS at
the address provided above; or by calling (203) 949-0303; or by
obtaining an order form at the Web site at: https://www/3MHIS.com.
Please specify the revision or revisions requested.
12. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0 (Incision of prostate);
60.12 (Open biopsy of prostate);
60.15 (Biopsy of periprostatic tissue);
60.18 (Other diagnostic procedures on prostate and
periprostatic tissue);
60.21 (Transurethral prostatectomy);
60.29 (Other transurethral prostatectomy);
60.61 (Local excision of lesion of prostate);
60.69 (Prostatectomy, not elsewhere classified);
60.81 (Incision of periprostatic tissue);
60.82 (Excision of periprostatic tissue);
60.93 (Repair of prostate);
60.94 (Control of (postoperative) hemorrhage of prostate);
60.95 (Transurethral balloon dilation of the prostatic
urethra);
60.96 (Transurethral destruction of prostate tissue by
microwave thermotherapy);
60.97 (Other transurethral destruction of prostate tissue
by other thermotherapy); and
60.99 (Other operations on prostate).
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\2\
---------------------------------------------------------------------------

\2\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003
final rule (67 FR 49999), we did not move any procedures from DRG
477. However, we did move procedure codes from DRG 468 and placed
them in more clinically coherent DRGs. In the FY 2004 final rule (68
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and
477 because the procedures are nonextensive. In the FY 2005 final
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In
addition, we added several existing procedures to DRGs 476 and 477.
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009,
2010, 2011, 2012, 2013, and 2014, no procedures were moved, as noted
in the FY 2008 final rule with comment period (72 FR 46241), in the
FY 2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR
43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012
final rule (76 FR 51549), in the FY 2013 final rule (77 FR 53321),
and in the FY 2014 final rule (78 FR 50545).
---------------------------------------------------------------------------

Our review of MedPAR claims data showed that there were no cases
that merited movement or should logically be assigned to any of the
other MDCs. Therefore, for FY 2015, we are not proposing to change the
procedures assigned among these MS-DRGs.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987
Through 989 Into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
As noted above, there were no cases that merited movement or that
should logically be assigned to any of the other MDCs. Therefore, for
FY 2015, we are not proposing to remove any procedures from MS-DRGs 981
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs
for the MDC into which the principal diagnosis is assigned.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we

[[Page 28021]]

have an adequate number of discharges to analyze the data.
There were no cases representing shifts in treatment practice or
reporting practice that would make the resulting MS-DRG assignment
illogical, or that merited movement so that cases should logically be
assigned to any of the other MDCs. Therefore, for FY 2015, we are not
proposing to move any procedure codes among these MS-DRGs.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections II.G.2. through 7. of the preamble of this proposed rule, we
are not proposing to add any diagnosis or procedure codes to MDCs for
FY 2015.
13. Proposed Changes to the ICD-9-CM System
a. ICD-10 Coordination and Maintenance Committee
In September 1985, the ICD-9-CM Coordination and Maintenance
Committee was formed. This is a Federal interdepartmental committee,
co-chaired by the National Center for Health Statistics (NCHS), the
Centers for Disease Control and Prevention, and CMS, charged with
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was to be made on October 1, 2013. Thereafter, the name of
the Committee was changed to the ICD-10 Coordination and Maintenance
Committee, effective with the March 19-20, 2014 meeting. The ICD-10
Coordination and Maintenance Committee will address updates to the ICD-
10-CM, ICD-10-PCS, and ICD-9-CM coding systems. The Committee is
jointly responsible for approving coding changes, and developing
errata, addenda, and other modifications to the coding systems to
reflect newly developed procedures and technologies and newly
identified diseases. The Committee is also responsible for promoting
the use of Federal and non-Federal educational programs and other
communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The official list of ICD-9-CM diagnosis and procedure codes by
fiscal year can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site
at: https://www.cms.gov/Medicare/Coding/ICD10/.
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM
diagnosis codes included in the Tabular List and Alphabetic Index for
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index
for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2015 at a public meeting held on September 18-19,
2013, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 15, 2013.
The Committee held its 2014 meeting on March 19-20, 2014. Any new
ICD-10-CM/PCS codes for which there was consensus of public support and
for which complete tabular and indexing changes will be made by May
2014 will be included in the October 1, 2014 update to ICD-10-CM/ICD-
10-PCS. For FY 2015, there are no proposed new, revised, or deleted
ICD-9-CM diagnosis or procedure codes.
Copies of the minutes of the procedure codes discussions at the
Committee's September 18-19, 2013 meeting and March 19-20, 2014 meeting
can be obtained from the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 18-19, 2013 meeting and
March 19-20, 2014 meeting are found at: https://www.cdc.gov/nchs/icd/icd9cm.html. These Web sites also provide detailed information about
the Committee, including information on requesting a new code,
attending a Committee meeting, and timeline requirements and meeting
dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
dfp4@cdc.gov.
Questions and comments concerning the procedure codes should be
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and
Maintenance Committee, CMS, Center for Medicare Management, Hospital
and Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by
Email to: patricia.brooks2@cms.hhs.gov.
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) . . . until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes

[[Page 28022]]

in order to identify and report the new codes.
The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance
Committee holds its meetings in the spring and fall in order to update
the codes and the applicable payment and reporting systems by October 1
of each year. Items are placed on the agenda for the Committee meeting
if the request is received at least 2 months prior to the meeting. This
requirement allows time for staff to review and research the coding
issues and prepare material for discussion at the meeting. It also
allows time for the topic to be publicized in meeting announcements in
the Federal Register as well as on the CMS Web site. The public decides
whether or not to attend the meeting based on the topics listed on the
agenda. Final decisions on code title revisions are currently made by
March 1 so that these titles can be included in the IPPS proposed rule.
A complete addendum describing details of all diagnosis and procedure
coding changes, both tabular and index, is published on the CMS and
NCHS Web sites in May of each year. Publishers of coding books and
software use this information to modify their products that are used by
health care providers. This 5-month time period has proved to be
necessary for hospitals and other providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this new April update would have on
providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee meeting
are considered for an April 1 update if a strong and convincing case is
made by the requester at the Committee's public meeting. The request
must identify the reason why a new code is needed in April for purposes
of the new technology process. The participants at the meeting and
those reviewing the Committee meeting summary report are provided the
opportunity to comment on this expedited request. All other topics are
considered for the October 1 update. Participants at the Committee
meeting are encouraged to comment on all such requests. There were no
requests approved for an expedited April l, 2014 implementation of a
code at the September 18-19, 2013 Committee meeting. Therefore, there
were no new codes implemented on April 1, 2014.
ICD-9-CM addendum and code title information is published on the
CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and
ICD-10-PCS addendum and code title information is published on the CMS
Web site at https://www.cms.gov/Medicare/Coding/ICD10/.
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at:
https://www.cdc.gov/nchs/icd/icd10cm.html. Information on new, revised,
and deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for
publication in the Coding Clinic for ICD-10. AHA also distributes
information to publishers and software vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore,
although we publish the code titles in the IPPS proposed and final
rules, they are not subject to comment in the proposed or final rules.
b. Code Freeze
In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR
3340), there was a discussion of the need for a partial or total freeze
in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS
codes. The public comment addressed in that final rule stated that the
annual code set updates should cease l year prior to the implementation
of ICD-10. The commenters stated that this freeze of code updates would
allow for instructional and/or coding software programs to be designed
and purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. The Committee also considered the delay in implementation of
ICD-10 until October 1, 2014. There was an announcement at the
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be
implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012 and October 1, 2013, there will be only
limited code updates to both ICD-9-CM and ICD-10 code sets to capture
new technology and new diseases.
On October 1, 2014, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to be no
updates to ICD-9-CM on October 1, 2014.
On October 1, 2015, one year after the originally
scheduled implementation of ICD-10, regular updates to ICD-10 were to
begin.
The ICD-10 (previously ICD-9-CM) Coordination and Maintenance
Committee announced that it would continue to meet twice a year during
the freeze. At these meetings, the public will be encouraged to comment
on whether or not requests for new diagnosis and procedure codes should
be created based on the need to capture new technology and new
diseases. Any code requests that do not meet the criteria will be
evaluated for implementation within ICD-10 one year after the
implementation of ICD-10, once the partial freeze is ended.

[[Page 28023]]

Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-10
Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting,
along with both written and audio transcripts of this meeting, is
posted on the Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
This partial code freeze has dramatically decreased the number of
codes created each year as shown by the following information.

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

As mentioned earlier, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-10 Coordination and Maintenance Committee meeting. The
public has supported only a limited number of new codes during the
partial code freeze, as can be seen by data shown above. We have gone
from creating several hundred new codes each year to creating only a
limited number of new ICD-9-CM and ICD-10 codes.
At the September 18-19, 2013 and March 19-20, 2014 Committee
meetings, we discussed any requests we had received for new ICD-10-CM
diagnosis and ICD-10-PCS procedure codes that were to be implemented on
October 1, 2014. We did not discuss ICD-9-CM codes. The public was
given the opportunity to comment on whether or not new ICD-10-CM and
ICD-10-PCS codes should be created, based on the partial code freeze
criteria. The public was to use the criteria as to whether codes were
needed to capture new diagnoses or new technologies. If the codes do
not meet those criteria for implementation during the partial code
freeze, consideration was to be given as to whether the codes should be
created after the partial code freeze ends one year after the
implementation of ICD-10-CM/PCS. We invited public comments on any code
requests discussed at the September 18-19, 2013 and March 19-20, 2014
Committee meetings for implementation as part of the October 1, 2014
update. The deadline for commenting on code proposals discussed at the
September 18-19, 2013 Committee meeting was November 15, 2013. The
deadline for commenting on code proposals discussed at the March 19-20,
2014 Committee meeting was April 18, 2014.

H. Recalibration of the Proposed FY 2015 MS-DRG Relative Weights

1. Data Sources for Developing the Proposed Relative Weights
In developing the proposed FY 2015 system of weights, we used two
data sources: Claims data and cost report data. As in previous years,
the claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2013 MedPAR data used in this proposed rule include
discharges occurring on October 1, 2012, through September 30, 2013,
based on bills received by CMS through December 31, 2013, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which at that time were under a waiver from the IPPS under
section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in
calculating the proposed relative weights includes data for
approximately 10,050,984 Medicare discharges from IPPS providers.
Discharges for Medicare beneficiaries enrolled in a Medicare Advantage
managed care plan are excluded from this analysis. These discharges are
excluded when the MedPAR ``GHO Paid'' indicator field on the claim
record is equal to ``1'' or when the MedPAR DRG payment field, which
represents the total payment for the claim, is equal to the MedPAR
``Indirect Medical Education (IME)'' payment field, indicating that the
claim was an ``IME only'' claim submitted by a teaching hospital on
behalf of a beneficiary enrolled in a Medicare Advantage managed care
plan. In addition, the December 31, 2013 update of the FY 2013 MedPAR
file complies with version 5010 of the X12 HIPAA Transaction and Code
Set Standards, and includes a variable called ``claim type.'' Claim
type ``60'' indicates that the claim was an inpatient claim paid as
fee-for-service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate
to encounter claims, Medicare Advantage IME claims, and HMO no-pay
claims. Therefore, the calculation of the proposed relative weights for
FY 2015 also excludes claims with claim type values not equal to
``60.'' The data exclude CAHs, including hospitals that subsequently
became CAHs after the period from which the data were taken. We note
that the FY 2015 proposed relative weights are based on the ICD-

[[Page 28024]]

9-CM diagnoses and procedures codes from the MedPAR claims data,
grouped through the ICD-9-CM version of the FY 2015 GROUPER (Version
32). The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS.
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year. Specifically, we used cost report data from the December
31, 2013 update of the FY 2012 HCRIS for calculating the proposed FY
2015 cost-based relative weights.
2. Methodology for Calculation of the Proposed Relative Weights
As we explain in section II.E.2. of the preamble of this proposed
rule, we are calculating the proposed FY 2015 relative weights based on
19 CCRs, as we did for FY 2014. The methodology we used to calculate
the proposed FY 2015 MS-DRG cost-based relative weights based on claims
data in the FY 2013 MedPAR file and data from the FY 2012 Medicare cost
reports is as follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2015 MS-DRG classifications discussed in sections
II.B. and II.G. of the preamble of this proposed rule.
The transplant cases that were used to establish the
proposed relative weights for heart and heart-lung, liver and/or
intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007,
respectively) were limited to those Medicare-approved transplant
centers that have cases in the FY 2012 MedPAR file. (Medicare coverage
for heart, heart-lung, liver and/or intestinal, and lung transplants is
limited to those facilities that have received approval from CMS as
transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 92.2 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50551) for the edit threshold related to FY 2014 and prior
fiscal years).
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the condition was present at the time of inpatient admission) in the
POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. These charges were then adjusted to cost by applying the
national average CCRs developed from the FY 2012 cost report data.
The 19 cost centers that we used in the proposed relative weight
calculation are shown in the following table. The table shows the lines
on the cost report and the corresponding revenue codes that we used to
create the 19 national cost center CCRs.

[[Page 28025]]

--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost from HCRIS Charges from HCRIS Medicare charges from
Revenue codes (Worksheet C, Part 1, (Worksheet C, Part 1, HCRIS (Worksheet D-
Cost center group name (19 MedPAR charge contained in Cost report line Column 5 and line Column 6 & 7 and line 3, Column & line
total) field MedPAR charge description number) Form CMS-2552- number) Form CMS-2552- number) Form CMS-2552-
field 10 10 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Routine Days................. Private Room 011X and 014X... Adults & C--1--C5--30 C--1--C6--30 D3--HOS--C2--30
Charges. Pediatrics
(General
Routine Care).
Semi-Private 012X, 013X and ..................... .....................
Room Charges. 016X-019X
Ward Charges.... 015X ..................... .....................
Intensive Days............... Intensive Care 020X............ Intensive Care C--1--C5--31 C--1--C6--31 D3--HOS--C2--31
Charges. Unit.
Coronary Care 021X............ Coronary Care C--1--C5--32 C--1--C6--32 D3--HOS--C2--32
Charges. Unit.
Burn Intensive C--1--C5--33 C--1--C6--33 D3--HOS--C2--33
Care Unit.
Surgical C--1--C5--34 C--1--C6--34 D3--HOS--C2--34
Intensive Care
Unit.
Other Special C--1--C5--35 C--1--C6--35 D3--HOS--C2--35
Care Unit.
Drugs........................ Pharmacy Charges 025X, 026X and Intravenous C--1--C5--64 C--1--C6--64 D3--HOS--C2--64
063X. Therapy. C--1--C7--64
Drugs Charged To C--1--C5--73 C--1--C6--73 D3--HOS--C2--73
Patient. C--1--C7--73
Supplies and Equipment....... Medical/Surgical 0270, 0271, Medical Supplies C--1--C5--71 C--1--C6--71 D3--HOS--C2--71
Supply Charges. 0272, 0273, Charged to C--1--C7--71
0274, 0277, Patients.
0279, and 0621,
0622, 0623.
Durable Medical 0290, 0291, 0292 DME-Rented...... C--1--C5--96 C--1--C6--96 D3--HOS--C2--96
Equipment and 0294-0299. C--1--C7--96
Charges.
Used Durable 0293............ DME-Sold........ C--1--C5--67 C--1--C6--97 D3--HOS--C2--97
Medical Charges. C--1--C7--97
Implantable Devices.......... ................ 0275, 0276, Implantable C--1--C5--72 C--1--C6--72 D3--HOS--C2--72
0278, 0624. Devices Charged C--1--C7--72
to Patients.
Therapy Services............. Physical Therapy 042X............ Physical Therapy C--1--C5--66 C--1--C6--66 D3--HOS--C2--66
Charges. C--1--C7--66
Occupational 043X............ Occupational C--1--C5--67 C--1--C6--67 D3--HOS--C2--67
Therapy Charges. Therapy. C--1--C7--67
Speech Pathology 044X and 047X... Speech Pathology C--1--C5--68 C--1--C6--68 D3--HOS--C2--68
Charges. C--1--C7--68
Inhalation Therapy........... Inhalation 041X and 046X... Respiratory C--1--C5--65 C--1--C6--65 D3--HOS--C2--65
Therapy Charges. Therapy. C--1--C7--65
Operating Room............... Operating Room 036X............ Operating Room.. C--1--C5--50 C--1--C6--50 D3--HOS--C2--50
Charges. C--1--C7--50
071X............ Recovery Room... C--1--C5--51 C--1--C6--51 D3--HOS--C2--51
C--1--C7--51
Labor & Delivery............. Operating Room 072X............ Delivery Room C--1--C5--52 C--1--C6--52 D3--HOS--C2--52
Charges. and Labor Room. C--1--C7--52
Anesthesia................... Anesthesia 037X............ Anesthesiology.. C--1--C5--53 C--1--C6--53 D3--HOS--C2--53
Charges. C--1--C7--53
Cardiology................... Cardiology 048X and 073X... Electrocardiolog C--1--C5--69 C--1--C6--69 D3--HOS--C2--69
Charges. y. C--1--C7--69
Cardiac Catheterization...... ................ 0481............ Cardiac C--1--C5--59 C--1--C6--59 D3--HOS--C2--59
Catheterization. C--1--C7--59
Laboratory................... Laboratory 030X, 031X, and Laboratory...... C--1--C5--60 C--1--C6--60 D3--HOS--C2--60
Charges. 075X. C--1--C7--60
PBP Clinic C--1--C5--61 C--1--C6--61 D3--HOS--C2--61
Laboratory C--1--C7--61
Services.
074X, 086X...... Electro- C--1--C5--70 C--1--C6--70 D3--HOS--C2--70
Encephalography. C--1--C7--70
Radiology.................... Radiology 032X, 040X...... Radiology--Diagn C--1--C5--54 C--1--C6--54 D3--HOS--C2--54
Charges. ostic. C--1--C7--54
028x, 0331, Radiology--Thera C--1--C5--55 C--1--C6--55 D3--HOS--C2--55
0332, 0333, peutic.
0335, 0339,
0342.
0343 and 344.... Radioisotope.... C--1--C5--56 C--1--C6--56 D3--HOS--C2--56
C--1--C7--56
Computed Tomography (CT) Scan CT Scan Charges. 035X............ Computed C--1--C5--57 C--1--C6--57 D3--HOS--C2--57
Tomography (CT) C--1--C7--57
Scan.

[[Page 28026]]

Magnetic Resonance Imaging MRI Charges..... 061X............ Magnetic C--1--C5--58 C--1--C6--58 D3--HOS--C2--58
(MRI). Resonance C--1--C7--58
Imaging (MRI).
Emergency Room............... Emergency Room 045x............ Emergency....... C--1--C5--91 C--1--C6--91 D3--HOS--C2--91
Charges. C--1--C7--91
Blood and Blood Products..... Blood Charges... 038x............ Whole Blood & C--1--C5--62 C--1--C6--62 D3--HOS--C2--62
Packed Red C--1--C7--62
Blood Cells.
Blood Storage/ 039x............ Blood Storing, C--1--C5--63 C--1--C6--63 D3--HOS--C2--63
Processing. Processing, & C--1--C7--63
Transfusing.
Other Services............... Other Service 0002-0099, 022X,
Charge. 023X, 024X,
052X, 053X.
055X-060X, 064X-
070X, 076X-
078X, 090X-095X
and 099X.
Renal Dialysis.. 0800X........... Renal Dialysis.. C--1--C5--74 C--1--C6--74 D3--HOS--C2--74
ESRD Revenue 080X and 082X- ................ ..................... C--1--C7--74 .....................
Setting Charges. 088X.
Home Program C--1--C5--94 C--1--C6--94 D3--HOS--C2--94
Dialysis. C--1--C7--94
Outpatient 049X............ ASC (Non C--1--C5--75 C--1--C6--75 D3--HOS--C2--75
Service Charges. Distinct Part).
Lithotripsy 079X............ ................ ..................... C--1--C7--75 .....................
Charge.
Other Ancillary. C--1--C5--76 C--1--C6--76 D3--HOS--C2--76
C--1--C7--76
Clinic Visit 051X............ Clinic.......... C--1--C5--90 C--1--C6--90 D3--HOS--C2--90
Charges. C--1--C7--90
Observation beds C--1--C5--92.01 C--1--C6--92.01 D3--HOS--C2--92.01
C--1--C7--92.01
Professional 096X, 097X, and Other Outpatient C--1--C5--93 C--1--C6--93 D3--HOS--C2--93
Fees Charges. 098X. Services. C--1--C7--93
Ambulance 054X............ Ambulance....... C--1--C5--95 C--1--C6--95 D3--HOS--C2--95
Charges. C--1--C7--95
Rural Health C--1--C5--88 C--1--C6--88 D3--HOS--C2--88
Clinic. C--1--C7--88
FQHC............ C--1--C5--89 C--1--C6--89 D3--HOS--C2--89
C--1--C7--89
--------------------------------------------------------------------------------------------------------------------------------------------------------

We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR
48462) for a discussion on the revenue codes included in the Supplies
and Equipment and Implantable Devices CCRs, respectively.
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2012 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The proposed FY 2015 cost-based relative weights were then
normalized by an adjustment factor of 1.642112 so that the average case
weight after

[[Page 28027]]

recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The proposed 19 national average CCRs for FY 2015 are as follows:

------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.483
Intensive Days................................................. 0.405
Drugs.......................................................... 0.191
Supplies & Equipment........................................... 0.293
Implantable Devices............................................ 0.355
Therapy Services............................................... 0.345
Laboratory..................................................... 0.128
Operating Room................................................. 0.212
Cardiology..................................................... 0.124
Cardiac Catheterization........................................ 0.131
Radiology...................................................... 0.164
MRIs........................................................... 0.086
CT Scans....................................................... 0.043
Emergency Room................................................. 0.197
Blood and Blood Products....................................... 0.360
Other Services................................................. 0.398
Labor & Delivery............................................... 0.393
Inhalation Therapy............................................. 0.182
Anesthesia..................................................... 0.115
------------------------------------------------------------------------

Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. In this FY 2015 IPPS/LTCH PPS proposed
rule, we are proposing to use that same case threshold in recalibrating
the proposed MS-DRG relative weights for FY 2015. Using data from the
FY 2013 MedPAR file, there were 8 MS-DRGs that contain fewer than 10
cases. Under the MS-DRGs, we have fewer low-volume DRGs than under the
CMS DRGs because we no longer have separate DRGs for patients aged 0 to
17 years. With the exception of newborns, we previously separated some
DRGs based on whether the patient was age 0 to 17 years or age 17 years
and older. Other than the age split, cases grouping to these DRGs are
identical. The DRGs for patients aged 0 to 17 years generally have very
low volumes because children are typically ineligible for Medicare. In
the past, we have found that the low volume of cases for the pediatric
DRGs could lead to significant year-to-year instability in their
relative weights. Although we have always encouraged non-Medicare
payers to develop weights applicable to their own patient populations,
we have received frequent complaints from providers about the use of
the Medicare relative weights in the pediatric population. We believe
that eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2015, because we do not have sufficient MedPAR data to set
accurate and stable cost relative weights for these low-volume MS-DRGs,
we are proposing to compute relative weights for the low-volume MS-DRGs
by adjusting their final FY 2014 relative weights by the percentage
change in the average weight of the cases in other MS-DRGs. The
crosswalk table is shown below:

------------------------------------------------------------------------
Low[dash]volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
768................... Vaginal Delivery with Final FY 2014 relative
O.R. Procedure weight (adjusted by
Except Sterilization percent change in
and/or D&C. average weight of the
cases in other MS-DRGs).
789................... Neonates, Died or Final FY 2014 relative
Transferred to weight (adjusted by
Another Acute Care percent change in
Facility. average weight of the
cases in other MS-DRGs).
790................... Extreme Immaturity or Final FY 2014 relative
Respiratory Distress weight (adjusted by
Syndrome, Neonate. percent change in
average weight of the
cases in other MS-DRGs).
791................... Prematurity with Final FY 2014 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
792................... Prematurity without Final FY 2014 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
793................... Full-Term Neonate Final FY 2014 relative
with Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
794................... Neonate with Other Final FY 2014 relative
Significant Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
795................... Normal Newborn....... Final FY 2014 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
------------------------------------------------------------------------

4. Bundled Payments for Care Improvement (BPCI) Initiative
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS' Center
for Medicare and Medicaid Innovation's Web site at https://innovation.cms.gov/initiatives/Bundled-Payments/ and to
section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53341 through 53343) for a discussion on the BPCI initiative.
In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent
fiscal years, we finalized a policy to treat hospitals that participate
in the BPCI initiative the same as prior fiscal years for the IPPS
payment modeling and ratesetting process without regard to a hospital's
participation within these bundled payment models (that is, as if a
hospital were not participating in those models under the BPCI
initiative). Therefore, for FY 2015, we are proposing to continue to
include all applicable data from subsection (d) hospitals participating
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in

[[Page 28028]]

the BPCI initiative in our ratesetting process.

I. Proposed Add-On Payments for New Services and Technologies

1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. Below we highlight
some of the major statutory and regulatory provisions relevant to the
new technology add-on payment criteria as well as other information.
For a complete discussion on the new technology add-on payment
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our
policy regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. Table 10
that was released with the FY 2014 IPPS/LTCH PPS final rule contains
the final thresholds that we use to evaluate applications for new
technology add-on payments for FY 2015. We refer readers to the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page.html for a complete
viewing of Table 10 from the FY 2014 IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a more detailed discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment is limited to the full MS-DRG payment plus 50 percent of the
estimated costs of the new technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We also amended Sec. 412.87(c) to specify that all
applicants for new technology add-on payments must have FDA approval or
clearance for their new medical service or technology by July 1 of each
year prior to the beginning of the fiscal year that the application is
being considered.
The Council on Technology and Innovation (CTI) at CMS oversees the

[[Page 28029]]

agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center for Clinical Standards and
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is
also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: https://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
CTI@cms.hhs.gov.
We note that applicants for add-on payments for new medical
services or technologies for FY 2016 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical
services or technologies under review before the publication of the
proposed rule for FY 2016, the CMS Web site also will post the tracking
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2015 prior
to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 29, 2013 (78 FR 71555
through 71557), and held a town hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February 12, 2014. In the announcement
notice for the meeting, we stated that the opinions and alternatives
provided during the meeting would assist us in our evaluations of
applications by allowing public discussion of the substantial clinical
improvement criterion for each of the FY 2015 new medical service and
technology add-on payment applications before the publication of the FY
2015 proposed rule.
Approximately 91 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting and posted
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=WXyR_TILfKo&list=TLiu1B_AxXsinTW6EEn4BVUdR4iEM61eV4. We
considered each applicant's presentation made at the town hall meeting,
as well as written comments submitted on the applications that were
received by the due date of January 21, 2014, in our evaluation of the
new technology add-on payment applications for FY 2015 in this proposed
rule.
In response to the published notice and the New Technology Town
Hall meeting, we received written comments regarding the applications
for FY 2015 new technology add-on payments. We summarize these comments
below or, if applicable, indicate that there were no comments received,
at the end of each discussion of the individual applications in this
proposed rule.
A number of attendees at the New Technology Town Hall meeting
provided comments that were unrelated to the ``substantial clinical
improvement'' criterion. As explained above and in the Federal Register
notice

[[Page 28030]]

announcing the New Technology Town Hall meeting (78 FR 71555 through
71557), the purpose of the meeting was specifically to discuss the
substantial clinical improvement criterion in regard to pending new
technology add-on payment applications for FY 2015. Therefore, we are
not summarizing those comments in this proposed rule. Commenters are
welcome to resubmit these comments in response to proposals presented
in this proposed rule.
3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. submitted an application for new technology
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY
2013. Glucarpidase is used in the treatment of patients who have been
diagnosed with toxic methotrexate (MTX) concentrations as of result of
renal impairment. The administration of Glucarpidase causes a rapid and
sustained reduction of toxic MTX concentrations.
Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350).
Voraxaze[supreg] was available on the market in the United States as a
commercial product to the larger population as of April 30, 2012. In
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we
expressed concerns about whether Voraxaze[supreg] could be considered
new for FY 2013. After consideration of all of the public comments
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which
is the date of market availability.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for Voraxaze[supreg]
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg]
are identified with ICD-9-CM procedure code 00.95 (Injection or
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per
vial. The applicant stated that an average of four vials is used per
Medicare beneficiary. Therefore, the average cost per case for
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for Voraxaze[supreg] is $45,000 per case.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). Our practice has been to begin and
end new technology add-on payments on the basis of a fiscal year, and
we have generally followed a guideline that uses a 6-month window
before and after the start of the fiscal year to determine whether to
extend the new technology add-on payment for an additional fiscal year.
In general, we extend add-on payments for an additional year only if
the 3-year anniversary date of the product's entry on the market occurs
in the latter half of the fiscal year (70 FR 47362).
With regard to the newness criterion for Voraxaze[supreg], as
stated above, we consider the beginning of the newness period to
commence when Voraxaze[supreg] was first available on the market on
April 30, 2012. Because the 3-year anniversary date for
Voraxaze[supreg] will occur in the latter half of FY 2015 (April 30,
2015), we are proposing to continue new technology add-on payments for
this technology for FY 2015. We are inviting public comments on this
proposal.
b. DIFICID^TM (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of
DIFICID^TM tablets. As indicated on the labeling submitted to
the FDA, the applicant noted that Fidaxomicin is taken twice a day as a
daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral
antibiotic. The applicant asserted that Fidaxomicin provides potent
bactericidal activity against C. Diff., and moderate bactericidal
activity against certain other gram-positive organisms, such as
enterococcus and staphylococcus. Unlike other antibiotics used to treat
CDAD, the applicant noted that the effects of Fidaxomicin preserve
bacteroides organisms in the fecal flora. These are markers of normal
anaerobic microflora. The applicant asserted that this helps prevent
pathogen introduction or persistence, which potentially inhibits the
re-emergence of C. Diff., and reduces the likelihood of overgrowths as
a result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserted that Fidaxomicin
does not alter this native intestinal microflora.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through
27941), we expressed concern that DIFICID^TM may not be
eligible for new technology add-on payments because eligibility is
limited to new technologies associated with procedures described by
ICD-9-CM codes. We further stated that drugs that are only taken orally
(such as DIFICID^TM) may not be eligible for consideration
for new technology add-on payments because there is no procedure
associated with these drugs and, therefore, no ICD-9-CM code(s). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after
consideration of the public comments received, we revised our policy to
allow the use of National Drug Codes (NDCs) to identify oral
medications that have no inpatient procedure for the purposes of new
technology add-on payments. The revised policy is effective for
payments for discharges occurring on or after October 1, 2012. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete
discussion on this issue.
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we
established that the beginning of the newness period for this
technology is its FDA approval date of May 27, 2011.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
DIFICID^TM and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved DIFICID^TM for new technology add-on payments for FY
2013. Cases of DIFICID^TM are identified with ICD-9-CM
diagnosis code 008.45 (Intestinal infection due to Clostridium
difficile) in combination with NDC code 52015-0080-01. Providers must
report the NDC on the 837i Health Care Claim Institutional form (in
combination with ICD-9-CM diagnosis code 008.45) in order to receive
the new technology add-on payment. According to the applicant, the cost
of DIFICID^TM is

[[Page 28031]]

$2,800 for a 10-day dosage. The average cost per day for
DIFICID^TM is $280 ($2,800/10). Cases of DIFICID^TM
within the inpatient setting typically incur an average dosage of 6.2
days, which results in an average cost per case for
DIFICID^TM of $1,736 ($280 x 6.2). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for DIFICID^TM is $868.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)).
The manufacturer commented through a letter to CMS, prior to the
publication of this proposed rule, requesting that CMS extend the
eligibility for a third year of new technology add-on payments for
DIFICID^TM in FY 2015. The manufacturer maintained that the
technology still meets all three criteria for new technology add-on
payments. Regarding the substantial clinical improvement criterion, the
applicant stated that DIFICID^TM continues to remain the only
FDA-approved treatment to demonstrate substantial clinical improvement
over existing therapies. No new treatments for CDAD have been approved
by the FDA since DIFICID^TM. The applicant further stated
that a third year of new technology add-on payments for
DIFICID^TM would continue to reduce access barriers in the
acute care hospital inpatient setting, which would support the
appropriate use of DIFICID^TM, a treatment that offers a
substantial clinical improvement over existing therapies.
With respect to the cost criterion, the applicant stated that
DIFICID^TM continues to meet the cost criterion. Using claims
data from the FY 2012 MedPAR file, the applicant provided updated data
from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53350 through 53358), and demonstrated that the average case-
weighted standardized charge per case exceeded the average case-
weighted thresholds under both analyses. The applicant stated that the
new technology add-on payment is intended to offer additional payments
to support patient access and appropriate use of new technologies for a
period of time until the MS-DRGs are adjusted to reflect the cost of
the new technology. The applicant believed that the analyses conducted
with the most recent MedPAR claims data available demonstrate that the
MS-DRG recalibrations are insufficient to accommodate the cost
associated with CDAD and new technologies to treat CDAD under the IPPS
within the allotted timeframe of 2 years. According to the applicant,
these payment amounts remain an obstacle for the appropriate use of new
technologies for CDAD that demonstrate substantial clinical improvement
over existing treatments, such as DIFICID^TM. The applicant
concluded that a third year of new technology add-on payments for
DIFICID^TM is needed to allow sufficient data for future MS-
DRG recalibration analyses.
With regard to newness criterion, the manufacturer commented that
it believed that the technology still meets the newness criterion for
the following reason: Sec. 412.87(b)(2) states that ``A medical
service or technology may be considered new within 2 or 3 years after
the point at which data begin to become available reflecting the
International Classification of Diseases, Ninth Revision, Clinical
Modification (ICD-9-CM) code assigned to the new service or technology
(depending on when a new code is assigned and data on the new service
or technology become available for DRG recalibration). After CMS has
recalibrated the DRGs, based on available data, to reflect the costs of
an otherwise new medical service or technology, the medical service or
technology will no longer be considered `new' under the criterion of
this section.'' The manufacturer noted that DIFICID^TM was
not assigned an ICD-9-CM procedure code and DIFICID^TM is the
first product for which no inpatient procedure is associated to receive
a new technology add-on payment since the implementation of the new
technology add-on payment policy.
The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53352), which indicated that ``Hospitals currently code and
report procedures and more invasive services such as surgeries,
infusion of drugs, and specialized procedures such as cardiac
catheterizations. Hospitals neither code nor report self-administered
drugs.'' Therefore, the manufacturer contended that, as an oral
therapy, neither DIFICID^TM nor its administration was
assigned an ICD-9-CM procedure code and, therefore, the technology
should still be eligible for the new technology add-on payments.
The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS
final rule, because an ICD-9-CM procedure code for the administration
of an oral medication did not exist and hospitals had no other
mechanism to report the use of DIFICID^TM, for FY 2013, CMS
instructed hospitals to report the DIFICID^TM NDC on hospital
inpatient claims to receive the new technology add-on payment for
DIFICID^TM. Prior to October 1, 2012, hospitals did not use
NDCs on hospital inpatient claims, which prevented CMS from isolating
DIFICID^TM cases and their associated costs. The manufacturer
further stated that the NDC methodology was a bold change in policy and
inpatient billing processes, and it stands to reason that, because of
hospitals unfamiliarity with reporting NDCs on inpatient claims,
hospitals' use of the DIFICID^TM NDC would greatly lag behind
the traditional use of ICD-9-CM procedure codes. As such, the
manufacturer reasoned that any lag in hospital reporting would directly
impact CMS' ability to track and analyze the cost data associated with
DIFICID^TM cases.
The manufacturer also noted that on August 31, 2012, CMS issued
Transmittal 2539, which is a change request for Medicare Administrative
Contractors concerning updates for the upcoming fiscal year. The
manufacturer stated that because the new technology add-on heading was
omitted in the transmittal, this change request did not highlight the
NDC billing approach to ensure that hospitals recognized the important
change, which may have caused hospitals to overlook the claim reporting
instructions for DIFICID^TM.
The manufacturer added that Transmittal 2539 and a Medicare
Learning Network[supreg] Matters (MLN) article were rescinded and
replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted
that among CMS' reasons for replacing the transmittal was to insert the
omitted new technology add-on section heading. The manufacturer stated
that, although the original transmittal further supports that
collection of DIFICID^TM-specific data did not begin until at
least October 1, 2012, CMS' reissuance of the claims processing
instructions, and the missing header in the initial instructions,
effectively delayed implementation of the new technology add-on
payments for 3 months past the October 2012 beginning date. The
manufacturer also believed that the need to replace the transmittal
underlies hospitals' difficulties instituting claims' reporting
instructions to receive new technology add-on payments for
DIFICID^TM at the hospital level.
The manufacturer noted that anecdotal feedback from hospitals,
which was shared with CMS during a

[[Page 28032]]

meeting in June 2013, suggests that some hospitals faced challenges
implementing the appropriate billing and coding processes. The
manufacturer was concerned that that these challenges were, in part,
caused by the missing header, and that these challenges may have
impacted whether eligible cases were properly billed and coded to
receive the new technology add-on payment for DIFICID^TM. The
manufacturer was further concerned that the effects of any lag or delay
caused by unfamiliarity with reporting NDCs and the missing header
would also impact the data available to CMS to recalibrate the MS-DRGs
and, separately, to evaluate the impact of the new technology add-on
payment for DIFICID^TM. The manufacturer further explained
that, while DIFICID^TM was available to hospitals after its
launch in July 2011, hospitals had no experience reporting NDCs until
October 2012, and may not have recognized the opportunity to, or
understood the mechanism for doing so, until after January 2013. For
the purposes of inpatient data collection and ratesetting, the
manufacturer believed that this meant that 2 complete years of
DIFICID^TM costs would not be fully reflected in the Medicare
claims data for the FY 2015 MS-DRG recalibrations.
The manufacturer also analyzed the 100 percent sample of the
Standard Analytical File (SAF) for calendar year 2012, which contained
first quarter claims data for FY 2013, the first 3 months that
DIFICID^TM was eligible for the new technology add-on
payments. The manufacturer found a total of 43,608 cases with a
diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38
cases across 26 hospitals that reported new technology add-on payments
for DIFICID^TM on submitted claims. The manufacturer stated
that this preliminary data suggests that the number of cases available
for MS-DRG recalibrations for FY 2015 is limited. The manufacturer
stated that it is currently attempting to secure FY 2013 MedPAR claims
data and that it will likely provide further insights on these issues.
In addition, the manufacturer noted that prior new technology add-
on payment application approvals have involved technologies with much
narrower patient populations compared to DIFICID^TM, allowing
the costs of those technologies to influence the MS-DRG relative
payment weights for the small number of MS-DRGs with which they are
associated. The manufacturer explained that, unlike other technologies
approved for new technology add-on payments, the DIFICID^TM
therapeutic value, while limited to patients with CDAD, is used in
patients across a wide range of MS-DRGs due to it being reported as a
secondary diagnosis in two-thirds of the cases compared to other
technologies, which are assigned to a relatively small number of MS-
DRGs. For example, cases involving the Spiration IBV[supreg] Valve
System, which was granted approval for new technology add-on payments
in FY 2010, primarily mapped to three MS-DRGs: 163 (Major Chest
Procedures with MCC), 164 (Major Chest Procedures with CC), and 165
(Major Chest Procedures without CC/MCC). In its analysis of the FY 2012
MedPAR data for the cost criterion, the manufacturer found cases using
DIFICID^TM mapped to 544 unique MS-DRGs. Under the 100
percent sample of the SAF for calendar year 2012, the 38 cases
mentioned above mapped to 20 different MS-DRGs. The manufacturer
maintained that because of the diffuse nature of the
DIFICID^TM cases mapping to many MS-DRGs, it believed an
extension of the newness period is required for the costs to be
adequately reflected in the MS-DRG relative payment weights. In the
unique case of DIFICID^TM for the treatment of CDAD, the
manufacturer stated that 2 years of new technology add-on payments is
insufficient to allow the 544 MS-DRGs to be recalibrated to
sufficiently reflect the cost of the use of DIFICID^TM, a
treatment that offers significant clinical improvement over existing
therapies.
With regard to the technology's newness, as discussed in the FY
2005 IPPS final rule (69 FR 49003), the timeframe that a new technology
can be eligible to receive new technology add-on payments begins when
data become available. Section 412.87(b)(2) clearly states that, ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new service or technology (depending on
when a new code is assigned and data on the new service or technology
become available for DRG recalibration).'' Section 412.87(b)(2) also
states, ``[a]fter CMS has recalibrated the DRGs, based on available
data, to reflect the costs of an otherwise new medical service or
technology, the medical service or technology will no longer be
considered `new' under the criterion of this section.'' Therefore,
regardless of whether a technology can be individually identified by a
separate ICD-9-CM code or whether it can only be identified using a NDC
code, if the costs of the technology are included in the charge data,
and the MS-DRGs have been recalibrated using that data, then the
technology can no longer be considered ``new'' for the purposes of this
provision. We further stated in that final rule that the period of
newness does not necessarily start with the approval date for the
medical service or technology, and does not necessarily start with the
issuance of a distinct code. Instead, it begins with availability of
the product on the U.S. market, which is when data become available. We
have consistently applied this standard, and believe that it is most
consistent with the purpose of new technology add-on payments.
In addition, similar to our discussion in the FY 2006 IPPS final
rule (70 FR 47349), we do not believe that case volume is a relevant
consideration for making the determination as to whether a product is
``new.'' Consistent with the statute, a technology no longer qualifies
as ``new'' once it is more than 2 to 3 years old, irrespective of how
frequently it has been used in the Medicare population. Similarly, this
same determination is applicable no matter how many MS-DRGs the
technology is spread across. Therefore, if a product is more than 2 to
3 years old, we consider its costs to be included in the MS-DRG
relative weights whether its use in the Medicare population has been
frequent or infrequent. We recognize that using an NDC was a novel
billing practice under the IPPS. Nevertheless, even though hospitals
may not have coded all uses of DIFICID^TM with the NDC,
hospital bills would still include charges for all items and services
furnished to a Medicare patient, including use of DIFICID^TM.
Therefore, even though we may be not be able to identify all uses of
DIFICID^TM in the Medicare charge data, hospital charges for
the MS-DRGs would continue to reflect use of this technology.
With respect to the Transmittal 2539 omitting the header referenced
above, as noted above, CMS corrected this issue as soon as possible by
rescinding and reissuing this transmittal. Additionally, as noted by
the manufacturer, this transmittal was meant for MACs and not
hospitals. We believe the guidance issued in Transmittal 2539 clearly
described to MACs how hospitals were to report the NDC on the inpatient
claim in order to identify cases using DIFICID^TM for
purposes of new technology add-on payments. Additionally, the MLN
article that the manufacturer referred to above (MLN articles are
typically a summary of transmittals for the general public) clearly
indicated that DIFICID^TM was new for FY 2013 new technology
add-

[[Page 28033]]

on payments and clearly described how to properly code
DIFICID^TM on the inpatient bill in order to receive the new
technology add-on payment for FY 2013. The MLN article can be
downloaded from the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM8041.pdf.
After considering the manufacturer's comments above, we still
consider the beginning of the newness period to commence when
DIFICID^TM was first approved by the FDA on May 27, 2011.
Because the 3-year anniversary date of the product's entry on the U.S.
market occurred in the second half of the fiscal year (after April 1,
2014), we continued new technology add-on payments for
DIFICID^TM for FY 2014. However, for FY 2015, the 3-year
anniversary date of the product's entry on the U.S. market would occur
on May 27, 2014, which is prior to the beginning of FY 2015. Therefore,
we are proposing to discontinue new technology add-on payments for
DIFICID^TM for FY 2015. We are inviting public comments on
this proposal.
c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. The applicant stated that the current treatment for patients who
have had an AAA is an endovascular graft. The applicant explained that
the Zenith[supreg] F. Graft is an implantable device designed to treat
patients who have an AAA and who are anatomically unsuitable for
treatment with currently approved AAA endovascular grafts because of
the length of the infrarenal aortic neck. The applicant noted that,
currently, an AAA is treated through an open surgical repair or medical
management for those patients not eligible for currently approved AAA
endovascular grafts.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we
stated that because the Zenith[supreg] F. Graft was approved by the FDA
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the
newness criterion as of that date.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
Zenith[supreg] F. Graft and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved the Zenith[supreg] F. Graft for new technology add-on payments
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are
eligible for new technology add-on payments are identified by ICD-9-CM
procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta). In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 are for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we do not believe it is appropriate to include these costs in our
calculation of the maximum cost to determine the maximum add-on payment
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for
the Zenith[supreg] F. Graft is $16,343 ($17,264-$921). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum add-on payment for a case involving the Zenith[supreg] F. Graft
is $8,171.50.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zenith[supreg] F. Graft, as stated above, we consider the
beginning of the newness period to commence when the Zenith[supreg] F.
Graft was approved by the FDA on April 4, 2012. Because the 3-year
anniversary date of the entry of the Zenith[supreg] F. Graft on the
U.S. market will occur in the second half of the fiscal year (April 4,
2015), we are proposing to continue new technology add-on payments for
this technology for FY 2015. We are inviting public comments on this
proposal.
d. Kcentra^TM
CSL Behring submitted an application for new technology add-on
payments for Kcentra^TM for FY 2014. Kcentra^TM is
a replacement therapy for fresh frozen plasma (FFP) for patients with
an acquired coagulation factor deficiency due to warfarin and who are
experiencing a severe bleed. Kcentra^TM contains the Vitamin
K dependent coagulation factors II, VII, IX and X, together known as
the prothrombin complex, and antithrombotic proteins C and S. Factor IX
is the lead factor for the potency of the preparation. The product is a
heat-treated, non-activated, virus filtered and lyophilized plasma
protein concentrate made from pooled human plasma. Kcentra^TM
is available as a lyophilized powder that needs to be reconstituted
with sterile water prior to administration via intravenous infusion.
The product is dosed based on Factor IX units. Concurrent Vitamin K
treatment is recommended to maintain blood clotting factor levels once
the effects of Kcentra^TM have diminished.
Kcentra^TM was approved by the FDA on April 29, 2013. In
the FY 2014 IPPS/LTCH PPS final rule, we approved new ICD-9-CM
procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex
Concentrate) which uniquely identifies Kcentra^TM.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted
that we were concerned that Kcentra^TM may be substantially
similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS
final rule, in response to comments submitted by the manufacturer, we
stated that we agree that Kcentra^TM may be used in a patient
population that is experiencing an acquired coagulation factor
deficiency due to Warfarin and who are experiencing a severe bleed
currently but are ineligible for FFP, particularly for use by IgA
deficient patients and other patient populations that have no other
treatment option to resolve severe bleeding in the context of an
acquired Vitamin K deficiency. In addition, FFP is limited because it
requires special storage conditions while Kcentra^TM is
stable for up to 36 months at room temperature thus allowing hospitals
that otherwise would not have access to FFP (for example, small rural
hospitals as discussed by the applicant in its comments) to keep a
supply of Kcentra^TM and treat patients who would possibly
have no access to FFP. We noted that FFP is considered perishable and
can be scarce by nature (due to production and other market
limitations) thus making some hospitals unable to store FFP, which
limits access to certain patient populations in certain locations.
Therefore, we stated that we believe that Kcentra^TM provides
a therapeutic option for a new patient population and is not
substantially similar to FFP. Also, we gave credence to the information
presented by the

[[Page 28034]]

manufacturer that Kcentra^TM provides a simple and rapid
repletion relative to FFP and reduces the risk of a transfusion
reaction relative to FFP because it does not contain ABO antibodies and
does not require ABO typing. As a result, we concluded that
Kcentra^TM is not substantially similar to FFP, and that it
meets the newness criterion.
After evaluation of the newness, cost, and substantial clinical
improvement criteria for new technology add-on payments for
Kcentra^TM and consideration of the public comments we
received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we
approved Kcentra^TM for new technology add-on payments for FY
2014 (78 FR 50575 through 50580). Cases involving Kcentra^TM
that are eligible for new technology add-on payments are identified by
ICD-9-CM procedure code 00.96. In the application, the applicant
estimated that the average Medicare beneficiary would require an
average dosage of 2500 International Units (IU). Vials contain 500 IU
at a cost of $635 per vial. Therefore, cases of Kcentra^TM
would incur an average cost per case of $3,175 ($635 x 5). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the technology or 50 percent of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum add-on payment for a case of Kcentra^TM is
$1,587.50 for FY 2014.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated
that new technology add-on payments for Kcentra^TM would not
be available with respect to discharges for which the hospital received
an add-on payment for a blood clotting factor administered to a
Medicare beneficiary with hemophilia who is a hospital inpatient. Under
section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG
prospective payment rate is ``the amount of the payment with respect to
the operating costs of inpatient hospital services (as defined in
subsection (a)(4) of this section)'' for discharges on or after April
1, 1988. Section 1886(a)(4) of the Act excludes from the term
``operating costs of inpatient hospital services'' the costs with
respect to administering blood clotting factors to individuals with
hemophilia. The costs of administering a blood clotting factor to a
Medicare beneficiary who has hemophilia and is a hospital inpatient are
paid separately from the IPPS. (For information on how the blood
clotting factor add-on payment is made, we refer readers to Section
20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which
can be downloaded from the CMS Web site at: https://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we
stated that if Kcentra^TM is approved by the FDA as a blood
clotting factor, we believed that it may be eligible for blood clotting
factor add-on payments when administered to Medicare beneficiaries with
hemophilia. We make an add-on payment for Kcentra^TM for such
discharges in accordance with our policy for payment of a blood
clotting factor, and the costs would be excluded from the operating
costs of inpatient hospital services as set forth in section 1886(a)(4)
of the Act.
Section 1886(d)(5)(K)(i) of the Act requires the Secretary to
``establish a mechanism to recognize the costs of new medical services
and technologies under the payment system established under this
subsection'' beginning with discharges on or after October 1, 2001. We
believe that it is reasonable to interpret this requirement to mean
that the payment mechanism established by the Secretary recognizes only
costs for those items that would otherwise be paid based on the
prospective payment system (that is, ``the payment system established
under this subsection''). As noted above, under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is the amount of payment for the operating costs of
inpatient hospital services, as defined in section 1886(a)(4) of the
Act, for discharges on or after April 1, 1988. We understand this to
mean that a new medical service or technology must be an operating cost
of inpatient hospital services paid based on the prospective payment
system, and not excluded from such costs, in order to be eligible for
the new technology add-on payment. We pointed out that new technology
add-on payments are based on the operating costs per case relative to
the prospective payment rate as described in Sec. 412.88. Therefore,
we believe that new technology add-on payments are appropriate only
when the new technology is an operating cost of inpatient hospital
services and are not appropriate when the new technology is excluded
from such costs.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated
that we believe that hospitals may only receive new technology add-on
payments for discharges where Kcentra^TM is an operating cost
of inpatient hospital services. In other words, a hospital would not be
eligible to receive the new technology add-on payment when it is
administering Kcentra^TM in treating a Medicare beneficiary
who has hemophilia. In those instances, Kcentra^TM is
specifically excluded from the operating costs of inpatient hospital
services in accordance with section 1886(a)(4) of the Act and paid
separately from the IPPS. However, when a hospital administers
Kcentra^TM to a Medicare beneficiary who does not have
hemophilia, the hospital would be eligible for a new technology add-on
payment because Kcentra^TM would not be excluded from the
operating costs of inpatient hospital services. Therefore, discharges
where the hospital receives a blood clotting factor add-on payment are
not eligible for a new technology add-on payment for the blood clotting
factor. We refer readers to Chapter Three, Section 20.7.3 of the
Medicare Claims Processing Manual for a complete discussion on when a
blood clotting factor add-on payment is made. The manual can be
downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for Kcentra^TM, as stated above, we consider the beginning of
the newness period to commence when Kcentra^TM was approved
by the FDA on April 29, 2013. Because Kcentra^TM is still
within the 3-year newness period, we are proposing to continue new
technology add-on payments for this technology for FY 2015. We are
inviting public comments on this proposal.
e. Argus[supreg] II Retinal Prosthesis System
Second Sight Medical Products, Inc. submitted an application for
new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System (Argus[supreg] II System) for FY 2014. The
Argus[supreg] II System is an active implantable medical device that is
intended to provide electrical stimulation of the retina to induce
visual perception in patients who are profoundly blind due to retinitis
pigmentosa (RP). These patients have bare or no light perception in
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally
worn video camera. The Argus[supreg] II implant is intended to be
implanted in a single eye, typically the worse-seeing eye. Currently,
bilateral

[[Page 28035]]

implants are not intended for this technology. According to the
applicant, the surgical implant procedure takes approximately 4 hours
and is performed under general anesthesia.
The Argus[supreg] II System consists of three primary components:
(1) An implant which is an epiretinal prosthesis that is fully
implanted on and in the eye (that is, there are no percutaneous leads);
(2) external components worn by the user; and (3) a ``fitting'' system
for the clinician that is periodically used to perform diagnostic tests
with the system and to custom-program the external unit for use by the
patient. We describe these components more fully below.
Implant: The retinal prosthesis implant is responsible for
receiving information from the external components of the system and
electrically stimulating the retina to induce visual perception. The
retinal implant consists of: (a) A receiving coil for receiving
information and power from the external components of the Argus[supreg]
II System; (b) electronics to drive stimulation of the electrodes; and
(c) an electrode array. The receiving coil and electronics are secured
to the outside of the eye using a standard scleral band and sutures,
while the electrode array is secured to the surface of the retina
inside the eye by a retinal tack. A cable, which passes through the eye
wall, connects the electronics to the electrode array. A pericardial
graft is placed over the extra-ocular portion on the outside of the
eye.
External Components: The implant receives power and data
commands wirelessly from an external unit of components, which include
the Argus II Glasses and Video Processing Unit (VPU). A small
lightweight video camera and transmitting coil are mounted on the
glasses. The telemetry coils and radio-frequency system are mounted on
the temple arm of the glasses for transmitting data from the VPU to the
implant. The glasses are connected to the VPU by a cable. This VPU is
worn by the patient, typically on a belt or a strap, and is used to
process the images from the video camera and convert the images into
electrical stimulation commands, which are transmitted wirelessly to
the implant.
``Fitting System'': To be able to use the Argus[supreg] II
System, a patient's VPU needs to be custom-programmed. This process,
which the applicant called ``fitting'', occurs in the hospital/clinic
shortly after the implant surgery and then periodically thereafter as
needed. The clinician/physician also uses the ``Fitting System'' to run
diagnostic tests (for example, to obtain electrode and impedance
waveform measurements or to check the radio-frequency link between the
implant and external unit). This ``Fitting System'' can also be
connected to a ``Psychophysical Test System'' to evaluate patients'
performance with the Argus[supreg] II System on an ongoing basis.
These three components work together to stimulate the retina and
allow a patient to perceive phosphenes (spots of light), which they
then need to learn to interpret. While using the Argus[supreg] II
System, the video camera on the patient-worn glasses captures a video
image. The video camera signal is sent to the VPU, which processes the
video camera image and transforms it into electrical stimulation
patterns. The electrical stimulation data are then sent to a
transmitter coil mounted on the glasses. The transmitter coil sends
both data and power via radio-frequency (RF) telemetry to the implanted
retinal prosthesis. The implant receives the RF commands and delivers
stimulation to the retina via an array of electrodes that is secured to
the retina with a retinal tack.
In patients with RP, the photoreceptor cells in the retina, which
normally transduce incoming light into an electro-chemical signal, have
lost most of their function. The stimulation pulses delivered to the
retina via the electrode array of the Argus[supreg] II Retinal
Prosthesis System are intended to mimic the function of these
degenerated photoreceptors cells. These pulses induce cellular
responses in the remaining, viable retinal nerve cells that travel
through the optic nerve to the visual cortex where they are perceived
as phosphenes (spots of light). Patients learn to interpret the visual
patterns produced by these phosphenes.
With respect to the newness criterion, according to the applicant,
the FDA designated the Argus[supreg] II System a Humanitarian Use
Device in May 2009 (HUD designation 09-0216). The applicant
submitted a Humanitarian Device Exemption (HDE) application
(H110002) to the FDA in May 2011 to obtain market approval for
the Argus[supreg] II System. The HDE was referred to the Ophthalmic
Devices Panel of the FDA's Medical Devices Advisory Committee for
review and recommendation. At the Panel's meeting held on September 28,
2012, the Panel voted 19 to 0 that the probable benefits of the
Argus[supreg] II System outweigh the risks of the system for the
proposed indication for use. The applicant received the HDE approval
from the FDA on February 14, 2013. Currently there are no other
approved treatments for patients with severe to profound RP. The
Argus[supreg] II System has an IDE number of G050001 and is a Class III
device. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50580 through
50583), we approved new ICD-9-CM procedure code 14.81 (Implantation of
Epiretinal Visual Prosthesis), which uniquely identifies the
Argus[supreg] II System. The other two codes approved by CMS are for
removal, revision, or replacement of the device. More information on
these codes can be found on the CMS Web site at: https://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html.
After evaluation of the new technology add-on payment application
and consideration of public comments received, we concluded that the
Argus[supreg] II System met all of the new technology add-on payment
policy criteria. Therefore, we approved the Argus[supreg] II System for
new technology add-on payments in FY 2014 (78 FR 50580 through 50583).
Cases involving the Argus[supreg] II System that are eligible for new
technology add-on payments are identified by ICD-9-CM procedure code
14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that
the Secretary establish a mechanism to recognize the costs of new
medical services or technologies under the payment system established
under that subsection, which establishes the system for paying for the
operating costs of inpatient hospital services. The system of payment
for capital costs is established under section 1886(g) of the Act,
which makes no mention of any add-on payments for a new medical service
or technology. Therefore, it is not appropriate to include capital
costs in the add-on payments for a new medical service or technology.
In the application, the applicant provided a breakdown of the costs of
the Argus[supreg] II System. The total operating cost of the
Argus[supreg] II System is $144,057.50. Under Sec. 412.88(a)(2), new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the device or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum add-on
payment for a case involving the Argus[supreg] II System for FY 2014 is
$72,028.75.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Argus[supreg] II System, as stated above, we consider the
beginning of the newness period to commence when the Argus[supreg] II

[[Page 28036]]

System was approved by the FDA on February 14, 2013. Because the
Argus[supreg] II System is still within the 3-year newness period, we
are proposing to continue new technology add-on payments for this
technology for FY 2015. We are inviting public comments on this
proposal.
f. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The
Zilver[supreg] PTX[supreg] is intended for use in the treatment of
peripheral artery disease (PAD) of the above-the-knee femoropopliteal
arteries (superficial femoral arteries). According to the applicant,
the stent is percutaneously inserted into the artery(s), usually by
accessing the common femoral artery in the groin. The applicant stated
that an introducer catheter is inserted over the wire guide and into
the target vessel where the lesion will first be treated with an
angioplasty balloon to prepare the vessel for stenting. The applicant
indicated that the stent is self-expanding, made of nitinol (nickel
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug
approved for use as an anticancer agent and for use with coronary
stents to reduce the risk of renarrowing of the coronary arteries after
stenting procedures.
The applicant received FDA approval on November 15, 2012, for the
Zilver[supreg] PTX[supreg]. The applicant maintains that the
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for
superficial femoral arteries. The technology is currently described by
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of
the superficial femoral artery).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through
50585), after evaluation of the new technology add-on payment
application and consideration of the public comments received, we
approved the Zilver[supreg] PTX[supreg] for new technology add-on
payments in FY 2014. Cases involving the Zilver[supreg] PTX[supreg]
that are eligible for new technology add-on payments are identified by
ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH
PPS final rule, to determine the amount of Zilver[supreg] PTX[supreg]
stents per case, instead of using the amount of stents used per case
based on the ICD-9-CM codes, the applicant used an average of 1.9
stents per case based on the Zilver[supreg] PTX[supreg] Global Registry
Clinical Study. The applicant stated in its application that the
anticipated cost per stent is approximately $1,795. Therefore, cases of
the Zilver[supreg] PTX[supreg] would incur an average cost per case of
$3,410.50 ($1,795 x 1.9). Under Sec. 412.88(a)(2), new technology add-
on payments are limited to the lesser of 50 percent of the average cost
of the device or 50 percent of the costs in excess of the MS-DRG
payment for the case. As a result, the maximum add-on payment for a
case of the Zilver[supreg] PTX[supreg] is $1,705.25 for FY 2014.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zilver[supreg] PTX[supreg], as stated above, we consider the
beginning of the newness period to commence when the Zilver[supreg]
PTX[supreg] was approved by the FDA on November 15, 2012. Because the
Zilver[supreg] PTX[supreg] is still within the 3-year newness period,
we are proposing to continue new technology add-on payments for this
technology for FY 2015. We are inviting public comments on this
proposal.
4. FY 2015 Applications for New Technology Add-On Payments
We received seven applications for new technology add-on payments
for FY 2015, three of which were applications resubmitted from FY 2014.
However, one applicant withdrew its application prior to the
publication of this proposed rule. In accordance with the regulations
under Sec. 412.87(c), applicants for new technology add-on payments
must have FDA approval by July 1 of each year prior to the beginning of
the fiscal year that the application is being considered. A discussion
of the six remaining applications is presented below.
a. Dalbavancin (Durata Therapeutics, Inc.)
Durata Therapeutics, Inc. submitted an application for new
technology add-on payments for FY 2015 for the use of Dalbavancin.
Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic
administered as a once-weekly 30-minute infusion via a peripheral line
for the treatment of patients with acute bacterial skin and skin
structure infections, or ABSSSI. According to the applicant,
Dalbavancin's unique pharmacokinetic profile demonstrates rapid
bactericidal activity that is potent and sustained against serious
gram-positive bacteria, including methicillin-resistant Staphylococcus
aureus (MRSA).
With respect to the newness criterion, the applicant stated that
Dalbavancin's once-weekly dosing, a simpler regimen than the current
standard of care (Vancomycin) of daily or multiple-times daily
intravenous dosing, allows for the discontinuation of IV access with
its attendant risks of line-related thrombosis and infection. The
applicant submitted a New Drug Approval Application (NDA) on September
26, 2013, and anticipates FDA approval of Dalbavancin sometime in May
of 2014. To date, no ICD-10-PCS code specifically describes the
administration of Dalbavancin. The applicant applied for a new ICD-10-
PCS code to describe the administration of Dalbavancin, which was
presented at the March 19-20, 2014 ICD-10 Coordination and Maintenance
Committee meeting. If approved, the code will be effective on October
1, 2014. We are inviting public comments on whether the technology
meets the newness criterion.
We note that in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43813 through 43814), we established criteria for evaluating whether a
new technology is substantially similar to an existing technology,
specifically: (1) Whether a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) whether a
product is assigned to the same or a different MS-DRG; and (3) whether
the new use of the technology involves the treatment of the same or
similar type of disease and the same or similar patient population. If
a technology meets all three of the criteria above, it would be
considered substantially similar to an existing technology and would
not be considered ``new'' for purposes of new technology add-on
payments.
In evaluating the first criterion, the applicant stated that
Dalbavancin's mechanism of action is unique compared to other
antibiotics as it involves the interruption of cell wall synthesis
resulting in bacterial cell death. Furthermore, the applicant cited
Dalbavancin's long half-life as the factor that differentiates itself
from existing antibacterial agents active against MRSA. With respect to
the second criterion, we believe that cases of ABSSSI that use
Dalbavancin or other antibiotics for treatment would be assigned to the
same MS-DRGs. Finally, with respect to the third criterion, we believe
that Dalbavancin and other antibiotics used to treat cases of ABSSSI
treat the same disease and patient population. Based on evaluation of
the substantially similarity criteria, it appears that Dalbavancin is
not substantially similar to other antibiotics for the treatment of
ABSSSI because it

[[Page 28037]]

does not use the same or a similar mechanism of action to achieve a
therapeutic outcome. We are inviting public comments regarding whether
Dalbavancin is substantially similar to existing antibiotics and
whether Dalbavancin meets the newness criterion.
According to the applicant, Dalbavancin is indicated to treat gram-
positive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These
conditions may be a primary diagnosis, but are often secondary to an
underlying condition such as diabetes, heart failure, pressure ulcers,
etc. Therefore, the technology is eligible to be used across all MS-
DRGs. To demonstrate that it meets the cost criterion, the applicant
searched the FY 2012 MedPAR file (across all MS-DRGs) for cases where
at least one ABSSSI ICD-9-CM code was present on the claim, including
those where MRSA was present on a claim with an ABSSSI diagnosis.
Specifically, the applicant searched for cases with one of the
following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and
abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and
paronychia of finger); 681.10 (Cellulitis and abscess of toe,
unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis
and abscess of unspecified digit); 682.0-682.9 (Other cellulitis and
abscess of face, neck, trunk, upper arm and forearm, hand except
fingers and thumb, buttock, leg except foot, foot except toes,
specified sites, unspecified sites); 686.00 (Pyoderma, unspecified);
686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic
granuloma of skin and subcutaneous tissue); 686.8 (Other specified
local infections of skin and subcutaneous tissue); 686.9 (Unspecified
local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic
wound infection not elsewhere classified); 998.51 (Infected
postoperative seroma); and 998.59 (Other postoperative infection). The
applicant believed that these cases represent potential cases eligible
for the administration of Dalbavancin.
The applicant found 570,698 cases across 682 MS-DRGs and noted that
almost 25 percent of the total number of cases would map to MS-DRGs 603
(Cellulitis without MCC), while the top 10 MS-DRGs accounted for almost
half (or 49 percent) of the total number of cases. Of the 682 MS-DRGs,
only 90 of these MS-DRGs accounted for 1,000 cases or more. The
applicant standardized the charges for all 570,698 cases, which equated
to an average case-weighted standardized charge per case of $46,138. We
note that the applicant did not inflate the charges nor did it include
charges for Dalbavancin in the average case-weighted standardized
charge per case. The applicant calculated an average case-weighted
threshold of $44,255 across all MS-DRGs. Therefore, the applicant
asserted the average case-weighted standardized charge per case
(without inflating and including charges for Dalbavancin) exceeds the
average case-weighted threshold of $44,255 (as indicated in Table 10 of
the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant
maintained that Dalbavancin meets the cost criterion. We are inviting
public comments regarding whether Dalbavancin meets the cost criterion,
particularly with regard to the assumptions and methodology used in the
applicant's analysis.
With regard to substantial clinical improvement, as previously
stated by the applicant, Dalbavancin is a new intravenous (IV)
lipoglycopeptide antibiotic administered as a once-weekly 30 minute
infusion via a peripheral line for the treatment of patients with acute
bacterial skin and skin structure infections, or ABSSSI. The applicant
noted that, in the setting of continuing emergence of resistance among
gram-positive pathogens worldwide, there is an increasing medical need
for new antibacterial agents with enhanced gram-positive activity. The
applicant cited the Infectious Diseases Society of America (IDSA),\3\
stating the need for a multi-pronged approach to address the impact of
antibiotic resistance. In addition, the applicant stated the FDA has
also designated MRSA as a pathogen of special interest which allows an
antibiotic effective against this organism to be designated as a
``Qualified Infectious Disease Product,'' recognizing the medical need
for drugs to treat infections caused by this pathogen. The applicant
believed that having a medicinal agent with clinical efficacy against
gram-positive pathogens, including MRSA and CA-MRSA, a favorable
benefit/risk ratio, and a favorable pharmacokinetics profile allowing
convenient dosing in inpatients and outpatients with the potential for
minimizing patient noncompliance would be a valuable addition to the
antibacterial armamentarium for the treatment of ABSSSI. The applicant
also noted that, when taking Dalbavancin, there is no need for oral
step-down therapy.
---------------------------------------------------------------------------

\3\ ``Bad Bugs, No Drugs,'' July 2004.
---------------------------------------------------------------------------

The applicant suggested that Dalbavancin offers treatment
advantages over other available options for therapy for skin infections
as a result of the following:
Improved potency against key bacterial pathogens with the
concentration of Dalbavancin required to kill key target pathogens
lower relative to other antibiotics commonly used to treat such
pathogens;
Retained activity against staphylococcus aureus resistant
to other antibiotics;
Improved safety profile as Dalbavancin exhibits more
favorable tolerability and safety than alternative approved
antibacterial drugs in areas such as no evidence of thrombocytopenia as
seen with linezolid and tedezolid, superior infusion related
tolerability relative to other antiobiotics, an absence or reduction of
drug specific toxicities, and once a week dosing of IV Dalbavancin
avoids pitfalls of patient noncompliance with an oral medication;
Lack of drug interactions due to metabolic profile which
minimizes risk of unexpected adverse events when co-administered with
other compounds as seen with linezolid and quinupristin/dalfopristin;
Decreased requirement for therapeutic interventions,
specifically the need for an intravenous catheter as Dalbavancin is
administered once a week, thus reducing catheter related infection as
well;
Reduced time to patient defined recovery;
Reduced mortality rate as demonstrated in the combined
phase of the Discover 1 and Discover 2 clinical trials;
The potential for avoidance of admission to the hospital
as Dalbavancin allows the utilization of a weekly treatment regimen,
thus potentially increasing the convenience of outpatient therapy for
patients.
The applicant conducted three phase three randomized, controlled,
double blinded clinical trials. The first was the pivotal VER001-9
study with a total of 873 patients with cSSSIs, which compared the
safety and efficacy of IV Dalbavancin with possible switch to oral
placebo to IV Linezolid with possible switch to oral Linezolid.
According to the applicant, the primary efficacy endpoint of clinical
response at test of 14 days with a plus or minus of 2 days after
completion of therapy demonstrated comparable clinical efficacy to
linezolid and met the requirement of statistical demonstration of
noninferiority. In the clinically evaluable population, 88.9 percent of
patients who received Dalbavancin compared to 91.2 percent of patients
who received vancomycin/linezolid

[[Page 28038]]

were clinical successes. The applicant also noted that Dalbavancin had
an improved safety profile compared to Linezolid as the overall
incidence and percentage of adverse events and deaths were lower in the
Dalbavancin group, which was statistically significant.
The second and third clinical trials were the Discover 1 and
Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI
and compared IV Dalbavancin with IV placebo every 12 hours to match
Vancomycin with possible switch to oral Vancomycin to IV Vancomycin
with IV placebo to match IV Dalbavancin with possible switch to oral
Linezolid. The applicant reported that in both studies, the primary
efficacy outcome measure was clinical response in 48 to 72 hours post-
study drug initiation and a secondary outcome measure was clinical
status at the end of treatment visit (day 14) in the Intent to Treat
(ITT) and clinically evaluable at End of Treatment populations.
Clinical status was also determined at the short-term follow-up and
long-term follow-up visits.
According to the applicant, the Discover 1 trial demonstrated that
83.3 percent of patients in the ITT population who received Dalbavancin
were responders at 48 to 72 hours after the start of therapy compared
to 81.8 percent of patients who received Vancomycin/Linezolid. The
applicant also noted that Dalbavancin was noninferior to Vancomycin/
Linezolid (Absolute Difference in Success Rates (95 percent confidence
interval): -4.6 percent; 7.9 percent).
The applicant further noted that the Discover 2 trial showed
similar results to the Discover 1 trial. Specifically, the trial
demonstrated that 76.8 percent of patients in the ITT population who
received Dalbavancin were responders at 48 to 72 hours after the start
of therapy compared to 78.3 percent of patients who received
Vancomycin/Linezolid. The applicant again noted that Dalbavancin was
noninferior to Vancomycin/Linezolid (Absolute Difference in Success
Rates (95 percent confidence interval): -7.4 percent; 4.6 percent).
The applicant found Dalbavancin to be effective against MRSA and
other gram-positive bacteria associated with ABSSSI. The applicant
stated that 25 percent of patients in the study were treated without an
inpatient admission.
We are concerned with the details of the trial design and the
primary efficacy endpoints used within those trials that were used to
provide the clinical data supplied by the applicant. All of the trials
were noninferiority studies, which prevent any determination as to
substantial clinical improvement from the trial data. The primary
efficacy endpoint was defined as having no increase in lesion size, and
no fever 48 to 72 hours after drug initiation. The secondary endpoint
was a >20 percent reduction in infection area at defined points in
time. At neither endpoint is the patient oriented endpoint of
resolution of infection increased. With these limitations in using
efficacy data to establish substantial clinical improvement, the
applicant suggested that the outpatient treatment, elimination of
central lines and avoidance of hospitalization all may improve safety,
avoid treatment-associated infections and improve patient satisfaction,
and that these factors demonstrate substantial clinical improvement.
While the factors mentioned may be true, the applicant did not present
any evidence to support its assertions. We are inviting public comments
on whether Dalbavancin meets the substantial clinical improvement
criterion, including public comments in response to our concern that
the applicant has only provided efficacy data of noninferiority, and no
data for the other suggested benefits.
We did not receive any public comments in response to the New
Technology Town Hall meeting held on February 12, 2014 regarding this
technology.
b. Heli-FX^TM EndoAnchor System (Aptus Endosystems, Inc.)
The Heli-FX^TM EndoAnchor System is indicated for use in
the treatment of patients whose endovascular grafts during treatment of
aortic aneurysms have exhibited migrations or endoleaks, or in the
treatment of patients who are at risk of such complications, and in
whom augmented radial fixation and/or sealing is required to regain or
maintain adequate aneurysm exclusion.
The Heli-FX^TM EndoAnchor System is comprised of the
following three components: (1) The EndoAnchor Implant; (2) the Heli-
FX^TM Applier; and (3) the Heli-FX^TM Guide with
Obturator. The Heli-FX^TM EndoAnchor System is a mechanical
fastening device that is designed to enhance the long-term durability
and reduce the risk of repeat interventions in endovascular aneurysm
repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By
deploying a small helical screw (the Heli-FX^TM EndoAnchors)
to connect the endograft to the aorta, the Heli-FX^TM System
seeks to provide a permanent seal and fixation, similar to the
stability achieved with an open surgical anastomosis.
The original Heli-FX^TM EndoAnchor System, designed for
treating abdominal aortic aneurysms (AAA), was cleared by the FDA
through the ``de novo'' 510(k) process on November 21, 2011 (reference
K102333). The Heli-FX^TM Thoracic System, which allows the
expanded use of the Heli-FX^TM EndoAnchor System technology
to the treatment of thoracic aortic aneurysms (TAA), was cleared by the
FDA on August 14, 2012 (reference K121168).
The applicant submitted two applications for approval for new
technology add-on payment in FY 2015: one for the treatment of AAAs and
the other for the treatment of TAA repair. We note that, as stated in
the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915),
two applications are necessary in this instance, because patients that
may be eligible for use of the technology under the first indication
are not expected to be assigned to the same MS-DRGs as patients
receiving treatment using the new technology under the second
indication. Specifically, patients who have endovascular grafts
implanted for the treatment of AAA map to MS-DRGs 237 (Major
Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular
Procedures without MCC), while patients who have endovascular grafts
implanted for the treatment of TAA map to MS-DRGs 219 (Cardiac Valve
and Other Major Cardiothoracic Procedure without Cardiac Catheter with
MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure
without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other
Major Cardiothoracic Procedure without Cardiac Catheter without CC/
MCC). Each indication/application must also meet the cost criterion and
the substantial clinical improvement criterion in order to be eligible
for new technology add-on payments beginning in FY 2015. We discuss
both of these applications below.
(1) Heli-FX^TM EndoAnchor System for the Treatment of AAA
As mentioned above, the original Heli-FX^TM EndoAnchor
System, designed for treating patients diagnosed with AAA, was cleared
by the FDA through the ``de novo'' 510(k) process on November 21, 2011
(reference K102333). According to the applicant, the device became
available to Medicare beneficiaries following the product launch at the
Society of Vascular Surgery (SVS) Annual Meeting held on June 7-9,
2012. Therefore, the applicant maintained that the Heli-FX^TM
EndoAnchor System meets the ``newness'' criterion because the

[[Page 28039]]

technology was not available on the U.S. market until June 2012. The
applicant explained that the delay in the general market availability
of the original Heli-FX^TM EndoAnchor System, following
initial FDA clearance, was mainly because of the regulatory uncertainty
inherent in the ``de novo'' 510(k) process. This uncertainty prevented
the manufacturer from being able to secure the venture capital funding
that was necessary to prepare for commercialization before obtaining
market clearance. The ability to secure venture capital through the
fundraising process was dependent upon the FDA clearance. According to
the applicant, funding to commercially market the technology was not
obtained until June 2012. In subsequent discussions with the applicant,
the applicant confirmed that the Heli-FX^TM EndoAnchor System
was available on the U.S. market as of November 2011. Further, the
applicant acknowledged that four implantations were performed on
Medicare beneficiaries between November 2011 and June 2012. Therefore,
the Heli-FX^TM EndoAnchor System is considered ``new'' as of
November 2011 when the technology was cleared by the FDA and became
available on the U.S. market.
Section 412.87(b)(2) of the regulations state that, ``a medical
service or technology may be considered new within 2 or 3 years after
the point at which data begin to become available reflecting the ICD-9-
CM code assigned to the new service or technology.'' Our past practice
has been to begin and end the eligibility for new technology add-on
payments on a fiscal year basis. We have generally followed a guideline
that uses a 6-month window, before and after the beginning of the
fiscal year, to determine whether to still consider a technology
``new'' and extend approved new technology add-on payments for an
additional fiscal year. In general, a technology is still considered
``new'' (and eligible to receive new technology add-on payments) only
if the 3-year anniversary date of the product's entry on the market
occurs in the latter half of the fiscal year. (We refer readers to 70
FR 47362.) With regard to the newness criterion for the Heli-
FX^TM EndoAnchor System, as stated above, we consider the
beginning of the newness period for the device to begin when the
technology first became available on the U.S. market in November 2011.
As previously stated, the applicant acknowledged that four
implantations were performed on Medicare beneficiaries between November
2011 and June 2012. Therefore, the costs of the Heli-FX^TM
EndoAnchor System are currently reflected in the MS-DRGs, and the 3-
year anniversary date under the newness criterion for the product's
entry on the U.S. market will occur during November 2014 (the first
half of FY 2015). As such, we do not believe that the Heli-
FX^TM EndoAnchor System meets the newness criterion. We are
inviting public comments on whether the Heli-FX^TM EndoAnchor
System meets the newness criterion.
The applicant requested an ICD-10-PCS code, and presented comments
at the March 2014 ICD-10 Coordination & Maintenance Committee meeting.
To demonstrate that the technology meets the cost criterion, the
applicant researched claims data from the 100 percent sample of the
2012 Inpatient Hospital Standard Analytical File (SAF) for cases
reporting either procedure code 39.71 (Endovascular implantation of
other graft in abdominal aorta), or procedure code 39.79 (Other
endovascular procedures on other vessels) in the first or second
procedure position on the claim, in combination with one of the
following primary diagnosis codes: 441.4 (Abdominal aneurysm without
mention of rupture); 996.1 (Mechanical complication of other vascular
device, implant, and graft); or 996.74 (Other complications due to
other vascular device, implant, and graft). The applicant believed that
this combination of ICD-9-CM codes identifies cases treated for AAA. We
note that the 2012 SAF dataset includes all claims submitted from
hospitals paid under the IPPS for calendar year 2012.
The applicant focused its analysis on MS-DRGs 237 and 238 because
these are the MS-DRGs that cases treated with the implantation of
endovascular grafts for AAAs would most likely map to. The applicant
found a total of 8,142 cases, and noted that 9.35 percent of the total
number of cases would map to MS-DRG 237, and 90.65 percent of the total
number of cases would map to MS-DRG 238. The applicant standardized the
charges for all 8,142 cases. Using the inflation factor of 1.47329
published in the FY 2014 IPPS/LTCH final rule (78 FR 50982), the
applicant inflated the standardized charges by 14.88 percent (the
applicant multiplied 1.47329 x 1.47329 x 1.47329 in order to inflate
the charges from 2012 to 2015). The applicant then added the charges
for the Heli-FX^TM EndoAnchor System to the standardized
charges by dividing the cost of the Heli-FX^TM EndoAnchor
System device by each individual hospital specific CCR from the FY 2012
impact file. This equated to an average case-weighted inflated
standardized charge per case of $111,613. The applicant noted that the
average case-weighted inflated standardized charge per case did not
contain additional operating room charges that relate to the Heli-
FX^TM EndoAnchor System. Therefore, the applicant determined
that it was necessary to add an additional $1,440 for operating room
charges, which was based on an additional half hour of operating room
time from one hospital, to the average case-weighted standardized
charge per case. This resulted in an average case-weighted standardized
charge per case of $113,053. The applicant calculated an average case-
weighted threshold of $86,278 across both MS-DRGs 237 and 238. The
applicant noted that the average case-weighted standardized charge per
case, computed without including the additional operating room charges
that relate to the Heli-FX^TM EndoAnchor System, exceeded the
average case-weighted threshold of $86,278. Therefore, the applicant
maintained that the technology meets the cost criterion.
The applicant also submitted claims data from the ANCHOR (Aneurysm
Treatment Using the Heli-FX Aortic Securement System Global Registry)
study to demonstrate that the technology meets the cost criterion. A
total of 51 cases were submitted with 11.76 percent of all the cases
mapping to MS-DRG 237, and 88.24 percent of all the cases mapping to
MS-DRG 238. The applicant standardized the charges for all 51 cases,
and determined an average case-weighted standardized charge per case of
$128,196. The applicant calculated an average case-weighted threshold
of $87,118 across MS-DRGs 237 and 238. Therefore, because the average
case-weighted standardized charge per case exceeds the average case-
weighted threshold, the applicant maintained that the technology meets
the cost criterion. We are inviting public comments on whether the
Heli-FX^TM EndoAnchor System meets the cost criterion,
particularly with regard to the assumptions and methodology used in the
applicant's analyses. We discuss whether the Heli-FX^TM
EndoAnchor System represents a substantial clinical improvement over
other treatments used for the repair of both abdominal and thoracic
aortic aneurysms in one discussion below.
(2) Heli-FX^TM EndoAnchor System for the Treatment of
Thoracic Aortic Aneurysms
The Heli-FX^TM Thoracic System, which allows the expanded
use of the Heli-FX^TM EndoAnchor System technology to TAA
repair, was cleared

[[Page 28040]]

by the FDA on August 14, 2012 (reference K121168). The new system
consists of a longer delivery device with additional tip configurations
to allow the helical EndoAnchor technology to treat TAA. A line
extension to the original Heli-FX^TM EndoAnchor System,
allowing improved treatment of AAA patients with larger aortic neck
diameters, was cleared by the FDA on April 12, 2013 (reference
K130677).
With regard to the newness criterion for the Heli-FX^TM
Thoracic System, we consider the beginning of the newness period for
the device to begin when the technology was approved by the FDA on
August 14, 2012. Because the 3-year anniversary date of the product's
entry on the U.S. market would occur in the second half of FY 2015
(August 14, 2015), we believe that the Heli-FX^TM Thoracic
System meets the newness criterion. We are inviting public comments on
whether the Heli-FX^TM Thoracic System meets the newness
criterion. As stated above, the applicant requested an ICD-10-PCS code,
and presented comments at the March 2014 ICD-10 Coordination &
Maintenance Committee meeting.
To demonstrate that the Heli-FX^TM Thoracic System meets
the cost criterion, similar to the analysis performed for the Heli-
FX^TM EndoAnchor System for the treatment of AAA, the
applicant researched claims data from the 100 percent sample of the
2012 SAF for cases reporting procedure code 39.73 (Endovascular
implantation of graft in thoracic aorta) in the first or second
procedure position on the claim, in combination with one of the
following primary diagnosis codes: 404.93 (Hypertensive heart and
chronic kidney disease, unspecified, with heart failure and chronic
kidney disease stage V or end-stage renal disease); 441.01 (Dissection
of aorta, thoracic); 441.03 (Dissection of aorta, thoracoabdominal);
441.2 (Thoracic aneurysm without mention of rupture); 441.4 (Abdominal
aneurysm without mention of rupture); 441.7 (Thoracoabdominal aneurysm,
without mention of rupture); 996.1 (Mechanical complication of other
vascular device, implant, and graft); or 996.74 (Other complications
due to other vascular device, implant, and graft). The applicant
believed that this combination of ICD-9-CM codes identifies cases
treated for TAA. We note that the 2012 SAF dataset includes all claims
submitted from hospitals paid under the IPPS for CY 2012.
The applicant focused its analysis on MS-DRGs 219, 220, and 221
because these are the MS-DRGs to which cases treated with the
implantation of endovascular grafts for TAA repair would most likely
map. The applicant found a total of 642 cases, and noted that 27.88
percent of the total number of cases would map to MS-DRG 219, 40.50
percent of the total number of cases would map to MS-DRG 220, and 31.62
percent of the total number of cases would map to MS-DRG 221. The
applicant standardized the charges for all 642 cases. Using the
inflation factor of 1.47329 published in the FY 2014 IPPS/LTCH final
rule (78 FR 50982), the applicant inflated the standardized charges by
14.88 percent (the applicant multiplied 1.47329 x 1.47329 x 1.47329 in
order to inflate the charges from 2012 to 2015). The applicant then
added the charges for the Heli-FX^TM EndoAnchor System to the
standardized charges by dividing the cost of the Heli-FX^TM
EndoAnchor System device by each individual hospital specific CCR from
the FY 2012 impact file. This equated to an average case-weighted
inflated standardized charge per case of $156,625. The applicant noted
that the average case-weighted inflated standardized charge per case
did not contain additional operating room charges related to the use of
this technology. Therefore, the applicant determined that it was
necessary to add an additional $2,160 for operating room charges, which
was based on an additional 45 minutes of operating room time from one
hospital, to the average case-weighted standardized charge per case.
This resulted in an average case-weighted standardized charge per case
of $158,785. The applicant calculated an average case-weighted
threshold of $141,194 across MS-DRGs 219, 220, and 221. The applicant
noted that the average case-weighted standardized charge per case,
without including charges for additional operating room time, exceeded
the average case-weighted threshold of $141,194. Therefore, the
applicant maintained that the technology meets the cost criterion. We
are inviting public comments on whether the Heli-FX^TM
Thoracic System meets the cost criterion, particularly with regard to
the assumptions and methodology used in the applicant's analysis.
(3) Evaluation of the Substantial Clinical Improvement Criterion for
the Heli-FX^TM EndoAnchor System for the Treatment of
Abdominal and Thoracic Aortic Aneurysms
The applicant stated that the Heli-FXTM EndoAnchor
System represents a substantial clinical improvement for the following
reasons: The technology improves overall rates of aneurysm exclusion
and long-term success after EVAR by increasing the integrity and long-
term durability of the proximal seal and fixation; the technology
reduces the risk and rate of secondary interventions and readmissions
due to aneurysm-related complications (for example, endoleaks,
migration, aneurysm enlargement) caused by failure of the proximal
seal; the technology improves the general applicability of EVAR to
patients with a broader spectrum of aortoiliac anatomy, including those
with hostile proximal neck anatomy; and the technology reduces the
rigor of life-long imaging follow-up for EVAR patients by reducing the
rate of late failure and increasing the post-EVAR rates of aneurysm sac
regression due to complete, endoleak-free durable aneurysm exclusion.
While current devices and capabilities are greatly improved over
the first generation of devices, the applicant noted that EVAR
treatments using the first generation of devices has not proven to be
as durable, anatomically applicable, or complication-free as open
surgery. ^{4 5 6 7} Several critical and life-threatening
limitations continue to require improvement to these devices and
procedures, including the need to reduce serious early and late device
and procedure-related complications, such as loss of stability, and
integrity and robustness of the clinical proximal aortic landing zone,
and to offer an alternative method of EVAR to a broader segment of the
patient population.
---------------------------------------------------------------------------

\4\ Abbruzzese, T.A., Kwolek, C.J., Brewster, D.C., et al,
``Outcomes following endovascular abdominal aortic aneurysm repair
(EVAR): An anatomic and device-specific analysis,'' Journal of
Vascular Surgery, 2008, Vol. 48, pp. 19-28.
\5\ Dangas, G., O'Connor, D., Firwana, B., et al, ``Open Versus
Endovascular Stent Graft Repair of Abdominal Aortic Aneurysms: A
Meta-Analysis of Randomized Trials,'' JACC, 2012, Vol. 5 (10), pp.
1072-1080.
\6\ De Bruin, J.L., Baas, A.F., Buth, J., et al, ``Long-Term
Outcome of Open or Endovascular Repair of Abdominal Aortic
Aneurysm,'' New England Journal of Medicine, May 2010, Vol. 362(20),
pp. 1881-1889.
\7\ Greenhalgh, R.M., Brown, L.C., Powell, J.T., et al,
``Endovascular versus open repair of abdominal aortic aneurysm,''
New England Journal of Medicine, May 2010, Vol. 362(20), pp. 1863-
1871.
---------------------------------------------------------------------------

The applicant provided literature, analyses of data from the
``STAPLE-2'' clinical trial and the ANCHOR Registry, and a meta-
analysis of EVAR trials to demonstrate that the Heli-FX^TM
EndoAnchor System represents a substantial clinical improvement above
current treatments available. We summarize the information provided by
the applicant that supports the clinically beneficial results of using
the Heli-FX^TM EndoAnchor System.
The ``STAPLE-2'' clinical trial enrolled 155 patients at 25 U.S.
centers between September 2007 and January

[[Page 28041]]

2009. Clinical (and imaging) data are available for 147, 139 and 125
patients at 1-year, 2-year, and 3-year follow-up, respectively,
representing the complete data sets at these time points. Patients
enrolled in the clinical trial and observed under the study will
continue to be followed per protocol for 5 years following aneurysm
repair. According to the applicant, the results of the trial and study
demonstrate that the Heli-FX^TM EndoAnchor System is
associated with an extremely low rate of proximal neck-related issues
in long-term follow-up. The applicant maintained that this
determination results in improved outcomes for aortic aneurysm
patients, and reduced rate of re-interventions, which are associated
with hospital admissions, procedural risks, and reversions to increased
follow-up frequency requiring more physician visits and radiographic
imaging studies.
The data used for this analysis was extracted from the clinical
database on February 1, 2013, and are identical to those used to
generate the most recent Annual Progress Report (APR) submitted to the
FDA, as required under the U.S. IDE regulations.
While the ``STAPLE-2'' clinical trial was conducted exclusively
with the Aptus AAA endograft (which remains investigational), the
applicant believed that the use of the Heli-FX^TM EndoAnchor
System-related data is applicable to the use of the anchor with the
compatible Cook, Gore, and Medtronic manufactured endografts in
treatment anatomies for AAA and TAA cases.
Through 3-year follow-up, the applicant noted that there have been
no anchor fractures as observed by the core lab. Further, there have
been no relative migrations of the Heli-FX^TM EndoAnchor
System as compared to other endografts reported by the core laboratory.
In the analysis of the ``STAPLE-2'' clinical trial data at 1-year
follow-up, the applicant noted that the core lab observed no proximal
migrations, and a single case of Type I endoleak. A single secondary
intervention was required to address the Type I endoleak in a patient
with a circumferentially incomplete proximal neck within the 1-year
follow-up period.
The applicant further noted that no additional Type I endoleaks
have been observed beyond the 1-year follow-up in any patient enrolled
in the trial. In addition, there were no reported instances of aneurysm
rupture, vessel perforation, vessel dissection, catheter embolization,
enteric fistula, infection, Type III endoleak, conversion, allergic
reactions, renal emboli, or patient death associated with the use of
the Heli-FX^TM EndoAnchor System. Further, there have been no
reports of bleeding or hematoma at the EndoAnchor penetration locations
in the aortic neck.
Beyond the 1-year follow-up, three patients have demonstrated
proximal migrations less than 1 cm. None of these cases were associated
with Type I endoleaks or aneurysm sac expansions.
The applicant then compared migrations and Type I endoleaks data
from the ``STAPLE-2'' clinical trial to analogous data from five
compatible AAA endografts that were not anchored (data taken from
published SSE data obtained from the FDA's Web site). One year of data
was compared because this timeframe is what is reported in a standard
fashion from IDE trials of endografts. The applicant noted that the
Heli-FX^TM EndoAnchor System data compares favorably against
the data obtained in U.S. pivotal trials of devices that did not employ
discrete independent fixation means, particularly when viewed in light
of the shorter average neck lengths treated in the ``STAPLE-2''
clinical trial versus those involving the Cook, Gore, and Medtronic
manufactured endografts. According to the applicant, the number of
proximal migrations were low across devices as reported in the SSE
data, and an analysis using the Fisher's exact method demonstrated no
statistically significant differences when compared to the anchored
endografts used in the ``STAPLE-2'' clinical trial (all p = NS). The
incidence of Type I endoleaks and the need for secondary interventions
to address them was significantly lower for the Heli-FX^TM
EndoAnchor System endografts analyzed under the ``STAPLE-2'' clinical
trial versus the Medtronic, AneuRx, and Talent manufactured endografts
(p = 0.026 versus AneuRx and p = 0.015 versus Talent). The applicant
stated that the applicability of post-hoc statistical analyses is
limited. However, the applicant believed that because the data being
compared under the analyses were collected through similar protocols
and with the same endpoint definitions, post-hoc comparisons were
deemed appropriate. The applicant further believed that the comparison
of this data demonstrates that the Heli-FX^TM EndoAnchor
System is associated with very low rates of Type I endoleaks and
migrations.
The applicant also provided data from the ANCHOR Registry, which is
a post-market, prospective, observational, multi-center, international,
dual-arm study designed to capture real-world data on the usage
patterns and clinical results associated with the use of the Heli-
FX^TM EndoAnchor System as a method of treatment for patients
in need of EVAR. The applicant explained that the ANCHOR Registry
represents a growing body of data on the application of the Heli-
FX^TM EndoAnchor System used as a method of endovascular
aortic aneurysm repair. The applicant noted that to its knowledge, the
anatomical challenges present in the registry are greater than those in
any large scale published series. The applicant further noted that,
although long-term results are limited, the acute results demonstrate a
high level of device safety, technical feasibility and acute success in
a patient population with few viable options.
Primary safety for the ANCHOR Registry is being measured as a
composite of freedom from device or procedure-related serious adverse
events through 1-year follow-up following the Heli-FX^TM
EndoAnchor System implantation. Primary effectiveness is being measured
as a composite of acute technical success and freedom from Type Ia
endoleaks and endograft migrations through 1-year follow-up. Inclusion
and exclusion criteria are minimal, essentially following the IFU
requirements. Patients are being followed in the registry by their
physician's standard of care for 5 years.
Enrollment in the ANCHOR Registry began in March 2012. Through
August 2013, a total of 258 patients were enrolled at 40 participating
centers (29 located in the United States and 11 located in the European
Union), and data are available in the registry's database. Of these,
195 patients (76 percent) were enrolled in the primary arm, having the
Heli-FX^TM EndoAnchor System implanted at the time of their
initial aneurysm treatment, either as a prophylactic measure, or to
address an acute leak seen on completion arteriography. The remaining
patients (63 or 24 percent) were enrolled in the revision arm, having
the Heli-FX^TM EndoAnchor Systems implanted at a secondary
procedure to arrest migration, or address endoleaks discovered on
follow-up in previously implanted endografts.
The applicant noted that physicians are choosing to apply the Heli-
FX^TM EndoAnchor System in a subset of patients that are at a
higher risk for proximal neck-related complications during follow-up.
The large average sac diameter in the revision arm suggested that these
patients' initial treatments were unsuccessful and, as such, they have
experienced continued sac expansion post-EVAR. These patients

[[Page 28042]]

also represent a high-risk subset of patients.
Acute results are measured in terms of technical success. In the
primary arm, 193 of 194 procedures were successful, and in the revision
arm, 57 of 63 procedures were successful. All technical failures were
persistence of Type Ia endoleaks. There has been a single re-
intervention at 69 days post-Endoanchor implantation for a persistent
Type Ia endoleak in one patient in the revision arm, in which the Heli-
FX^TM EndoAnchor System combined with a proximal cuff were
unable to completely resolve the endoleak. There have been no device-
related serious adverse events.
As mentioned above, because the ``STAPLE-1,'' \8\ and ``STAPLE-2''
clinical trials were single-arm studies, no data are available from
them to assess the impact of the Heli-FX^TM EndoAnchor System
on endograft performance. To make this assessment, a meta-analysis was
conducted. The meta-analysis combined long-term AAA endograft
performance from endografts marketed in the United States, and compared
these measures to those from long-term follow-up in the ``STAPLE-2''
trial.
---------------------------------------------------------------------------

\8\ Deaton, D.H., Mehla, M., Kasirajan, K., et al., ``The Phase
I Multi-center Trial (Staple-1) of the Aptus Endovascular Repair
System: Results at 6 Months and 1 Year,'' Journal of Vascular
Surgery, 2009, Vol. 49, pp. 851-857 (discussion on pp. 857-858.)
---------------------------------------------------------------------------

According to the applicant, the key findings from the meta-analysis
are as follows:
Heli-FX^TM EndoAnchors reduced the proportion of
treated aneurysms with enlargement greater than 5 mm at 3 years from
12.7 percent to 3.9 percent (p = .002).
Heli-FX EndoAnchor System reduced the proportion of leaks
requiring treatment at 3 years from 12 percent to 1.3 percent (p <
.001).
Heli-FX^TM EndoAnchor System reduced (all-cause)
mortality at 3 years from 18.8 percent to 8.4 percent (p = .002).
However, this does not appear to have been totally mediated by AAA-
related mortality, which was reduced by the Heli-FX^TM
EndoAnchor System from 2.5 percent to 0.7 percent at 3 years (but was
not statistically significant, p = .372).
According to the applicant, in general, patients in the ANCHOR
Registry were similar to the patients in the AAA endograft studies. The
applicant noted that the results of the analysis using the Fisher's
Exact Tests were consistent between the All-Studies' comparisons and
the IDE-Studies' comparisons: All-Cause Mortality, Leaks requiring
Treatment, and Enlargement were all significantly lower at 3 years in
the endografts implanted with the Heli-FX^TM EndoAnchor
System than in standard endografts.
The applicant asserted that the meta-analysis shows that there is
objective evidence that the Heli-FX^TM EndoAnchor System
effectively reduces well-documented problems with endografts. By
providing the endograft with better apposition to the native artery,
the applicant noted that the Heli-FX^TM EndoAnchor System
reduces the rates of enlargement and endoleaks requiring treatment. The
applicant further noted that these results were consistent in the All-
Studies' and IDE Studies' meta-analyses. The applicant believed that
lower rates of leaks requiring intervention would save payers money
over the long term.
The applicant observed that, while there was no significant
improvement in the rate of ruptures with the Heli-FX^TM
EndoAnchor System, this may be due to the fact that leaks were treated
and, thereby, prevented any ruptures. The applicant believed that the
higher rate of treated endoleaks in endografts implanted without the
Heli-FX^TM EndoAnchor System provides for this hypothesis.
Also, migration did not appear to be significantly reduced by the Heli-
FX^TM EndoAnchor System (3.5 percent at 3 years in both
groups; p = 1.0).
Finally, the applicant concluded that, overall, the lower
complication rates seen with the Heli-FX^TM EndoAnchor System
in the meta-analysis provide evidence of the clinical benefits and
likely economic benefits associated with the use of the Heli-
FX^TM EndoAnchor System. The applicant believed that the
technology may be especially helpful in patients with difficult
anatomy, and that it may be reasonable to consider using the Heli-
FX^TM EndoAnchor System prophylactically in the treatment of
all such patients.
In addition to the formal study data from the ``STAPLE-2'' trial,
the Global ANCHOR Registry, and the meta-analysis based on these, the
applicant provided published peer-reviewed literature that represent an
early state of scientific data dissemination outside of non-company
sponsored clinical studies, which is commensurate with the recent
market approvals of the Heli-FX^TM EndoAnchor System
technology. The applicant believed that this data demonstrates strong
initial physician enthusiasm and resulting favorable clinical results
in their experience to date. The applicant noted that the general body
of scientific literature is considered meaningful and growing for this
early stage of market introduction. However, the applicant asserted
that the literature supports the study and meta-analysis data above
that documents that improved clinical outcomes were observed, including
outcomes in a broader range of patients that are often ineligible for,
or at greatest risk with, EVAR.
We are concerned that the three sources of data, the ``STAPLE-2''
clinical trial, the Anchor registry, and the literature review that the
applicant submitted to support their application are not high quality
evidence. The ``STAPLE-2'' study was a single-arm study and only used
one endograft, the registry is an observational study, and the
literature review does not provide clinical data. Also, the meta-
analysis of all the submitted data is only as good as the data used.
While the clinical data submitted suggests that some outcomes such as
EVAR failure are improved, we are concerned that there is not enough
clinical evidence to support the substantial clinical improvement
criterion. We are inviting public comments on whether the submitted
data demonstrate that the Heli-FX^TM EndoAnchor System
represents a substantial clinical improvement in the treatment of
Medicare beneficiaries, particularly in regard to the concerns we have
identified.
We received public comments in response to the New Technology Town
Hall meeting held on February 12, 2014. We summarize these comments
below.
Comment: Several commenters supporting new technology add-on
payments for the Heli-FX^TM EndoAnchor System. In addition,
one commenter believed that EndoAnchors would broaden the applicability
of endovascular aneurysm repair. The commenter noted that use of
EndoAnchors increases the force needed to dislodge the proximal neck of
the graft by several times, and in some cases even stronger than a
hand-sewn anastomosis. This commenter further noted that this would
allow patients with short, or otherwise difficult aortic necks to be
treated more safely with endovascular aneurysm repair. The commenter
stated that the technology is beneficial for patients who have medical
problems or advanced age as contraindications to open surgery because
endovascular repair can be made possible with the Heli-FX^TM
EndoAnchor System.
The commenter further stated that patients with endoleaks
identified during follow-up are frequently not candidates for extension
prostheses and would otherwise require open explantation of the graft
and aneurysm

[[Page 28043]]

repair. The commenter explained that these are far more challenging and
risky operations than primary open aneurysm repairs, and are routinely
associated with blood loss of several liters as well as prolonged lower
extremity, renal, and visceral ischemia. The commenter noted that many
of these often elderly patients can be successfully treated in a
minimally invasive manner using the Heli-FX^TM EndoAnchor
System, reestablishing proximal fixation and seal while avoiding the
morbidity and mortality associated with graft explantation and open
repair. The commenter concluded that if new technology add-on payments
are approved for the Heli-FX^TM EndoAnchor System, many
patients would realize the advantages of this unique and necessary
device, improving their care and reducing overall cost.
Another commenter stated that the Heli-FX^TM EndoAnchor
System provides an opportunity to extend a less mortal procedure (EVAR)
to patients whose anatomy may predispose them to late failure,
including patients with large proximal neck diameters, increased iliac
diameters, or abnormal neck anatomy. In primary repair, the applicant
stated that endoanchors have been demonstrated to mimic a surgical
anastomosis. The commenter believed that this would lead to less
reinterventions and less aneurysm related mortality. Given the cost of
reintervention or treating a ruptured AAA, the commenter believed that
this technology should have a real impact in the overall cost of EVAR
in this patient population.
Response: We appreciate the commenters' support. We considered
these comments in our evaluation of the Heli-FX^TM EndoAnchor
System application for new technology add-on payments for FY 2015 and
in the development of this proposed rule. As stated above, we are
inviting additional public comments on whether the Heli-FX^TM
EndoAnchor System represents a substantial clinical improvement in the
treatment of Medicare beneficiaries, particularly in regard to the
concerns we have identified.
c. WATCHMAN[supreg] Left Atrial Appendage Closure Technology
Boston Scientific Corporation submitted an application for new
technology add-on payments for the WATCHMAN[supreg] Left Atrial
Appendage Closure Technology (Watchman[supreg] System) for FY 2015.
When a patient has an arrhythmia known as atrial fibrillation (AF), the
left atrium does not expand and contract normally. As a result, the
left atrium is not capable of completely emptying itself of blood.
Blood may pool, particularly in the part of the left atrium called the
left atrial appendage. This pooled blood is prone to clotting, causing
formation of a thrombus (that is, a blood clot). When a thrombus breaks
off, it is called an embolism (or thromboembolism). An embolism can
cause a stroke or other peripheral arterial blockage.
The WATCHMAN[supreg] Left Atrial Appendage (LAA) Closure Device is
an implant that acts as a physical barrier, sealing the LAA to prevent
thromboemboli from entering into the arterial circulation from the LAA,
thereby reducing the risk of stroke and potentially eliminating the
need for Warfarin therapy in those patients diagnosed with nonvalvular
AF and who are eligible for Warfarin therapy.
The applicant anticipates FDA premarket approval of the
WATCHMAN[supreg] System in the first half of 2014. According to the
applicant, the WATCHMAN[supreg] System is the first LAA closure device
that would be approved by the FDA. Therefore, the applicant believes
that the technology meets the newness criterion. The device is
currently identified by ICD-9-CM procedure code 37.90 (Insertion of
Left Atrial Appendage Device), which was issued on October 1, 2004. We
are inviting public comments on if, and how, the WATCHMAN[supreg]
System meets the newness criterion.
With regard to the cost criterion, the applicant used the FY 2012
MedPAR file and searched the claims data for cases reporting with ICD-
9-CM procedure code 37.90. The applicant provided two analyses. The
first analysis includes all claims that contained ICD-9-CM procedure
code 37.90 regardless of whether it was the principle procedure that
determined the MS-DRG assignment of the case. This returned 243 cases
spread across 21 MS-DRGs. The applicant noted that the MedPAR file
contained claims that were returned to the provider reporting charges
for actual cases from clinical trials that used the WATCHMAN[supreg]
System that were well below post-FDA approval pricing. Therefore, the
applicant removed the premarket device related charges. The applicant
then standardized the charges, applied an inflation factor of 1.096898
based on the 2-year charge inflation factor listed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50982) and then added post-FDA approval
charges for the WATCHMAN[supreg] System. This resulted in an average
case-weighted standardized charge per case of $176,943. The applicant
calculated an average case-weighted threshold of $107,345 across all
MS-DRGs. Therefore, the applicant asserted that the average case-
weighted standardized charge per case exceeds the average case-weighted
threshold and maintained that the technology meets the cost criterion.
The second analysis focused on cases reporting ICD-9-CM procedure
code 37.90, and assigned to MS-DRGs 250 (Percutaneous Cardiovascular
Procedure without Coronary Artery Stent with MCC) and 251 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent without MCC).
According to the applicant, these are the MS-DRGs to which cases using
the WATCHMAN[supreg] System in the delivery of treatment as the
principal procedure performed during the inpatient stay are assigned.
The applicant found a total of 122 cases, and noted that 9.02 percent
of the total number of cases would map to MS-DRG 250, and 90.98 percent
of the total number of cases would map to MS-DRG 252. Similar to above,
the applicant noted that the MedPAR file contained claims that were
returned to the provider reporting charges for actual cases from
clinical trials that used the WATCHMAN[supreg] System that were well
below post-FDA approval pricing. Therefore, the applicant removed the
premarket device-related charges. The applicant then standardized the
charges, applied an inflation factor of 1.096898 based on the 2-year
charge inflation factor listed in the FY 2014 IPPS/LTCH final rule (78
FR 50982), and then added post FDA-approval charges for the
WATCHMAN[supreg] System. This resulted in an average case-weighted
standardized charge per case of $113,210. The applicant calculated an
average case-weighted threshold of $68,093. The applicant asserted that
the average case-weighted standardized charge per case exceeds the
average case-weighted threshold. Therefore, the applicant maintained
that the technology meets the cost criterion. We are inviting public
comments on whether the WATCHMAN[supreg] System meets the cost
criterion, particularly with regard to the assumptions and methodology
used in the applicant's analysis.
The applicant asserted in its application that the WATCHMAN[supreg]
System meets the substantial clinical improvement criterion. The
applicant believed that the WATCHMAN[supreg] System provides a
permanent solution proven to reduce the risk of thromboembolic stroke
in patients diagnosed with high-risk, nonvalvular AF, and who are
eligible for Warfarin therapy. Therefore, the applicant believed that
the WATCHMAN[supreg] System fulfills a major unmet clinical need.
According to the applicant, clinical trial data

[[Page 28044]]

demonstrated non-inferiority of the WATCHMAN[supreg] System compared to
Warfarin therapy. Further, long-term follow-up data suggested
superiority compared to Warfarin therapy by demonstrating 40 percent
relative reduction of primary efficacy events, and 60 percent relative
reduction for CV mortality. The applicant also stated that, procedure
complication rate is low, with the majority of events occurring soon
before, during, or soon after the procedure.
The applicant submitted multiple clinical trial studies to
demonstrate that the technology represents a substantial clinical
improvement. Specifically, the WATCHMAN[supreg] System United States
clinical program included five studies with approximately 2000
patients. There were two prospective, randomized-controlled trials
(PROTECT AF ^{9 10 11 12} and PREVAIL \13\ \14\), two continued
access registries for patients who completed PROTECT AF and PREVAIL
(CAP and CAP2, respectively), and the ASAP feasibility study.
---------------------------------------------------------------------------

\9\ Wrigley, B., Lip, G., ``Can the WATCHMAN device truly
PROTECT from stroke in atrial fibrillation?'', Lancet Neurology,
2009.
\10\ Reddy, V., Holmes, D., Doshi, S., et al. ``Safety of
percutaneous left atrial appendage closure: Results from the
WATCHMAN left atrial appendage system for embolic protection in
patients With AF (PROTECT AF) clinical trial and the Continued
Access Registry. Circulation.'' Vol. 123, 2011.
\11\ Reddy, V., Doshi, S., Sievert, H., et. al., ``Percutaneous
left atrial appendage closure for stroke prophylaxis in patients
with atrial fibrillation: 2.3-year follow up of the PROTECT AF
(Watchman Left Atrial Appendage System for embolic protection in
patients with atrial fibrillation) trial,'' Circulation., 2013, Vol.
127, pp. 720-729.
\12\ Alli, O., Doshi, S., Kar, S., et al., ``Quality of Life
Assessment in the Randomized PROTECT AF Trial of Patients at Risk
for Stroke With Non-Valvular Atrial Fibrillation,'' Journal of
American College of Cardiology, Vol. 61, No 17, 2013, pp. 1790-1798.
\13\ Landmesser, U., Holmes, D., ``Left atrial appendage
closure: A percutaneous transcatheter approach for stroke prevention
in atrial fibrillation,'' European Heart Journal, Vol. 33, 2012.
\14\ Homes, D.R. PREVAIL Results CIT, 2013.
---------------------------------------------------------------------------

According to the applicant, PROTECT AF was a prospective,
randomized-controlled trial comparing the outcomes of patients who
received care for LAA closure using the WATCHMAN[supreg] System (463
patients) with those of patients who were anticoagulated with Warfarin
therapy (244 patients). The trial was designed to show that the
WATCHMAN[supreg] System was noninferior to Warfarin therapy. The
primary outcome was anticipated to occur at a rate of 6.15 per 100
patient-years in the control group, and the sample size was chosen
using a ``two-fold non-inferiority margin.'' Because patients could be
randomized to Warfarin therapy, all patients were eligible to continue
Warfarin, and did not have an excessive risk of bleeding. By design,
all patients in PROTECT AF continued Warfarin therapy for 45 days after
the device implantation procedure.
Outcome data from PROTECT AF have been reported after mean follow-
ups of 1.5 years, 2.3 years, and 3.7 years. The primary efficacy
endpoint was the composite of stroke, systemic embolism, cardiovascular
death, or unexplained death. This primary endpoint occurred in the
control group at a lower rate than was assumed in the sample size
calculations: The observed rate was between 3.8 and 4.9 per 100
patient-years compared with the design estimate of 6.15 per 100
patient-years. According to the applicant, patients randomly assigned
to receive the WATCHMAN[supreg] System device in the PROTECT AF trial
had numerically lower rates of the primary endpoint than the patients
randomly assigned to Warfarin (also known as Coumadin) at all time
points. We note that, although the point estimates favor the device for
the primary endpoint, the differences were not statistically
significant because the upper 95 percent confidence intervals are all
above 1.0. However, the secondary endpoint of cardiovascular death was
reduced significantly, as was all-cause mortality with a rate ratio of
0.66 (CL 0.45-0.98).
The criteria for noninferiority of the primary endpoint were met
over all follow-up intervals. According to the applicant, the
probability is >99 percent that device-treated patients have no more
than twice the rate of stroke, embolism, or death than Warfarin-treated
patients.
Also, the incidence of procedural-related complications in this
trial was 8.7 percent. The applicant noted that complications early in
the trial were related to procedures performed by new users. As a
result, changes were made to the procedure and physician training, and
the complication rate subsequently decreased.
The applicant stated in its application that the Circulatory System
Devices Advisory Panel to the Division of Cardiovascular Devices (DCD)
within the Center for Devices and Radiological Health (CDRH) of the FDA
reviewed the 1-year PROTECT AF data on April 23, 2009. The panel voted
7:5 in favor of the device, resulting in a positive recommendation for
``approval with conditions.'' However, noting the complication rate,
the FDA required additional data collection on procedural safety to
confirm the lower rates observed in the second half of the trial. As a
result of this requirement, the PREVAIL trial study was designed in a
similar fashion to PROTECT AF, but with modifications to trial entry
criteria and a minimum number of new operators.
According to the applicant, in the interim, FDA also recognized the
effectiveness of the WATCHMAN[supreg] System and the need for a new
therapeutic option for patients receiving Warfarin therapy, and a
continued access program (CAP) was authorized. With 460 patients
enrolled, according to the applicant, efficacy rates in the CAP trial
study were similar to those seen in the PROTECT AF trial study, and
procedural complications were reduced by over 50 percent compared to
the PROTECT AF trial study, from 8.7 percent to 4.1 percent.
From November 2010 to June 2012, the PREVAIL trial enrolled a total
of 407 patients, 269 of whom received treatment for LAA closure with
the WATCHMAN[supreg] System, and 138 who received Warfarin therapy. The
applicant noted that the procedural complication rate was 4.4 percent,
confirming the rate seen in the second half of the PROTECT AF trial
study and the CAP trial study. After the PREVAIL trial closed, the FDA
authorized a second CAP (specifically, CAP2), which has enrolled 336
patients as of the date the applicant submitted its application.
The applicant also submitted data concerning patients diagnosed
with AF who are not on an oral anticoagulant. These patients are not
protected from stroke by an oral anticoagulant. There may be increased
periprocedural risk of device implantation because thrombus might form
on the device surface more readily in patients with no anticoagulation
(patients in the PROTECT AF trial were treated with Warfarin for 45
days after the device implantation procedure). Specifically, the ASAP
Registry (5) enrolled 150 patients, at one of four centers, that had a
contraindication to even short-term anticoagulation, mostly a history
of prior bleeding. There was no control group. Device implantation led
to a serious adverse event in 13 patients (8.7 percent), including one
case of device thrombus leading to ischemic stroke. Five other patients
had a device-related thrombus that did not lead to stroke (four of
these patients were treated with low molecular weight heparin),
resulting in an overall 4.0 percent incidence (6 out of 150) of device-
associated thrombus. In the PROTECT AF trail study, 20 of the 473
patients (4.2 percent) had device-associated thrombus, 3 of which led
to an ischemic stroke. The rates of device-related thrombus are similar
in the two studies

[[Page 28045]]

(4.0 percent versus 4.2 percent), but the number of patient studied is
smaller in the ASAP Registry (5) study compared to the PROTECT AF
clinical trial study.
In the 14-month follow-up data for the ASAP Registry (5) study, the
rate of stroke or systemic embolism was 2.3 percent per year, which was
said to be ``lower than expected'' based on prior data for patients
diagnosed with AF who were not treated with Warfarin (there was no
concurrent control group). The data provided suggested efficacy in this
patient population. However, we are concerned that there is not strong
evidence that the device prevents stroke.
All trials in the U.S. clinical program allowed for continued
follow-up of patients out to 5 years post-randomization. According to
the applicant, the patients enrolled in the PROTECT AF clinical trial
now have an average of 3.8 years of follow-up. The applicant asserted
that an analysis of this long-term data demonstrates superior primary
efficacy outcomes of the WATCHMAN[supreg] System over Warfarin therapy.
The applicant concluded that the WATCHMAN[supreg] System provides a
permanent solution to reduce the risk of ischemic strokes caused by
thromboemboli originating in the LAA in patients diagnosed with
nonvalvular AF. The applicant further stated that, the data demonstrate
that LAA closure using the WATCHMAN[supreg] System is a substantial
improvement in care as compared to currently available pharmacologic
therapy, such as Warfarin therapy.
The WATCHMAN[supreg] System may be used in two populations: (1)
Patients who could take Warfarin (or other oral anticoagulant), but
would prefer to avoid the risk of bleeding from anticoagulant therapy;
(2) patients who are not eligible for oral anticoagulation therapy
because of an unacceptable risk of bleeding. Most of the clinical
evidence presented by the applicant is from the former group, and the
applicant has requested from the FDA that the label indication be for
``high risk patients with nonvalvular atrial fibrillation who are
eligible for warfarin therapy, but, for whom the risks posed by long-
term warfarin therapy outweigh the benefits.''
We are concerned that the evidence presented by the applicant
demonstrating the superiority of the WATCHMAN[supreg] System compared
to Warfarin therapy is insufficient. The clinical study discussed above
was designed to demonstrate that the WATCHMAN[supreg] is noninferior to
Warfarin therapy. Specifically, in the PREVAIL AF trial study, the
primary endpoint was not significantly improved in the conventional
hypothesis testing statistical analysis at any time point. The longer
term data has improved efficacy and safety data, but still remain
sparse. Even for the secondary patient population ineligible for
anticoagulation therapy, the evidence remains weak as the only data
comes from the ASAP Registry (5) observational study of 150 patients
without a concurrent control group.
A recent article in the Journal of the American College of
Cardiology echoes these concerns: ``Current issues compromising the
implementation of procedural approaches for stroke prevention in AF are
discussed herein and include: (1) Lack of multiple randomized clinical
trials; (2) lack of consensus regarding the appropriate target
population to study; and (3) ability to obtain approval of devices for
outcome measures of unconfirmed clinical importance, such as, the use
of complete closure of the LAA at the time of the index procedure as a
surrogate for clinical efficacy.'' \15\
---------------------------------------------------------------------------

\15\ Holmes, D.R., et. al., ``Left Atrial Occlusion,'' Journal
of American College of Cardiology, 2014, Vol. 63, pp. 291-8.
---------------------------------------------------------------------------

We are inviting public comments on whether this technology meets
the substantial clinical improvement criterion, particularly regarding
our concerns discussed above.
We did not receive any public comments in response to the New
Technology Town Hall meeting held on February 12, 2014 in regard to
this technology.
d. CardioMEMS^TM HF (Heart Failure) System
CardioMEMS, Inc. submitted an application for new technology add-on
payment for FY 2015 for the CardioMEMS^TM HF (Heart Failure)
System, which is an implantable hemodynamic monitoring system comprised
of an implantable sensor/monitor placed in the distal pulmonary artery.
Pulmonary artery hemodynamic monitoring is used in the management of
heart failure. The CardioMEMS^TM HF System measures multiple
pulmonary artery pressure parameters for an ambulatory patient to
measure and transmit data via a wireless sensor to a secure Web site.
The CardioMEMS^TM HF System utilizes radiofrequency (RF)
energy to power the sensor and to measure pulmonary artery (PA)
pressure and consists of three components: An Implantable Sensor with
Delivery Catheter, an External Electronics Unit, and a Pulmonary Artery
Pressure Database. The system provides the physician with the patient's
PA pressure waveform (including systolic, diastolic, and mean
pressures) as well as heart rate. The sensor is permanently implanted
in the distal pulmonary artery using transcatheter techniques in the
catheterization laboratory where it is calibrated using a Swan-Ganz
catheter. PA pressures are transmitted by the patient at home in a
supine position on a padded antenna, pushing one button which records
an 18-second continuous waveform. The data also can be recorded from
the hospital, physician's office or clinic.
The hemodynamic data, including a detailed waveform, are
transmitted to a secure Web site that serves as the Pulmonary Artery
Pressure Database, so that information regarding PA pressure is
available to the physician or nurse at any time via the Internet.
Interpretation of trend data allows the clinician to make adjustments
to therapy and can be used along with heart failure signs and symptoms
to adjust medications.
The applicant believed that a large majority of patients receiving
the sensor would be admitted as an inpatient to a hospital with a
diagnosis of acute or chronic heart failure, which is typically
described by ICD-9-CM diagnosis code 428.43 (Acute or chronic combine
systolic and diastolic heart failure) and the sensor would be implanted
during the inpatient stay. The applicant stated that for safety
considerations, a small portion of these patients may be discharged and
the sensor would be implanted at a future date in the hospital
outpatient setting. In addition, there would likely be a group of
patients diagnosed with chronic heart failure who are not currently
hospitalized, but who have been hospitalized in the past few months for
whom the treating physician believes that regular pulmonary artery
pressure readings are necessary to optimize patient management.
Depending on the patient's status, the applicant stated that these
patients may have the sensor implanted in the hospital inpatient or
outpatient setting.
The applicant anticipates FDA approval and commercial launch in the
second quarter of 2014. The CardioMEMS^TM HF System is
currently described by ICD-9-CM procedure code 38.26 (Insertion of
implantable pressure sensor without lead for intracardiac or great
vessel hemodynamic monitoring). We are inviting public comments
regarding how the CardioMEMS^TM HF System meets the newness
criterion.
With respect to cost criterion, the applicant submitted actual
claims from

[[Page 28046]]

the CHAMPION \16\ clinical trial. Of the 550 patients enrolled in the
trial, the applicant received 310 hospital bills. The applicant
excluded the following claims: Incomplete or missing procedure codes,
incomplete charge information and bills that were statistical outliers
(three standard deviations away from the geometric mean). This resulted
in a final cohort of 138 claims. The applicant noted that cases treated
with the CardioMEMS^TM HF System would typically map to MS-
DRG 264 (Other Circulatory System Operating Room Procedures). Using the
138 clinical trial claims, the applicant standardized the charges and
added charges for the CardioMEMS^TM HF System (because the
clinical trial claims did not contain charges for the
CardioMEMS^TM HF System). This resulted in an average case-
weighted standardized charge per case of $79,218.
---------------------------------------------------------------------------

\16\ Abraham WT, Adamson PB, Bourge RC, Aaron MF, Costanzo MR,
Stevenson LW, Strickland W, Neelagaru S, Raval N, Krueger S, Weiner
S, Shavelle D, Jeffries B, Yadav JS; for the CHAMPION Trial Study
Group. Wireless pulmonary artery haemodynamic monitoring in chronic
heart failure: a randomised controlled trial, Lancet, February 19,
2011, Vol. 377(9766), pp:658-666.
---------------------------------------------------------------------------

Using the FY 2014 Table 10 thresholds, the threshold for MS-DRG 264
is $60,172. Because the average case-weighted standardized charge per
case exceeded the threshold amount, the applicant maintained that the
CardioMEMS^TM HF System would meet the cost criterion. We are
inviting public comments on whether or not the CardioMEMS^TM
HF System meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserted that elevated PA pressures occur prior to signs and symptoms
of heart failure and changes in PA pressures provide a sound
physiologic basis for its management. The applicant also contended
that, until the creation of the CardioMEMS wireless PA implant,
knowledge of PA pressure was only feasible in the hospital with the
performance of a right heart catheterization. According to the
applicant, the CardioMEMS^TM HF System provides physicians
knowledge of PA pressure while the patient is at home, allowing
proactive management to prevent heart failure decompensation and
hospitalization.
The applicant cited clinical data from the CHAMPION trial. The
trial is a prospective, multicenter, randomized, single-blinded
clinical trial conducted in the United States, designed to evaluate the
safety and efficacy of the CardioMEMS^TM HF System in
reducing heart failure-related hospitalizations in a subset of subjects
suffering from heart failure. The applicant shared several major
findings from the CHAMPION trial as described below.
The primary efficacy endpoint of the CHAMPION trial was the rate of
HF hospitalizations during the first 6 months of randomized access.
There were 84 heart failure hospitalizations in the treatment group
compared with 120 heart failure hospitalizations in the control group.
This difference between the groups represented a 28-percent reduction
in the rate of hospitalization for heart failure in the treatment group
(0.32 hospitalizations per patient in the treatment group versus 0.44
hospitalizations per patient in the control group, p = 0.0002).
Although not a primary end point, the rate of HF hospitalizations after
18 months was 33 percent lower in the treatment group than in the
control group.
According to the applicant, secondary endpoints of the CHAMPION
trial are changes in pulmonary artery pressures, proportion of subjects
hospitalized, days alive outside of the hospital, quality of life
(QOL), and heart failure management which demonstrated the following
results:
Pulmonary Artery Pressures: At baseline, both treatment
and control patients had similar PA mean pressures. The change in
pressure over the first 6 months was evaluated by integrating the area
under the pressure curve (AUC). At 6 months of follow-up, the treatment
group had a significantly greater reduction in AUC of -155.7 mmHg days
compared to the control group which had an increase in AUC of +33.1
mmHg-days; p = 0.0077.
Proportion of Subjects Hospitalized: During the 6-month
follow-up period, the proportion of subjects hospitalized for 1 or more
HF hospitalizations was significantly lower in the treatment group (55
out of 270 patients) than in the control group (80 out of 280 patients)
(20.4 percent versus 28.6 percent; p = 0.0292).
Days Alive Outside of the Hospital: At 6 months, treatment
patients had a nonsignificant and clinically not meaningful increase in
days alive outside of the hospital (174.4 versus 172.1; p = 0.0280) and
fewer average days in the hospital (2.2 versus 3.8; p = 0.0246)
compared to control patients.
Quality of Life: The heart failure specific quality of
life was assessed with the MLHFQ total score at 6 months. The average
total score in the treatment group was 45.2 26.4 which was
significantly better than the average total score in the control group
50.6 24.8 (p = 0.0236). The difference in total quality of
life was primarily due to the physical domain. The average physical
score for the treatment group (19.8 11.2) was
significantly better than the control group (22.4 10.9) (p
= 0.0096). There was also a significant difference in the emotional
domain with an average score of 9.5 8.1 for the treatment
group and 11.0 7.7 for the control group (p = 0.0398).
Heart Failure Management: Physicians responded to
treatment of patients' elevated PA pressures by making medication
changes to lower PA pressures and reduce the risk for HF
hospitalization. Physicians documented all medication changes for all
patients and indicated whether the change was made in response to PA
pressures or standard of care information. During the 6-month follow-up
period, physicians made approximately one additional HF medication
change per patient per month in the treatment group when compared to
the control group. Specifically, treatment patients had 1.55 medication
changes per month on average compared to control patients having 0.65
medication changes per month (p < 0.0001). The difference in HF
management between the treatment and control group was due to HF
medication changes made in response to PA pressures.
The study met the two primary safety endpoints: (1) Freedom from
device/system related complications (DSRC); and (2) freedom from sensor
failure. The protocol pre-specified objective performance criterion
(OPC) were that at least 80 percent of patients were to be free from
DSRC and at least 90 percent were to be free from pressure sensor
failure. Of the 575 patients in the safety population, 567 (98.6
percent) were free from DSRC at 6 months (lower confidence limit 97.3
percent, p < 0.0001). This lower limit of 97.3 percent is greater than
the pre-specified OPC of 80 percent. There were no sensor explants or
repeat implants and all sensors were operational at 6 months for a
freedom from sensor failure of 100 percent (lower confidence limit 99.3
percent, p < 0.0001). This lower limit of 99.3 percent is greater than
the pre-specified OPC of 90 percent.
The applicant also noted that the CardioMEMS^TM HF System
reduces the occurrence of HF hospitalizations in NYHA Class III heart
failure patients. According to the applicant, the device had very few
device and system related complications occurring over the course of
the clinical trial. All primary and secondary study endpoints were
successfully achieved. In addition, the CHAMPION trial suggests the
safety and effectiveness of the device was

[[Page 28047]]

maintained during longer term follow-up.
After reviewing the information provided by the applicant, we have
the following concerns. The applicant did not discuss long-term
outcomes, specifically death. We believe additional long-term outcome
information and how the technology changes long-term outcomes would
further assist in our determination of whether the technology
represents a substantial clinical improvement. With regard to the
clinical trial, information from the randomized access period and the
open access period did not include the total number of deaths in each
group. While the data support a reduction in total hospitalizations,
the rate of hospitalization in each group (0.32 versus 0.44) does not
appear to be clinically meaningful. This is supported by total days
alive out of the hospital being virtually identical in both groups.
Finally, we are concerned about the cause of the significant dropouts
in the Kaplan Meier curves which further demonstrates lack of impact on
survival. We are inviting public comments on whether or not the
CardioMEMS^TM HF Monitoring System technology represents a
substantial clinical improvement in the Medicare population.
We received public comments via email in response to the February
12, 2014 New Technology Town Hall meeting in regard to this technology.
We summarize these comments below.
Comment: Commenters supported the approval of new technology add-on
payments for the CardioMEMS^TM HF System. One commenter
stated that it had personal experience with the CardioMEMS^TM
HF System. The commenter explained that having access to a patient's
daily pressures provides trend data. The commenter further explained
that if there is a variation or increase in a patient's pressure, the
physician can contact the patient over the phone and conduct an
evaluation to look for increased symptoms or to learn if the patient
has skipped their diuretics. The device prompts the clinician to ask
questions such as what is different today than yesterday and if the
patient is feeling okay, especially if the patient has not taken a
pressure rate in a few days. Based on the answer to these questions or
if the clinician has concerns, the primary investigator or the
patient's primary cardiologist can assess the pressures and symptoms
and decide the next course of treatment for the patient. The commenter
believed that this structured and consistent monitoring has kept many
patients out of the hospital.
The commenter noted that the monitoring of pressures to assess
clinical status before the patient recognizes symptoms for chronic CHF
patients with significant left ventricular dysfunction can be very
useful. The commenter explained that these patients are accustomed to
being sick and tend to ignore the first symptoms and do not seek
treatment until they are unable to breathe. The commenter noted that
often a clinician can increase the patient's home medications before
pressures get too high.
The commenter also noted that, for patients who go to a CHF clinic
on a regular basis, typically patient information of pressure trends,
along with symptoms and laboratory results, can help determine if
medications should be given that day. The commenter stated that extra
information from the CardioMEMS^TM HF System can change the
way physicians treat the patient and has, in many instances, at its
site. The commenter concluded the CardioMEMS^TM HF System
provides a substantial clinical benefit versus current methods for
managing heart failure.
Another commenter stated that the implant procedure was very simple
and straightforward for patients, especially compared to having a
pacemaker or defibrillator implanted. The commenter further stated that
the device is compatible with defibrillators and cardiac
resynchronization therapy, which are present in many advanced heart
failure patients. The commenter added that the CardioMEMS^TM
HF System is a wireless device and does not involve addition of another
intracardiac lead. Aside from regular pressure readings, the commenter
noted that it found unexpected intake issues for some patients who were
unknowingly consuming certain high-sodium foods. The commenter noted
that they were able to reduce sodium intake further to help reduce
pressures. The commenter also noted that it presented a case report of
increasing pressures in a patient in whom the primary investigator
adjusted diuretic therapy and later the patient's ACE-Inhibitor and
nitrates. The commenter stated that it successfully lowered pressures
and avoided a probable heart failure hospitalization. The commenter
added that the CardioMEMS^TM HF System allows hospitals to
easily obtain pressures at home for transmission and the ability to
check pressures rather than perform right heart catheterization if a
patient was admitted to the hospital.
The commenter also stated that patients found transmission of their
data easy and were surprised how quickly the data was sent to the
clinic. The commenter added that it had patients that liked the
portability of the home electronic equipment, which allowed them to
take it with them on long weekends or vacations. The commenter added
that this information was advantageous as it further allowed clinicians
to implement changes in a timely manner.
The commenter noted the following trial results in its clinic,
which the commenter believed confirm the benefit of hemodynamic
monitoring: A 28-percent reduction in heart failure hospitalization at
6 months and a 15-percent reduction at 15 months. The commenter noted
that there were no sensor failures and 98.6 percent of patients
remained free from device or system complications. The commenter
further noted that it did not experience any complications in patients
who were implanted with the device. The commenter did explain that
inevitably, due to the nature of heart failure, several patients
eventually required advanced therapies with transplantation or
ventricular assist device support without any issue from the sensor.
The commenter also noted some additional key points such as: A
reduction in hospitalization for patients with preserved ejection
fraction; in addition to diuretic adjustment, the study found nitrates
were also adjusted, which further supports use of the device to
optimize vasodilator therapy for pulmonary hypertension and afterload
reduction in this patient population. The commenter concluded that, for
the reasons stated above, the CardioMEMS^TM HF System
provides a substantial clinical benefit versus current methods for
managing heart failure.
One commenter stated that the CardioMEMS^TM HF System
provides clinicians with daily remotely monitored pulmonary artery
pressure and has been proven clinically and dramatically to reduce
heart failure hospitalizations. The commenter cited the CHAMPION IDE
trial, which was a prospective, multicenter, single-blind, clinical
study that enrolled 550 patients randomized to treatment guided by the
CardioMEMS^TM HF System verses optimal medical therapy. The
commenter stated that the trial met all of its primary safety and
efficacy endpoints; reducing heart failure hospitalizations by 28
percent 6 months after implant (p = 0.0002). The commenter further
stated that the reduction in heart failure hospitalizations increased
over time reaching 33 percent (p < 0.0001) at 17 months after implant.
In addition, the

[[Page 28048]]

commenter asserted that the system was shown to be extremely safe, with
almost 99 percent of patients free from device or system complications.
The commenter also stated that one criterion CMS uses to evaluate
substantial clinical improvement is that the device offers the ability
to diagnose a medical condition earlier in a patient population than
allowed by currently available methods. The commenter believed that
there is evidence that use of the CardioMEMS^TM HF System to
make a diagnosis affects the management of the patient. The commenter
added that the CHAMPION trial demonstrated that therapy guided by
CardioMEMS^TM HF System allows physicians to titrate
medications earlier and more effectively reduce heart failure
hospitalizations. The commenter noted that this information is not
available with any other device or treatment alternative.
The commenter further stated that another of CMS' criteria is that
use of the device significantly improves clinical outcomes for a
patient population as compared to currently available treatments, such
as a decreased number of future hospitalizations. The commenter stated
that evidence provided in the CHAMPION trial at 6 months showed a 28-
percent reduction in heart failure hospitalizations and even a larger
reduction of 33 percent during long-term follow-up at 17 months. Based
on the criteria outlined by CMS and the evidence supporting the
CardioMEMS^TM HF System, the commenter believed that the
CardioMEMS^TM HF System meets the criteria for substantial
clinical improvement.
Another commenter, the applicant, reiterated the statements set
forth above in the substantial clinical improvement discussion.
Response: We appreciate the commenters' support. We considered
these comments in our evaluation of the CardioMEMS^TM HF
System for new technology add-on payments for FY 2015 and in the
development of this proposed rule. As stated above, we are inviting
additional public comments on whether or not the
CardioMEMS^TM HF System represents a substantial clinical
improvement in the Medicare population.
e. MitraClip[supreg] System
Abbott Vascular submitted an application for new technology add-on
payments for the MitraClip[supreg] System for FY 2015. (We note that
the applicant submitted an application for new technology add-on
payments for FY 2014 but failed to receive FDA approval by the July 1
deadline.) The MitraClip[supreg] System is a transcatheter mitral valve
repair system that includes a MitraClip[supreg] device implant, a
Steerable Guide Catheter, and a Clip Delivery System. It is designed to
perform reconstruction of the insufficient mitral valve for high-risk
patients who are not candidates for conventional open mitral valve
repair surgery.
Mitral regurgitation (MR), also referred to as mitral insufficiency
or mitral incompetence, occurs when the mitral valve fails to close
completely causing the blood to leak or flow backwards (regurgitate)
into the left ventricle. If the amount of blood that leaks backwards
into the left ventricle is minimal, then intervention is usually not
necessary. However, if the amount of blood that is regurgitated becomes
significant, this can cause the left ventricle to work harder to meet
the body's need for oxygenated blood. Severity levels of MR can range
from grade 1+ through grade 4+. If left untreated, severe MR can lead
to heart failure and death. The American College of Cardiology (ACC)
and the American Heart Association (AHA) issued practice guidelines in
2006 that recommended intervention for moderate/severe or severe MR
(grade 3+ to 4+). The applicant stated that the MitraClip[supreg]
System is ``indicated for percutaneous reduction of significant mitral
regurgitation . . . in patients who have been determined to be at
prohibitive risk for mitral value surgery by a heart team, which
includes a cardiac surgeon experienced in mitral valve surgery and a
cardiologist experienced in mitral valve disease and in whom existing
comorbidities would not preclude the expected benefit from correction
of the mitral regurgitation.''
The MitraClip [supreg] System mitral valve repair procedure is
based on the double-orifice surgical repair technique that has been
used as a surgical technique in open chest, arrested-heart surgery for
the treatment of MR since the early 1990s. According to the applicant,
in utilizing ``the double-orifice technique, a portion of the anterior
leaflet is sutured to the corresponding portion of the posterior
leaflet using standard techniques and forceps and suture, creating a
point of permanent coaptation (``approximation'') of the two leaflets.
When the suture is placed in the middle of the valve, the valve will
have a functional double orifice during diastole.''
With regard to the newness criterion, the MitraClip[supreg] System
received a premarket approval from the FDA on October 24, 2013. The
MitraClip[supreg] System is indicated ``for the percutaneous reduction
of significant symptomatic mitral regurgitation (MR >= 3+) due to
primary abnormality of the mitral apparatus (degenerative MR) in
patients who have been determined to be at prohibitive risk for mitral
valve surgery by a heart team, which includes a cardiac surgeon
experienced in mitral valve surgery and a cardiologist experienced in
mitral valve disease, and in whom existing comorbidities would not
preclude the expected benefit from reduction of the mitral
regurgitation.'' The MitraClip[supreg] System became immediately
available on the U.S. market following FDA approval. The
MitraClip[supreg] System is a Class III device, and has an
investigational device exemption (IDE) for the EVEREST study
(Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for
the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip
Percutaneous Therapy for Health Failure Patients with Functional Mitral
Regurgitation)--IDE G120024. Effective October 1, 2010, ICD-9-CM
procedure code 35.97 (Percutaneous mitral valve repair with implant)
was created to identify and describe the MitraClip[supreg] System
technology.
Abbott Vascular has also submitted an application for a National
Coverage Decision (NCD) for the MitraClip[supreg] System device. We
refer readers to the CMS Web site at: https://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273&NcaName=Transcatheter+Mitral+Valve+(TMV)+Procedures
&TimeFrame=90&DocType=All&bc=AAAAIAAACAAAAA%3d%3d& for information
related to this ongoing NCD. The tracking sheet for this National
Coverage Analysis (NCA) indicates an expected NCA completion date of
August 16, 2014, which is after the FY 2015 IPPS/LTCH PPS final rule is
scheduled to be published. The processes for evaluation and
determination of an NCD, and the processes for evaluation and approval
of an application for new technology add-on payments are made
independent of each other. However, any payment made under the Medicare
program for services provided to a beneficiary would be contingent on
CMS' coverage of the item, and any restrictions on the coverage would
apply. We are inviting public comments on how the MitraClip[supreg]
System meets the newness criterion for purposes of new technology add-
on payments and the issues that may arise from concurrent NCD requests
and new technology add-on payment application review and approval
processes.

[[Page 28049]]

With regard to the cost criterion, the applicant conducted two
analyses. The applicant noted that, while ICD-9-CM procedure code 35.97
maps to MS-DRGs 246 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent with Major Complication or Comorbidity (MCC) or 4+
Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure
with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 249
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent
without MCC), 250 (Percutaneous Cardiovascular Procedure without
Coronary Artery Stent or AMI with MCC), and 251 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent or AMI without
MCC), clinical experience with the MitraClip[supreg] System device has
demonstrated that it is extremely rare for a patient to receive stents
concurrently during procedures using the MitraClip[supreg] System
device. The applicant further cited the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53308) which stated, ``According to the Food and Drug
Administration's (FDA's) terms of the clinical trial for MitraClip\TM\,
the device is to be implanted in patients without any additional
surgeries performed. Therefore, based on these terms, we stated that
while the procedure code is assigned to MS-DRGs 246 through 251, the
most likely MS-DRG assignments would be MS-DRGs 250 and 251.'' As a
result, the applicant stated that it conducted its analyses solely for
MS-DRGs 250 and 251 to demonstrate that the cases involving the
MitraClip[supreg] System device meet the incremental cost thresholds
provided in Table 10 for those MS-DRGs.
The applicant researched the FY 2012 MedPAR file for claims for
cases reporting ICD-9-CM procedure code 35.97. Under the first analysis
and methodology, the applicant noted that this search yielded actual
claims for cases in which the MitraClip[supreg] System device was used
in procedures performed in an IDE study type setting, and hospitals
obtained the MitraClip[supreg] System device at a reduced
investigational price. The applicant further stated that it is likely
that hospitals did not report the charges for the investigational
device, or submitted claims for charges that were significantly less
than the actual device acquisition costs (we refer readers to the
explanation below). The applicant found 57 cases in MS-DRG 250 (29.38
percent of the total number of cases), and 137 cases in MS-DRG 251
(70.61 percent of the total number of cases), which resulted in an
average case-weighted standardized charge per case of $232,670.
The applicant standardized the charges using the FY 2014 IPPS final
rule impact file, and inflated the result using three different
inflation factors. We note that, since the applicant used FY 2012
MedPAR data, we believe it is appropriate to use comparable data for
standardization. Therefore, we believe use of the FY 2012 final rule
impact file is more appropriate rather than the FY 2014 final rule
impact file. The first analysis and methodology used an inflation
factor of 4.57 percent, which was based on data from the BLS' non-
seasonally adjusted CPI for all urban consumers between January 2011
and January 2013. This resulted in an average case-weighted
standardized charge per case of $94,517. The second methodology under
the first analysis used an inflation factor of 9.92 percent, which was
based on the 2-year charge inflation factor listed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50982). This resulted in an average case-
weighted standardized charge per case of $96,199. The third methodology
used under the first analysis used an inflation factor of 4.63 percent,
which was based on the Medicare Economic Index (MEI) from the IPPS
market basket update between the third quarter of 2012 projected
through the third quarter of 2014. This resulted in an average case-
weighted standardized charge per case of $91,570. The applicant noted
that all three methodologies used under the first analysis to determine
each respective average case-weighted standardized charge per case were
calculated without any adjustments to reflect the reduced
investigational price, or inadequate hospital claim reporting and
billing.
Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations
above were performed using unrounded numbers). Because the average
case-weighted standardized charge per case for the applicable MS-DRGs
calculated under each methodology under the first analysis discussed
above exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion.
Under the second analysis, which used the same premise as the first
analysis, the applicant researched the FY 2012 MedPAR file for claims
for cases reporting procedure code 35.97 that mapped to MS-DRGs 250 and
251, except that the applicant excluded charges related to the
MitraClip[supreg] System by removing all charges from the claim that
would map to the implantable cost center on the cost report. The
applicant then standardized the charges, inflated the result using the
three inflation factors above, and added a fixed amount of commercial
charges based on post-FDA approval pricing. This resulted in an average
case weighted standardized charge per case of $139,536 under the first
inflation factor (4.57 percent), $142,364 under the second inflation
factor (9.2 percent), and $139,568 under the third inflation factor
(4.63 percent).
Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations
above were performed using unrounded numbers). Because the average
case-weighted standardized charge per case for the applicable MS-DRGs
calculated under all three methodologies discussed above exceeds the
average case-weighted threshold amount, the applicant maintained that
the MitraClip[supreg] System meets the cost criterion.
We are inviting public comments on whether or not the
MitraClip[supreg] System meets the cost criterion. In addition, we are
inviting public comments on the methodologies used by the applicant in
its two analyses.
The applicant asserted that the MitraClip[supreg] System meets the
substantial clinical improvement criterion. Severe MR is associated
with significant morbidity and mortality rates, and is a progressive
condition. For symptomatic patients diagnosed with significant MR,
surgical repair or replacement is considered the gold standard--
offering improvements in symptoms and longer survival rates. However,
the applicant explained that studies have indicated that a significant
proportion of patients are not eligible for mitral valve repair and/or
replacement surgery because of risk factors, including reduced left
ventricular function, significant comorbidities, and advanced age. As a
result, the applicant stated that there is a significant unmet clinical
need for patients diagnosed with severe MR who are too high-risk for
surgery, who are receiving palliative medical management.
The applicant also stated that the MitraClip[supreg] System meets
the substantial clinical improvement criterion based on clinical
studies \17,18,19,20,21,22,23,24,25\

[[Page 28050]]

that have consistently shown that procedures performed using the
MitraClip [supreg] System device lead to a significant reduction of MR;
improvements in left ventricular (LV) function including LV volumes and
dimensions; improved patient outcomes as measured by improvements in
New York Heart Association (NYHA) functional class, improvement in
health-related quality of life measures, and reductions in heart-
failure related hospitalizations; and significantly lower mortality
rates than predicted surgical mortality rates.
---------------------------------------------------------------------------

\17\ Feldman, et al., ``Percutaneous Repair or Surgery for
Mitral Regurgitation,'' New England Journal of Medicine, 2011, Vol.
364, pp. 1395-1406.
\18\ Foster, et al., ``Percutaneous Mitral Valve Repair in the
Initial EVEREST Cohort: Evidence of Reverse Left Ventricular
Remodeling,'' Circulation in Cardivascular Imaging, July 2013, Vol.
6(4), pp. 522-530.
\19\ Grayburn, et al., ``The Relationship between the Magnitude
of Reduction in Mitral Regurgitation Severity and Left Ventricular
and Left Atrial Reverse Remodeling after MitraClip Therapy,''
Circulation in Cardiovascular Imaging, September 2013, epub,
September 6, 2013.
\20\ Lim, et al., ``Improved Functional Status and Quality of
Life in Prohibitive Surgical Risk Patients With Degenerative Mitral
Regurgitation Following Transcatheter Mitral Valve Repair With the
MitraClip[supreg] System,'' Journal of American College of
Cardiology, 2013, In Press, Accepted Manuscript, Available online,
October 31, 2013.
\21\ Maisano, F., et al., ``Percutaneous Mitral Valve
Interventions in the Real World: Early and One Year Results From the
ACCESS-EU, a Prospective, Multicenter, Non-Randomized Post-Approval
Study of the MitraClip Therapy in Europ,'' Journal of American
College of Cardiology, 2013, doi: 10.1016/j.jacc.2013.02.094.
\22\ Mauri, et al., ``4-Year Results of a Randomized Controlled
Trial of Percutaneous Repair Versus Surgery for Mitral
Regurgitation,'' Journal of American College of Cardiology, Volume
62, Issue 4, 2013, pp. 317-328.
\23\ Munkholm, et al., ``Asystemic Review on the Safety and
Efficacy of Percutaneousedge-to-edge Mitral Valve Repair with the
MitraClip System for high surgical risk candidates,'' Heart, June
27, 2013.
\24\ Reichenspurner, H., et al., ``Clinical Outcomes Through 12
Months in Patients With Degenerative Mitral Regurgitation Treated
With the MitraClip Device in the ACCESS-EUrope Phase I Trial,''
European Journal of Cardiology-and Thoracic Surgy, 2013, Vol. 15,
pp. 919-927.
\25\ Whitlow, et al,. ``Acute and 12-Month Results With
Catheter-Based Mitral Valve Leaflet Repair: The EVEREST II
(Endovascular Valve Edge-to-Edge Repair) High Risk Study,'' Journal
of American College of Cardiology, 2012, Vol. 59, pp. 130-139.
---------------------------------------------------------------------------

The applicant cited clinical data from the EVEREST II High-Risk
Study and the EVEREST II (REALISM) Continued Access Study/Registry. The
applicant also cited clinical data from a high-risk cohort of patients
(the EVEREST II High-Risk Cohort), which is an integrated analysis of
the following: (1) Patients within the EVEREST II High-Risk Study who
met eligibility criteria for being too high-risk to undergo mitral
valve repair surgery; and (2) patients within the EVEREST II (REALISM)
Continued Access Study/Registry who were too high-risk for surgery
using identical eligibility inclusion criteria. The applicant also
cited data from the Prohibitive Risk Degenerative Mitral Regurgitation
(DMR) Cohort, which is an analysis of retrospectively evaluated high-
risk patients diagnosed with DMR enrolled in the EVEREST II studies
that had 1-year follow-up available.
In addition to the published clinical experience from the EVEREST
studies, the applicant cited data on the use of the MitraClip[supreg]
System device in a ``real-world'' setting published recently by a
select number of European centers as part of their individual and/or
multi-center commercial experience or enrollment in the
MitraClip[supreg] System device group of the ACCESS-EU post-approval
clinical trial in Europe. The European use of the MitraClip[supreg]
System device is focused on patients who are too high-risk for surgery,
and patients who are selected for therapy using a multi-disciplinary
``heart team'' approach.
The applicant stated that published reports on the
MitraClip[supreg] System device and the procedures in which the device
was used have consistently demonstrated a significant reduction in MR
incidents that have been durable out to 1, 2, 3, and 4 years. The
applicant cited the EVEREST II High-Risk Study (an analysis of 78
patients diagnosed with degenerative or functional MR enrolled in the
trial), which stated that ``objective measures of MR grade improved in
the MitraClip^TM group, including MR grade of <=2+ in 78
percent of surviving patients at 1 year. These patients also
experienced clinically significant improvements in left ventricular
volume measurements. The clinical significance of these improvements is
reflected in the NYHA class improvements. At baseline, 89 percent of
patients were NYHA III/IV, improving to Class I/II in 74 percent of
surviving patients at 12 months. Quality of life scores also improved
significantly. Finally, the number of admissions for heart failure was
significantly reduced compared to the year prior to
MitraClip^TM therapy.''
The applicant cited clinical outcomes from the Prohibitive Risk DMR
cohort. These results are the basis of the FDA premarket approval.
Major effectiveness endpoints evaluated at 12 months demonstrated
clinically important improvements in MR severity, with MR severity
grades of 3+/4+ decreasing from 90.4 percent at baseline to 16.7
percent at 1 year; NYHA Class III/IV decreasing from 86.6 percent at
baseline to 13.1 percent at 1 year; and the SF-36 Physical/Mental scale
measuring 33.4/46.6 at baseline increasing to 39.4/52.2 at 1 year.
The applicant stated in its new technology add-on payment
application that, ``Heart failure hospitalizations were reduced by 73
percent in the 12 months post MitraClip^TM procedure from the
12 month pre-MitraClip^TM procedure . . .,'' and ``the
primary safety analysis indicated low procedural (30-day) mortality
(6.3 percent) after MitraClip^TM in comparison with the STS
predicted surgical mortality risk score for these patients (13.2
percent).''
The applicant discussed published results \26\ ``assessing the
relationship between the magnitude of reduction in MR and left
ventricular (LV) and left atrial (LA) remodeling after the
MitraClip^TM therapy.'' In this study of patients diagnosed
with significant (grade 3+ or 4+) DMR or functional MR (FMR), the
authors found that, ``even reduction of MR severity to moderate (2+) is
associated with LV and LA reverse remodeling. In both DMR and FMR,
reduction in left ventricular end-diastolic volume (LVEDV) and LA
volumes were improved proportionally to the degree of MR reduction at
one year.''
---------------------------------------------------------------------------

\26\ Grayburn, et al., ``The Relationship between the Magnitude
of Reduction in Mitral Regurgitation Severity and Left Ventricular
and Left Atrial Reverse Remodeling after MitraClip Therapy,''
Circulation in Cardiovascular Imaging, September 2013, epub,
September 6, 2013.
---------------------------------------------------------------------------

In conclusion, the applicant cited data from the ACCESS-EU study,
which noted improvement in disease-specific quality of life measures,
including the Minnesota Living with Heart Failure Questionnaire and
Six-Minute Walk Test. The applicant also provided data supporting the
overall safety and effectiveness of the MitraClip[supreg] System device
in European ``real-world'' outcome studies.
As noted in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547
through 27552), we are concerned that the applicant revised its initial
FDA request for the use of the MitraClip[supreg] System device in all
patients diagnosed with significant MR, after learning that the FDA
expressed concern that the initial study, EVEREST II, demonstrated
that, while the MitraClip[supreg] System device had clinically
meaningful improvements in LV volume and QOL, the surgical option had
better outcomes than the MitraClip[supreg] System device in surgical
candidates. The FDA then required a second trial focused on high
surgical risk patients. We note that the data evaluated by the FDA and
presented by the applicant in its application for new technology add-on
payments included information from the following:
[ssquf] EVEREST I feasibility trial; enrollment 2003-2006; 55
patients.
[ssquf] EVEREST II RCT; enrollment 2005-2008; 279 patients.

[[Page 28051]]

[ssquf] EVEREST II High-Risk Study; enrollment 2007-2008; 78
patients. (A comparator group of 36 patients was identified from
patients who were screened for the study, but did not meet the mitral
valve anatomic criteria for placement of the device.)
[ssquf] EVEREST (REALISM) Continued Access Study and compassionate
use; enrollment 2009-2013; 49 patients.
The applicant provided comparisons of various outcomes prior to the
procedure using the MitraClip[supreg] System device and outcomes 12
months later. MR severity, LV end diastolic volume, NYHA Class, SF36
Physical/Mental scale, and heart failure hospitalization rates all had
clinically meaningful improvements. For the EVEREST II HRS, the
applicant provided analysis demonstrating a significant survival
benefit (76 percent versus 55 percent/p <0.047) over the comparator
group.
In our review of the clinical trials' data, we have the following
key points of concern:
Post-hoc analyses of pooled data sets retain all of the
individual shortcomings of the individual data sets;
Pooling does not enhance the utility and scientific value
of uncontrolled single-arm registries with no comparators; and
Inappropriate pooling introduces additional confounders.
It is also unclear if the appropriate target population for the
MitraClip[supreg] System device has been identified because the
clinical trials conducted by the applicant included patients diagnosed
with both DMR and FMR. This makes it difficult to determine which group
of patients may benefit more, or less, from the new technology. For
example, in a subgroup analysis of the EVEREST II RCT, the authors
concluded that, older patients and those patients diagnosed with FMR or
abnormal left ventricular function had results more comparable to
surgical repair. Data results from 2 years of the EVEREST II RCT also
demonstrated that surgery reduced incidents of MR more than the
procedures performed using the percutaneous MitraClip[supreg] System
device. However, both the surgical patients and the patients who were
treated using the MitraClip[supreg] System device showed comparable
results for improved left ventricular function, NYHA functional class,
and quality of life.
We are inviting public comments on whether this technology meets
the substantial clinical improvement criterion, particularly in
comparison to other surgical therapies, such as mitral valve repair or
replacement, and the appropriate target population for this technology.
We did not receive any public comments in response to the New
Technology Town Hall meeting held on February 12, 2014 in regard to
this technology.
f. Responsive Neurostimulator (RNS[supreg]) System
NeuroPace, Inc. submitted an application for new technology add-on
payments for FY 2015 for the use of the RNS[supreg] System. (We note
that the applicant submitted an application for new technology add-on
payments for FY 2014, but failed to receive FDA approval prior to the
July 1 deadline.) Seizures occur when brain function is disrupted by
abnormal electrical activity. Epilepsy is a brain disorder
characterized by recurrent, unprovoked seizures. According to the
applicant, the RNS[supreg] System is the first implantable medical
device (developed by NeuroPace, Inc.) for treating persons diagnosed
with epilepsy whose partial onset seizures have not been adequately
controlled with antiepileptic medications. The applicant further stated
that, the RNS[supreg] System is the first closed-loop, responsive
system to treat partial onset seizures. Responsive electrical
stimulation is delivered directly to the seizure focus in the brain
when abnormal brain activity is detected. A cranially implanted
programmable neurostimulator senses and records brain activity through
one or two electrode-containing leads that are placed at the patient's
seizure focus/foci. The neurostimulator detects electrographic patterns
previously identified by the physician as abnormal, and then provides
brief pulses of electrical stimulation through the leads to interrupt
those patterns. Stimulation is delivered only when abnormal
electrocorticographic activity is detected. The typical patient is
treated with a total of 5 minutes of stimulation a day. The RNS[supreg]
System incorporates remote monitoring, which allows patients to share
information with their physicians remotely.
With respect to the newness criterion, the applicant stated that
some patients diagnosed with partial onset seizures that cannot be
controlled with antiepileptic medications may be candidates for the
vagus nerve stimulator (VNS) or for surgical removal of the seizure
focus. According to the applicant, these treatments are not appropriate
for, or helpful to, all patients. Therefore, the applicant believed
that there is an unmet clinical need for additional therapies for
partial onset seizures. The applicant further stated that the
RNS[supreg] System addresses this unmet clinical need by providing a
novel treatment option for treating persons diagnosed with medically
intractable partial onset seizures. The applicant received FDA
premarket approval in November 2013. The following ICD-9-CM procedure
codes are used to identify this technology: 01.20 (Cranial implantation
or replacement of neurostimulator pulse generator); 01.29 (Removal of
cranial neurostimulator pulse generator); and 02.93 (Implantation or
replacement of intracranial neurostimulator lead(s)). We are inviting
public comments on whether the technology meets the newness criterion.
With regard to the cost criterion, the applicant stated that
substantially all cases eligible for the RNS[supreg] System would map
to MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex
Central Nervous System Principal Diagnosis without MCC). The applicant
further stated that, while it is possible for some cases to occur in
MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central
Nervous System Principal Diagnosis with MCC or Chemotherapy Implant),
it would be extremely rare because the applicant believed that these
major complications and/or comorbidities would probably preclude a
patient from receiving treatment using the RNS[supreg] System because
the technology is an elective procedure.
The applicant submitted two analyses to demonstrate that the
technology meets the cost criterion. For the first analysis, the
applicant used clinical trial claims data collected in the RNS[supreg]
System Pivotal Clinical Investigation to calculate the anticipated
average case-weighted standardized charge per case. The applicant
maintained that this analysis best represents the anticipated charges
for the technology because it is based on actual cases treated using
this technology. The applicant analyzed 163 claims from 28 hospitals
participating in the clinical trial. Five claims from one hospital were
excluded because no hospital-specific information regarding
standardization was available. The resulting 158 claims included dates
of service ranging from May 2006 through May 2009. The average case-
weighted standardized charge per case for these 158 claims was $54,691.
The applicant then standardized the charges for each claim. The
applicant noted that it was not necessary to remove any charges from
these claims because the technology was provided at no charge in the
trial. After standardizing the charges for each

[[Page 28052]]

claim, the applicant inflated the charges reported on each claim using
the BLS' CPI-IP data covering the same period. Specifically, because
the publicly available FY 2012 MedPAR data do not identify the month of
the discharge on inpatient claims, but do identify the calendar
quarter, the applicant used a mid-month convention to determine the
relevant monthly CPI-IP for each calendar quarter. The applicant then
calculated the percentage change from the relevant quarter to the
quarter of the most recently available CPI-IP, which was the August
2013 CPI-IP. Specifically, the applicant used the following
assumptions:

----------------------------------------------------------------------------------------------------------------
Percent change
FY 2012 calendar quarter Midpoint of quarter CPI IP to August 2013
----------------------------------------------------------------------------------------------------------------
Q4 2011....................................... Nov-11.......................... 242.672 7.93
Q1 2012....................................... Feb-11.......................... 245.721 6.59
Q2 2012....................................... May-11.......................... 247.646 5.76
Q3 2012....................................... Aug-11.......................... 248.856 5.25
Most recent as of application................. Aug-13.......................... 261.915 ..............
----------------------------------------------------------------------------------------------------------------
Source as cited by applicant: Bureau of Labor Statistics' Web site, accessed October 13, 2013; Base Period:
December 1996 = 100.

After inflating the charges, the applicant estimated charges for
the RNS[supreg] System by multiplying the device cost to the hospital
by an anticipated hospital markup of 100 percent, or conversely by
dividing the device cost by a CCR of 0.50. The applicant based its
estimated CCR on four analyses. First, the applicant reviewed the 2007
and 2008 reports prepared by RTI for CMS on charge compression, which
found that the national aggregate CCR for devices and implants was 0.43
and 0.467, as presented in the respective reports. Second, the
applicant queried hospitals participating in the RNS[supreg] System
Pivotal trial, and these queries yielded a mean and median CCR for
implantable devices of 0.37 and 0.36, respectively. Third, the
applicant reviewed data from the (All Payor) Premier database for cases
performed during 2000 through 2010 that reported ICD-9 CM procedure
codes 02.93 and/or 86.95 on a claim, and calculated a mean and median
CCR for implanted leads and neurostimulators of 0.50 and 0.44,
respectively. The applicant then reviewed other discussions of past new
technology add-on payment applications published in the Federal
Register, and noted that other applicants used lower CCRs (higher
markups) for implanted devices than the CCR of 0.50 used in the
applicant's analyses.
Using this approach, the applicant added the anticipated hospital
charge for the implantable RNS[supreg] System to the average case-
weighted standardized charge per case, and determined a final average
case-weighted standardized charge per case of $128,723. The anticipated
hospital charge for the implantable RNS[supreg] System is $73,900.
Using the FY 2014 IPPS Table 10 thresholds, the threshold for MS-DRG
024 is $91,197. Because the final average case-weighted standardized
charge per case of $128,723 for MS-DRG 024 exceeds the average case-
weighted threshold amount, the applicant maintained that the
RNS[supreg] System meets the cost criterion.
In the second analysis, which the applicant characterizes as
supplementary, the applicant researched the FY 2012 MedPAR file for
cases reporting the following combinations of ICD-9-CM procedures
codes: 02.93 and 86.95, or procedures codes 02.93 and 01.20 that mapped
to MS-DRG 024. The applicant found 383 claims for cases reporting the
combination of ICD-9-CM procedures codes 02.93 and 01.20, and pointed
out that these cases were coded with procedure code 01.20 in error
because no new RNS[supreg] System implantations occurred after May
2009. The applicant analyzed these 383 claims, and found that more than
90 percent of these cases had a primary or secondary diagnosis of
Parkinson's disease, essential tremor, or dystonia. These diagnoses are
FDA-approved indications for deep brain stimulation (DBS). In addition,
the applicant noted that the total covered charges for these cases were
less than the estimated charges for a full DBS system, and hypothesized
that these cases did not represent implantation of a full DBS system,
but did represent the implantation of leads only. The applicant
contacted two hospitals that reported claims for cases where total
covered charges were less than the charges for a full DBS system, and
the hospitals confirmed that their claims represented lead
implantations only. Therefore, for the second analysis, the applicant
included all of the cases assigned to MS-DRG 024 reporting a
combination of ICD-9-CM procedures codes 02.93 and 86.95, and all of
the cases assigned to MS-DRG 024 reporting a combination of ICD-9-CM
procedures codes 02.93 and 01.20 where the covered charges were greater
than, or equal to, the estimated charges of a full DBS system. The
applicant maintained that 374 claims from 106 providers met this
criterion, and data represented claims from the fourth calendar quarter
of 2011 through the third calendar quarter of 2012. Based on this
assumption, the applicant calculated an average case-weighted
standardized charge per case of $65,555.
The applicant then removed DBS charges from the average case-
weighted standardized charge per case. The applicant estimated charges
for a full DBS system, and maintained that the average cost for a full
DBS system is $25,979. Similar to its first analysis, the applicant
assumed a CCR of 0.50, or 100 percent markup, which resulted in
estimated charges for a full DBS system of $51,958. After removing the
DBS system charges, the applicant inflated the charges to the current
period using the same methodology in the first analysis, added charges
for the RNS[supreg] System, and determined a final average case-
weighted standardized charge per case of $130,233. As noted above, the
anticipated hospital charge for the implantable RNS[supreg] System is
$73,900. Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRG 024 is $91,197. Because the final average
standardized charge per case of $130,233 for MS-DRG 024 exceeds the
threshold amount, the applicant maintained that the RNS[supreg] System
meets the cost criterion.
Under either analysis, the applicant maintained that the final
average case-weighted standardized charge per case would exceed the
average case-weighted threshold. We are inviting public comments on
whether the RNS[supreg] System meets the cost criterion, particularly
based on the assumptions and methodology used in the applicant's
analyses.
With regard to substantial clinical improvement, as previously
stated, some patients diagnosed with partial

[[Page 28053]]

onset seizures may not be able to control their seizures with
antiepileptic medications, VNS, or with surgical removal of the seizure
focus. The applicant stated that the RNS[supreg] System provides
treatment for those patients diagnosed with partial onset seizures who
fail treatment with antiepileptic medications, or VNS therapy, and who
are ineligible for resective surgery because of the extent and/or
location of the seizure focus, or patients who do not elect surgery.
According to the applicant, the RNS[supreg] System clinical trials
provide Class I evidence that treatment using the RNS[supreg] System
substantially reduces disabling seizures in patients diagnosed with
severe epilepsy, who have tried and failed treatment with antiepileptic
medications, and in many cases, VNS or epilepsy surgery. The applicant
maintained that the results from their clinical trials demonstrate
significant and sustained improvements in health outcomes over the
controlled period and over the long term. The applicant conducted a
feasibility trial, which was designed to demonstrate adequate safety of
its treatment, and provide evidence of effectiveness to support
commencement of a randomized double-blinded pivotal trail. In addition,
the applicant has an ongoing long-term treatment clinical investigation
trial (LTT trial) to assess the long-term safety and effectiveness of
the treatment on patients who have completed either the Feasibility
trial, or the RNS[supreg] System Pivotal trial for an additional seven
years. The LTT trial started in April 2006, and the final patient is
expected to complete the trial in 2018. The applicant noted that
patients enrolled in the LTT trial continued to experience a reduction
in seizures over several years of follow-up, further demonstrating the
positive effect of responsive stimulation from the RNS[supreg] System
is durable.
The applicant stated that their pivotal trial met its primary
effectiveness endpoint by proving that there was a statistically
significant greater reduction in seizures in the treatment group&fnl;
compared to the control group (p = 0.012). Significant improvements at
1 and 2 years post-implant included:
A significant reduction in disabling seizures of 44
percent and 53 percent at 1 and 2 years, respectively;
Fifty-five percent of patients who reached 2 years post-
implant experienced a 50 percent or greater reduction in seizures; and
Significant improvements in overall quality of life, as
well as individual quality of life measures including memory, language,
attention, concentration and medication effects.
The applicant asserted that there was no negative effect of
treatment using the RNS[supreg] System on neuropsychological function
(including verbal functioning, visual spatial processing, and memory)
or mood. The applicant concluded that the RNS[supreg] System Pivotal
trial provides Class I evidence that responsive cortical stimulation is
effective in significantly reducing seizure frequency in adults with
one or two seizure foci who have failed two or more antiepileptic
medication trials. The applicant stated that experience across all of
the RNS[supreg] System trials demonstrates the reduction in seizure
frequency of disabling partial onset seizures improves over time. In
addition, the applicant noted that sustained improvements were also
seen in quality of life. Finally, the applicant noted that safety and
tolerability measures compare favorably to alternative treatments, such
as antiepileptic medications, VNS, and epilepsy surgery.
With regard to the substantial clinical improvement criterion, we
are concerned that the average age of the patients enrolled in the
applicant's trials was 35 years. Although the applicant maintained that
31 percent of the patients enrolled in the pivotal trial were Medicare
beneficiaries, we are unsure of the extent to which this technology
would be used by Medicare beneficiaries because of the relatively young
age of the majority of the patients enrolled in the pivotal trial. We
also are concerned that further clarification on how the RNS[supreg]
System compares to other neurostimulation treatments was not provided
by the applicant.
Because the applicant included claims with DBS charges in one of
its cost analyses, we believe that the similarities and differences
between DBS and the RNS[supreg] System may also be relevant under the
substantial clinical improvement criterion. In addition, we are
concerned that the time period in the clinical trial may not be
sufficient to confirm durability. In the RNS[supreg] System Pivotal
Clinical Investigation, the primary effectiveness endpoint considered
seizure frequency over the last 3 months of the blinded period of the
trial. We note that the applicant is currently conducting a 5-year
study. We are inviting public comments on whether the RNS[supreg]
System meets the substantial clinical improvement criterion,
particularly in regard to the degree in which the technology would be
used by Medicare beneficiaries, the comparison to other
neurostimulation treatments, and its durability.
We received public comments in response to the New Technology Town
Hall meeting held on February 12, 2014, regarding this technology and
the application for new technology add-on payments. We summarize these
comments below.
Comment: One commenter, a physician, stated that even with the
release of multiple new antiepileptic medications in the past 20 years,
over one-third of people diagnosed with epilepsy cannot obtain adequate
seizure control. The commenter noted that seizures lead to loss of
employment and driving licenses and are socially disabling. The
commenter further noted that uncontrolled seizures can cause physical
injury and even significantly increased risk of death. The commenter
stated that only a fraction of these patients are candidates for
potentially curative resective brain surgery and antiepileptic
medications can have disabling or severe adverse effects, such as
lethargy, ataxia, organ or blood cell damage, Stevens-Johnson syndrome,
and psychiatric changes including suicidal ideation. For this reason,
the commenter believed that new treatments are still needed.
The commenter asserted that the RNS[supreg] System represents a
much needed new therapy for patients who are desperate to get seizures
under control and lead a productive life. The commenter stated that of
its patients that participated in the clinical trials, these patients
have demonstrated significant and sustained benefits from treatment
with the RNS[supreg] System. The commenter noted that two patients had
a significant reduction in the amount of seizures per month, and are
now able to obtain driver licenses and both show improved quality of
life.
The commenter also noted that the RNS[supreg] System is a unique
therapy for the following reasons: (1) While medications are chemicals
that circulate to every organ, the RNS[supreg] System delivers therapy
directly to the epileptic focus; (2) RNS[supreg] therapy is delivered
automatically, avoiding compliance problems that occur with
medications; and (3) the RNS[supreg] System constantly records data on
seizure occurrences that is available to the clinician at any time
which can track a patient's progress without depending on the patient's
memory or willingness to report seizures. The commenter asserted that
no other therapy offers this capability.
The commenter urged CMS to approve the new technology add-on
payment application for the RNS[supreg] System, which the commenter
believed would help ensure access to this novel therapy for Medicare
beneficiaries for whom there are otherwise no good treatment options
available.

[[Page 28054]]

Another commenter, also a physician, stated that some of the
benefits of the RNS[supreg] System therapy include a significant
reduction in the seizure frequency and severity, and for some patients,
extended periods of seizure freedom. The commenter explained that this
reduction in the seizure frequency improves over time, is sustained
over several years of follow-up, and can result in improved cognition
and a better quality of life. The commenter further stated that some
patients have been able to live independently for the first time in
their life, take care of children, resume driving, go back to school
and/or obtain employment. The commenter concluded the following
comparisons between the RNS[supreg] System and the vagus nerve
stimulator (VNS):
In clinical trials, the RNS[supreg] System subjects
experienced a greater reduction in seizures than VNS subjects. The
median percent reduction in seizures was: 1 year: RNS--44 percent and
VNS--31 percent; 2 years: RNS--53 percent and VNS--41 percent.
VNS therapy results in stimulation-related side effects,
including coughing, difficulties with speech and throat pain.
RNS[supreg] therapy does not result in chronic side effects.
About one-third of patients in RNS[supreg] System pivotal
trial had previously failed therapy with a VNS. These subjects achieved
the same positive improvements in health outcomes from the RNS[supreg]
System as patients that had not previously tried a VNS.
In the commenter's experience, not only is the frequency
of the seizure activity improved but also the severity of the seizures
can improve with the RNS[supreg] System.
The commenter further noted the ``positive long-term results of RNS
therapy.'' The commenter stated that therapy is being evaluated in the
ongoing LTT trial, in which patients are enrolled for an additional 7
years after completing the initial 2-year clinical trial with some
patients having the implant for over 9 years. The commenter asserted
that the long-term data clearly show that the therapy is durable.
Specifically, the commenter noted that seizure reductions are
maintained at 50 percent or greater through 7 years (that is, the
median percent reduction in seizures is about 60 percent at 7 years).
The commenter added that the vast majority of its patients have elected
to continue treatment with the device given their response to the
RNS[supreg] therapy. The commenter encouraged CMS to approve new
technology add-on payments for the RNS[supreg] System.
Response: We appreciate the commenters' support. We considered
these comments in our evaluation of the RNS[supreg] System new
technology add-on payment application for FY 2015 and in the
development of this proposed rule. As stated above, we are inviting
additional public comments on whether the RNS[supreg] System meets the
substantial clinical improvement criterion, particularly in regard to
the degree in which the technology would be used by Medicare
beneficiaries, the comparison to other neurostimulation treatments, and
its durability.

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

A. Background

Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts ``for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the proposed FY 2015 hospital wage index based
on the statistical areas appears under section III.B. of the preamble
of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. This provision
also requires that any updates or adjustments to the wage index be made
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The proposed adjustment for
FY 2015 is discussed in section II.B. of the Addendum to this proposed
rule.
As discussed in section III.H. of the preamble of this proposed
rule, we also take into account the geographic reclassification of
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of
the Act when calculating IPPS payment amounts. Under section
1886(d)(8)(D) of the Act, the Secretary is required to adjust the
standardized amounts so as to ensure that aggregate payments under the
IPPS after implementation of the provisions of sections 1886(d)(8)(B),
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The proposed budget neutrality adjustment for FY 2015 is discussed in
section II.A.4.b. of the Addendum to this proposed rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are proposing to
apply to the FY 2015 wage index appears under section III.F. of the
preamble of this proposed rule.

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

1. Background
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by the Office of Management and Budget (OMB). The
current statistical areas used in FY 2014 are based on OMB standards
published on December 27, 2000 (65 FR 82228) and Census 2000 data and
Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No.
10-02). For a discussion of OMB's delineations of CBSAs and our
implementation of the CBSA definitions, we refer readers to the
preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We
also discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582)
and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013,
OMB planned to announce new labor market area delineations based on new
standards adopted in 2010 (75 FR 37246) and the 2010 Census of
Population and Housing data. As stated in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27552) and final rule (78 FR 50586), on February
28, 2013, OMB issued OMB Bulletin No. 13-01, which established revised
delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas. A
copy of this bulletin may be obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. According to OMB,
``[t]his bulletin provides the delineations of all Metropolitan
Statistical Areas, Metropolitan Divisions, Micropolitan Statistical
Areas, Combined Statistical

[[Page 28055]]

Areas, and New England City and Town Areas in the United States and
Puerto Rico based on the standards published on June 28, 2010, in the
Federal Register (75 FR 37246-37252) and Census Bureau data.'' In this
FY 2015 IPPS/LTCH PPS proposed rule, when referencing the new OMB
geographic boundaries of statistical areas, we are using the term
``delineations'' rather than the term '' definitions'' that we have
used in the past, consistent with OMB's use of the terms (75 FR 37249).
In order to implement these changes for the IPPS, it is necessary
to identify the new labor market area delineation for each county and
hospital in the country. While the revisions OMB published on February
28, 2013 are not as sweeping as the changes OMB announced in 2003, the
February 28, 2013 bulletin does contain a number of significant
changes. For example, under the new OMB delineations, there would be
new CBSAs, urban counties that would become rural, rural counties that
would become urban, and existing CBSAs would be split apart. In
addition, the effect of the new OMB delineations on various hospital
reclassifications, the out-migration adjustment (established by section
505 of Pub. L. 108-173), and treatment of hospitals located in certain
rural counties (that is, ``Lugar'' hospitals) provided for under
section 1886(d)(8)(B) of the Act must be considered. These are just a
few of the many issues that need to be reviewed regarding the effects
of the new OMB labor market area delineations prior to proposing and
establishing policies.
However, because the bulletin was not issued until February 28,
2013, with supporting data not available until later, and because the
changes made by the bulletin and their ramifications needed to be
extensively reviewed and verified, we were unable to undertake such a
lengthy process before publication of the FY 2014 IPPS/LTCH PPS
proposed rule and, thus, did not implement changes to the wage index
for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50586), we stated that we intended to
propose changes to the wage index based on the new OMB delineations in
this FY 2015 proposed rule. As discussed below, in this proposed rule,
we are proposing to implement the new OMB delineations as described in
the February 28, 2013 OMB Bulletin No. 13-01, effective for the FY 2015
IPPS wage index.
2. Proposed Implementation of New Labor Market Area Delineations
As discussed previously, CMS delayed implementing the new OMB labor
market area delineations to allow for sufficient time to assess the new
changes. We believe it is important for the IPPS to use the latest
labor market area delineations available as soon as is reasonably
possible in order to maintain a more accurate and up-to-date payment
system that reflects the reality of population shifts and labor market
conditions. While CMS and other stakeholders have explored potential
alternatives to the current CBSA-based labor market system (we refer
readers to the CMS Web site at: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus
has been achieved regarding how best to implement a replacement system.
As discussed in the FY 2005 IPPS final rule (69 FR 49027), ``While we
recognize that MSAs are not designed specifically to define labor
market areas, we believe they do represent a useful proxy for this
purpose.'' We further believe that using the most current delineations
will increase the integrity of the IPPS wage index system by creating a
more accurate representation of geographic variations in wage levels.
We have reviewed our findings and impacts relating to the new OMB
delineations, and find no compelling reason to further delay
implementation. Therefore, we are proposing to implement the new OMB
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective for the FY 2015 IPPS wage index. We are proposing to use
these new delineations to calculate area wage indexes in a manner that
is generally consistent with the CBSA-based methodologies finalized in
the FY 2005 IPPS final rule, and refined in subsequent rulemaking. We
also are proposing a wage index transition period applicable to all
hospitals that experience negative impacts due to the proposed
implementation of the new OMB delineations. This transition is
discussed in more detail below.
a. Micropolitan Statistical Areas
As discussed in the FY 2005 IPPS final rule (69 FR 49029 through
49032), CMS considered whether to use Micropolitan Statistical Areas to
define the labor market areas for the purpose of the IPPS wage index.
OMB defines a ``Micropolitan Statistical Area'' as a CBSA ``associated
with at least one urban cluster that has a population of at least
10,000, but less than 50,000'' (75 FR 37252). We refer to these areas
as Micropolitan Areas. After extensive impact analysis, CMS determined
the best course of action would be to treat all hospitals located in
Micropolitan Areas as ``rural'' and include them in the calculation of
each State's rural wage index. Because Micropolitan areas tend to
encompass smaller population centers and contain fewer hospitals than
MSAs, we determined that if Micropolitan Areas were to be treated as
separate labor market areas, the IPPS wage index would have included
drastically more single-provider labor market areas. This larger number
of labor market areas with fewer hospitals could create instability in
year-to-year wage index values for a large number of hospitals; could
reduce the averaging effect of the wage index, thus lessening some of
the efficiency incentive inherent in a system based on the average
hourly wages for a large number of hospitals; and could arguably create
an inequitable system when so many hospitals have wage indexes based
solely on their own wage data while other hospitals' wage indexes are
based on an average hourly wage across many hospitals. For these
reasons, we adopted a policy to include Micropolitan Areas in the
State's rural wage area, and have continued this policy through the
present.
Based upon the new 2010 Decennial Census data, a number of urban
counties have switched status and have joined or became Micropolitan
Areas, and some counties that once were part of a Micropolitan Area,
under current OMB delineations, have become urban. Overall, there are
fewer Micropolitan Areas (541) under the new OMB delineations based on
the 2010 Census than existed under the latest data from the 2000 Census
(581). We believe that the best course of action would be to continue
the policy established in the FY 2005 IPPS final rule and include
hospitals located in Micropolitan Areas in each State's rural wage
index. These areas continue to be defined as having relatively small
urban cores (populations of 10,000-49,999). We do not believe it would
be appropriate to calculate a separate wage index for areas that
typically may include only a few hospitals for the reasons set forth in
the FY 2005 IPPS/LTCH PPS final rule, as discussed above. Therefore, in
conjunction with our proposal to implement the new OMB labor market
area delineations beginning in FY 2015, we are proposing to continue to
treat Micropolitan Areas as ``rural'' and to include the Micropolitan
Areas in the calculation of each State's rural wage index.
b. Urban Counties That Would Become Rural Under the New OMB
Delineations
As previously discussed, we are proposing to implement the new OMB
labor market area delineations (based

[[Page 28056]]

upon the 2010 Decennial Census data) beginning in FY 2015. Our analysis
shows that a total of 37 counties (and county equivalents) and 12
hospitals that were once considered part of an urban CBSA would be
considered to be located in a rural area, beginning in FY 2015, under
these new OMB delineations. The following chart lists the 37 urban
counties that would be rural if we finalize our proposal to implement
the new OMB delineations.

Counties That Would Lose Urban Status
----------------------------------------------------------------------------------------------------------------
Previous
County State CBSA CBSA
number
----------------------------------------------------------------------------------------------------------------
Greene County............................ IN 14020 Bloomington, IN.
Anson County............................. NC 16740 Charlotte-Gastonia-Rock Hill, NC-
SC.
Franklin County.......................... IN 17140 Cincinnati-Middletown, OH-KY-IN.
Stewart County........................... TN 17300 Clarksville, TN-KY.
Howard County............................ MO 17860 Columbia, MO.
Delta County............................. TX 19124 Dallas-Fort Worth-Arlington, TX.
Pittsylvania County...................... VA 19260 Danville, VA.
Danville City............................ VA 19260 Danville, VA.
Preble County............................ OH 19380 Dayton, OH.
Gibson County............................ IN 21780 Evansville, IN-KY.
Webster County........................... KY 21780 Evansville, IN-KY.
Franklin County.......................... AR 22900 Fort Smith, AR-OK.
Ionia County............................. MI 24340 Grand Rapids-Wyoming, MI.
Newaygo County........................... MI 24340 Grand Rapids-Wyoming, MI.
Greene County............................ NC 24780 Greenville, NC.
Stone County............................. MS 25060 Gulfport-Biloxi, MS.
Morgan County............................ WV 25180 Hagerstown-Martinsburg, MD-WV.
San Jacinto County....................... TX 26420 Houston-Sugar Land-Baytown, TX.
Franklin County.......................... KS 28140 Kansas City, MO-KS.
Tipton County............................ IN 29020 Kokomo, IN.
Nelson County............................ KY 31140 Louisville/Jefferson County, KY-
IN.
Geary County............................. KS 31740 Manhattan, KS.
Washington County........................ OH 37620 Parkersburg-Marietta-Vienna, WV-
OH.
Pleasants County......................... WV 37620 Parkersburg-Marietta-Vienna, WV-
OH.
George County............................ MS 37700 Pascagoula, MS.
Power County............................. ID 38540 Pocatello, ID.
Cumberland County........................ VA 40060 Richmond, VA.
King and Queen County.................... VA 40060 Richmond, VA.
Louisa County............................ VA 40060 Richmond, VA.
Washington County........................ MO 41180 St. Louis, MO-IL.
Summit County............................ UT 41620 Salt Lake City, UT.
Erie County.............................. OH 41780 Sandusky, OH.
Franklin County.......................... MA 44140 Springfield, MA.
Ottawa County............................ OH 45780 Toledo, OH.
Greene County............................ AL 46220 Tuscaloosa, AL.
Calhoun County........................... TX 47020 Victoria, TX.
Surry County............................. VA 47260 Virginia Beach-Norfolk-Newport
News, VA-NC.
----------------------------------------------------------------------------------------------------------------

We are proposing that the wage data for all hospitals located in
the counties listed above would now be considered rural when
calculating their respective State's rural wage index. We recognize
that rural areas typically have lower area wage index values than urban
areas, and hospitals located in these counties may experience a
negative impact in their IPPS payment due to the proposed adoption of
the new OMB delineations. We refer readers to section III.B.2.e. of the
preamble of this proposed rule for a discussion of the proposed wage
index transition period, in particular, the discussion regarding the 3-
year transition for hospitals located in these specific counties.
c. Rural Counties That Would Become Urban Under the New OMB
Delineations
As previously discussed, we are proposing to implement the new OMB
labor market area delineations (based upon the 2010 Decennial Census
data) beginning in FY 2015. Analysis of these OMB labor market area
delineations shows that a total of 105 counties (and county
equivalents) and 81 hospitals that were located in rural areas would be
located in urban areas under the new OMB delineations. The following
chart lists the 105 rural counties that would be urban if we finalize
our proposal to implement the new OMB delineations.

Counties That Would Gain Urban Status
------------------------------------------------------------------------
New CBSA
County State number CBSA.
------------------------------------------------------------------------
Utuado Municipio............. PR 10380 Aguadilla-Isabela,
PR.
Linn County.................. OR 10540 Albany, OR.
Oldham County................ TX 11100 Amarillo, TX.
Morgan County................ GA 12060 Atlanta-Sandy
Springs-Roswell,
GA.
Lincoln County............... GA 12260 Augusta-Richmond
County, GA-SC.

[[Page 28057]]

Newton County................ TX 13140 Beaumont-Port
Arthur, TX.
Fayette County............... WV 13220 Beckley, WV.
Raleigh County............... WV 13220 Beckley, WV.
Golden Valley County......... MT 13740 Billings, MT.
Oliver County................ ND 13900 Bismarck, ND.
Sioux County................. ND 13900 Bismarck, ND.
Floyd County................. VI 13980 Blacksburg-
Christiansburg-
Radford, VA.
De Witt County............... IL 14010 Bloomington, IL.
Columbia County.............. PA 14100 Bloomsburg-Berwick,
PA.
Montour County............... PA 14100 Bloomsburg-Berwick,
PA.
Allen County................. KY 14540 Bowling Green, KY.
Butler County................ KY 14540 Bowling Green, KY.
St. Mary's County............ MD 15680 California-Lexington
Park, MD.
Jackson County............... IL 16060 Carbondale-Marion,
IL.
Williamson County............ IL 16060 Carbondale-Marion,
IL.
Franklin County.............. PA 16540 Chambersburg-
Waynesboro, PA.
Iredell County............... NC 16740 Charlotte-Concord-
Gastonia, NC-SC.
Lincoln County............... NC 16740 Charlotte-Concord-
Gastonia, NC-SC.
Rowan County................. NC 16740 Charlotte-Concord-
Gastonia, NC-SC.
Chester County............... SC 16740 Charlotte-Concord-
Gastonia, NC-SC.
Lancaster County............. SC 16740 Charlotte-Concord-
Gastonia, NC-SC.
Buckingham County............ VA 16820 Charlottesville, VA.
Union County................. IN 17140 Cincinnati, OH-KY-
IN.
Hocking County............... OH 18140 Columbus, OH.
Perry County................. OH 18140 Columbus, OH.
Walton County................ FL 18880 Crestview-Fort
Walton Beach-
Destin, FL.
Hood County.................. TX 23104 Dallas-Fort Worth-
Arlington, TX.
Somervell County............. TX 23104 Dallas-Fort Worth-
Arlington, TX.
Baldwin County............... AL 19300 Daphne-Fairhope-
Foley, AL.
Monroe County................ PA 20700 East Stroudsburg,
PA.
Hudspeth County.............. TX 21340 El Paso, TX.
Adams County................. PA 23900 Gettysburg, PA.
Hall County.................. NE 24260 Grand Island, NE.
Hamilton County.............. NE 24260 Grand Island, NE.
Howard County................ NE 24260 Grand Island, NE.
Merrick County............... NE 24260 Grand Island, NE.
Montcalm County.............. MI 24340 Grand Rapids-
Wyoming, MI.
Josephine County............. OR 24420 Grants Pass, OR.
Tangipahoa Parish............ LA 25220 Hammond, LA.
Beaufort County.............. SC 25940 Hilton Head Island-
Bluffton-Beaufort,
SC.
Jasper County................ SC 25940 Hilton Head Island-
Bluffton-Beaufort,
SC.
Citrus County................ FL 26140 Homosassa Springs,
FL.
Butte County................. ID 26820 Idaho Falls, ID.
Yazoo County................. MS 27140 Jackson, MS.
Crockett County.............. TN 27180 Jackson, TN.
Kalawao County............... HI 27980 Kahului-Wailuku-
Lahaina, HI.
Maui County.................. HI 27980 Kahului-Wailuku-
Lahaina, HI.
Campbell County.............. TN 28940 Knoxville, TN.
Morgan County................ TN 28940 Knoxville, TN.
Roane County................. TN 28940 Knoxville, TN.
Acadia Parish................ LA 29180 Lafayette, LA.
Iberia Parish................ LA 29180 Lafayette, LA.
Vermilion Parish............. LA 29180 Lafayette, LA.
Cotton County................ OK 30020 Lawton, OK.
Scott County................. IN 31140 Louisville/Jefferson
County, KY-IN.
Lynn County.................. TX 31180 Lubbock, TX.
Green County................. WI 31540 Madison, WI.
Benton County................ MS 32820 Memphis, TN-MS-AR.
Midland County............... MI 33220 Midland, MI.
Martin County................ TX 33260 Midland, TX.
Le Sueur County.............. MN 33460 Minneapolis-St. Paul-
Bloomington, MN-WI.
Mille Lacs County............ MN 33460 Minneapolis-St. Paul-
Bloomington, MN-WI.
Sibley County................ MN 33460 Minneapolis-St. Paul-
Bloomington, MN-WI.
Maury County................. TN 34980 Nashville-Davidson-
Murfreesboro-
Franklin, TN.
Craven County................ NC 35100 New Bern, NC.
Jones County................. NC 35100 New Bern, NC.
Pamlico County............... NC 35100 New Bern, NC.
St. James Parish............. LA 35380 New Orleans-
Metairie, LA.
Box Elder County............. UT 36260 Ogden-Clearfield,
UT.
Gulf County.................. FL 37460 Panama City, FL.
Custer County................ SD 39660 Rapid City, SD.

[[Page 28058]]

Fillmore County.............. MN 40340 Rochester, MN.
Yates County................. NY 40380 Rochester, NY.
Sussex County................ DE 41540 Salisbury, MD-DE.
Worcester County............. MA 41540 Salisbury, MD-DE.
Highlands County............. FL 42700 Sebring, FL.
Webster Parish............... LA 43340 Shreveport-Bossier
City, LA.
Cochise County............... AZ 43420 Sierra Vista-
Douglas, AZ.
Plymouth County.............. IA 43580 Sioux City, IA-NE-
SD.
Union County................. SC 43900 Spartanburg, SC.
Pend Oreille County.......... WA 44060 Spokane-Spokane
Valley, WA.
Stevens County............... WA 44060 Spokane-Spokane
Valley, WA.
Augusta County............... VA 44420 Staunton-Waynesboro,
VA.
Staunton City................ VA 44420 Staunton-Waynesboro,
VA.
Waynesboro City.............. VA 44420 Staunton-Waynesboro,
VA.
Little River County.......... AR 45500 Texarkana, TX-AR.
Sumter County................ FL 45540 The Villages, FL.
Pickens County............... AL 46220 Tuscaloosa, AL.
Gates County................. NC 47260 Virginia Beach-
Norfolk-Newport
News, VA-NC.
Falls County................. TX 47380 Waco, TX.
Columbia County.............. WA 47460 Walla Walla, WA.
Walla Walla County........... WA 47460 Walla Walla, WA.
Peach County................. GA 47580 Warner Robins, GA.
Pulaski County............... GA 47580 Warner Robins, GA.
Culpeper County.............. VA 47894 Washington-Arlington-
Alexandria, DC-VA-
MD-WV.
Rappahannock County.......... VA 47894 Washington-Arlington-
Alexandria, DC-VA-
MD-WV.
Jefferson County............. NY 48060 Watertown-Fort Drum,
NY.
Kingman County............... KS 48620 Wichita, KS.
Davidson County.............. NC 49180 Winston-Salem, NC.
Windham County............... CT 49340 Worcester, MA-CT.
------------------------------------------------------------------------

We are proposing that when calculating the area wage index, the
wage data for hospitals located in these counties would be included in
their new respective urban CBSAs. Typically, hospitals located in an
urban area would receive a higher wage index value than hospitals
located in their State's rural area. However, with regard to the wage
index applicable to individual hospitals, we are proposing to implement
a transitional wage index adjustment for any hospital that would
receive a lower wage index under the new OMB delineations than it would
have received under the current CBSA definitions. We refer readers to
section III.B.2.e. of the preamble of this proposed rule for further
discussion of this proposed transition.
d. Urban Counties That Would Move to a Different Urban CBSA Under the
New OMB Delineations
In addition to rural counties becoming urban and urban counties
becoming rural, several urban counties would shift from one urban CBSA
to another urban CBSA under our proposal to adopt the new OMB
delineations. In certain cases, adopting the new OMB delineations would
involve a change only in CBSA name or number, while the CBSA continues
to encompass the same constituent counties. For example, CBSA 29140
(Lafayette, IN) would experience both a change to its number and its
name, and become CBSA 29200 (Lafayette-West Lafayette, IN), while all
of its three constituent counties would remain the same. We have
identified 19 counties that would remain in a CBSA that experienced a
change in name or number under the new delineations, but would retain
the same constituent counties, as shown in the following table.

Counties That Would Remain in CBSA That Changed Number
------------------------------------------------------------------------
Prior CBSA No. New CBSA No. County State
------------------------------------------------------------------------
14484................. 14454 Norfolk County... MA.
14484................. 14454 Plymouth County.. MA.
14484................. 14454 Suffolk County... MA.
47644................. 47664 Lapeer County.... MI.
47644................. 47664 Livingston County MI.
47644................. 47664 Macomb County.... MI.
47644................. 47664 Oakland County... MI.
47644................. 47664 St. Clair County. MI.
26180................. 46520 Honolulu County.. HI.
29140................. 29200 Benton County.... IN.
29140................. 29200 Carroll County... IN.
29140................. 29200 Tippecanoe County IN.
42044................. 11244 Orange County.... CA.
42060................. 42200 Santa Barbara CA.
County.
44600................. 48260 Jefferson County. OH.
44600................. 48260 Brooke County.... WV.

[[Page 28059]]

44600................. 48260 Hancock County... WV.
13644................. 43524 Frederick County. MD.
13644................. 43524 Montgomery County MD.
------------------------------------------------------------------------

We are not discussing further in this section these proposed
changes because they are inconsequential changes with respect to the
IPPS wage index. However, in other cases, if we adopt the new OMB
delineations, counties would shift between existing and new CBSAs,
changing the constituent makeup of the CBSAs.
In one type of change, an entire CBSA would be subsumed by another
CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single
county (Flagler, FL) CBSA. Flagler County would become a part of CBSA
19660 (Deltona-Daytona Beach-Ormond Beach, FL) under the new OMB
delineations.
In another type of change, some CBSAs have counties that would
split off to become part of or to form entirely new labor market areas.
For example, CBSA 37964 (Philadelphia Metropolitan Division) currently
is comprised of five Pennsylvania counties (Bucks, Chester, Delaware,
Montgomery, and Philadelphia). If we adopt the new OMB delineations,
Montgomery, Bucks, and Chester counties would split off and form the
new CBSA 33874 (Montgomery County-Bucks County-Chester County, PA
Metropolitan Division), while Delaware and Philadelphia counties would
remain in CBSA 37964.
Finally, in some cases, a CBSA would lose counties to another
existing CBSA if we adopt the new OMB delineations. For example,
Lincoln County and Putnam County, WV would move from CBSA 16620
(Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV-KY-OH). CBSA
16620 still would exist in the new labor market delineations with fewer
constituent counties.
The following chart lists the urban counties that would move from
one urban CBSA to another urban CBSA if we adopted the new OMB
delineations.

Counties That Would Change to Another CBSA
------------------------------------------------------------------------
Prior CBSA New CBSA County State
------------------------------------------------------------------------
11300................. 26900 Madison County... IN.
11340................. 24860 Anderson County.. SC.
14060................. 14010 McLean County.... IL.
37764................. 15764 Essex County..... MA.
16620................. 26580 Lincoln County... WV.
16620................. 26580 Putnam County.... WV.
16974................. 20994 DeKalb County.... IL.
16974................. 20994 Kane County...... IL.
21940................. 41980 Ceiba Municipio.. PR.
21940................. 41980 Fajardo Municipio PR.
21940................. 41980 Luquillo PR.
Municipio.
26100................. 24340 Ottawa County.... MI.
31140................. 21060 Meade County..... KY.
34100................. 28940 Grainger County.. TN.
35644................. 35614 Bergen County.... NJ.
35644................. 35614 Hudson County.... NJ.
20764................. 35614 Middlesex County. NJ.
20764................. 35614 Monmouth County.. NJ.
20764................. 35614 Ocean County..... NJ.
35644................. 35614 Passaic County... NJ.
20764................. 35084 Somerset County.. NJ.
35644................. 35614 Bronx County..... NY.
35644................. 35614 Kings County..... NY.
35644................. 35614 New York County.. NY.
35644................. 20524 Putnam County.... NY.
35644................. 35614 Queens County.... NY.
35644................. 35614 Richmond County.. NY.
35644................. 35614 Rockland County.. NY.
35644................. 35614 Westchester NY.
County.
37380................. 19660 Flagler County... FL.
37700................. 25060 Jackson County... MS.
37964................. 33874 Bucks County..... PA.
37964................. 33874 Chester County... PA.
37964................. 33874 Montgomery County PA.
39100................. 20524 Dutchess County.. NY.
39100................. 35614 Orange County.... NY.
41884................. 42034 Marin County..... CA.
41980................. 11640 Arecibo Municipio PR.
41980................. 11640 Camuy Municipio.. PR.
41980................. 11640 Hatillo Municipio PR.
41980................. 11640 Quebradillas PR.
Municipio.
48900................. 34820 Brunswick County. NC.
49500................. 38660 Gu[aacute]nica PR.
Municipio.
49500................. 38660 Guayanilla PR.
Municipio.

[[Page 28060]]

49500................. 38660 Pe[ntilde]uelas PR.
Municipio.
49500................. 38660 Yauco Municipio.. PR.
------------------------------------------------------------------------

If hospitals located in these counties move from one CBSA to
another under the new OMB delineations, there may be impacts, both
negative and positive, upon their specific wage index values. We refer
readers to section III.B.2.e. of the preamble of this proposed rule for
a discussion of our proposals to moderate the impact of our proposed
adoption of the new OMB delineations.
e. Proposed Transition Period
(1) Background
Overall, we believe implementing the new OMB labor market area
delineations would result in wage index values being more
representative of the actual costs of labor in a given area. However,
we recognize that some hospitals would experience decreases in wage
index values as a result of our proposed implementation of the new
labor market area delineations. We also realize that some hospitals
would have higher wage index values due to our proposed implementation
of the new labor market area delineations.
In the past, we have provided for transition periods when adopting
changes that have significant payment implications, particularly large
negative impacts. As discussed in the FY 2005 IPPS final rule (69 FR
49032 through 49034), we evaluated several options to ease the
transition to the new CBSA system, which we implemented starting in FY
2005 and which is the system currently in use.
As discussed in that rule, we determined that the transition to the
current wage index system would have the largest negative impacts upon
hospitals that were originally considered urban, but would be
considered rural under the new definitions. To alleviate the decreased
payments associated with having a rural wage index, in calculating the
area wage index, in the FY 2005 IPPS final rule, we allowed urban
hospitals that became rural under new definitions to maintain their
assignment to the labor market area where they were located for FY
2004. This adjustment was granted for a period of 3 fiscal years.
In the FY 2005 IPPS final rule, for all hospitals that experienced
negative payment impacts due to new definitions (for example, they were
moved to an urban CBSA with a lower wage index value than their
previous rural or urban labor market area), we implemented a 1-year
blended adjustment. We calculated wage indexes for all hospitals using
both old and new labor market definitions. Hospitals received 50
percent of their wage index based on the new OMB delineations, and 50
percent of their wage index based on their current labor market area.
This adjustment only applied to hospitals that would have experienced a
drop in wage index values due to a change in labor market definitions.
Hospitals that benefitted from the labor market area transition
received their new wage index at the time the new labor market
definitions became effective.
We continue to have the same concerns expressed in the FY 2005 IPPS
final rulemaking. Therefore, we are proposing a similar transition
methodology to mitigate any negative financial impacts experienced by
hospitals due to our proposal to implement the new OMB labor market
area delineations for FY 2015.
(2) Proposed Transition for Hospitals in Urban Areas That Would Become
Rural
For hospitals that are currently located in an urban county that
would become rural under the new OMB delineations, and would have no
form of wage index reclassification or redesignation in place for FY
2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the
Act, redesignations under section 1886(d)(8)(B) of the Act, or rural
reclassifications under section 1886(d)(8)(E) of the Act), we are
proposing a policy to assign them the urban wage index value of the
CBSA in which they are physically located for FY 2014 for a period of 3
fiscal years (with the rural and imputed floors applied and with the
rural floor budget neutrality adjustment applied to the area wage
index). As stated in the FY 2005 IPPS proposed rule (69 FR 28252), we
have in the past provided transitions when adopting changes that have
significant payment implications, particularly large negative impacts.
We believe it is appropriate to apply a 3-year transition period for
hospitals located in urban counties that would become rural under the
new OMB delineations, given the potentially significant payment impacts
for these hospitals. This is consistent with the transition policy
adopted in FY 2005 (69 FR 49032 through 49034). We continue to believe,
as we stated in the FY 2005 IPPS final rule (69 FR 49033), that the
longer transition period is appropriate because, as a group, we expect
these hospitals would experience a steeper and more abrupt reduction in
their wage index due to the labor market revisions compared to other
hospitals. Assigning these hospitals the urban wage index value of the
CBSA in which they are physically located for FY 2014 for a period of 3
fiscal years (with the rural and imputed floors applied and with the
rural floor budget neutrality adjustment applied to the area wage
index) would be the most similar to the actual payment wage index that
these hospitals received in FY 2014, thereby minimizing the negative
impact of adopting the new OMB delineations for these hospitals.
Accordingly, for FYs 2015, 2016, and 2017, assuming no other form of
wage index reclassification or redesignation is granted, we are
proposing to assign these hospitals the area wage index value of the
urban CBSA to which they geographically were located in FY 2014 (with
the rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied to the area wage index). For example, if
urban CBSA 12345 consisted of three counties in FY 2014, and, under the
new OMB delineations, one of those counties, County X, would no longer
be part of CBSA 12345 and would become rural for FY 2015, we are
proposing that hospitals in County X would be assigned the FY 2015 wage
index of CBSA 12345, computed using the remaining two counties, with
the rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied to the area wage index. We believe that
assigning the wage index of the hospitals' current area is the simplest
and most effective method for mitigating negative payment impacts due
to the proposed adoption of the new OMB delineations. We have
identified relatively few hospitals that are located in urban counties
that would become rural, and fewer yet that do not have a
reclassification or redesignation in effect for FY 2015. Because we
believe that these urban to rural transitions would

[[Page 28061]]

be the most likely to cause significant negative payment impacts, we
believe that these hospitals should be granted a longer transition
period than hospitals that may be switching between urban labor market
areas, which as discussed later, we are proposing may receive 1-year
blended wage index.
We note that there are situations where a hospital cannot be
assigned the wage index value of the CBSA to which it geographically
belonged in FY 2014 because that CBSA would be split and no longer
exist and some or all of the constituent counties would be added to
another urban labor market area under the new OMB delineations. If the
hospital cannot be assigned the wage index value of the CBSA to which
it is geographically located in FY 2014 because that CBSA would be
split apart and no longer exist, and some or all of its constituent
counties would be added to another urban labor market area under the
new OMB delineations, we are proposing that hospitals located in such
counties that would become rural under the new OMB delineations would
be assigned the wage index of the FY 2015 urban labor market area that
contains the urban county in their FY 2014 CBSA to which they are
closest (with the rural and imputed floors applied and with the rural
floor budget neutrality adjustment applied) for a period of 3 fiscal
years. We believe this approach of assigning the wage index of the FY
2015 urban labor market area that contains the urban county in their FY
2014 CBSA to which they are closest (with the rural and imputed floors
applied and with the rural floor budget neutrality adjustment applied)
would most closely approximate the hospitals' FY 2014 actual payment
wage index, thereby minimizing the negative effects of the proposed
change in the OMB delineations. For example, George County, MS and
Jackson County, MS, together, in FY 2014, comprise the urban CBSA 37700
(Pascagoula, MS). Under the new OMB delineations, George County would
be considered rural and Jackson County, MS would become part of the
urban labor market area of Gulfport-Biloxi-Pascagoula, MS (CBSA 25060).
In this instance, we are proposing that hospitals in George County, MS
would be assigned the FY 2015 wage index for CBSA 25060 (Gulfport-
Biloxi-Pascagoula, MS), with the rural and imputed floors applied and
with the rural floor budget neutrality adjustment applied.
Furthermore, we are proposing that any hospital that is currently
located in an urban county that would become rural for FY 2015 under
the new OMB delineations, but also has a reclassification or
redesignation in effect for FY 2015 (from a pre-existing
reclassification or redesignation granted prior to FY 2015), would not
be eligible for the 3-year transition wage index. This is because if
the hospital is reclassified or redesignated in some manner, it would
instead receive a wage index that reflects its own choice to obtain its
reclassified or redesignated status. Accordingly, if a hospital is
currently located in an urban county that would become rural for FY
2015 under the new OMB delineations and such hospital sought and was
granted reclassification or redesignation for FY 2015 or such hospital
seeks and is granted any reclassification or redesignation for FY 2016
or FY 2017, we are proposing that the hospital would permanently lose
its 3-year transitional assigned wage index status, and would not be
eligible to reinstate it. For example, if a hospital that is currently
urban but would become rural under the new OMB delineations received a
3-year transition wage index in FY 2015 based on the wage index of the
urban CBSA to which it was geographically located in FY 2014 and then
by its own choice, reclassifies to obtain a different area wage index
in FY 2016, the hospital would not be eligible to reinstate the
transition wage index, even if it opts to cancel its reclassification
for FY 2017. We are proposing the transition adjustment to assist
hospitals if they experience a negative payment impact specifically due
to the proposed adoption of the new OMB delineations in FY 2015. If a
hospital chooses in a future fiscal year to forego this transition
adjustment by obtaining some form of reclassification or redesignation,
we do not believe reinstatement of this transition adjustment would be
appropriate. The purpose of the adjustment is to assist hospitals that
may be negatively impacted by the new OMB delineations in transitioning
to a wage index based on these delineations. By obtaining a
reclassification or redesignation, we believe that the hospital has
made the determination that the transition adjustment is not necessary
because it has other viable options for mitigating the impact of the
transition to the new OMB delineations.
With respect to the wage index computation, we are proposing to
follow our existing policy regarding the inclusion of a hospital's wage
index data in the CBSA in which it is geographically located (we refer
readers to Step 6 of the method for computing the unadjusted wage index
in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592)). Accordingly,
beginning with FY 2015, we are proposing that the wage data of all
hospitals receiving this type of 3-year transition adjustment would be
included in the statewide rural area in which they are geographically
located under the new OMB labor market area delineations of FY 2015.
After the 3-year transition period, beginning in FY 2018, we are
proposing that these formerly urban hospitals discussed above would
receive their statewide rural wage index, absent any reclassification
or redesignation.
In addition, we are proposing that the hospitals receiving this 3-
year transition because they are in counties that were urban under the
current CBSA definitions, but would be rural under the new OMB
delineations, would not be considered urban hospitals. Rather, they
would maintain their status as rural hospitals for other payment
considerations. This is because our proposal to apply a 3-year
transitional wage index for these newly rural hospitals only applies
for the purpose of calculating the wage index under our proposal to
adopt the new CBSA delineations. We are not proposing transitions for
other IPPS payment policies that may be impacted by the proposed
adoption of the new CBSA delineations. However, we will continue to
apply the existing regulations at Sec. 412.102 with respect to
determining DSH payments in the first year after a hospital loses urban
status (we refer readers to section II.B.2.e.(7) of the preamble of
this proposed rule).
(3) Proposed Transition for Hospitals Deemed Urban Under Section
1886(d)(8)(B) of the Act Where the Urban Area Would Become Rural Under
the New OMB Delineations
As discussed in section II.H.3. of the preamble of this proposed
rule, there are some hospitals that currently are geographically
located in rural areas but are deemed to be urban under section
1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals
currently redesignated under section 1886(d)(8)(B) of the Act would no
longer be eligible for deemed urban status under the new OMB
delineations, as discussed in detail in section III.H.3. of the
preamble of this proposed rule. Similar to the policy implemented in
the FY 2005 IPPS final rule (69 FR 49059), and consistent with the
policy we are proposing for other hospitals in counties that were urban
and would become rural under the new OMB delineations, we are proposing
to apply the 3-year transition to these hospitals currently
redesignated to urban areas under section 1886(d)(8)(B) of the Act

[[Page 28062]]

that would no longer be deemed urban under the new OMB delineations and
would revert to being rural. That is, for FYs 2015, 2016, and 2017,
assuming no other form of wage index reclassification or redesignation
is granted, we are proposing to assign these hospitals the FY 2015 area
wage index value of hospitals reclassified to the urban CBSA (that is,
the attaching wage index) to which they were redesignated in FY 2014
(with the rural and imputed floors applied and with the rural floor
budget neutrality adjustment applied). If the hospital cannot be
assigned the reclassified wage index value of the CBSA to which it was
redesignated in FY 2014 because that CBSA would split apart and no
longer exist, and some or all of its constituent counties would be
added to another urban labor market area under the new OMB
delineations, we are proposing that such hospitals would be assigned
the wage index of the hospitals reclassified to the FY 2015 urban labor
market area that contains the urban county in their FY 2014
redesignated CBSA to which they are closest for a period of 3 fiscal
years. We are proposing to assign these hospitals the area wage index
of hospitals reclassified to a CBSA because hospitals deemed urban
under section 1886(d)(8)(B) of the Act are treated as reclassified
under current policy, under which such hospitals receive an area wage
index that includes wage data of all hospitals reclassified to the
area.
(4) Proposed Transition for Hospitals That Would Experience a Decrease
in Wage Index Under the New OMB Delineations
While we believe that instituting the latest OMB labor market area
delineations would create a more accurate wage index system, we also
recognize that implementing the new OMB delineations may cause some
short-term instability in hospital payments. Therefore, in addition to
the 3-year transition adjustment for hospitals being transitioned from
urban to rural status as discussed above, we are proposing a 1-year
blended wage index for all hospitals that would experience any decrease
in their actual payment wage index (that is, a hospital's actual wage
index used for payment, which accounts for all applicable effects of
reclassification and redesignation) exclusively due to the proposed
implementation of the new OMB delineations. Similar to the policy
adopted in the FY 2005 IPPS final rule (69 FR 49033), we are proposing
that a post-reclassified wage index with the rural and imputed floor
applied would be computed based on the hospital's FY 2014 CBSA (that
is, using all of its FY 2014 constituent county/ies), and another post-
reclassified wage index with the rural and imputed floor applied would
be computed based on the hospital's new FY 2015 CBSA (that is, the FY
2015 constituent county/ies). We are proposing to compare these two
wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs
would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs,
we are proposing that a blended wage index would be computed,
consisting of 50 percent of each of the two wage indexes added
together. We are proposing that this blended wage index would be the
hospital's wage index for FY 2015. We believe a 1-year, 50/50 blend
would mitigate the short-term instability and negative payment impacts
due to the proposed implementation of the new OMB delineations,
providing hospitals with a transition period during which they may
adjust to their new geographic CBSA or may assess any reclassification
options that would be available to them starting in FY 2016. We are
proposing a longer 3-year transition adjustment for hospitals losing
urban status because there are significantly fewer affected urban-to-
rural hospitals, and we believe the negative impacts to a hospital
shifting from urban to rural status would typically be greater than
other types of transitions. We believe that a transition period longer
than 1 year to address other impacts of the proposed adoption of new
OMB delineations would reduce the accuracy of the overall labor market
area wage index system because far more hospitals would be affected.
In addition, for FY 2015, for hospitals that would receive the
proposed 3-year transition, it is possible that receiving the FY 2015
wage index (with the rural and imputed floors applied and with the
rural floor budget neutrality adjustment applied) of the CBSA where the
hospital is geographically located for FY 2014 might still be less than
the FY 2015 wage index that the hospital would have received in the
absence of the adoption of the new OMB delineations (particularly in
States where the rural floor is historically very high). Therefore,
such a hospital may additionally benefit from application of the 50/50
blended wage indexes. Accordingly, we are proposing to include the
assignment of the 3-year transitional wage index in our calculation of
the FY 2015 portion of the 50/50 blended wage index for that hospital.
After FY 2015, such a hospital may revert to the second year of the 3-
year transition. For example, if Hospital X (formerly part of CBSA
12345, now rural) is assigned CBSA 12345's FY 2015 wage index value of
1.0000 as part of the 3-year transition, but that FY 2015 wage index
value would have been 1.1000 under the previous OMB delineations, that
hospital would receive a 50/50 blended wage index of 1.0500 for FY
2015. In FY 2016 and FY 2017, Hospital X would still be eligible to
receive the remaining 2 years of the 3-year transition wage index of
CBSA 12345 (that is, in FY 2016, Hospital X would receive the FY 2016
wage index of CBSA 12345 (with the rural and imputed floors applied and
with the rural floor budget neutrality adjustment applied)), and in FY
2017, Hospital X would receive the FY 2017 wage index of CBSA 12345
(with the rural and imputed floors applied and with the rural floor
budget neutrality adjustment applied).
(5) Impact of Proposed Adoption of New OMB Labor Market Area
Delineations
To illustrate how the proposed adoption of the new OMB labor market
area delineations would impact hospitals' proposed FY 2015 wage
indexes, we compared the proposed FY 2015 occupational mix adjusted
post-reclassified wage indexes with rural floor budget neutrality
applied under the FY 2014 CBSAs and under the proposed FY 2015 CBSAs
using the new OMB delineations. (This analysis does not include the
effects of the out-migration adjustment, the frontier floor, the
proposed 3-year hold harmless transition wage indexes, or the proposed
1-year transition blended wage indexes). As a result of applying the
proposed new OMB delineations to the wage data, the proposed wage index
values for 2,362 urban hospitals (83.8 percent) and 396 (64.0 percent)
rural hospitals would increase. The wage index values of 2,337 (82.9
percent) urban hospitals would increase by less than 5 percent, and the
wage index values of 13 (0.5 percent) urban hospitals would increase by
at least 5 percent but less than 10 percent. The wage index values of
12 (0.4 percent) urban hospitals would increase by greater than or
equal to 10 percent. The wage index values of 369 (59.6 percent) rural
hospitals would increase by less than 5 percent, 18 rural hospitals
(2.9 percent) would increase by at least 5 percent but less than 10
percent, and 9 rural hospitals (1.5 percent) would increase by greater
than or equal to 10 percent. However, the wage index values for 451
urban hospitals (16.0 percent) and 223 (36.0 percent) rural hospitals
would decrease. The wage index values of 396 (14.0

[[Page 28063]]

percent) urban hospitals would decrease by less than 5 percent, 40
urban hospitals (1.4 percent) would decrease by at least 5 percent but
less than 10 percent, and 15 urban hospitals (0.5 percent) would
decrease by greater than or equal to 10 percent. The wage index values
of 198 (32.0 percent) rural hospitals would decrease by less than 5
percent, 24 rural hospitals (3.9 percent) would decrease by 5 percent
and less than 10 percent, and 1 rural hospital (0.2 percent) would
decrease by greater than or equal to 10 percent. The wage index values
of 6 (0.2 percent) urban hospitals and zero rural hospitals would
remain unchanged by the adoption of the new OMB CBSA delineations. The
largest positive impacts would be for 8 hospitals in 5 States (Texas,
Minnesota, Louisiana, Alabama, and Michigan) that would be moving from
a rural to an urban area (ranging from a 16.57 percent to a 22.91
percent increase in wage index), and for 10 hospitals that would be
moving from one urban CBSA (FY 2014 CBSA 20764, Edison-New Brunswick,
NJ) to new urban CBSA 35614 (New York-Jersey City-White Plains, NY-NJ),
representing a 15.12 percent increase in wage index. The largest
negative impacts would be for 5 hospitals in 4 States (New York,
Alabama, Idaho, and North Carolina) that would be moving from an urban
to a rural area (ranging from a 13.08 percent to a 27.25 percent
decrease in wage index), and for 8 hospitals that would be moving from
one urban CBSA (FY 2014 CBSA 35644, New York-White Plains-Wayne, NY-NJ)
to new urban CBSA 20524 (Dutchess County-Putnam County, NY),
representing a 11.42 percent decrease in wage index. These results
illustrate that hospitals that would move from rural CBSAs to urban
CBSAs generally would benefit significantly, while hospitals that would
move from urban to rural CBSAs generally would have larger negative
impacts. For all hospitals combined, the wage index values of 2,758
(80.2 percent) overall would be increasing, and 674 (19.6 percent)
overall would be decreasing, indicating that most hospitals would be
positively affected by the adoption of the new OMB delineations.
Furthermore, the magnitude of the changes would be relatively small
overall, with only 132 hospitals (3.8 percent) experiencing either an
increase or decrease of at least 5 percent.
The following table shows the impact of the proposed adoption of
the new OMB delineations on hospitals' proposed FY 2015 wage indexes,
comparing the proposed FY 2015 occupational mix adjusted post-
reclassified wage indexes with rural floor budget neutrality applied
under the FY 2014 CBSAs and the proposed FY 2015 CBSAs using the new
OMB delineations. (This analysis does not include the effects of the
out-migration adjustment, the frontier floor, the proposed 3-year hold
harmless transition wage indexes, or the proposed 1-year transition
blended wage indexes).

----------------------------------------------------------------------------------------------------------------
Number of post- Number of post-
reclassified reclassified
Percent change in FY 2015 wage index rural hospitals urban hospitals Total number of
based on FY 2014 based on FY 2014 hospitals
CBSA CBSA
----------------------------------------------------------------------------------------------------------------
Decrease greater than or equal to 10.0.................... 1 15 16
Decrease greater than or equal to 5.0 but less than 10.0.. 24 40 64
Decrease greater than or equal to 2.0 but less than 5.0... 36 94 130
Decrease greater than 0.0 but less than 2.0............... 162 302 464
No change................................................. 0 6 6
Increase greater than 0.0 but less than 2.0............... 365 2,304 2,669
Increase greater than or equal to 2.0 but less than 5.0... 4 33 37
Increase greater than or equal to 5.0 but less than 10.0.. 18 13 31
Increase greater than or equal to 10.0.................... 9 12 21
-----------------------------------------------------
Total................................................. 619 2,819 3,438
----------------------------------------------------------------------------------------------------------------

(6) Proposed Budget Neutrality
For FY 2015, we are proposing to apply both the 3-year transition
and 50/50 blended wage index adjustments in a budget neutral manner. We
are proposing to make an adjustment to the standardized amount to
ensure that the total payments, including the effect of the transition
provisions, would equal what payments would have been if we would not
be providing for any transitional wage indexes under the new OMB
delineations. For a complete discussion on this proposed budget
neutrality adjustment for FY 2015, we refer the reader to section
II.A.4.b. of the Addendum to this proposed rule.
We note that, consistent with past practice (69 FR 49034), we are
not adopting the new OMB delineations themselves in a budget neutral
manner. We do not believe that the revision to the labor market areas
in and of itself constitutes an ``adjustment or update'' to the
adjustment for area wage differences, as provided under section
1886(d)(3)(E) of the Act.
(7) Proposals With Respect To Determining Disproportionate Share
Hospital (DSH) Payments
As noted in the FY 2005 IPPS final rule (69 FR 49033), the
provisions of Sec. 412.102 of the regulations would continue to apply
with respect to determining DSH payments. Specifically, in the first
year after a hospital loses urban status, the hospital would receive an
additional payment that equals two-thirds of the difference between the
urban DSH payments applicable to the hospital before its redesignation
from urban to rural and the rural DSH payments applicable to the
hospital subsequent to its redesignation from urban to rural. In the
second year after a hospital loses urban status, the hospital would
receive an additional payment that equals one-third of the difference
between the urban DSH payments applicable to the hospital before its
redesignation from urban to rural and the rural DSH payments applicable
to the hospital subsequent to its redesignation from urban to rural.
We also are proposing to make changes to the regulations to delete
Sec. 412.64(b)(1)(ii)(D). In this regulation section, we currently
define a ``hospital reclassified as rural'' as a hospital located in a
county that, in FY 2004, was urban but was redesignated as rural after
September 30, 2004, as a result of the most recent census data and
implementation of the new MSA definitions announced by OMB on June 6,
2003. Because this term is not used in Sec. 412.64, but is used in
Sec. 412.102, we

[[Page 28064]]

are proposing to delete Sec. 412.64(b)(1)(ii)(D) and revise the
language at Sec. 412.102 to address the circumstances set forth in
Sec. 412.64(b)(1)(ii)(D). The regulation at Sec. 412.102, which
addresses special treatment of hospitals located in areas that are
changing from urban to rural as a result of a geographic redesignation,
is the only location that currently references a ``hospital
reclassified as rural'', as defined at Sec. 412.64(b)(1)(ii)(D). To
avoid confusion with urban hospitals that choose to reclassify as rural
under Sec. 412.103, we are proposing to revise the regulation text at
Sec. 412.102 so that it no longer refers to the defined term
``hospital reclassified as rural,'' and instead specifically states the
circumstances in which Sec. 412.102 applies. In addition, we are
proposing to modify the regulation text so that it would apply to all
transitions from urban to rural status that occur as a result of any
future adoption of new or revised OMB standards for delineating
statistical areas adopted by CMS. Specifically, we are proposing to
revise the regulations at Sec. 412.102 to state that ``An urban
hospital that was part of an MSA, but was redesignated as rural as a
result of the most recent OMB standards for delineating statistical
areas adopted by CMS, may receive an adjustment to its rural Federal
payment amount for operating costs for 2 successive fiscal years as
provided in paragraphs (a) and (b) of this section. . . .''

C. Worksheet S-3 Wage Data for the Proposed FY 2015 Wage Index

The proposed FY 2015 wage index values are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2011 (the FY 2014 wage indexes
were based on data from cost reporting periods beginning during FY
2010).
1. Included Categories of Costs
The proposed FY 2015 wage index includes the following categories
of data associated with costs paid under the IPPS (as well as
outpatient costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty);
Home office costs and hours;
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47318)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2014, the
proposed wage index for FY 2015 also excludes the direct and overhead
salaries and hours for services not subject to IPPS payment, such as
skilled nursing facility (SNF) services, home health services, costs
related to GME (teaching physicians and residents) and certified
registered nurse anesthetists (CRNAs), and other subprovider components
that are not paid under the IPPS. The proposed FY 2015 wage index also
excludes the salaries, hours, and wage-related costs of hospital-based
rural health clinics (RHCs), and Federally qualified health centers
(FQHCs) because Medicare pays for these costs outside of the IPPS (68
FR 45395). In addition, salaries, hours, and wage-related costs of CAHs
are excluded from the wage index, for the reasons explained in the FY
2004 IPPS final rule (68 FR 45397 through 45398).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
Under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indexes applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indexes for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.

D. Verification of Worksheet S-3 Wage Data

The wage data for the proposed FY 2015 wage index were obtained
from Worksheet S-3, Parts II and III of the Medicare cost report for
cost reporting periods beginning on or after October 1, 2010, and
before October 1, 2011. For wage index purposes, we refer to cost
reports during this period as the ``FY 2011 cost report,'' the ``FY
2011 wage data,'' or the ``FY 2011 data.'' Instructions for completing
the wage index sections of Worksheet S-3 are included in the Provider
Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 40,
Sections 4005.2 through 4005.4 for Form CMS-2552-10. The data file used
to construct the proposed FY 2015 wage index includes FY 2011 data
submitted to us as of February 27, 2014. As in past years, we performed
an extensive review of the wage data, mostly through the use of edits
designed to identify aberrant data.
We asked our MACs to revise or verify data elements that result in
specific edit failures. For the proposed FY 2015 wage index, we
identified and excluded 50 providers with data that were too aberrant
to include in the proposed wage index, although if data elements for
some of these providers are corrected, we intend to include some of
these providers in the final FY 2015 wage index. We instructed MACs to
complete their data verification of questionable data elements and to
transmit any changes to the wage data no later than April 9, 2014. We
intend that all unresolved data elements will be resolved by the date
the FY 2015 final rule is issued. The revised data will be reflected in
the FY 2015 IPPS final rule.
In constructing the proposed FY 2015 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2011, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398). For this proposed
rule, we removed 6 hospitals that converted to CAH status on or after
February 14, 2013, the cut-off date for CAH exclusion from the FY 2014
wage index, and through and including February 13, 2014, the cut-off
date for CAH exclusion from the FY 2015 wage index. After removing
hospitals with aberrant data and hospitals that converted to CAH
status, the proposed FY 2015 wage index is calculated based on 3,400
hospitals.
For the proposed FY 2015 wage index, we allotted the wages and
hours data for a multicampus hospital among the different labor market
areas where its campuses are located in the same manner that we
allotted such hospitals' data in the FY 2014 wage index (78 FR 50587).
Table 2 containing the proposed

[[Page 28065]]

FY 2015 wage index associated with this proposed rule (available via
the Internet on the CMS Web site) includes separate wage data for the
campuses of 6 multicampus hospitals.
Questions have been raised recently regarding the reporting of
contract housekeeping and dietary services on Worksheet S-3, Part II,
lines 33 and 35 of the Medicare cost report. CMS finalized its proposal
to begin collecting contract labor costs and hours for housekeeping,
and dietary (along with management services and the overhead services
of administrative and general) in the FY 2003 IPPS final rule (67 FR
50022 through 50023). At that time, we stated, ``We continue to
consider whether to expand our contract labor definition to include
more types of contract services in the wage index. In particular, we
have examined whether to include the costs for acquired dietary and
housekeeping services, as many hospitals now provide these services
through contracts. Costs for these services tend to be below the
average wages for all hospital employees. Therefore, excluding the
costs and hours for these services if they are provided under contract,
while including them if the services are provided directly by the
hospital, creates an incentive for hospitals to contract for these
services in order to increase their average hourly wage for wage index
purposes'' (67 FR 50022). In the FY 2003 IPPS proposed rule, we
explained that we selected the three overhead services of
administrative and general, housekeeping, and dietary because they are
provided at all hospitals, either directly or through contracts, and
together they comprise about 60 percent of a hospital's overhead hours
(67 FR 31433). In the FY 2003 IPPS final rule, we stated that we ``will
monitor the hospital industry for information regarding the hospitals'
ability to provide the data. Further, we will work with hospitals and
intermediaries [MACs] to develop acceptable methods for tracking the
costs and hours. Finally, before including these additional costs in
the wage index, we will provide a detailed analysis of the impact of
including these additional costs in the wage index values in the
Federal Register and provide for public comment. Our final decision on
whether to include contract indirect patient care labor costs in our
calculation of the wage index will depend on the outcome of our
analyses and public comments'' (67 FR 50023).
Subsequent to the issuance of the FY 2003 IPPS final rule, we
revised Worksheet S-3, Part II of the Medicare cost report (CMS Form
2552-96) to add four lines for the reporting of contract labor
salaries, wages, and hours. The lines added for contract housekeeping
and dietary services were lines 26.01 and 27.01, respectively. (Line
9.03 for contract management and line 22.01 for contract administrative
and general (A&G) services were also added at that time). These lines
were effective with cost reporting periods beginning on or after
October 1, 2003 (that is, FY 2004). Because the cost report data used
for the wage index are on a 4-year lag, data from these new contract
labor lines would first be available for the FY 2008 wage index.
In the FY 2008 rulemaking process, we provided an analysis of the
effect on the inclusion in the wage index of the wages and hours
related to the new contract labor lines. At that time, 56 hospitals
(1.6 percent) failed edits for contract housekeeping line 26.01; and 99
hospitals (2.8 percent) failed edits for contract dietary line 27.01
(72 FR 24680 and 24782). We also noted that ``many of these edit
failures are for wage data that are not to be included in the wage
index and will be excluded through the wage index calculation. . . . In
addition, some of the aberrant data will be resolved by the final rule
through the correction process'' (72 FR 24680 and 24782). The small
percentage of hospitals that failed edits for these contract labor
lines indicates that the vast majority of hospitals completing these
contract labor lines were able to obtain and report reasonable
salaries, wages, and hours associated with contract housekeeping and
dietary services. In the FY 2008 IPPS final rule, we stated that we
believe that ``the impact of this policy is generally very minor, and
we do not believe the additional complexity of a transition wage index
is warranted for an impact this small. Further, we continue to believe
it is prudent policy to include in the wage index the costs for these
contract indirect patient care services'' (72 FR 47316). Therefore, we
adopted the policy to include the new contract labor lines in the wage
index, beginning with the FY 2008 wage index.
The questions that have recently come to our attention involve
hospitals that consistently do not provide documentable salaries,
wages, and hours for their contracted housekeeping and/or dietary
services. (On the Medicare cost report (CMS Form 2552-10), contract
housekeeping is on Worksheet S-3, Part II, line 33 and contract dietary
is on line 35). When this situation occurs, CMS has instructed the
Medicare contractors to use reasonable estimates, such as regional
average hourly rates, as a substitute for actual wages and hours, and
to report the estimates on the hospital's Worksheet S-3, Part II, line
33 or line 35, respectively. Our policy has been to use reasonable
estimates for these housekeeping and dietary lines, rather than report
zeroes for wages and hours, because, as discussed above and as stated
in the FY 2003 IPPS final rule, ``[c]osts for these services tend to be
below the average wages for all hospital employees. Therefore,
excluding the costs and hours for these services if they are provided
under contract, while including them if the services are provided
directly by the hospital, creates an incentive for hospitals to
contract for these services in order to increase their average hourly
wage for wage index purposes'' (57 FR 50022). We understand that the
reason many hospitals provide for failing to report such contract wages
and hours is that their contracts do not clearly specify this
information, often because they use a single vendor to provide several
different contract labor services. We believe that allowing hospitals
to routinely use contracts that do not clearly break out the salaries,
wages, and hours associated with these services as a reason for not
being able to report proper salaries, wages, and hours for these cost
report lines undermines the purpose of instituting these lines in the
first place. Furthermore, because every hospital must provide
housekeeping and dietary services, and because the wage index is a
relative measure of the value of the labor provided to a hospital in a
particular labor market area, to report zeroes for salaries, wages, and
hours for housekeeping and dietary services is not only unrealistic (in
that every hospital provides for these services), but also
misrepresents the labor costs in that area and undermines our policy.
Consequently, CMS has instructed the Medicare contractors not to zero
out these line items when a hospital cannot document the housekeeping
or dietary salaries, wages, and hours, but instead to use a reasonable
estimation of these wages and hours.
In this proposed rule, we are reiterating our requirement that all
hospitals must document salaries, wages, and hours for the purpose of
reporting this information on Worksheet S-3, Part II, lines 32, 33, 34,
and/or 35 (for either directly employed housekeeping and dietary
employees on lines 32 and 34, and contract labor on lines 33 and 35).
It is not acceptable for a hospital to request that the Medicare
contractor zero out these line items if the hospital's contract does
not

[[Page 28066]]

specifically break out the actual wages and hours. As indicated above,
and stated in the FY 2008 IPPS proposed rule (72 FR 24680 and 24782), a
small percentage of hospitals failed edits associated with the contract
housekeeping and dietary lines, showing that the vast majority of
hospitals reporting data on these lines were able to obtain and report
reasonable salaries, wages, and hours associated with contract
housekeeping and dietary services. We encourage hospitals to ensure
that their contracts clearly specify the salaries, wages, and hours
related to all of their contract labor. Because these line items have
been included in the cost report since FY 2004, we believe that
hospitals have had adequate notice and time to structure their
contracts so that the wages and hours of contract employees can be
determined and included in the cost reports. We expect hospitals to
provide accurate data on their cost reports.
We understand that there may be rare situations where a hospital
would not have documentable salaries, wages, and hours for contract
housekeeping and dietary services. In these situations, we believe that
it is appropriate and necessary to use reasonable estimates for these
numbers in order to determinate the best, most realistic, wage index
that we can. As discussed previously, housekeeping and dietary services
are unique in that the costs for housekeeping and dietary services tend
to be below the average wages for all hospital employees. Thus, an
incentive is created for hospitals to avoid reporting these contract
labor salaries, wages, and hours on the cost report in order to
increase their average hourly wage for wage index purposes. To deter
hospitals from not reporting this information and to ensure that the
wage index more accurately reflects the labor costs in an area, we
believe that it is both necessary and appropriate for the Medicare
contractors to estimate such salaries, wages, and hours in the rare
instance where a hospital cannot provide such information. Therefore,
in the absence of documentable wages and hours for contract
housekeeping and dietary services, Medicare contractors would continue
to use reasonable estimates for these services. Examples of reasonable
estimates are regional average hourly rates, including an average of
the wages and hours for dietary and housekeeping services of other
hospitals in the same CBSA as the hospital in question. Hospitals also
may conduct time studies to determine hours worked. If, for whatever
reason, regional averages or time studies cannot be used, Medicare
contractors may use data from the Bureau of Labor Statistics to obtain
average wages and hours for housekeeping and dietary services.
Commenters may also suggest alternatives for imputing reasonable
estimates for possible consideration by CMS. In all cases, Medicare
contractors must determine that the data used are reasonable.

E. Method for Computing the Proposed FY 2015 Unadjusted Wage Index

The method used to compute the proposed FY 2015 wage index without
an occupational mix adjustment follows the same methodology that we
used to compute the FY 2012, FY 2013, and FY 2014 final wage indexes
without an occupational mix adjustment (76 FR 51591 through 51593, 77
FR 53366 through 53367, and 78 FR 50587 through 50588, respectively).
As discussed in the FY 2012 final rule, in ``Step 5,'' for each
hospital, we adjust the total salaries plus wage-related costs to a
common period to determine total adjusted salaries plus wage-related
costs. To make the wage adjustment, we estimate the percentage change
in the employment cost index (ECI) for compensation for each 30-day
increment from October 14, 2010, through April 15, 2012, for private
industry hospital workers from the BLS' Compensation and Working
Conditions. We have consistently used the ECI as the data source for
our wages and salaries and other price proxies in the IPPS market
basket, and we are not proposing any changes to the usage for FY 2015.
The factors used to adjust the hospital's data were based on the
midpoint of the cost reporting period, as indicated in the following
table.

Midpoint of Cost Reporting Period
------------------------------------------------------------------------
After Before Adjustment factor
------------------------------------------------------------------------
10/14/2010 11/15/2010 1.02230
11/14/2010 12/15/2010 1.02078
12/14/2010 01/15/2011 1.01929
01/14/2011 02/15/2011 1.01782
02/14/2011 03/15/2011 1.01637
03/14/2011 04/15/2011 1.01494
04/14/2011 05/15/2011 1.01355
05/14/2011 06/15/2011 1.01219
06/14/2011 07/15/2011 1.01084
07/14/2011 08/15/2011 1.00948
08/14/2011 09/15/2011 1.00811
09/14/2011 10/15/2011 1.00674
10/14/2011 11/15/2011 1.00538
11/14/2011 12/15/2011 1.00403
12/14/2011 01/15/2012 1.00269
01/14/2012 02/15/2012 1.00134
02/14/2012 03/15/2012 1.00000
03/14/2012 04/15/2012 0.99866
------------------------------------------------------------------------

For example, the midpoint of a cost reporting period beginning
January 1, 2011, and ending December 31, 2011, is June 30, 2011. An
adjustment factor of 1.01084 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50587 through 50588), the proposed FY 2015 national
average hourly wage (unadjusted for occupational mix) is $39.1525. The
proposed FY 2015 Puerto Rico overall average hourly wage (unadjusted
for occupational mix) is $17.0010.

F. Proposed Occupational Mix Adjustment to the Proposed FY 2015 Wage
Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the Proposed FY 2015 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50588),
the occupational mix adjustment to the FY 2014 wage index was based on
data collected on the 2010 Medicare Wage Index Occupational Mix Survey
(Form CMS-10079 (2010)). For the FY 2015

[[Page 28067]]

wage index, we are proposing to again use occupational mix data
collected on the 2010 survey to compute the occupational mix adjustment
for FY 2015. We are including data for 3,165 hospitals that also have
wage data included in the proposed FY 2015 wage index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2013, FY 2014, and the proposed FY
2015 wage index associated with this proposed rule. Therefore, a new
measurement of occupational mix will be required for FY 2016.
On December 7, 2012, we published in the Federal Register a notice
soliciting comments on the proposed 2013 Medicare Wage Index
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013
survey, which will be applied to the FY 2016 wage index, includes the
same data elements and definitions as the 2010 survey and provides for
the collection of hospital-specific wages and hours data for nursing
employees for calendar year 2013 (that is, payroll periods ending
between January 1, 2013 and December 31, 2013). The comment period for
the notice ended on February 5, 2013. After considering the public
comments that we received on the December 2012 notice, we made a few
minor editorial changes and published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679). This survey was approved
by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/WAGE-INDEX-OCCUPATIONAL-MIX-SURVEY2013.pdf.
The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079
for the Wage Index Beginning FY 2016 (in excel format) is available on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2016-Wage-Index-OccupationalMix.html. Hospitals are required to submit their
completed 2013 surveys to their MACs by July 1, 2014. The preliminary,
unaudited 2013 survey data will be released afterward, along with the
FY 2012 Worksheet S-3 wage data, for the FY 2016 wage index review and
correction process.
3. Calculation of the Proposed Occupational Mix Adjustment for FY 2015
For FY 2015, we are proposing to calculate the occupational mix
adjustment factor using the same methodology that we used for the FY
2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77
FR 53367 through 53368, and 78 FR 50588 through 50589, respectively).
As a result of applying this methodology, the proposed FY 2015
occupational mix adjusted national average hourly wage (based on the
proposed new OMB delineations) is $39.1177. The proposed FY 2015
occupational mix adjusted Puerto Rico-specific average hourly wage
(based on the proposed new OMB delineations) is $17.0526.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the proposed FY
2015 wage index. For the FY 2015 proposed wage index, because we are
using the Worksheet S-3, Parts II and III wage data of 3,400 hospitals,
and we are using the occupational mix surveys of 3,165 hospitals for
which we also have Worksheet S-3 wage data, that represents a
``response'' rate of 93.1 percent (3,165/3,400). In the proposed FY
2015 wage index established in this proposed rule, we applied proxy
data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the 2010 occupational mix
survey. We instructed fiscal intermediaries/MACs to continue gathering
this information as part of the FY 2014 and FY 2015 wage index desk
review process. We stated that we would review these data for future
analysis and consideration of potential penalties for noncompliant
hospitals.

G. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2015 Occupational Mix Adjusted Wage
Index

1. Analysis of the Proposed Occupational Mix Adjustment and the
Proposed Occupational Mix Adjusted Wage Index
As discussed in section III.F. of the preamble of this proposed
rule, for FY 2015, we are proposing to apply the proposed occupational
mix adjustment to 100 percent of the proposed FY 2015 wage index. We
calculated the proposed occupational mix adjustment using data from the
2010 occupational mix survey data, using the methodology described in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586).
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the proposed FY 2015 wage
index results in a proposed national average hourly wage (based on the
new OMB delineations) of $39.1177 and a proposed Puerto-Rico specific
average hourly wage of $17.0526. After excluding data of hospitals that
either submitted aberrant data that failed critical edits, or that do
not have FY 2011 Worksheet S-3, Parts II and III, cost report data for
use in calculating the proposed FY 2015 wage index, we calculated the
proposed FY 2015 wage index using the occupational mix survey data from
3,165 hospitals. For the FY 2015 proposed wage index, because we are
using the Worksheet S-3, Parts II and III wage data of 3,400 hospitals,
and we are using the occupational mix survey data of 3,165 hospitals
for which we also have Worksheet S-3 wage data, those data represent a
``response'' rate of 93.1 percent (3,165/3,400). The proposed FY 2015
national average hourly wages for each occupational mix nursing
subcategory as calculated in Step 2 of the occupational mix calculation
are as follows:

[[Page 28068]]

------------------------------------------------------------------------
Proposed average
Occupational mix nursing subcategory hourly wage
------------------------------------------------------------------------
National RN.................................... 37.388291241
National LPN and Surgical Technician........... 21.767178303
National Nurse Aide, Orderly, and Attendant.... 15.31155016
National Medical Assistant..................... 17.246724132
National Nurse Category........................ 31.744397958
------------------------------------------------------------------------

The proposed national average hourly wage for the entire nurse
category as computed in Step 5 of the occupational mix calculation is
$31.744397958. Hospitals with a nurse category average hourly wage (as
calculated in Step 4) of greater than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of less than 1.0. Hospitals with a nurse category
average hourly wage (as calculated in Step 4) of less than the national
nurse category average hourly wage receive an occupational mix
adjustment factor (as calculated in Step 6) of greater than 1.0.
Based on the 2010 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 43.43
percent, and the national percentage of hospital employees in the all
other occupations category is 56.57 percent. At the CBSA level, using
the new OMB delineations proposed for FY 2015, the percentage of
hospital employees in the nurse category ranged from a low of 21.88
percent in one CBSA to a high of 73.27 percent in another CBSA.
We compared the proposed FY 2015 occupational mix adjusted wage
indexes for each CBSA to the proposed unadjusted wage indexes for each
CBSA. We used the proposed FY 2015 new OMB delineations for this
analysis. As a result of applying the proposed occupational mix
adjustment to the wage data, the proposed wage index values for 215
(52.8 percent) urban areas and 29 (61.7 percent) rural areas would
increase. One hundred and sixteen (28.5 percent) urban areas would
increase by 1 percent but less than 5 percent, and 4 (1.0 percent)
urban areas would increase by 5 percent or more. Fourteen (29.8
percent) rural areas would increase by 1 percent but less than 5
percent, and no rural areas would increase by 5 percent or more.
However, the wage index values for 190 (46.7 percent) urban areas and
18 (38.3 percent) rural areas would decrease. Eighty (19.7 percent)
urban areas would decrease by 1 percent but less than 5 percent, and 1
(0.2 percent) urban area would decrease by 5 percent or more. Seven
(14.9 percent) rural areas would decrease by 1 percent and less than 5
percent, and no rural areas would decrease by 5 percent or more. The
largest positive impacts would be 6.56 percent for an urban area and
3.35 percent for a rural area. The largest negative impacts would be
5.32 percent for an urban area and 1.71 percent for a rural area. Two
urban areas' wage indexes, but no rural area wage indexes, would remain
unchanged by application of the occupational mix adjustment. These
results indicate that a larger percentage of rural areas (61.7 percent)
would benefit from the occupational mix adjustment than would urban
areas (52.8 percent). However, approximately one-third (38.3 percent)
of rural CBSAs would still experience a decrease in their wage indexes
as a result of the occupational mix adjustment.
2. Proposed Application of the Rural, Imputed, and Frontier Floors
a. Proposed Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the proposed FY 2015 wage index associated with this proposed rule and
available on the CMS Web site, based on the proposed implementation of
the new OMB delineations discussed in section III.B. of the preamble of
this proposed rule, we estimated that 441 hospitals would receive an
increase in their FY 2015 proposed wage index due to the application of
the rural floor.
b. Proposed Imputed Floor for FY 2015
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy four times,
the last of which was adopted in the FY 2014 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2014. (We refer readers to
further discussion of the imputed floor in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50589 through 50590) and to our regulations at 42 CFR
412.64(h)(4).) There were previously two all-urban States, New Jersey
and Rhode Island, that have a range of wage indexes assigned to
hospitals in the State, including through reclassification or
redesignation (we refer readers to discussions of geographic
reclassifications and redesignations in section III.H. of the preamble
of this proposed rule). However, as we explain below, the method as of
FY 2012 for computing the imputed floor (the original methodology)
benefitted only New Jersey, and not Rhode Island.
In computing the imputed floor for an all-urban State under the
original methodology, we calculated the ratio of the lowest-to-highest
CBSA wage index for each all-urban State as well as the average of the
ratios of lowest-to-highest CBSA wage indexes of those all-urban
States. We then compared the State's own ratio to the average ratio for
all-urban States and whichever is higher is multiplied by the highest
CBSA wage index value in the State--the product of which established
the imputed floor for the State. Under the current OMB labor market
area delineations that we used for the FY 2014 wage index, Rhode Island
has only one CBSA (Providence-New Bedford-Fall River, RI-MA) and New
Jersey has 10 CBSAs. Therefore, under the original methodology, Rhode
Island's own ratio equaled 1.0, and its imputed floor was equal to its
original CBSA wage index value. However, because the average ratio of
New Jersey and Rhode Island was higher than New Jersey's own ratio,
this methodology provided a benefit for New Jersey, but not for Rhode
Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), we retained the imputed floor calculated under the original
methodology as discussed above, and established an alternative
methodology for computing the imputed floor wage index to address the
concern that the original imputed floor methodology guaranteed a
benefit

[[Page 28069]]

for one all-urban State with multiple wage indexes (New Jersey) but
could not benefit the other all-urban State (Rhode Island). The
alternative methodology for calculating the imputed floor was
established using data from the application of the rural floor policy
for FY 2013. Under the alternative methodology, we first determined the
average percentage difference between the post-reclassified, pre-floor
area wage index and the post-reclassified, rural floor wage index
(without rural floor budget neutrality applied) for all CBSAs receiving
the rural floor. (Table 4D associated with the FY 2013 IPPS/LTCH PPS
final rule (which is available on the CMS Web site) included the CBSAs
receiving a State's rural floor wage index.) The lowest post-
reclassified wage index assigned to a hospital in an all-urban State
having a range of such values then is increased by this factor, the
result of which establishes the State's alternative imputed floor. We
amended Sec. 412.64(h)(4) of the regulations to add new paragraphs to
incorporate the finalized alternative methodology, and to make
reference and date changes.
In summary, for the FY 2013 wage index, we did not make any changes
to the original imputed floor methodology at Sec. 412.64(h)(4) and,
therefore, made no changes to the New Jersey imputed floor computation
for FY 2013. Instead, for FY 2013, we adopted a second, alternative
methodology for use in cases where an all-urban State has a range of
wage indexes assigned to its hospitals, but the State cannot benefit
from the methodology in existing Sec. 412.64(h)(4).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through
50590), we extended the imputed floor policy (both the original
methodology and the alternative methodology) for 1 additional year,
through September 30, 2014, while we continued to explore potential
wage index reforms.
For FY 2015, we are proposing to continue the extension of the
imputed floor policy (both the original methodology and alternative
methodology) for another year, through September 30, 2015, as we
continue to explore potential wage index reforms. As discussed in
section III.B. of the preamble of this proposed rule, we are proposing
to adopt the new OMB labor market area delineations beginning in FY
2015. Under OMB's new labor market area delineations based on Census
2010 data, Delaware would become an all-urban State, along with New
Jersey and Rhode Island. Under the new OMB delineations, Delaware would
have three CBSAs, New Jersey would have seven CBSAs, and Rhode Island
would continue to have only one CBSA (Providence-Warwick, RI-MA). We
refer readers to a detailed discussion of our proposal to adopt the new
OMB labor market area delineations in section III.B. of the preamble of
this proposed rule. We are proposing to revise the regulations at Sec.
412.64(h)(4) and (h)(4)(vi) to reflect the proposed 1-year extension of
the imputed floor. We are inviting public comments on our proposal
regarding the 1-year extension of the imputed floor.
The wage index and impact tables associated with this FY 2015 IPPS/
LTCH PPS proposed rule that are available on the CMS Web site reflect
the proposed continued application of the imputed floor policy at Sec.
412.64(h)(4) and a national budget neutrality adjustment for the
imputed floor for FY 2015. There are 12 providers in New Jersey, and 1
provider in Delaware that would receive an increase in their FY 2015
wage index due to the proposed continued application of the imputed
floor policy under the original methodology. The wage index and impact
tables for this FY 2015 proposed rule also reflect the proposed
application of the second alternative methodology for computing the
imputed floor, which would benefit four hospitals in Rhode Island.
c. Proposed State Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160 through 50161)). Based on the proposed implementation
of the new OMB delineations discussed in section III.B. of the preamble
of this proposed rule, 46 hospitals would receive the frontier floor
value of 1.0000 for their proposed FY 2015 wage index in this proposed
rule. These hospitals are located in Montana, North Dakota, South
Dakota, and Wyoming. Although Nevada is also defined as a frontier
State, its proposed FY 2015 rural floor value of 1.1373 is greater than
1.0000, and therefore, no Nevada hospitals would receive a frontier
floor value for their proposed FY 2015 wage index.
The areas affected by the proposed rural, imputed, and frontier
floor policies for the proposed FY 2015 wage index are identified in
Table 4D associated with this proposed rule, which is available on the
CMS Web site.
3. Proposed FY 2015 Wage Index Tables
The proposed wage index values for FY 2015 (except those for
hospitals receiving wage index adjustments under section 1886(d)(13) of
the Act), included in Tables 4A, 4B, 4C, and 4F, available on the CMS
Web site, include the proposed occupational mix adjustment, geographic
reclassification or redesignation as discussed in section III.H. of the
preamble of this proposed rule, and the application of the rural,
imputed, and frontier State floors as discussed in section III.G.2. of
the preamble of this proposed rule. We note that because we are
proposing to adopt the new OMB labor market area delineations for FY
2015, these tables have additional tabulations to account for wage
index calculations computed under the previous and the new OMB
delineations.
Tables 3A and 3B, available on the CMS Web site, list the proposed
3-year average hourly wage for each labor market area before the
redesignation or reclassification of hospitals based on FYs 2009, 2010,
and 2011 cost reporting periods. Table 3A lists these data for urban
areas, and Table 3B lists these data for rural areas. In addition,
Table 2, which is available on the CMS Web site, includes the proposed
adjusted average hourly wage for each hospital from the FY 2009 and FY
2010 cost reporting periods, as well as the FY 2011 period used to
calculate the proposed FY 2015 wage index. The proposed 3-year averages
are calculated by dividing the sum of the dollars (adjusted to a common
reporting period using the method described in Step 5 in section III.G.
of the preamble of this proposed rule) across all 3 years, by the sum
of the hours. If a hospital is missing data for any of the previous
years, its proposed average hourly wage for the 3-year period is
calculated based on the data available during that period. The proposed
average hourly wages in Tables 2, 3A, and 3B, which are available on
the CMS Web site, include the proposed occupational mix adjustment. The
proposed wage index values in Tables 4A, 4B, 4C, and 4D also include
the proposed national rural floor budget neutrality adjustment (which
includes the proposed imputed floor). The proposed wage index values in
Table 2 also include the proposed out-migration adjustment for eligible
hospitals. As stated above, because we are proposing to adopt the new
OMB labor market area delineations for FY 2015, these tables have
additional tabulations to account for wage index calculations computed
under the current labor market definitions and the

[[Page 28070]]

new OMB labor market area delineations. In addition, for certain
applicable hospitals, the proposed wage index values included in Table
2 are computed to reflect the proposed transitional wage index or the
50/50 blended wage index discussed in detail in section III.B.2.e. of
the preamble of this proposed rule.

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

1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (generally by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions by the end of February for reclassifications that
become effective for the following fiscal year (beginning October 1).
The regulations applicable to reclassifications by the MGCRB are
located in 42 CFR 412.230 through 412.280. (We refer readers to a
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875)
regarding how the MGCRB defines mileage for purposes of the proximity
requirements.) The general policies for reclassifications and
redesignations that we are proposing for FY 2015, and the policies for
the effects of hospitals' reclassifications and redesignations on the
wage index, are the same as those discussed in the FY 2012 IPPS/LTCH
PPS final rule for the FY 2012 final wage index (76 FR 51595 and
51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the
effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. Hospitals that are geographically located
in States without any rural areas are ineligible to apply for rural
reclassification in accordance with the provisions of 42 CFR 412.103.
While our general policies on geographic reclassification,
redesignations under section 1886(d)(8)(B) of the Act, and urban
hospitals reclassifying to rural under 42 CFR 412.103 will remain
unchanged for FY 2015, we note that, due to our proposed adoption of
the new OMB labor market area delineations for FY 2015, there are
numerous unique classification considerations for FY 2015 that are
discussed in more detail in section III.H. of the preamble of this
proposed rule. For a discussion of the new CBSA changes based on the
new OMB labor market area delineations and our proposed implementation
of those changes, we refer readers to sections III.B. and VI.C. of the
preamble of this proposed rule.
2. FY 2015 MGCRB Reclassifications
a. FY 2015 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
In February 2014, the MGCRB completed its review of FY 2015
reclassification requests. Based on such reviews, there were 379
hospitals approved for wage index reclassifications by the MGCRB
starting in FY 2015. Because MGCRB wage index reclassifications are
effective for 3 years, for FY 2015, hospitals reclassified beginning
during FY 2013 or FY 2014 are eligible to continue to be reclassified
to a particular labor market area based on such prior reclassifications
for the remainder of their 3-year period. There were 172 hospitals
approved for wage index reclassifications in FY 2013, and 287 hospitals
approved for wage index reclassifications in FY 2014. Of all the
hospitals approved for reclassification for FY 2013, FY 2014, and FY
2015, as of February 2014, 838 hospitals are in a reclassification
status for FY 2015.
Under the regulations at 42 CFR 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
within 45 days of the publication of a proposed rule. For information
about withdrawing, terminating, or canceling a previous withdrawal or
termination of a 3-year reclassification for wage index purposes, we
refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR
50065 through 50066). Additional discussion on withdrawals and
terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2015 will be incorporated
into the wage index values published in the FY 2015 IPPS/LTCH PPS final
rule. These changes affect not only the wage index value for specific
geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Effects of Implementation of New OMB Labor Market Area Delineations
on Reclassified Hospitals
Because hospitals that have been reclassified beginning in FY 2013,
2014, or 2015 were reclassified based on the current labor market
delineations, if we adopt the new OMB labor market area delineations
beginning in FY 2015, the areas to which they have been reclassified,
or the areas where they are located, may change. Under the new OMB
delineations, many existing CBSAs would be reconfigured. Hospitals with
current reclassifications are encouraged to verify area wage indexes on
Tables 4A-2 and 4B-2 associated with this proposed rule (which are
available via the Internet on the CMS Web site), and confirm that the
areas to which they have been reclassified for FY 2015 would continue
to provide a higher wage index than their geographic area wage index.
Hospitals may withdraw their FY 2015 reclassifications by contacting
the MGCRB within 45 days from the publication of this proposed rule.
In some cases, adopting the new OMB delineations would result in
counties splitting apart from CBSAs to form new CBSAs, or counties
shifting from one CBSA designation to another CBSA. Reclassifications
granted under section 1886(d)(10) of the Act are effective for 3 fiscal
years so that a hospital or county group of hospitals would be assigned
a wage index based upon the wage data of hospitals in a nearby labor
market area for a 3-year period. If CBSAs are split apart, or if
counties shift from one CBSA to another under the new OMB delineations,
it raises the question of how to continue a hospital's reclassification
for the remainder of its 3-year reclassification period, if that area
to which the hospital reclassified no longer exists, in whole or in
part. We dealt with this question in FY 2005 as well when CMS adopted
the current OMB labor market area definitions.

[[Page 28071]]

Consistent with the policy CMS implemented in the FY 2005 IPPS final
rule (69 FR 49054 through 49056), if a CBSA would be reconfigured due
to the new OMB delineations and it would not be possible for the
reclassification to continue seamlessly to the reconfigured CBSA, we
believe it is appropriate for us to determine the best alternative
location to reassign current reclassifications for the remaining 3
years. Therefore, to maintain the integrity of a hospital's 3-year
reclassification period, we are proposing a policy to assure that
current geographic reclassifications (applications approved in FY 2013,
FY 2014, or FY 2015) that would be affected by CBSAs that are split
apart or counties that shift to another CBSA under the new OMB
delineations, would ultimately be assigned to a CBSA under the new OMB
delineations that contains at least one county from the reclassified
CBSA under the current FY 2014 OMB definitions, and would be generally
consistent with rules that govern geographic reclassification. That is,
consistent with policy finalized in FY 2005 (69 FR 49054 and 49055), we
are proposing a general policy that affected reclassified hospitals
would be assigned to a CBSA that (1) would contain the most proximate
county that is located outside of the hospital's proposed FY 2015
geographic labor market area, and (2) is part of the original FY 2014
CBSA to which the hospital is reclassified. We believe that by
assigning reclassifications to the CBSA that contains the nearest
eligible county (as described above) satisfies the statutory
requirement at section 1886(d)(10)(v) of the Act by maintaining
reclassification status for a period of 3 fiscal years, while generally
respecting the longstanding principle of geographic proximity in the
labor market reclassification process. The hospitals that we are
proposing to reassign to a different CBSA based on our proposed policy
above are listed in a special Table 9A-2 for this proposed rule, which
is available via the Internet on the CMS Web site. In addition, we are
proposing to allow a hospital, or county group of hospitals, to request
reassignment to another CBSA that would contain a county that is part
of the current FY 2014 CBSA to which they are reclassified, if the
hospital or county group of hospitals can demonstrate compliance with
applicable reclassification proximity rules, as described later in this
section.
We recognize that this proposed reclassification reassignment
described for hospitals that are reclassified to CBSAs that would split
apart or to counties that would shift to another CBSA under the new OMB
delineations may result in the reassignment of the hospital for the
remainder of its 3-year reclassification period to a CBSA having a
lower wage index than the wage index that would have been assigned for
the reclassified hospital in the absence of the proposed adoption of
the new OMB delineations. Therefore, as discussed in section
III.B.2.e.(4) of the preamble of this proposed rule, we are proposing
that all hospitals that would experience a decrease in their FY 2015
wage index value due to the proposed implementation of the new OMB
delineations would receive a 50/50 blended wage index adjustment in FY
2015. For FY 2015, using FY 2015 wage data, we are proposing to
calculate a wage index value based on the current FY 2014 OMB
definitions, and a wage index value based upon the proposed new OMB
delineations (including reclassification assignments discussed in this
section). If the wage index under the proposed new OMB delineations
would be lower than the wage index calculated with the current (FY
2014) OMB definitions, the hospital would be assigned a blended wage
index (50 percent of the current; 50 percent of the proposed). We
believe that this proposed transitional adjustment would mitigate
negative payment impacts for FY 2015, and would afford hospitals
additional time to fully assess any additional reclassification options
available to them under the new OMB delineations.
We are including the following descriptions of specific situations
where we have determined that reassignment of reclassification areas
would be appropriate.
(1) Reclassifications to CBSAs That Would Be Subsumed by Other CBSAs
We identified 66 counties that are currently located in CBSAs that
would be subsumed by another CBSA under the new OMB labor market area
delineations. As a result, hospitals reclassifying to those CBSAs would
now find that their reclassifications are to a CBSA that no longer
exists. For these hospitals, we are proposing to reassign
reclassifications to the newly configured CBSA to which all of the
original constituent counties in the FY 2014 CBSA are transferred. For
example, CBSA 11300 (Anderson, IN) would no longer exist under the
proposed FY 2015 delineations. The only constituent county in CBSA
11300, Madison County, IN, would be moving to CBSA 26900 (Indianapolis-
Carmel-Anderson, IN). Because the original Anderson, IN labor market
area no longer exists, we are proposing to reassign reclassifications
from the original Anderson, IN labor market area to a newly configured
CBSA where the original constituent county or counties are transferred,
which is Indianapolis-Carmel-Anderson, IN. For hospitals reclassified
to a CBSA that would be subsumed by another CBSA, the following table
reflects the hospitals' current reclassified CBSA, and the CBSA to
which CMS is proposing to assign them for FY 2015.

Proposed Hospital Reclassification Reassignments for Hospitals
Reclassified to a CBSA That Would Be Subsumed by Another CBSA
------------------------------------------------------------------------
CMS certification No. Current reclassified
(CCN) CBSA Proposed CBSA
------------------------------------------------------------------------
050022 42044 11244
050054 42044 11244
050102 42044 11244
050243 42044 11244
050292 42044 11244
050329 42044 11244
050390 42044 11244
050423 42044 11244
050534 42044 11244
050573 42044 11244
050684 42044 11244
050686 42044 11244
050701 42044 11244
050765 42044 11244
050770 42044 11244
140067 14060 14010
150089 11300 26900
220001 14484 14454
220002 14484 14454
220008 14484 14454
220011 14484 14454
220019 14484 14454
220020 14484 14454
220049 14484 14454
220058 14484 14454
220062 14484 14454
220063 14484 14454
220070 14484 14454
220073 14484 14454
220074 14484 14454
220082 14484 14454
220084 14484 14454
220090 14484 14454
220095 14484 14454
220098 14484 14454
220101 14484 14454
220105 14484 14454
220163 14484 14454
220171 14484 14454
220175 14484 14454
220176 14484 14454
230002 47644 47664
230020 47644 47664
230024 47644 47664
230053 47644 47664
230089 47644 47664
230104 47644 47664
230142 47644 47664
230146 47644 47664

[[Page 28072]]

230165 47644 47664
230176 47644 47664
230244 47644 47664
230270 47644 47664
230273 47644 47664
230297 47644 47664
300017 37764 15764
300023 37764 15764
300029 37764 15764
390151 13644 43524
410001 14484 14454
410004 14484 14454
410005 14484 14454
410007 14484 14454
410010 14484 14454
410011 14484 14454
410012 14484 14454
------------------------------------------------------------------------

(2) Reclassification to CBSAs Where the CBSA Number or Name Has Changed
or to CBSAs Containing Counties That Would Be Moving to Another CBSA
We identified six CBSAs with current reclassifications that would
maintain the same constituent counties, but the CBSA number or name
would change if we adopted the new OMB delineations. For example, CBSA
29140 (Lafayette, IN) currently contains three counties (Benton,
Carroll, and Tippecanoe Counties). The CBSA name and number for these
counties would change to CBSA 29200 (Lafayette-West Lafayette, IN)
under the new OMB delineations. Because the constituent counties in
these CBSAs would not change under the new delineations, we would
consider these CBSAs to be unchanged, and we are not proposing any
reassignment for hospitals reclassified to those labor market areas.
Table 9A-2 for this proposed rule (which is available via the Internet
on the CMS Web site) reflects the proposed revised CBSA number
effective in FY 2015.
We identified eight CBSAs with current reclassifications that have
one or more counties that would split off and move to a new CBSA or to
a different existing CBSA under the new OMB delineations. These CBSAs
are shown in the following table.

------------------------------------------------------------------------
Current FY 2014 CBSA Current FY 2014 CBSA name
------------------------------------------------------------------------
16620............................ Charleston, WV.
16974............................ Chicago-Joliet-Naperville, IL.
20764............................ Edison-New Brunswick, NJ.
31140............................ Louisville/Jefferson County, KY-IN.
35644............................ New York-White Plains-Wayne, NY-NJ.
37964............................ Philadelphia, PA.
39100............................ Poughkeepsie-Newburgh-Middletown, NY.
48900............................ Wilmington, NC.
------------------------------------------------------------------------

We have determined that 69 hospitals have current reclassifications
to one of these CBSAs. Similar to the methodology finalized in the FY
2005 IPPS final rule (69 FR 49054 through 49055), we are proposing to
follow the general policy discussed in section III.H.2.b. of the
preamble of this proposed rule. Specifically, we are proposing that
affected reclassified hospitals would be assigned to a CBSA (under the
new OMB delineations) that would contain the most proximate county that
is (1) located outside of the hospital's proposed FY 2015 geographic
labor market area; and (2) is included in the current CBSA to which
they are reclassified. For each of the 69 hospitals, we conducted a
mapping analysis and determined driving distances from their geographic
location to the borders of each county (that is in the reclassified
CBSA under the FY 2014 delineations) and is also included in a CBSA
under the new OMB delineations, excluding any counties that would be
located in the hospital's proposed FY 2015 geographic labor market
area. Following the general reassignment principle that we are
proposing, we are proposing to reassign those reclassified hospitals to
the CBSA which contains the geographically closest county. For example,
there are hospitals that currently are reclassified to CBSA 39100
(Poughkeepsie-Newburgh-Middletown, NY) under the FY 2014 delineations,
which is comprised of Dutchess County and Orange County, NY. Under the
new OMB delineations, Dutchess County would become part of new CBSA
20524 (Dutchess County-Putnam County, NY), while Orange County would
join CBSA 35614 (New York-Jersey City-White Plains, NY-NJ Metropolitan
Division). Therefore, we mapped the distances from one reclassified
hospital to the border of Dutchess County and Orange County, NY (the
two counties that were part of CBSA 39100 under the FY 2014
delineations). Our analysis showed that the hospital is 2.2 miles from
Dutchess County, and 25.9 miles from Orange County. Therefore, we are
proposing to reassign this hospital's reclassification from the FY 2014
CBSA 39100 to the new CBSA 20524.
We also identified affected county group reclassifications. For
these reclassifications, we would follow our proposed policy discussed
above, except that, for county group reclassifications, we are
proposing to reassign hospitals in a county group reclassification to
the CBSA under the new OMB delineations to which the majority of
hospitals in the group reclassification are geographically closest.
Because hospitals in a county group applied as a group, we believe the
reassignment should also be applied to the whole group. For example,
the hospitals of Fairfield County, CT are reclassified as a group to
CBSA 35644 under the FY 2014 delineations. Under the new OMB
delineations, CBSA 35644 would no longer exist and would be split into
the following two new CBSAs: 20524 (Dutchess County-Putnam County, NY)
and 35614 (New York-Jersey City-White Plains, NY-NJ). Of the six
hospitals in the group reclassification, all but one would be closer to
an eligible county (Westchester, NY) in CBSA 35614 than to an eligible
county (Putnam, NY) in CBSA 20524. Because these hospitals in
Fairfield, CT applied as a group, we believe the reassignment should
also be applied to the whole group. Therefore, we are proposing to
assign the hospitals in this group reclassification to CBSA 35614, the
reconfigured CBSA to which the majority of the hospitals in the group
reclassification are geographically closest.
To summarize, of the 69 hospitals reclassified to one of the 8
CBSAs in the preceding table that have counties that would split off
and move to a new CBSA or a different existing CBSA under the new OMB
delineations, there are 27 hospitals that would maintain the same
reclassified CBSA number under our proposals. Another 28 hospitals
would be reassigned to a reconfigured CBSA that would contain a similar
number of counties from their current reclassified CBSA. For example,
the new CBSA 35614 (New York-Jersey City-White Plains, NY-NJ
Metropolitan Division) would contain 10 out of 11 counties from current
(FY 2014) CBSA 35644 (New York-White Plains-Wayne, NY-NJ Metropolitan
Division).
For the remaining 14 reclassified hospitals, we are proposing to
assign them to a CBSA (under the new OMB delineations) that would have
a different CBSA number from the labor market area to which they are
currently reclassified (under the current FY 2014 delineations). This
is because if the original CBSA to which the hospitals are reclassified
is losing counties to another urban CBSA, it may be that the

[[Page 28073]]

original reclassification determination would not be reflective of the
new delineations. In addition, because proximity to a CBSA is a
requirement of reclassifications approved under section 1886(d)(10) of
the Act, we believe it is appropriate to propose to reassign
reclassification status to an urban CBSA that contains the county (from
the hospital's current CBSA reclassification) that is closest to the
hospital. We believe this would more accurately reflect the geographic
labor market area of the reclassified hospital. For example, under the
FY 2014 delineations, CBSA 37964 (Philadelphia, PA Metropolitan
Division) is comprised of five counties (Bucks, Chester, Delaware,
Montgomery, and Philadelphia Counties, PA). Under the new OMB
delineations, CBSA 37964 would retain the same CBSA name and number,
but three counties (Bucks, Chester, and Montgomery) would split off to
form the new CBSA 33874 (Montgomery County-Bucks County-Chester County,
PA Metropolitan Division). While CBSA 37964 exists under the FY 2014
and proposed new labor market area delineations, the fact that three
counties would be moved to another CBSA means that current
reclassifications to CBSA 37964 (Philadelphia) may be more proximate to
new CBSA 33874. Therefore, if reclassified hospitals, or the majority
of hospitals in a county group, are geographically closer to a county
in CBSA 33874 than to a county in CBSA 37964, we are proposing to
reassign the reclassification to that area, new CBSA 33874 (Montgomery
County-Bucks County-Chester County, PA Metropolitan Division).
Consistent with refinements implemented in the FY 2005 IPPS final
rule (69 FR 49055), we are proposing to allow hospitals that
reclassified under section 1886(d)(10) of the Act to one of the eight
CBSAs that split (that is, current FY 2014 CBSAs 16620, 16974, 20764,
31140, 35644, 37964, 39100, 48900) to be reclassified to any CBSA
containing a county from their original reclassification labor market
area, provided that the hospital demonstrates that it meets the
applicable proximity requirements under 42 CFR 412.230(b) and (c) (for
individual hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42
CFR 412.234(a)(2) and (a)(3) (for an urban group) to that CBSA.
Hospitals that wish to be reassigned to an alternate CBSA (other than
the CBSA to which their reclassification would be reassigned in this
proposed rule) for which they meet the applicable proximity criteria
may request reassignment within 45 days from the publication of this
proposed rule. Hospitals must send a request to WageIndex@cms.hhs.gov
and provide documentation certifying that they meet the requisite
proximity criteria for reassignment to an alternate CBSA, as described
above. We believe this option of allowing hospitals to submit a request
to CMS would provide hospitals with greater flexibility with respect to
their reclassification reassignment, while ensuring that the proximity
requirements are met. We believe that where the proximity requirements
are met, the reclassified wage index would be consistent with the labor
market area to which the hospitals were originally approved for
reclassification. Under this proposed policy, a hospital may request to
be assigned a reclassification to any CBSA that contains any county
from the CBSA to which it is currently reclassified. However, to be
reassigned to an area that is not the most proximate to the hospital
(or the majority of hospitals in a county group), we believe it is
necessary that the hospital demonstrates that it complies with the
applicable proximity criteria. If a hospital cannot demonstrate
proximity to an alternate CBSA, the hospital would not be considered
for reclassification to that labor market area, and reassignment would
remain with the closest eligible (new) CBSA.
As discussed previously in this section, under the new OMB
delineations, we identified CBSA 35644 (New York-White Plains-Wayne,
NY-NJ Metropolitan Division) as one of the examples of the eight CBSAs
that would have at least one county that would split off and join
another new CBSA (Putnam County joined Dutchess County, NY to form new
CBSA 20524), while also having multiple counties assigned to a
reconfigured CBSA 35614 (New York-Jersey City-White Plains, NY-NJ
Metropolitan Division). CBSA 35614 would also add Orange County, NY
under the new OMB delineations. The hospitals that are currently
located in CBSA 39100 (Poughkeepsie-Newburgh-Middletown, NY) are
currently part of a group reclassification of Orange County, NY to CBSA
35644 (New York-White Plains-Wayne, NY-NJ Metropolitan Division). As
discussed above, we are proposing to reassign current reclassifications
to the CBSA that contains the most proximate county that is located
outside of the reclassified hospital's proposed geographic labor market
area, and is currently part of the original CBSA to which the hospital
is reclassified. In the case of the Orange County, NY group
reclassification, the closest (and only) county from the original
reclassified area (CBSA 35644), that would not be located in Orange
County's proposed home labor market area (CBSA 35614) is Putnam County,
NY. Therefore, we are proposing to reassign the Orange County group
reclassification to CBSA 20524 (Putnam County-Dutchess County, NY). If
the hospitals from the Orange County, NY group reclassification do not
wish to maintain this assignment, we encourage them to formally
terminate the current group reclassification within 45 days from the
publication of this proposed rule, as discussed earlier in this
section.
The following table shows proposed hospital reclassification
assignments for hospitals reclassified to CBSAs from which counties
would be split off and moved to a different CBSA under the new OMB
delineations. The following table shows the current reclassified CBSA
and the CBSA to which CMS is proposing reassignment.

Proposed Hospital Reclassification Reassignments for Hospitals That Are
Reclassified to CBSAs From Which Counties Would Be Split Off and Moved
to a Different CBSA
------------------------------------------------------------------------
CMS Certification number Current reclassified Proposed reassigned
(CCN) CBSA CBSA
------------------------------------------------------------------------
070006 35644 35614
070010 35644 35614
070018 35644 35614
070028 35644 35614
070033 35644 35614
070034 35644 35614
140B10 16974 16974
140012 16974 20994
140033 16974 16974
140084 16974 16974
140100 16974 16974
140110 16974 16974
140130 16974 16974
140155 16974 16974
140161 16974 16974
140186 16974 16974
140202 16974 16974
140291 16974 16974
150002 16974 16974
150004 16974 16974
150008 16974 16974
150034 16974 16974
150090 16974 16974
150125 16974 16974
150126 16974 16974
150165 16974 16974
150166 16974 16974
180012 31140 31140
180048 31140 31140
310002 35644 35614
310009 35644 35614
310014 37964 37964
310015 35644 35614
310017 35644 35614
310031 20764 35614
310038 35644 20524

[[Page 28074]]

310039 35644 20524
310050 35644 35614
310054 35644 35614
310070 35644 20524
310076 35644 35614
310083 35644 35614
310096 35644 35614
310108 35644 20524
310119 35644 35614
330027 35644 35614
330106 35644 35614
330126 35644 20524
330135 35644 20524
330167 35644 35614
330181 35644 35614
330182 35644 35614
330198 35644 35614
330205 35644 20524
330224 39100 20524
330225 35644 35614
330259 35644 35614
330264 35644 20524
330331 35644 35614
330332 35644 35614
330372 35644 35614
340042 48900 48900
340068 48900 34820
390044 37964 33874
390096 37964 33874
390316 37964 33874
420085 48900 48900
510062 16620 16620
510070 16620 16620
------------------------------------------------------------------------

Table 9A-2 for this proposed rule (which is available via the
Internet on the CMS Web site) reflects all proposed reassignments of
hospital reclassifications. We are proposing that hospitals that
disagree with our determination of the most proximate county must
provide an alternative method for determining proximity to CMS within
45 days from the publication of this proposed rule.
The hospital's request for reassignment should contain the
hospital's name, address, CCN, and point of contact information. All
requests must be sent to WageIndex@cms.hhs.gov. Changes to a hospital's
CBSA assignment on the basis of a hospital's disagreement with our
determination of closest county, or on the basis of being granted a
reassignment due to meeting applicable proximity criteria to an
eligible CBSA will be announced in the FY 2015 IPPS final rule.
(3) Reclassifications to CBSAs That Would Contain Hospital's Geographic
County
We identified 14 reclassified hospitals that would be
geographically located in their reclassified labor market area under
the new OMB delineations. For example, hospital 34-0015 is located in
Rowan County, NC. Rowan County is currently a Micropolitan Statistical
Area in NC, and treated as rural. The hospital is reclassified to CBSA
16740 (Charlotte-Concord-Rock Hill, NC-SC). Under the new OMB
delineations, CBSA 16740 (Charlotte-Concord-Gastonia, NC-SC) would
include Rowan County. Therefore, the current reclassification would
become redundant. CBSA 16740 did not lose any counties to another labor
market area; therefore, assignment to another alternate CBSA would not
be an option under our proposed methodology. Because, by definition, a
hospital would not be ``reclassified'' to its own geographic labor
market area, and maintaining that ``reclassified'' status to its own
geographic labor market area would serve no beneficial purpose for a
hospital, we expect that all such affected hospitals would wish to
terminate their reclassification status. Therefore, we are assuming for
purposes of this proposed rule that the affected hospitals would be
terminating their reclassification status for the remaining years of
their 3-year reclassification period, and for FY 2015, we are proposing
to assign them the wage index of the CBSA in which they are
geographically located. Affected hospitals should inform CMS if they
wish to retain their current reclassification by sending notice to
WageIndex@cms.hhs.gov within 45 days from the publication of this
proposed rule. If an affected hospital does not inform us that they
wish to retain their current reclassification, we will assume that the
hospital has elected to terminate the reclassification. For purposes of
this proposed rule, we are presenting tables under the presumption that
all 14 hospitals will opt to cancel their reclassification status. We
are proposing to assign these hospitals the wage index value of their
home area from Table 4A-2 for this proposed rule (which is available
via the Internet on the CMS Web site), and not include them as
reclassified hospitals in Table 9A-2 for this proposed rule (which is
available via the Internet on the CMS Web site).

Hospitals Reclassified to Proposed Home Labor Market Area
------------------------------------------------------------------------
CMS certification No. Current geographic Proposed geographic
(CCN) CBSA CBSA
------------------------------------------------------------------------
340015 34 16740
340129 34 16740
340144 34 16740
420036 42 16740
450596 45 23104
420027 11340 24860
150088 11300 26900
150113 11300 26900
190003 19 29180
440073 44 34980
460017 46 36260
460039 46 36260
190144 19 43340
490019 49 47894
------------------------------------------------------------------------

We have included a footnote for Table 9A-2 for this proposed rule
indicating that these hospitals have been removed from this table,
pending notification by the hospitals.
c. Applications for Reclassifications for FY 2016
Applications for FY 2016 reclassifications are due to the MGCRB by
September 2, 2014 (the first working day of September 2014). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d). As
discussed in section III.B. of the preamble of this proposed rule, we
are proposing to adopt the new OMB labor market area delineations
announced on February 28, 2013. Therefore, hospitals would apply for
reclassifications based on the new OMB delineations we are proposing to
use for FY 2015. Applications and other information about MGCRB
reclassifications may be obtained via the Internet on the CMS Web site
at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/, or by calling the MGCRB at (410) 786-1174. The mailing
address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore,
MD 21244-2670.3.
We also are proposing changes to the regulations at Sec.
412.232(b)(2) and Sec. 412.234(a)(3)(iv) to include reference to the
most recent OMB standards for delineating statistical areas (using the
most recent Census Bureau data and estimates) that were adopted by CMS.
For rural groups, the group of hospitals must demonstrate that the
county in which the hospitals are located meets the standards for
redesignation to an MSA as an ``outlying county.'' For urban groups,
hospitals located in counties that are in the same combined statistical
area or CBSA as the urban area to which

[[Page 28075]]

they seek redesignation qualify as meeting the proximity requirements
for reclassification to the urban area to which they seek
redesignation. We are not proposing any changes to the reclassification
policy, but would include language to reflect use of the most recent
OMB standards for delineating statistical areas (using the most recent
Census Bureau data and estimates) that were adopted by CMS in
consideration of group reclassification applications submitted for
review in FY 2015 (that is submitted by September 30, 2014, reviewed by
the MGCRB in FY 2015, to be effective in FY 2016) and future years.
3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B)(i) of the Act requires the Secretary to
``treat a hospital located in a rural county adjacent to one or more
urban areas as being located in the urban metropolitan statistical area
to which the greatest number of workers in the county commute'' if
certain adjacency and commuting criteria are met. The criteria utilize
standards for designating Metropolitan Statistical Areas published in
the Federal Register by the Director of the Office of Management and
Budget (OMB) based on the most recently available decennial population
data. Effective beginning FY 2005, we used OMB's CBSA standards based
on the 2000 Census and the 2000 Census data to identify counties in
which hospitals qualify under section 1886(d)(8)(B) of the Act to
receive the wage index of the urban area. Hospitals located in these
counties have been known as ``Lugar'' hospitals and the counties
themselves are often referred to as ``Lugar'' counties.
As discussed in section III.B. of the preamble to this proposed
rule, we are proposing to implement OMB's revised labor market area
delineations based on the Census 2010 data for purposes of determining
applicable wage indexes for acute care hospitals beginning in FY 2015.
As we have done in the past, we also are proposing to use the new OMB
delineations to identify rural counties that would qualify as ``Lugar''
under section 1886(d)(8)(B) of the Act and therefore would be
redesignated to urban areas for FY 2015. We are proposing to revise the
regulations at Sec. 412.64(b)(3)(i) to reflect the most recent OMB
standards for delineating statistical areas adopted by CMS. By applying
the new OMB delineations, the number of qualifying counties, shown in
the following chart, would increase from 98 to 127. After evaluating
and analyzing the 2010 Census commuting data, we are proposing that,
effective for discharges on or after October 1, 2014, in accordance
with section 1886(d)(8)(B) of the Act, hospitals located in the rural
counties listed in the first column of the following table would be
designated as part of the urban area listed in the second column based
on the criteria discussed above. We note that rural counties that no
longer meet the qualifying criteria to be Lugar are discussed below in
section III.H.3.c. of the preamble of this proposed rule.

Rural Counties Containing Hospitals Redesignated as Urban Under Section 1886(d)(8)(B) of the Act (Based on New
OMB Delineations and Census 2010 Data)
----------------------------------------------------------------------------------------------------------------
Rural county Lugar designated CBSA
----------------------------------------------------------------------------------------------- NEW
County name State CBSA CBSA name
----------------------------------------------------------------------------------------------------------------
Chambers County...................... AL.............. 12220 Auburn-Opelika, AL.......... New.
Cherokee County...................... AL.............. 40660 Rome, GA.................... ................
Cleburne County...................... AL.............. 11500 Anniston-Oxford- New.
Jacksonville, AL.
Macon County......................... AL.............. 12220 Auburn-Opelika, AL.......... ................
Talladega County..................... AL.............. 11500 Anniston-Oxford- ................
Jacksonville, AL.
Denali Borough....................... AK.............. 21820 Fairbanks, AK............... New.
Hot Spring County.................... AR.............. 26300 Hot Springs, AR............. ................
Litchfield County.................... CT.............. 35300 New Haven-Milford, CT....... ................
Bradford County...................... FL.............. 27260 Jacksonville, FL............ ................
Levy County.......................... FL.............. 23540 Gainesville, FL............. ................
Washington County.................... FL.............. 37460 Panama City, FL............. New.
Chattooga County..................... GA.............. 40660 Rome, GA.................... ................
Jackson County....................... GA.............. 12060 Atlanta-Sandy Springs- ................
Roswell, GA.
Lumpkin County....................... GA.............. 12060 Atlanta-Sandy Springs- ................
Roswell, GA.
Polk County.......................... GA.............. 40660 Rome, GA.................... ................
Talbot County........................ GA.............. 17980 Columbus, GA-AL............. ................
Oneida County........................ ID.............. 36260 Ogden-Clearfield, UT........ New.
Christian County..................... IL.............. 44100 Springfield, IL............. ................
Iroquois County...................... IL.............. 28100 Kankakee, IL................ ................
Logan County......................... IL.............. 44100 Springfield, IL............. ................
Mason County......................... IL.............. 37900 Peoria, IL.................. ................
Ogle County.......................... IL.............. 40420 Rockford, IL................ ................
Union County......................... IL.............. 16060 Carbondale-Marion, IL....... ................
Clinton County....................... IN.............. 29200 Lafayette-West Lafayette, IN ................
Greene County........................ IN.............. 14020 Bloomington, IN............. New.
Henry County......................... IN.............. 26900 Indianapolis-Carmel- ................
Anderson, IN.
Marshall County...................... IN.............. 43780 South Bend-Mishawaka, IN-MI. New.
Parke County......................... IN.............. 45460 Terre Haute, IN............. New.
Spencer County....................... IN.............. 21780 Evansville, IN-KY........... ................
Starke County........................ IN.............. 16980 Chicago-Naperville-Elgin, IL- ................
IN-WI.
Tipton County........................ IN.............. 26900 Indianapolis-Carmel- New.
Anderson, IN.
Warren County........................ IN.............. 29200 Lafayette-West Lafayette, IN ................
Boone County......................... IA.............. 11180 Ames, IA.................... ................
Buchanan County...................... IA.............. 47940 Waterloo-Cedar Falls, IA.... ................
Cedar County......................... IA.............. 26980 Iowa City, IA............... ................
Delaware County...................... IA.............. 20220 Dubuque, IA................. New.
Iowa County.......................... IA.............. 26980 Iowa City, IA............... New.

[[Page 28076]]

Jasper County........................ IA.............. 19780 Des Moines-West Des Moines, New.
IA.
Franklin County...................... KS.............. 28140 Kansas City, MO-KS.......... New.
Nelson County........................ KY.............. 31140 Louisville/Jefferson County, New.
KY-IN.
Assumption Parish.................... LA.............. 12940 Baton Rouge, LA............. ................
Jefferson Davis Parish............... LA.............. 29340 Lake Charles, LA............ New.
St. Landry Parish.................... LA.............. 29180 Lafayette, LA............... New.
Oxford County........................ ME.............. 30340 Lewiston-Auburn, ME......... New.
Caroline County...................... MD.............. 12580 Baltimore-Columbia-Towson, New.
MD.
Franklin County...................... MA.............. 44140 Springfield, MA............. New.
Allegan County....................... MI.............. 24340 Grand Rapids-Wyoming, MI.... ................
Ionia County......................... MI.............. 24340 Grand Rapids-Wyoming, MI.... New.
Lenawee County....................... MI.............. 11460 Ann Arbor, MI............... New.
Newaygo County....................... MI.............. 24340 Grand Rapids-Wyoming, MI.... New.
Shiawassee County.................... MI.............. 29620 Lansing-East Lansing, MI.... ................
Tuscola County....................... MI.............. 40980 Saginaw, MI................. ................
Goodhue County....................... MN.............. 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Meeker County........................ MN.............. 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Rice County.......................... MN.............. 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Pearl River County................... MS.............. 25060 Gulfport-Biloxi-Pascagoula, ................
MS.
Stone County......................... MS.............. 25060 Gulfport-Biloxi-Pascagoula, New.
MS.
Dade County.......................... MO.............. 44180 Springfield, MO............. ................
Otoe County.......................... NE.............. 30700 Lincoln, NE................. New.
Douglas County....................... NV.............. 16180 Carson City, NV............. New.
Lyon County.......................... NV.............. 16180 Carson City, NV............. ................
Los Alamos County.................... NM.............. 42140 Santa Fe, NM................ ................
Cayuga County........................ NY.............. 45060 Syracuse, NY................ ................
Cortland County...................... NY.............. 27060 Ithaca, NY.................. New.
Genesee County....................... NY.............. 40380 Rochester, NY............... ................
Greene County........................ NY.............. 10580 Albany-Schenectady-Troy, NY. ................
Lewis County......................... NY.............. 48060 Watertown-Fort Drum, NY..... New.
Montgomery County.................... NY.............. 10580 Albany-Schenectady-Troy, NY. New.
Schuyler County...................... NY.............. 27060 Ithaca, NY.................. ................
Seneca County........................ NY.............. 40380 Rochester, NY............... New.
Camden County........................ NC.............. 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Caswell County....................... NC.............. 15500 Burlington, NC.............. ................
Granville County..................... NC.............. 20500 Durham-Chapel Hill, NC...... ................
Greene County........................ NC.............. 24780 Greenville, NC.............. New.
Harnett County....................... NC.............. 39580 Raleigh, NC................. ................
Polk County.......................... NC.............. 43900 Spartanburg, SC............. ................
Wilson County........................ NC.............. 40580 Rocky Mount, NC............. New.
Traill County........................ ND.............. 24220 Grand Forks, ND-MN.......... New.
Ashtabula County..................... OH.............. 17460 Cleveland-Elyria, OH........ ................
Champaign County..................... OH.............. 44220 Springfield, OH............. ................
Columbiana County.................... OH.............. 49660 Youngstown-Warren-Boardman, ................
OH-PA.
Harrison County...................... OH.............. 48260 Weirton-Steubenville, WV-OH. New.
Preble County........................ OH.............. 19380 Dayton, OH.................. New.
Clinton County....................... PA.............. 48700 Williamsport, PA............ ................
Fulton County........................ PA.............. 25180 Hagerstown-Martinsburg, MD- New.
WV.
Greene County........................ PA.............. 38300 Pittsburgh, PA.............. ................
Lawrence County...................... PA.............. 38300 Pittsburgh, PA.............. New.
Schuylkill County.................... PA.............. 39740 Reading, PA................. ................
Susquehanna County................... PA.............. 13780 Binghamton, NY.............. ................
Adjuntas Municipio................... PR.............. 38660 Ponce, PR................... New.
Coamo Municipio...................... PR.............. 41980 San Juan-Carolina-Caguas, PR New.
Las Mar[iacute]as Municipio.......... PR.............. 32420 Mayag[uuml]ez, PR........... New.
Maricao Municipio.................... PR.............. 32420 Mayag[uuml]ez, PR........... New.
Salinas Municipio.................... PR.............. 25020 Guayama, PR................. New.
Clarendon County..................... SC.............. 44940 Sumter, SC.................. ................
Colleton County...................... SC.............. 16700 Charleston-North Charleston, New.
SC.
Lee County........................... SC.............. 44940 Sumter, SC.................. ................
Marion County........................ SC.............. 22500 Florence, SC................ New.
Newberry County...................... SC.............. 17900 Columbia, SC................ New.
Meigs County......................... TN.............. 17420 Cleveland, TN............... ................
Blanco County........................ TX.............. 12420 Austin-Round Rock, TX....... New.
Bosque County........................ TX.............. 47380 Waco, TX.................... ................
Calhoun County....................... TX.............. 47020 Victoria, TX................ New.
Fannin County........................ TX.............. 19100 Dallas-Fort Worth-Arlington, ................
TX.
Grimes County........................ TX.............. 17780 College Station-Bryan, TX... ................
Harrison County...................... TX.............. 30980 Longview, TX................ ................

[[Page 28077]]

Henderson County..................... TX.............. 46340 Tyler, TX................... ................
Hill County.......................... TX.............. 19100 Dallas-Fort Worth-Arlington, New.
TX.
Milam County......................... TX.............. 12420 Austin-Round Rock, TX....... ................
Van Zandt County..................... TX.............. 19100 Dallas-Fort Worth-Arlington, ................
TX.
Willacy County....................... TX.............. 15180 Brownsville-Harlingen, TX... ................
King and Queen County................ VA.............. 40060 Richmond, VA................ New.
Louisa County........................ VA.............. 40060 Richmond, VA................ New.
Madison County....................... VA.............. 16820 Charlottesville, VA......... New.
Orange County........................ VA.............. 47900 Washington-Arlington- New.
Alexandria, DC-VA-MD-WV.
Page County.......................... VA.............. 25500 Harrisonburg, VA............ ................
Shenandoah County.................... VA.............. 49020 Winchester, VA-WV........... ................
Southampton County................... VA.............. 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Surry County......................... VA.............. 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Island County........................ WA.............. 42660 Seattle-Tacoma-Bellevue, WA. ................
Mason County......................... WA.............. 36500 Olympia-Tumwater, WA........ ................
Jackson County....................... WV.............. 16620 Charleston, WV.............. ................
Morgan County........................ WV.............. 25180 Hagerstown-Martinsburg, MD- New.
WV.
Roane County......................... WV.............. 16620 Charleston, WV.............. ................
Green Lake County.................... WI.............. 22540 Fond du Lac, WI............. ................
Jefferson County..................... WI.............. 33340 Milwaukee-Waukesha-West ................
Allis, WI.
Walworth County...................... WI.............. 33340 Milwaukee-Waukesha-West ................
Allis, WI.
----------------------------------------------------------------------------------------------------------------

a. Proposed New Lugar Areas for FY 2015
Of the 127 qualifying counties identified as Lugar counties based
on the new OMB delineations, 58 counties would be newly designated as
Lugar for FY 2015 if we finalize our proposed adoption of the new OMB
delineations. Hospitals in these counties, with at least 25 percent of
their workers commuting to a higher wage area, effective October 1,
2014, will be deemed to be located in the CBSA to which the highest
number of their workers commute (which is identified in the column
titled ``Lugar Designated CBSA'' in the table above). Hospitals in
these counties would receive the reclassified urban wage index of the
corresponding Lugar Designated CBSA, unless they choose to waive their
Lugar status, as discussed later in this section.
Some areas that are currently urban counties would be
geographically rural if we adopted the new OMB delineations and would
meet the requirements for redesignation as Lugar areas. As described in
section III.B.2.e.(2) of the preamble of this proposed rule, we are
proposing a 3-year hold harmless transitional wage index adjustment for
hospitals located in urban counties that become rural under the new OMB
delineations. Because Lugar status is a form of redesignation,
hospitals that currently are located in urban counties that would
become rural under the new OMB delineations and are also considered
Lugar areas under the new OMB delineations would not be eligible for
the 3-year transition wage index adjustment unless they choose to waive
Lugar status for FY 2015 (as discussed later in this section) and seek
no other form of wage index reclassification.
b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Using Table 4C associated with this proposed rule (which is
available via the Internet on the CMS Web site), affected hospitals may
compare the reclassified wage index for the labor market area into
which they would be reclassified by the MGCRB to the reclassified wage
index for the area to which they are redesignated under section
1886(d)(8)(B) of the Act. Hospitals may withdraw from an MGCRB
reclassification within 45 days of the publication of this FY 2015
proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.)
We treat New England deemed counties in a manner consistent with
how we treat Lugar counties. (We refer readers to the FY 2008 IPPS
final rule with comment period (72 FR 47337 through 47338) for a
discussion of this policy.)
c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as
Lugar
If we adopt the new OMB delineations, 29 rural counties would no
longer meet the qualifying criteria to be redesignated as Lugar
effective October 1, 2014, either because they would be geographically
located in an urban area, or they would fail to meet the 25-percent
cumulative out-migration threshold with application of the new 2010
Census commuting data.
Counties that were deemed urban under section 1886(d)(8)(B) of the
Act in FY 2014, but would be geographically located in an urban area
under the new OMB delineations for FY 2015 are:

Windham County, CT
Flagler County, FL
Walton County, FL
Morgan County, GA
Peach County, GA
De Witt County, IL
Allen County, KY
St. James Parrish, LA
Montcalm County, MI
Fillmore County, MN
Lincoln County, NC
Cotton County, OK
Linn County, OR
Adams County, PA
Monroe County, PA
Falls County, TX
Buckingham County, VA
Floyd County, VA
Green County, WI

[[Page 28078]]

Counties that would fail to meet the 25-percent threshold in FY
2015 are:

Banks County, GA
Hendry County, FL
Bingham County, ID
Oceana County, MI
Columbia County, NY
Sullivan County, NY
Wyoming County, NY
Oconee County, SC
Middlesex County, VA
Wahkiakum County, WA

In section III.B.2.e.(2) of the preamble of this proposed rule, to
help ease dramatic negative impacts in payment for hospitals designated
as urban under the current FY 2014 OMB delineations, but would be
classified as rural under the new OMB delineations, for FYs 2015, 2016,
and 2017, assuming no other form of wage index reclassification or
redesignation is granted, we are proposing to assign these hospitals
the FY 2015 area wage index value of the urban CBSA to which they
geographically belonged in FY 2014 (with the rural and imputed floors
applied and with the rural floor budget neutrality adjustment applied
to the area wage index). (For purposes of the wage index computation,
the wage data of these hospitals would remain assigned to the statewide
rural area in which they are located.) Similarly, we are proposing that
the same 3-year transition apply to hospitals located in those counties
that would lose their deemed urban designation under section
1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB
delineations. Because these hospitals would, in fact, lose their
designated urban status, we are proposing to extend the 3-year hold
harmless transitional wage index adjustment to these hospitals located
in counties formerly designated as urban under section 1886(d)(8)(B) of
the Act. That is, for FYs 2015, 2016, and 2017, assuming no other form
of wage index reclassification or redesignation is granted, we are
proposing to assign these hospitals the FY 2015 area wage index value
of the urban CBSA to which they were designated as urban in FY 2014
(with the rural and imputed floors applied and with the rural floor
budget neutrality adjustment applied). We are proposing to use the wage
data from these hospitals as part of computing the rural wage index. In
addition, during this 3-year transition period, these hospitals would
be eligible to apply for reclassification by the MGCRB. As discussed in
section III.B.2.e.(3) of the preamble of this proposed rule, we are
proposing that if a hospital is currently located in an urban county
that would become rural for FY 2015 under the new OMB delineations, and
such hospital seeks and is granted any reclassification or
redesignation during FYs 2015, 2016, or 2017, the hospital would
permanently lose its 3-year transitional assigned wage index, and would
not be able to reinstate it. Similarly, we are proposing that this
policy also apply to hospitals located in those counties that would
lose their deemed urban designation under section 1886(d)(8)(B) of the
Act and would become rural if we adopt the new OMB delineations. In FY
2018, we are proposing that these hospitals would receive their
statewide rural wage index.
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section IV.F. of the preamble of this proposed rule.)
In addition, we adopted a minor procedural change that would allow
a Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within 45 days from the
publication of the proposed rule) to waive its urban status for the
full 3-year period for which its out-migration adjustment is effective.
By doing so, such a Lugar hospital would no longer be required during
the second and third years of eligibility for the out-migration
adjustment to advise us annually that it prefers to continue being
treated as rural and receive the out-migration adjustment. Therefore,
under the procedural change, a Lugar hospital that requests to waive
its urban status in order to receive the rural wage index in addition
to the out-migration adjustment would be deemed to have accepted the
out-migration adjustment and agrees to be treated as rural for the
duration of its 3-year eligibility period, unless, prior to its second
or third year of eligibility, the hospital explicitly notifies CMS in
writing, within the required period (generally 45 days from the
publication of the proposed rule), that it instead elects to return to
its deemed urban status and no longer wishes to accept the out-
migration adjustment. If the hospital does notify CMS that it is
electing to return to its deemed urban status, it would again be
treated as urban for all IPPS payment purposes.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.
5. Update of Application of Urban to Rural Reclassification Criteria
Section 401(a) of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (Pub. L. 106-113), which amended section
1886(d)(8) of the Act by adding a new paragraph (E), directed the
Secretary to treat any subsection (d) hospital located in an urban area
as being located in the rural area of the State in which the hospital
is located, providing that the hospital applied for reclassification in
a manner determined by the Secretary and met certain criteria. As
discussed in the FY 2001 interim final rule (65 FR 47029 through
47031), we codified in regulation at Sec. 412.103 the application
process and the qualifying criteria for any hospital seeking rural
reclassification.
In order to be approved for a rural reclassification, a hospital
must meet one of three criteria. The first criterion, located at Sec.
412.103(a)(1), qualifies a hospital located in a rural census tract of
an MSA area, as determined under the most recent version of the
Goldsmith Modification, the Rural-Urban Commuting Area (RUCA) codes. On
February 28, 2013, OMB issued OMB Bulletin No. 13-01, which established
revised delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas.
These delineations are based on 2010 decennial Census data. Several
modifications of RUCA codes were necessary to take into account updated
commuting data and revised OMB delineations. We refer readers to the
U.S. Department of Agriculture's Economic Research Service Web site for
a detailed listing of updated RUCA codes found at: https://www.ers.usda.gov/data-products/rural-urban-commuting-area-codes.aspx.
The updated RUCA code definitions were introduced in late 2013. As
discussed at Sec. 412.103(f), the duration of an approved rural
reclassification remains in effect without need for reapproval unless
there is a change in the circumstances under which the

[[Page 28079]]

classification was approved. If a hospital located in an urban area was
approved for a rural reclassification under Sec. 412.103(a)(1), that
reclassification would no longer be valid if the hospital is no longer
located within a rural census tract of an MSA defined as an RUCA.
Therefore, we encourage all hospitals with active rural
reclassifications under section 1886(d)(8)(E) of the Act to review
their original reclassification application and determine whether the
reclassification status would still apply. As discussed in section
VI.C.2. of the preamble of this proposed rule, we are proposing a 2-
year grace period allowing affected CAHs additional time to seek a new
rural reclassification without the threat of losing its CAH status. As
discussed in section VI.C.2. of the preamble of this proposed rule, we
are not proposing a grace period for other types of hospitals to seek a
new rural reclassification. We note that rural reclassification status
under Sec. 412.103 is effective as of the filing date of the
application. Therefore, if the change in RUCA codes invalidates any
hospital's rural reclassification status, we believe hospitals will
have adequate time to apply for a new reclassification using an
alternative qualification criterion specified at either Sec.
412.103(a)(2) or Sec. 412.103(a)(3). A rural referral center (RRC) or
a sole community hospital (SCH) that continues to meet the appropriate
qualification criteria would, in itself, qualify for a rural
reclassification. If a complete application is received before October
1, 2014, and is approved by the CMS Regional Office, the hospital would
experience no interruption in its rural status.

I. Proposed FY 2015 Wage Index Adjustment Based on Commuting Patterns
of Hospital Employees

In accordance with section 1886(d)(13) of the Act, as added by
section 505 of Public Law 108-173, beginning with FY 2005, we
established a process to make adjustments to the hospital wage index
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS
final rule (69 FR 49061), provides for an increase in the wage index
for hospitals located in certain counties that have a relatively high
percentage of hospital employees who reside in the county but work in a
different county (or counties) with a higher wage index.
When this provision was implemented for the FY 2005 wage index, we
analyzed commuting data compiled by the U.S. Census Bureau which was
derived from a special tabulation of the 2000 Census journey-to-work
data for all industries (CMS extracted data applicable to hospitals).
These data were compiled from responses to the ``long-form'' survey,
which the Census Bureau used at the time, and it contained questions on
where residents in each county worked (69 FR 49062). However, the 2010
Census was ``short form'' only; therefore, this information was not
collected as part of the 2010 Census. The Census Bureau is working with
CMS to provide an alternative dataset based on the latest available
data that is expected to meet our needs for developing a new out-
migration adjustment. We believe we will have the necessary time to
obtain, review and analyze the data in order to propose new out-
migration adjustments based on new commuting patterns developed from
the 2010 Census data beginning with FY 2016. Section 1886(d)(13)(B) of
the Act requires the Secretary to use data the Secretary determines to
be appropriate to establish the qualifying counties. The data used for
the FY 2014 out-migration adjustment are the most recent data that have
been analyzed, and we believe that these data are appropriate to
establish the qualifying counties. Therefore, we are proposing that the
FY 2015 out-migration adjustments continue to be based on the 2000
Census data. We also are proposing that the FY 2015 out-migration
adjustments continue to be based on the policies, procedures, and
computation that were used for the FY 2014 out-migration adjustment.
(We refer readers to a full discussion of the adjustment, including
rules on deeming hospitals reclassified under section 1886(d)(8) or
section 1886(d)(10) of the Act to have waived the out-migration
adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601
through 51602)). Table 4J, which is available via the Internet on the
CMS Web site, lists the proposed out-migration adjustments for the
proposed FY 2015 wage index.
Section 1886(d)(13)(F) of the Act states that ``[a] wage index
increase under this paragraph shall be effective for a period of 3
fiscal years, except that the Secretary shall establish procedures
under which a subsection (d) hospital may elect to waive the
application of such wage index increase.'' Therefore, for FY 2015,
because we are proposing to continue to use the out-migration
adjustment data used for FY 2014, consistent with the statute, we also
are proposing to allow hospitals that qualified in FY 2013 or FY 2014
to receive the out-migration adjustment based on the commuting data and
the CBSA delineations used for FY 2014 to continue to receive the same
out-migration adjustment for the remainder of their 3-year
qualification period. Similarly, if a hospital qualifies for and opts
to receive the out-migration adjustment for the first time in FY 2015,
we also are proposing to allow that hospital to receive the out-
migration adjustment based on the data used for FY 2014 for FYs 2015,
2016, and 2017. Accordingly, even if we propose to adopt new out-
migration adjustment data for FY 2016, as we believe we will be able to
do, hospitals that are already receiving an out-migration adjustment
beginning with a fiscal year prior to FY 2016 would still receive their
out-migration adjustment based on the data used for FY 2014 for the
years that remain of their 3-year qualification period in FY 2016 and
after.
We intend to address application of the FY 2016 out-migration
adjustment in greater detail in the FY 2016 proposed rule. However, in
this FY 2015 proposed rule, we are soliciting comments on how to
implement the new out-migration adjustment data for FY 2016, given the
statutory requirement at section 1886(d)(13)(F) of the Act that an out-
migration adjustment be effective for 3 fiscal years.
As discussed in section III.B. of the preamble of this proposed
rule, we are proposing to use OMB's new labor market area delineations
based on the 2010 Census data to identify counties qualifying as Lugar
counties for FY 2015. In section III.H.3 of the preamble of this
proposed rule, we discuss hospitals located in rural counties that are
deemed to be urban under section 1886(d)(8)(B) of the Act. These rural
counties are known as ``Lugar'' counties. Under the new OMB
delineations, there would be counties newly qualifying as Lugar as well
as counties that were previously Lugar counties that would no longer
meet the criteria to be redesignated as Lugar. As discussed in section
III.H.4. of the preamble of this proposed rule, if a Lugar hospital
qualifies for and accepts the out-migration adjustment, it must waive
its deemed urban status and can do so for the 3-year period for which
the out-migration adjustment is effective. Therefore, hospitals located
in counties newly designated as Lugar due to the new OMB delineations
would have the choice to either maintain their Lugar status or waive it
in order to receive the out-migration adjustment in FY 2015 based on
the out-migration adjustment data used for FY 2014.
On the other hand, there are hospitals in counties deemed to be
Lugar under

[[Page 28080]]

the previous CBSA delineations that waived their Lugar status for the
out-migration adjustment, but are not Lugar under the new OMB
delineations. These hospitals would continue to receive the out-
migration adjustment for the 3-year eligibility period through FY 2015
or FY 2016. However, these hospitals that are located in urban counties
under the new OMB delineations, and wish to continue to maintain their
rural status effective October 1, 2014, must do so by reclassifying
from urban to rural under Sec. 412.103. Section 1886(d)(13)(G) of the
Act states that a hospital cannot simultaneously receive the out-
migration adjustment and be subject to a reclassification under section
1886(d)(8) or 1886(d)(10) of the Act. Therefore, if such hospital is
not located in a geographically rural area under the new OMB
delineations, and reclassifies under Sec. 412.103 of the regulations
in order to be treated as rural for IPPS purposes, the hospital would
be ineligible to receive an out-migration adjustment, even if the 3-
year eligibility period has not expired.
As discussed in section III.B.5. of the preamble of this proposed
rule, we are proposing a 1-year blended wage index for any provider
that experiences a decrease in wage index value due to the proposed
implementation of the new OMB labor market area delineations. This
proposal would create a wage index that is 50 percent of the wage index
derived using the current FY 2014 OMB delineations, and 50 percent of
the wage index based on the proposed new OMB delineations. As discussed
in section III.B.2.e.(4) of the preamble of this proposed rule, we are
proposing to apply this blended wage index value to any affected
hospital in a budget neutral manner. However, we are proposing that
hospitals receiving the out-migration adjustment would have it added to
the result of the 50/50 blended wage index, after budget neutrality is
applied. We are proposing the blended wage index transition adjustment
specifically to address any negative impact that may be caused by the
proposed adoption of the new OMB delineations in FY 2015. To
specifically identify and address any such negative payment impact, we
are proposing to apply the out-migration adjustment independent of the
blended wage index and other wage index adjustments (for example, the
rural floor) and related budget neutrality adjustments. This is
consistent with our current policy to apply the out-migration
adjustment after all other wage index adjustments and related budget
neutrality adjustments have been applied. Therefore, we believe the
out-migration adjustment would be properly applied as a supplemental
addition to a hospital's final wage index value, similar to our
treatment of hospitals receiving the frontier State floor value of
1.00, as described under 42 CFR 412.64(m), that also qualify for an
out-migration adjustment and would receive that adjustment.

J. Process for Requests for Wage Index Data Corrections

The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2015 wage index were made
available on September 13, 2013, through the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this file does not
alter the current wage index process or schedule. We notify the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encourage hospitals to sign up for automatic notifications of
information about hospital issues and the scheduling of the Hospital
Open Door forums at the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/.
In a memorandum dated September 16, 2013, we instructed all MACs to
inform the IPPS hospitals they service of the availability of the wage
index data files and the process and timeframe for requesting revisions
(including the specific deadlines listed below). We also instructed the
MACs to advise hospitals that these data were also made available
directly through their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the September 13, 2013 wage and occupational mix data files, the
hospital was to submit corrections along with complete, detailed
supporting documentation to its MAC by November 21, 2013. Hospitals
were notified of this deadline and of all other deadlines and
requirements, including the requirement to review and verify their data
as posted in the preliminary wage index data files on the Internet,
through the September 16, 2013 memorandum referenced above.
In the September 16, 2013 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in September, highlight the revised
cells on its spreadsheet, and submit its spreadsheet(s) and complete
documentation to its MAC no later than November 21, 2013.
The MACs notified the hospitals by early-February 2014 of any
changes to the wage index data as a result of the desk reviews and the
resolution of the hospitals' late-November revision requests. The MACs
also submitted the revised data to CMS by late January 2014. CMS
published the proposed wage index public use files that included
hospitals' revised wage index data on February 20, 2014. Hospitals had
until March 3, 2014, to submit requests to the MACs for reconsideration
of adjustments made by the MACs as a result of the desk review, and to
correct errors due to CMS' or the MAC's mishandling of the wage index
data. Hospitals also were required to submit sufficient documentation
to support their requests.
After reviewing requested changes submitted by hospitals, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by April 9, 2014. The deadline for
a hospital to request CMS intervention in cases where the hospital
disagreed with the MAC's policy interpretations was April 16, 2014. We
note that, beginning with the FY 2015 wage index, per the FY 2015 wage
index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the April appeals must be sent via mail and
email. We refer readers to the wage index timeline for complete
details.
Upon release of this proposed rule, hospitals should examine Table
2, which is listed in section VI. of the Addendum to this proposed rule
and available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. Table 2 contains each hospital's proposed adjusted average
hourly wage used to construct the wage index values for the past 3
years, including the FY 2011 data used to construct the proposed FY
2015 wage index. We note that the proposed hospital average hourly
wages shown in

[[Page 28081]]

Table 2 only reflect changes made to a hospital's data that were
transmitted to CMS by February 26, 2014.
The final wage index data public use files are posted on May 2,
2014 on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. The May 2014 public use files are made available
solely for the limited purpose of identifying any potential errors made
by CMS or the MAC in the entry of the final wage index data that
resulted from the correction process described above (revisions
submitted to CMS by the MACs by April 9, 2014).
After the release of the May 2014 wage index data files, changes to
the wage and occupational mix data will only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by the
MACs on or before April 9, 2014.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 20,
2014 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the May 2014 final public use files, a hospital
believes that its wage or occupational mix data are incorrect due to a
MAC or CMS error in the entry or tabulation of the final data, the
hospital should notify both its MAC and CMS regarding why the hospital
believes an error exists and provide all supporting information,
including relevant dates (for example, when it first became aware of
the error). The hospital is required to send its request to CMS and to
the MAC no later than June 2, 2014. Similar to the April appeals,
beginning with the FY 2015 wage index, in accordance with the FY 2015
wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the June appeals must be sent via mail and
email to CMS and the MACs. We refer readers to the wage index timeline
for complete details. (We refer readers to section II.K. of the
preamble to this proposed rule where we are proposing revisions to the
wage index timetable.)
Verified corrections to the wage index data received timely by CMS
and the MACs (that is, by June 2, 2014) will be incorporated into the
final wage index in the FY 2015 IPPS/LTCH PPS final rule, which will be
effective October 1, 2014.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2015 payment rates. Accordingly,
hospitals that do not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the MAC's decision with respect to requested
changes. Specifically, our policy is that hospitals that do not meet
the procedural deadlines set forth above will not be permitted to
challenge later, before the PRRB, the failure of CMS to make a
requested data revision. We refer readers also to the FY 2000 IPPS
final rule (64 FR 41513) for a discussion of the parameters for appeals
to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the MAC's attention. Moreover,
because hospitals have access to the final wage index data by early May
2014, they have the opportunity to detect any data entry or tabulation
errors made by the MAC or CMS before the development and publication of
the final FY 2015 wage index by August 2014, and the implementation of
the FY 2015 wage index on October 1, 2014. If hospitals avail
themselves of the opportunities afforded to provide and make
corrections to the wage and occupational mix data, the wage index
implemented on October 1 should be accurate. Nevertheless, in the event
that errors are identified by hospitals and brought to our attention
after June 2, 2014, we retain the right to make midyear changes to the
wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) The MAC or CMS made an
error in tabulating its data; and (2) the requesting hospital could not
have known about the error or did not have an opportunity to correct
the error, before the beginning of the fiscal year. For purposes of
this provision, ``before the beginning of the fiscal year'' means by
the June deadline for making corrections to the wage data for the
following fiscal year's wage index (for example, June 2, 2014 for the
FY 2015 wage index). This provision is not available to a hospital
seeking to revise another hospital's data that may be affecting the
requesting hospital's wage index for the labor market area. As
indicated earlier, because CMS makes the wage index data available to
hospitals on the CMS Web site prior to publishing both the proposed and
final IPPS rules, and the MACs notify hospitals directly of any wage
index data changes after completing their desk reviews, we do not
expect that midyear corrections will be necessary. However, under our
current policy, if the correction of a data error changes the wage
index value for an area, the revised wage index value will be effective
prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The MAC or CMS made an error in tabulating data used for the wage
index calculation; (2) the hospital knew about the error and requested
that the MAC and CMS correct the error using the established process
and within the established schedule for requesting corrections to the
wage index data, before the beginning of the fiscal year for the
applicable IPPS update (that is, by the June 2, 2014 deadline for the
FY 2015 wage index); and (3) CMS agreed before October 1 that the MAC
or CMS made an error in tabulating the hospital's wage index data and
the wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 2, 2014 deadline for the FY 2015 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the MAC's mishandling of the data, we believe that
the hospital should not be penalized by our delay in publishing or
implementing the correction. As with our current policy, we indicated
that the provision is not available to a hospital seeking to revise
another hospital's data. In addition, the provision cannot be used to
correct prior years' wage index data; and it can only be used for the
current Federal fiscal year. In situations where our policies would
allow midyear

[[Page 28082]]

corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we
continue to believe that it is appropriate to make prospective-only
corrections to the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.

K. Notice of Change to Wage Index Development Timetable

As explained in section III.J. the preamble of this proposed rule,
the preliminary, unaudited Worksheet S-3 wage data and occupational mix
survey data files for the proposed FY 2015 wage index were made
available on September 13, 2013, through the Internet on the CMS Web
site. The posting of these preliminary files initiate what is virtually
a year-long cycle for developing the wage index associated with the
following IPPS fiscal year. This lengthy, almost year-long cycle is
unique to the development of the IPPS wage index, and occurs
independently from the development of the IPPS proposed and final
rules, which typically are published in the spring and summer each
year. In addition, the wage index, which is based on hospitals' wage
data reported on Worksheets S-3, Parts II and III of the Form CMS-2552-
10 of the Medicare cost report and occupational mix data, is the only
portion of the IPPS that historically has been subject to its own
annual review process, first by the MACs, and then by CMS, followed by
distinct opportunities for hospitals to appeal decisions made by the
MACs or CMS. This process is separate and independent from the standard
cost report settlement and appeals processes established under the
regulations at 42 CFR 405.1800 through 405.1889.
Although this unique wage index development timetable has been in
place since the early days of the IPPS, the current timetable is rooted
in changes adopted in the FY 1998 IPPS final rule with comment period
(62 FR 45990 through 45993). However, with numerous legislative and
regulatory changes made to the IPPS since FY 1998, the demands on
hospitals, MACs, and CMS have increased substantially. As a result, it
has become increasingly challenging for wage index stakeholders to
manage the wage index timetable with competing priorities. For the FY
2015 wage index, CMS made slight changes to the wage index development
timetable, by posting the preliminary public use file (PUF) in
September 2013 rather than in October 2013, which, in turn, moved back
the deadline for hospitals to request revisions to the data displayed
in that preliminary PUF to November 2013, instead of December 2013. In
addition, the date for the MACs to complete desk reviews on that data
was similarly moved to a slightly earlier deadline in early CY 2014.
The FY 2015 Wage Index Development Timetable, which is posted on the
CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, shows that
hospitals have a little more than 2 months to request revisions to
their data displayed in the September 13, 2013 preliminary PUF, until
the commencement of the desk review process by the MACs on November 21,
2013. The MACs also have a little more than 2 months to complete the
desk reviews and submit revised cost report data to CMS by January 29,
2014. Less than a month later, on February 20, 2014, the revised FY
2015 wage index and occupational mix PUFs were posted on the CMS Web
site. Ensuring the accuracy of the February PUF is extremely important
and beneficial to hospitals because, as the timetable shows, it is the
basis for hospitals to appeal data that are incorrect, with March 3,
2014 being the last date that hospitals can request revisions to errors
in the February 20, 2014 PUF.
Therefore, we have concluded that steps should be taken to improve
the accuracy of the February PUF, most importantly by proposing changes
to the wage index timetables for future IPPS fiscal years that are much
more significant and fundamental than the slight revisions to the
timetable implemented for FY 2015. We believe that the changes we are
proposing below would not only improve the accuracy of the February
PUF, but also would reduce the number of hospital appeals based on the
February PUF. For example, as specified below, instead of the current
timetable which only provides CMS with less than a month to review the
MACs' desk reviews and prepare the February PUF, we are proposing
approximately 3 months between the date that the MACs' desk reviews
would end and the date that CMS would post the subsequent PUF. To allow
hospitals and MACs adequate time to prepare for the changes to the wage
index development timetable, we are proposing to make the following
significant changes beginning with the FY 2017 wage index cycle. We are
listing the proposed changes for FY 2017 below in a table side by side
with the existing timetable, so that commenters may read the proposed
changes in the context of the existing timetable. Under the proposed
changes for FY 2017, although we are not providing exact dates for the
FY 2017 wage index timetable, we note that, with every change listed
below, we intend to provide hospitals and MACs with the same or
somewhat more time than under the current timetable to complete reviews
and request revisions. The proposed revisions would not reduce the
amount of time that either hospitals or MACs have to review wage data.
Therefore, these proposed changes would not result in additional work
on the part of the hospitals or MACs; in fact, in shifting the various
dates, we expect that more time would be provided to hospitals, MACs,
and CMS to ensure an even more accurate wage index.

----------------------------------------------------------------------------------------------------------------
Deadlines FY 2015 Timetable Proposed FY 2017 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web site September 13, 2013...... Mid May 2015.
Deadline for Hospitals to Request November 21, 2013....... Early August 2015.
Revisions to Preliminary PUF.
Deadline for MACs to Complete Desk Reviews January 29, 2014........ Mid-October 2015.
Posting of February PUF on CMS Web site... February 20, 2014....... Late January 2016.
Deadline Following Posting of February PUF March 3, 2014........... Mid-February 2016.
for Hospitals to Request Revisions.
Completion of Appeals by MACs and April 9, 2014........... Mid- to Late March 2016.
Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in April. April 16, 2014.......... Early April 2016.
Posting of Final Rule PUF................. May 2, 2014............. Late April 2016.
Deadline for Hospitals to Appeal in June.. June 2, 2014............ Late May 2016.
Expected Issuance of IPPS final rule...... August 1, 2014.......... August 1, 2016.
----------------------------------------------------------------------------------------------------------------

[[Page 28083]]

With regard to the FY 2016 wage index cycle, we believe it can
serve as a transition to the more significant changes we are proposing
for the FY 2017 wage index cycle. We believe that there are steps we
can take to improve the accuracy of the February 2016 PUF by building
in more time to the FY 2016 wage index review process as well.
Specifically, we are notifying hospitals of changes to the deadlines
only in the beginning of the FY 2016 wage index timetable, as a
transition to the more significant proposed changes for the entire FY
2017 wage index timetable. That is, for FY 2016, we are only changing
the following four dates: the posting of the preliminary wage index
PUF; the posting of the CY 2013 occupational mix survey data
preliminary PUF; the deadline for hospitals to request revisions to the
wage data and occupational mix data preliminary PUFs; and the deadline
for MACs to complete the desk reviews. We are not changing the
remainder of the FY 2016 timetable at this time. We expect that making
these changes for the FY 2016 timetable would improve the accuracy of
the February 2016 PUF, and also mitigate the number of hospital appeals
based on the February 2016 PUF. In addition, we believe these changes
would help hospitals, MACs, and CMS adjust to the more significant
timeline changes proposed for FY 2017. We are listing only the changes
for FY 2016 in the following table side by side with the existing FY
2015 timetable, so that commenters may read the FY 2016 changes in the
context of the existing timetable. We are not listing dates that would
remain unchanged for FY 2016.

----------------------------------------------------------------------------------------------------------------
Deadlines FY 2015 Timetable Adjusted FY 2016 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary Wage Data PUF on September 13, 2013...... Late May 2014.
CMS Web site.
Posting of Preliminary CY 2013 September 13, 2013...... Early to Mid-July 2014.
Occupational Mix Data PUF on CMS Web site.
Deadline for Hospitals to Request November 21, 2013....... Early October 2014.
Revisions to Preliminary PUF.
Deadline for MACs to Complete Desk Reviews January 29, 2014........ Mid-December 2014.
----------------------------------------------------------------------------------------------------------------

Typically, the preliminary PUF initiating the start of an IPPS wage
index fiscal year contains one spreadsheet with the Worksheet S-3 wage
data for the applicable fiscal year on one tab, and another tab with
the preliminary occupational mix data for that fiscal year. For the FY
2016 wage index, new occupational mix survey data will be available for
use, based on the CY 2013 occupational mix survey. Hospitals are
required to submit their CY 2013 occupational mix surveys to their MACs
no later than July 1, 2014. Therefore, we will not have the preliminary
CY 2013 occupational mix survey data in time to post it simultaneously
in late May 2014 with the preliminary FY 2016 wage data. Accordingly,
as the table above indicates, we would post the preliminary FY 2016
wage data by itself first in late May 2014, to be followed by a
separate posting of the preliminary CY 2013 occupational mix survey
data when the data are available, in early to mid-July 2014.
We are inviting public comments on our proposals set forth above to
make revisions to the wage index timetables for FY 2017.

L. Labor-Related Share for the FY 2015 Wage Index

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion (as estimated by the Secretary from time to
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates. . . .'' We refer to
the portion of hospital costs attributable to wages and wage-related
costs as the labor-related share. The labor-related share of the
prospective payment rate is adjusted by an index of relative labor
costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate ``from time to time'' the proportion of hospitals'
costs that are ``attributable to wages and wage-related costs.'' Thus,
hospitals receive payment based on either a 62-percent labor-related
share, or the labor-related share estimated from time to time by the
Secretary, depending on which labor-related share resulted in a higher
payment.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through
50607), we rebased and revised the hospital market basket. We
established a FY 2010-based IPPS hospital market basket to replace the
FY 2006-based IPPS hospital market basket, effective October 1, 2013.
In that final rule, we presented our analysis and conclusions regarding
the frequency and methodology for updating the labor-related share for
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a
labor-related share for FY 2014 of 69.6 percent. In addition, we
implemented this revised and rebased labor-related share in a budget
neutral manner, but consistent with section 1886(d)(3)(E) of the Act,
we did not take into account the additional payments that would be made
as a result of hospitals with a wage index less than or equal to 1.0
being paid using a labor-related share lower than the labor-related
share of hospitals with a wage index greater than 1.0.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. In this FY 2015 proposed rule, we are not proposing to make
any further changes to the national average proportion of operating
costs that are attributable to wages and salaries, employee benefits,
contract labor, the labor-related portion of professional fees,
administrative and facilities support services, and all other labor-
related services.
Therefore, for FY 2015, we are proposing to continue to use a
labor-related share of 69.6 percent for discharges occurring on or
after October 1, 2014. Tables 1A and 1B, which are published in section
VI. of the Addendum to this proposed rule and available via the
Internet, reflect this proposed labor-related share. For FY 2015, for
all IPPS hospitals whose wage indexes are less than or equal to 1.0000,
we are proposing to apply the wage index to a labor-related share of 62
percent of the national standardized amount. For all IPPS hospitals
whose wage indexes are greater than 1.0000, for FY 2015, we are
proposing to apply the wage index to a proposed labor-

[[Page 28084]]

related share of 69.6 percent of the national standardized amount. We
note that, for Puerto Rico hospitals, the national labor-related share
is 62 percent because the national wage index for all Puerto Rico
hospitals is less than 1.0.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through
50603), we also rebased and revised the labor-related share for the
Puerto Rico-specific standardized amounts using FY 2010 as a base year.
We finalized a labor-related share for the Puerto Rico-specific
standardized amounts for FY 2014 of 63.2 percent. In this FY 2015
proposed rule, we are not proposing to make any further changes to the
Puerto Rico specific average proportion of operating costs that are
attributable to wages and salaries, employee benefits, contract labor,
the labor-related portion of professional fees, administrative and
facilities support services, and all other labor-related services.
Therefore, for FY 2015, we are proposing to continue to use a labor-
related share for the Puerto Rico-specific standardized amounts of 63.2
percent for discharges occurring on or after October 1, 2014. Puerto
Rico hospitals are paid based on 75 percent of the national
standardized amounts and 25 percent of the Puerto Rico-specific
standardized amounts. For FY 2015, we are proposing to adopt that the
labor-related share of a hospital's Puerto Rico-specific rate would be
either the Puerto Rico-specific labor-related share of 63.2 percent or
62 percent, depending on which results in higher payments to the
hospital. If the hospital has a Puerto Rico-specific wage index of
greater than 1.0 for FY 2015, we are proposing to set the hospital's
rates using a labor-related share of 63.2 percent for the 25 percent
portion of the hospital's payment determined by the Puerto Rico
standardized amounts because this amount would result in higher
payments. Conversely, a hospital with a Puerto Rico-specific wage index
of less than or equal to 1.0 for FY 2015 would be paid using the Puerto
Rico-specific labor-related share of 62 percent of the Puerto Rico-
specific rates because the lower labor-related share would result in
higher payments. The proposed Puerto Rico labor-related share of 63.2
percent for FY 2015 is reflected in Table 1C, which is published in
section VI. of the Addendum to this proposed rule and available via the
Internet.

IV. Other Decisions and Proposed Changes to the IPPS for Operating
Costs and Graduate Medical Education (GME) Costs

A. Proposed Changes to MS-DRGs Subject to the Postacute Care Transfer
Policy (Sec. 412.4)

1. Background
Existing regulations at Sec. 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
acute care transfers, and Sec. 412.4(c) defines postacute care
transfers. Our policy, set forth in Sec. 412(f), provides that when a
patient is transferred and his or her length of stay is less than the
geometric mean length of stay for the MS-DRG to which the case is
assigned, the transferring hospital is generally paid based on a
graduated per diem rate for each day of stay, not to exceed the full
MS-DRG payment that would have been made if the patient had been
discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full DRG payment by the geometric mean length of stay for
the MS-DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
generally provides for payment that is twice the per diem amount for
the first day, with each subsequent day paid at the per diem amount up
to the full MS-DRG payment (Sec. 412.4(f)(1)). Transfer cases are also
eligible for outlier payments. In general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic
variations in costs), divided by the geometric mean length of stay for
the MS-DRG, and multiplied by the length of stay for the case, plus one
day.
We established the criteria set forth in Sec. 412.4(d) for
determining which DRGs qualify for postacute care transfer payments in
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The
determination of whether a DRG is subject to the postacute care
transfer policy was initially based on the Medicare Version 23.0
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is
revised, we use the current version of the Medicare GROUPER and the
most recent complete year of MedPAR data to determine if the DRG is
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds
the 55th percentile for all MS-DRGs and the proportion of short-stay
discharges to postacute care to total discharges in the MS-DRG exceeds
the 55th percentile for all MS-DRGs, CMS will apply the postacute care
transfer policy to that MS-DRG and to any other MS-DRG that shares the
same base MS-DRG. In the preamble to the FY 2006 IPPS final rule (70 FR
47419), we stated that ``we will not revise the list of DRGs subject to
the postacute care transfer policy annually unless we are making a
change to a specific DRG.''
To account for MS-DRGs subject to the postacute care transfer
policy that exhibit exceptionally higher shares of costs very early in
the hospital stay, Sec. 412.4(f) also includes a special payment
methodology. For these MS-DRGs, hospitals receive 50 percent of the
full MS-DRG payment, plus the single per diem payment, for the first
day of the stay, as well as a per diem payment for subsequent days (up
to the full MS-DRG payment (Sec. 412.4(f)(6)). For an MS-DRG to
qualify for the special payment methodology, the geometric mean length
of stay must be greater than 4 days, and the average charges of 1-day
discharge cases in the MS-DRG must be at least 50 percent of the
average charges for all cases within the MS-DRG. MS-DRGs that are part
of an MS-DRG group will qualify under the DRG special payment policy if
any one of the MS-DRGs that share that same base MS-DRG qualifies
(Sec. 412.4(f)(6)).
2. Proposed Changes to the Postacute Care Transfer MS-DRGs
Based on our annual review of MS-DRGs, we have identified a number
of MS-DRGs that should be included on the list of MS-DRGs subject to
the postacute care transfer policy. As we discuss in section II.G. of
this proposed rule, in response to public comments and based on our
analysis of FY 2013 MedPAR claims data, we are proposing to make
several changes to MS-DRGs to better capture certain severity of
illness levels, to be effective for FY 2015. Specifically, we are
proposing to modify the assignment of endovascular cardiac valve
replacements currently assigned to MS-DRGs 216 (Cardiac Valve & Other
Major Cardiothoracic Procedures with Cardiac Catheterization with MCC),
217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization with CC), 218 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC),
219 (Cardiac Valve & Other Major Cardiothoracic Procedures

[[Page 28085]]

without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other
Major Cardiothoracic Procedures without Cardiac Catheterization with
CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures
without Cardiac Catheterization without CC/MCC) to MS-DRGs 266 and 267
(Endovascular Cardiac Valve Replacement with and without MCC,
respectively) to better reflect the differences in patients receiving
endovascular cardiac valve replacements from patients who undergo an
open chest cardiac valve replacement. We also are proposing to further
refine back and neck procedures currently assigned to MS-DRGs 490 and
491 (Back & Neck Procedure Except Spinal Fusion with CC/MCC or Disc
Device/Neurostimulator and without CC/MCC or Disc Device/
Neurostimulator, respectively) into additional severity levels, now
identified as MS-DRGs 518, 519, and 520 (Back & Neck Procedure Except
Spinal Fusion with MCC or Disc Device/Neurostimulator, with CC, and
without MCC/CC, respectively). Finally, we are proposing to remove the
severity levels for reverse shoulder replacements, merging MS-DRGs 483
and 484 (Major Joint & Limb Reattachment Procedure of Upper Extremity
with CC/MCC and without CC/MCC, respectively) into MS-DRG 483 (Major
Joint/Limb Reattachment Procedure of Upper Extremities). A discussion
of these proposed changes can be found in section II.G.4.c., II.G.5.c.
and II.G.5.a., respectively, of the preamble of this proposed rule.
In light of these proposed changes to the MS-DRGs, according to the
regulations under Sec. 412.4(c), we evaluated these proposed FY 2015
MS-DRGs against the general postacute care transfer policy criteria
using the FY 2013 MedPAR data. If an MS-DRG qualified for the postacute
care transfer policy, we also evaluated that MS-DRG under the special
payment methodology criteria according to regulations at Sec.
412.4(f)(6). We continue believe it is appropriate to reassess MS-DRGs
when proposing reassignment of diagnostic codes that would result in
material changes to an MS-DRG. As a result of our review, we found that
MS-DRGs 216 through 221 would require no revisions in postacute care
transfer or special payment policy status. However, we are proposing to
update the list of MS-DRGs that are subject to the postacute care
transfer policy to include the proposed new MS-DRGs 266, 267, 518, 519,
and 520. (These MS-DRGs are reflected in Table 5, which is listed in
section VI. of the Addendum to this proposed rule and available via the
Internet on the CMS Web site, and also are listed in the charts at the
end of this section.)
In addition, based on our evaluation of the proposed FY 2015 MS-
DRGs using the FY 2013 Med PAR data, we have determined that proposed
revised MS-DRG 483 would no longer meet the postacute care transfer
criteria. Therefore, we are proposing that it be removed from the list
of MS-DRGs subject to the postacute care transfer policy, effective FY
2015. We refer readers to the asterisk (*) bolded text in the following
table for which criterion was not met in our analysis for each MS-DRG
removed from the postacute care transfer policy list.

List of MS-DRGs That Would Change Postacute Care Transfer Policy Status in FY 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of short-
stay postacute
Postacute care care transfers
transfers (55th Short-stay to all cases Postacute transfer
MS-DRG MS-DRG Title Total cases percentile: postacute care (55th policy status
1,471) transfers percentile:
7.9060%)
(percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
266........................... Endovascular Cardiac Valve. 4,086 2,851 1,030 25.21 YES.
Replacement with MCC.......
267........................... Endovascular Cardiac Valve 4,476 2,800 835 18.66 YES.
Replacement w/o MCC.
483........................... Major Joint/Limb 41,372 17,289 2,271 * 5.49 NO.
Reattachment Procedure of
Upper Extremities.
518........................... Back & Neck Procedure 3,844 2,136 412 10.72 YES.
Except Spinal Fusion with
MCC or Disc Device/
Neurostimulator.
519........................... Back & Neck Procedure 15,238 7,405 1,126 * 7.39 YES.**
Except Spinal Fusion with
CC.
520........................... Back & Neck Procedure 31,792 7,859 0 * 0.00 YES.**
Except Spinal Fusion
without CC/MCC).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the postacute care transfer
policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

Finally, we have determined that MS-DRGs 266, 267, 518, 519, and
520 also would meet the criteria for the special payment methodology.
Therefore, we are proposing that they would be subject to the MS-DRG
special payment methodology, effective FY 2015.

List of MS-DRGs That Would Change DRG Special Payment Policy Status in FY 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
50% of average
Geometric mean Average charges of charges for all Special pay policy
MS-DRG MS-DRG Title length of stay 1-day discharges cases within MS- status
DRG
--------------------------------------------------------------------------------------------------------------------------------------------------------
266............................... Endovascular Cardiac Valve 8.3643 $42,081 $126,326 YES.*
Replacement with MCC.

[[Page 28086]]

267............................... Endovascular Cardiac Valve 5.0271 128,013 95,141 YES.
Replacement without MCC.
518............................... Back & Neck Procedure Except 4.2882 68,515 43,514 YES.
Spinal Fusion with MCC or Disc
Device/Neurostimulator.
519............................... Back & Neck Procedure Except 3.0507 0 0 YES.*
Spinal Fusion with CC.
520............................... Back & Neck Procedure Except 1.7315 0 0 YES.*
Spinal Fusion without CC/MCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify under the DRG special payment policy if
any one of the MS-DRGs that share that same base MS-DRG qualifies.

B. Proposed Changes in the Inpatient Hospital Update for FY 2015 (Sec.
412.64(d))

1. Proposed FY 2015 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.'' In FY
2014, consistent with section 1886(b)(3)(B) of the Act, as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act, we set the
applicable percentage increase under the IPPS by applying the following
adjustments in the following sequence. Specifically, the applicable
percentage increase under the IPPS is equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas, subject to
a reduction of 2.0 percentage points if the hospital fails to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.3 percentage point as required by section
1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
For FY 2015, there are three statutory changes to the applicable
percentage increase compared to FY 2014. First, under section
1886(b)(3)(B)(viii) of the Act, beginning with FY 2015, the reduction
in the applicable percentage increase for hospitals that fail to submit
quality information under rules established by the Secretary is one-
quarter of the applicable percentage increase (prior to the application
of statutory adjustments under sections 1886(b)(3)(B)(ix),
1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act) or one-quarter of
the applicable market basket update. For FY 2014, the reduction to the
applicable percentage increase for hospitals that failed to submit
quality information under rules established by the Secretary was 2.0
percentage points. Second, beginning with FY 2015, section
1886(b)(3)(B)(ix) requires that any hospital that is not a meaningful
electronic health record (EHR) user (as defined in section1886(n)(3) of
the Act and not subject to an exception under section1886(b)(3)(B)(ix)
of the Act)) will have ``three-quarters'' of the applicable percentage
increase (prior to the application of statutory adjustments under
sections 1886(b)(3)(B)(viii), 1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii)
of the Act), or three-quarters of the applicable market basket update,
reduced by 33\1/3\ percent. The reduction to three-quarters of the
applicable percentage increase for those hospitals that are not
meaningful EHR users increases to 66\2/3\ percent for FY 2016, and, for
FY 2017 and subsequent fiscal years, to 100 percent. Third, for FY
2015, section 1886(b)(3)(B)(xii) of the Act applies an additional
reduction of 0.2 percentage point compared to 0.3 percentage point for
FY 2014.
To summarize, for FY 2015, consistent with section 1886(b)(3)(B) of
the Act, as amended by sections 3401(a) and 10319(a) of the Affordable
Care Act, we are setting the applicable percentage increase by applying
the following adjustments in the following sequence. Specifically, the
applicable percentage increase under the IPPS is equal to the rate-of-
increase in the hospital market basket for IPPS hospitals in all areas,
subject to a reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act and a 33\1/3\ percent reduction to
three-fourths of the applicable percentage increase (prior to the
application of other statutory adjustments; also referred to as the
market basket update or rate-of-increase (with no adjustments)) for
hospitals not considered to be meaningful EHR users in accordance with
section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment
based on changes in economy-wide productivity (the multifactor
productivity (MFP) adjustment), and an additional reduction of 0.2
percentage point as required by section 1886(b)(3)(B)(xii) of the Act.
As noted previously, sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of
the Act, as added by section 3401(a) of the Affordable Care Act, state
that application of the MFP adjustment and the additional FY 2015
adjustment of 0.2 percentage point may result in the applicable
percentage increase being less than zero.
We note that, in compliance with section 404 of the MMA, in the FY
2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS
operating and capital market baskets with the revised and rebased FY
2010-based IPPS operating and capital market baskets for FY 2014. We
are proposing to continue to use the FY 2010-based IPPS operating and
capital market baskets for FY 2015. We also are proposing to continue
to use a labor-related share that is reflective of the FY 2010 base
year. For FY 2015, we are proposing to continue using the labor-related
share of 69.6 percent, which is based on the FY 2010-based IPPS market
basket.
Based on the most recent data available for this FY 2015 proposed
rule, in accordance with section 1886(b)(3)(B) of the Act, we are

[[Page 28087]]

proposing to base the proposed FY 2015 market basket update used to
determine the applicable percentage increase for the IPPS on IHS Global
Insight, Inc.'s (IGI's) first quarter 2014 forecast of the FY 2010-
based IPPS market basket rate-of-increase with historical data through
fourth quarter 2013, which is estimated to be 2.7 percent.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. For FY 2015, we are not proposing to make any change in
our methodology for calculating and applying the MFP adjustment. For FY
2015, we are proposing a MFP adjustment of -0.4 percentage point.
Similar to the market basket adjustment, for this proposed rule, we
used the most recent data available to compute the MFP adjustment.
For FY 2015, depending on whether a hospital submits quality data
under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital
that submits quality data) and is a meaningful EHR user under section
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that
is a meaningful EHR user), there are four possible applicable
percentage increases that can be applied to the standardized amount.
Below we discuss these four options.
For a hospital that submits quality data and is a
meaningful EHR user, we are proposing an applicable percentage increase
to the FY 2015 operating standardized amount of 2.1 percent (that is,
the FY 2015 estimate of the market basket rate-of-increase of 2.7
percent less an adjustment of 0.4 percentage point for economy-wide
productivity (that is, the MFP adjustment) and less 0.2 percentage
point).
For a hospitals that submits quality data and is not a
meaningful EHR user, we are proposing an applicable percentage increase
to the operating standardized amount of 1.425 percent (that is, the FY
2015 estimate of the market basket rate-of-increase of 2.7 percent,
less an adjustment of 0.675 percentage point (the market basket rate-
of-increase of 2.7 percent x 0.75)/3) for failure to be a meaningful
EHR user, less an adjustment of 0.4 percentage point for the MFP
adjustment, and less an additional adjustment of 0.2 percentage point).
For a hospital that does not submit quality data and is a
meaningful EHR user, we are proposing an applicable percentage increase
to the operating standardized amount of 1.425 percent (that is, the FY
2015 estimate of the market basket rate-of-increase of 2.7 percent,
less an adjustment of 0.675 percentage point (the market basket rate-
of-increase of 2.7 percent/4) for failure to submit quality data, less
an adjustment of 0.4 percentage point for the MFP adjustment, and less
an additional adjustment of 0.2 percentage point).
For a hospital that does not submit quality data and is
not a meaningful EHR user, we are proposing an applicable percentage
increase to the operating standardized amount of 0.75 percent (that is,
the FY 2015 estimate of the market basket rate-of-increase of 2.7
percent, less an adjustment of 0.675 percentage point (the market
basket rate-of-increase of 2.7 percent/4) for failure to submit quality
data, less an adjustment of 0.675 percentage point (the market basket
rate-of-increase of 2.7 percent x 0.75)/3) for failure to be a
meaningful EHR user, less an adjustment of 0.4 percentage point for the
MFP adjustment, and less an additional adjustment of 0.2 percentage
point).
If more recent data become subsequently available (for example, a
more recent estimate of the market basket and the MFP adjustment), we
are proposing to use such data, if appropriate, to determine the FY
2015 market basket update and MFP adjustment in the final rule. Below
we provide a table summarizing the four proposed applicable percentage
increases.

----------------------------------------------------------------------------------------------------------------
Hospital submitted Hospital did NOT Hospital did NOT
Hospital submitted quality data and submit quality submit quality
FY 2015 quality data and is NOT a data and is a data and is NOT a
is a meaningful meaningful EHR meaningful EHR meaningful EHR
EHR user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket 2.7 2.7 2.7 2.7
Rate[dash]of[dash]Increase.....
Adjustment for Failure to Submit 0.0 0.0 -0.675 -0.675
Quality Data under Section
1886(b)(3)(B)(viii) of the Act.
Adjustment for Failure to be a 0.0 -0.675 0.0 -0.675
Meaningful EHR User under
Section 1886(b)(3)(B)(ix) of
the Act........................
MFP Adjustment under Section -0.4 -0.4 -0.4 -0.4
1886(b)(3)(B)(xi) of the Act...
Statutory Adjustment under -0.2 -0.2 -0.2 -0.2
Section 1886(b)(3)(B)(xii) of
the Act........................
-------------------------------------------------------------------------------
Proposed Applicable 2.1 1.425 1.425 0.75
Percentage Increase Applied
to Standardized Amount.....
----------------------------------------------------------------------------------------------------------------

We are proposing to revise the existing regulations at 42 CFR
412.64(d) to reflect the current law for the FY 2015 update.
Specifically, in accordance with section 1886(b)(3)(B) of the Act, we
are proposing to add a new paragraph (vi) to Sec. 412.64(d)(1) to
reflect the applicable percentage increase to the FY 2015 operating
standardized amount as the percentage increase in the market basket
index, subject to a reduction of one-fourth of the applicable
percentage increase (prior to the application of other statutory
adjustments) if the hospital fails to submit quality information (under
rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act) and a 33\1/3\ percent reduction to
three-fourths of the applicable percentage increase (prior to the
application of other statutory adjustments) for a hospital that is not
a meaningful EHR user in accordance with section 1886(b)(3)(B)(ix) of
the Act, less an MFP adjustment and less an additional reduction of 0.2
percentage point.
In addition, we are proposing to make technical changes to
Sec. Sec. 412.64(d)(1), (d)(1)(i) through (d)(1)(v), (d)(2)(i),
(d)(2)(ii), and (d)(3) introductory text to reflect the order in which
CMS applies the statutory adjustments to the

[[Page 28088]]

applicable percentage increase under section 1886(b)(3)(B) of the Act.
As mentioned above, consistent with section 1886(b)(3)(B) of the Act,
CMS sets the applicable percentage increase under the IPPS by applying
the following adjustments in the following sequence. Specifically, we
set the applicable percentage increase under the IPPS equal to the
rate-of-increase in the hospital market basket for IPPS hospitals in
all areas subject to a reduction for hospitals that fail to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act and, beginning
in FY 2015, a reduction for hospitals not considered to be meaningful
EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act; and
then subject to an adjustment based on changes in economy-wide
productivity (the MFP adjustment), and an additional reduction as
required by section 1886(b)(3)(B)(xii) of the Act.
The existing regulation text at Sec. 412.64(d)(2) and (d)(3)
describes the reductions for hospitals that fail to submit quality
information under rules established by the Secretary in accordance with
section 1886(b)(3)(B)(viii) of the Act and hospitals not considered to
be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of
the Act as reductions to ``the applicable percentage change specified
in paragraph (d)(1) of this section.'' Section 412.64(d)(1) describes
the applicable percentage change for the applicable fiscal year as the
percentage increase in the market basket index less the MFP adjustment
and less the additional reduction required by section
1886(b)(3)(B)(xii) of the Act. This text suggests that CMS applies the
reduction for hospitals that fail to submit quality information and,
beginning in FY 2015, the reduction for hospitals not considered to be
meaningful EHR users, after it applies the MFP adjustment and the
additional reduction under section 1886(b)(3)(B)(xii) of the Act.
Therefore, we are proposing to revise the regulations in Sec.
412.64(d) to reflect the order in which CMS applies the adjustments to
the applicable percentage increase under section 1886(b)(3)(B) of the
Act. We note that we also are proposing clarifying amendments to the
regulatory text for prior fiscal years under Sec. Sec. 412.64(d)(1)(i)
through (d)(1)(v) to reflect the determination of the applicable
percentage change for those prior years as well as other technical
changes for readability.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs and MDHs
equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all
other hospitals subject to the IPPS). Therefore, the update to the
hospital-specific rates for SCHs and MDHs is also subject to section
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act. Accordingly, for FY 2015, we are
proposing the following updates to the hospital-specific rates
applicable to SCHs and MDHs: An update of 2.1 percent for a hospital
that submits quality data and is a meaningful EHR user; an update of
1.425 percent for a hospital that fails to submit quality data and is a
meaningful EHR user; an update of 1.425 percent for a hospital that
submits quality data and is not a meaningful EHR user; an update of
0.75 percent for a hospital that fails to submit quality data and is
not a meaningful EHR user. (As noted below, under current law, the MDH
program is effective for discharges occurring on or before March 31,
2015.) For FY 2015, the existing regulations in Sec. Sec.
412.73(c)(16), 412.75(d), 412.77(e), 412.78(e), and 412.79(d) contain
provisions that set the update factor for SCHs and MDHs equal to the
update factor applied to the national standardized amount for all IPPS
hospitals. Therefore, we are not proposing to make any further changes
to these five regulatory provisions to reflect the FY 2015 update
factor for the hospital-specific rates of SCHs and MDHs. As mentioned
above, for this proposed rule, we used IGI's first quarter 2014
forecast of the FY 2010-based IPPS market basket update with historical
data through fourth quarter 2013. Similarly, we used IGI's first
quarter 2014 forecast of the MFP adjustment. For the final rule, we are
proposing to use the most recent data available.
We note that, as discussed in section IV.G. of the preamble of this
proposed rule, section 1106 of the Pathway for SGR Reform Act of 2013
(Pub. L. 113-67), enacted on December 26, 2013, extended the MDH
program from the end of FY 2013 through the first half of FY 2014 (that
is, for discharges occurring before April 1, 2014). Subsequently,
section 106 of the Protecting Access to Medicare Act of 2014, Public
Law 113-93, enacted on April 1, 2014, further extended the MDH program
through the first half of FY 2015 (that is, for discharges occurring
before April l, 2015). Prior to the enactment of Public Law 113-67, the
MDH program was to be in effect through the end of FY 2013 only. The
MDH program expires for discharges beginning on April 1, 2015 under
current law. Accordingly, the proposed update of the hospital-specific
rates for FY 2015 for MDHs will apply in determining payments for FY
2015 discharges occurring before April 1, 2015.
2. FY 2015 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, we
are proposing an applicable percentage increase to the Puerto Rico-
specific operating standardized amount of 2.1 percent for FY 2015. We
note that the provisions of section 1886(b)(3)(B)(viii) of the Act,
which specify the adjustments to the applicable percentage increase for
``subsection (d)'' hospitals that do not submit quality data under the
rules established by the Secretary, and the provisions of section
1886(b)(3)(B)(ix) of the Act, which specify the adjustments to the
applicable percentage increase for ``subsection (d)'' hospitals that
are not meaningful EHR users, are not applicable to hospitals located
in Puerto Rico.
For FY 2015, the existing regulations in Sec. 412.211(c) set the
update factor for

[[Page 28089]]

Puerto Rico-specific standardized amount equal to the update factor
applied to the national standardized amount for all IPPS hospitals.
Therefore, we are not proposing to make any further changes to this
regulatory provision to reflect the FY 2015 update factor for the
Puerto Rico-specific standardized amount.
As mentioned previously, for this proposed rule, we used IGI's
first quarter 2014 forecast of the FY 2010-based IPPS market basket
update with historical data through fourth quarter 2013. For the final
rule, we are proposing to use the most recent data available.
Similarly, we used IGI's first quarter 2014 forecast of the MFP
adjustment. For the final rule, we are proposing to use the most recent
data available.

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

Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs are also not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area where the
hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, ``[a]ny
hospital classified as an RRC by the Secretary . . . for fiscal year
1991 shall be classified as such an RRC for fiscal year 1998 and each
subsequent year.'' In the August 29, 1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated RRC status for all hospitals that
lost the status due to triennial review or MGCRB reclassification.
However, CMS did not reinstate the status of hospitals that lost RRC
status because they were now urban for all purposes because of the OMB
designation of their geographic area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were
revisiting that decision. Specifically, we stated that we would permit
hospitals that previously qualified as an RRC and lost their status due
to OMB redesignation of the county in which they are located from rural
to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR
Part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum CMI and a minimum number of discharges), and
at least one of three optional criteria (relating to specialty
composition of medical staff, source of inpatients, or referral
volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53 FR 38513).) With respect to the
two mandatory prerequisites, a hospital may be classified as an RRC
if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. (The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The proposed national
median CMI value for FY 2015 includes data from all urban hospitals
nationwide, and the proposed regional values for FY 2015 are the median
CMI values of urban hospitals within each census region, excluding
those hospitals with approved teaching programs (that is, those
hospitals that train residents in an approved GME program as provided
in Sec. 413.75). These proposed values are based on discharges
occurring during FY 2013 (October 1, 2012 through September 30, 2013),
and include bills posted to CMS' records through December 2013.
We are proposing that, in addition to meeting other criteria, if
rural hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2014, they must have a CMI value for FY 2013 that is at least--
1.5730; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed CMI values by region are set forth in the following
table:

------------------------------------------------------------------------
Proposed case-
Region mix index
value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.3602
2. Middle Atlantic (PA, NJ, NY)......................... 1.4334
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.4815
4. East North Central (IL, IN, MI, OH, WI).............. 1.4915
5. East South Central (AL, KY, MS, TN).................. 1.4099
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.5498
7. West South Central (AR, LA, OK, TX).................. 1.6041
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.6583
9. Pacific (AK, CA, HI, OR, WA)......................... 1.5680
------------------------------------------------------------------------

We intend to update the preceding numbers in the FY 2015 final rule
to reflect the updated FY 2013 MedPAR file, which would contain data
from additional bills received through March 2014.

[[Page 28090]]

A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. We are proposing to update the
regional standards based on discharges for urban hospitals' cost
reporting periods that began during FY 2012 (that is October 1, 2011
through September 30, 2012), which are the latest cost report data
available at the time this proposed rule was developed.
We are proposing that, in addition to meeting other criteria, a
hospital, if it is to qualify for initial RRC status for cost reporting
periods beginning on or after October 1, 2014, must have, as the number
of discharges for its cost reporting period that began during FY 2012,
at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located, as indicated in the
following table.

------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,679
2. Middle Atlantic (PA, NJ, NY)......................... 10,661
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 10,591
4. East North Central (IL, IN, MI, OH, WI).............. 8,130
5. East South Central (AL, KY, MS, TN).................. 7,065
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,925
7. West South Central (AR, LA, OK, TX).................. 4,524
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 8,830
9. Pacific (AK, CA, HI, OR, WA)......................... 8,261
------------------------------------------------------------------------

We intend to update these numbers in the FY 2015 final rule based
on the latest available cost report data.
We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2014, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2012.

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

1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital that is paid under IPPS
beginning in FY 2005. Sections 3125 and 10314 of the Affordable Care
Act provided for a temporary change in the low-volume hospital payment
policy for FYs 2011 and 2012. Section 605 of the American Taxpayer
Relief Act of 2012 (ATRA) extended, for FY 2013, the temporary changes
in the low-volume hospital payment policy provided for in FYs 2011 and
2012 by the Affordable Care Act. Prior to the enactment of the Pathway
for SGR Reform Act of 2013 (Pub. L. 113-67) on December 26, 2013 and
section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L.
113-93) on April l, 2014, beginning with FY 2014, the low-volume
hospital qualifying criteria and payment adjustment returned to the
statutory requirements under section 1886(d)(12) of the Act that were
in effect prior to the amendments made by the Affordable Care Act and
the ATRA. (For additional information on the expiration of the
temporary changes in the low-volume hospital payment policy for FYs
2011 through 2013 provided for by the Affordable Care Act and the ATRA,
we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610
through 50613).)
Section 1105 of the Pathway for SGR Reform Act extended, for the
first 6 months of FY 2014 (that is, through March 31, 2014), the
temporary changes in the low-volume hospital payment policy provided
for in FYs 2011 and 2012 by the Affordable Care Act and extended
through FY 2013 by the ATRA. We addressed the extension of the
temporary changes to the low-volume hospital payment policy through
March 31, 2014 under the Pathway for SGR Reform Act in an interim final
rule with comment period that appeared in the Federal Register on March
18, 2014 (79 FR 15022 through 15025). In that March 18, 2014 interim
final rule with comment period, we also amended the regulations at 42
CFR 412.101 to reflect the extension of the temporary changes to the
qualifying criteria and the payment adjustment for low-volume hospitals
through March 31, 2014.
2. Provisions of the Protecting Access to Medicare Act of 2014
Section 105 of the Protecting Access to Medicare Act of 2014 (Pub.
L. 113-93) extends, for an additional year (that is, through March 31,
2015), the temporary changes in the low-volume hospital payment policy
provided for in FYs 2011 and 2012 by the Affordable Care Act and
extended through FY 2013 by the ATRA and the first half of FY 2014 by
the Pathway for SGR Reform Act. We intend to address the extension of
the temporary changes to the low-volume hospital payment policy for the
second half of FY 2014 (that is, from April 1, 2014 through September
30, 2014) under Public Law 113-93 in a forthcoming Federal Register
notice. However, in this proposed rule, we are proposing to make
conforming changes to the existing regulations text at Sec. 412.101 to
reflect the extension of the changes to the qualifying criteria and the
payment adjustment methodology for low-volume hospitals through the
first half of FY 2015 (that is, through March 31, 2015) in accordance
with section 105 of Public Law 113-93. Specifically, we are proposing
to revise paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of
Sec. 412.101. Under these proposed changes to Sec. 412.101, beginning
with FY 2015 discharges occurring on or after April 1, 2015, consistent
with section 1886(d)(12) of the Act, as amended, the low-volume
hospital qualifying criteria and payment adjustment methodology would
revert to that which was in effect prior to the amendments made by the
Affordable Care Act and subsequent legislation (that is, the low-volume
hospital payment adjustment policy in effect for FYs 2005 through
2010).

[[Page 28091]]

3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015
As discussed above, under section 1886(d)(12) of the Act, as
amended, the temporary changes in the low-volume hospital payment
policy originally provided by the Affordable Care Act and extended
through subsequent legislation, are effective for FY 2015 discharges
occurring before April 1, 2015. To implement the extension of the
temporary change in the low-volume hospital payment policy through the
first half of FY 2015 (that is, for discharges occurring through March
31, 2015) provided for by Public Law 113-93, in accordance with
proposed Sec. 412.101(b)(2)(ii) and consistent with our historical
approach, we are proposing to update the discharge data source used to
identify qualifying low-volume hospitals and calculate the payment
adjustment (percentage increase) for FY 2015 discharges occurring
before April 1, 2015. Under existing Sec. 412.101(b)(2)(ii), for the
applicable fiscal years, a hospital's Medicare discharges from the most
recently available MedPAR data, as determined by CMS, are used to
determine if the hospital meets the discharge criteria to receive the
low-volume payment adjustment in the current year. The applicable low-
volume percentage increase, as originally provided for by the
Affordable Care Act, is determined using a continuous linear sliding
scale equation that results in a low-volume hospital payment adjustment
ranging from an additional 25 percent for hospitals with 200 or fewer
Medicare discharges to a zero percent additional payment adjustment for
hospitals with 1,600 or more Medicare discharges. For FY 2015
discharges occurring before April 1, 2015, consistent with our
historical policy, we are proposing that qualifying low-volume
hospitals and their payment adjustment would be determined using the
most recently available Medicare discharge data from the FY 2013 MedPAR
file, as these data are the most recent data available. Table 14 listed
in the Addendum of this proposed rule (which is available only through
the Internet on the CMS Web site at https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) lists the ``subsection (d)''
hospitals with fewer than 1,600 Medicare discharges based on the
December 2013 update of the FY 2013 MedPAR file and their proposed low-
volume payment adjustment for FY 2015 discharges occurring before April
1, 2015 (if eligible). Eligibility for the low-volume hospital payment
adjustment for the first 6 months of FY 2015 would also be dependent
upon meeting (in the case of a hospital that did not qualify for the
low-volume hospital payment adjustment in FY 2014) or continuing to
meet (in the case of a hospital that did qualify for the low-volume
hospital payment adjustment in FY 2014) the mileage criterion specified
at proposed Sec. 412.101(b)(2)(ii). A hospital also must be located
more than 15 road miles from any other IPPS hospital in order to
qualify for a low-volume hospital payment adjustment for FY 2015
discharges occurring before April 1, 2015. We note that the list of
hospitals with fewer than 1,600 Medicare discharges in Table 14 does
not reflect whether or not the hospital meets the mileage criterion. If
more recent Medicare discharge data become available, we intend to use
updated data to determine the list of ``subsection (d)'' hospitals with
fewer than 1,600 Medicare discharges based on the March 2014 update of
the FY 2013 MedPAR file and their potential low-volume payment
adjustment for FY 2015 discharges occurring before April 1, 2015 (if
eligible) in Table 14 of the final rule.
Furthermore, in accordance with section 1886(d)(12) of the Act, as
amended, beginning with FY 2015 discharges occurring on or after April
1, 2015, the low-volume hospital definition and payment adjustment
methodology will revert back to the statutory requirements that were in
effect prior to the amendments made by the Affordable Care Act and
subsequent legislation (including the Protecting Access to Medicare
Act). Therefore, consistent with section 1886(d)(12) of the Act, as
amended, under the proposed conforming changes to Sec. 412.101(b)(2),
effective for FY 2015 discharges occurring on or after April 1, 2015
and subsequent years, in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 discharges total, including both Medicare and non-
Medicare discharges) during the fiscal year. Under our existing policy,
effective for FY 2015 discharges occurring on or after April 1, 2015
and subsequent years, qualifying hospitals would receive the low-volume
hospital payment adjustment of an additional 25 percent for discharges
occurring during the fiscal year (or portion of the fiscal year).
Consistent with our existing policy for FYs 2005 through 2010, for FY
2015 discharges occurring on or after April 1, 2015 (and subsequent
years), the discharge determination for the low-volume hospital payment
adjustment would be made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges, as specified
at proposed Sec. 412.101(b)(2)(i). The hospital's most recently
submitted cost report is used to determine if the hospital meets the
discharge criterion to receive the low-volume hospital payment
adjustment in the current fiscal year. We use cost report data to
determine if a hospital meets the discharge criterion because these
data are the best available data source that includes information on
both Medicare and non-Medicare discharges. In addition to a discharge
criterion, eligibility for the low-volume hospital payment adjustment
also depends on the hospital meeting a mileage criterion. As specified
at proposed Sec. 412.101(b)(2)(i), to meet the mileage criterion to
qualify for the low-volume hospital payment adjustment for FY 2015
discharges occurring on or after April 1, 2015 (and subsequent years),
a hospital must be located more than 25 road miles from the nearest
subsection (d) hospital.
Consistent with our previously established procedure, for FY 2015,
we are proposing the following process for requesting and obtaining the
low-volume hospital payment adjustment. That is, in order to receive a
low-volume hospital payment adjustment under Sec. 412.101, a hospital
must notify and provide documentation to its MAC that it meets the
discharge and distance requirements under proposed Sec.
412.101(b)(2)(ii) for FY 2015 discharges occurring before April 1,
2015, and under proposed Sec. 412.101(b)(2)(i) for FY 2015 discharges
occurring on or after April 1, 2015, if also applicable. The MAC will
determine, based on the most recent data available, if the hospital
qualifies as a low-volume hospital, so that the hospital would know in
advance whether or not it will receive a payment adjustment. The MAC
and CMS may review available data, in addition to the data the hospital
submits with its request for low-volume hospital status, in order to
determine whether or not the hospital meets the qualifying criteria.
Consistent with our previously established procedure, for FY 2015, we
are proposing that a hospital must make a written request for low-
volume hospital status that is received by its MAC no later than
September 1, 2014, in order for the applicable low-volume hospital
payment adjustment to be applied to payments for its discharges

[[Page 28092]]

occurring on or after October 1, 2014, and through March 31, 2015,
under proposed Sec. 412.101(b)(2)(ii) or through September 30, 2015,
for hospitals that also qualify under proposed Sec. 412.101(b)(2)(i)).
A hospital that qualified for the low-volume payment adjustment in FY
2014 may continue to receive a low-volume payment adjustment for FY
2015 discharges occurring before April 1, 2015, without reapplying if
it continues to meet the Medicare discharge criterion established for
FY 2015 (shown in Table 14, which is available via the Internet on the
CMS Web site) and the distance criterion. However, the hospital must
send written verification that is received by its MAC no later than
September 1, 2014, that it continues to be more than 15 miles from any
other ``subsection (d)'' hospital.
If a hospital's written request for low-volume hospital status for
FY 2015 is received after September 1, 2014, and if the MAC determines
that the hospital meets the criteria to qualify as a low-volume
hospital under proposed Sec. 412.101(b)(2)(ii), the MAC would apply
the applicable low-volume hospital payment adjustment to determine the
payment for the hospital's FY 2015 discharges, effective prospectively
within 30 days of the date of its low-volume hospital status
determination through discharges occurring on or before March 31, 2015.
If the hospital also qualifies under proposed Sec. 412.101(b)(2)(i),
the MAC would apply the 25-percent low-volume hospital payment
adjustment to determine the payment for the hospital's FY 2015
discharges occurring on or after April 1, 2015. If a hospital's written
request for low-volume hospital status for FY 2015 is received on a
later date such that the prospective effective date would be on or
after April 1, 2015, and the hospital qualifies under proposed Sec.
412.101(b)(2)(i), the MAC would apply the 25-percent low-volume
hospital payment adjustment to determine the payment for the hospital's
FY 2015 discharges occurring from the prospective effective date
through September 30, 2015. (For additional details on our established
process for the low-volume hospital payment adjustment, we refer
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).)

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

1. IME Adjustment Factor for FY 2015
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B) of the Act states that, for discharges occurring during
FY 2008 and fiscal years thereafter, the IME formula multiplier is
1.35. Accordingly, for discharges occurring during FY 2015, the formula
multiplier is 1.35. We estimate that application of this formula
multiplier for the FY 2015 IME adjustment will result in an increase in
IPPS payment of 5.5 percent for every approximately 10 percent increase
in the hospital's resident to bed ratio.
2. Proposed IME Medicare Part C Add-On Payments to Sole Community
Hospitals (SCHs) That Are Paid According to Their Hospital-Specific
Rates and Proposed Change in Methodology in Determining Payment to SCHs
Section 1886(d)(11) of the Act provides for an additional payment
amount to a subsection (d) teaching hospital that has an approved
medical residency training program for each applicable discharge of any
individual who is enrolled under Medicare Managed Care under Part C.
The amount of such payment is specified in section 1886(d)(11)(C) of
the Act and ``shall be equal to the applicable percentage (as defined
in subsection (h)(3)(D)(ii)) of the estimated average per discharge
amount that would otherwise have been paid under paragraph (5)(B) if
the individuals had not been enrolled as described in subparagraph
(B).''
Under section 1886(d)(5)(D) of the Act, sole community hospitals
(SCHs) are paid based on their hospital-specific rate from specified
base years or the IPPS Federal rate, whichever yields the greatest
aggregate payment for the hospital's cost reporting period. Payments
based on the Federal rate are based on the IPPS standardized amount and
include all applicable IPPS add-on payments, such as outliers, DSH, and
IME, while payments based on the hospital-specific rate include no add-
on payments. Under CMS' current payment system, both the IME add-on
payment for Medicare Part A patient discharges under section
1886(d)(5)(B) of the Act and the IME add-on payment for Medicare Part C
patient discharges under section 1886(d)(11) of the Act are included as
part of the Federal rate payment, whereas neither of these add-on
payments are included as part of the hospital-specific rate payment. We
note that SCHs that are paid based on their hospital-specific rate do
not receive an IME add-on payment for Medicare Part A patient
discharges because, generally, the hospital-specific rate already
reflects the additional costs that a teaching hospital incurs for its
Medicare Part A patients, but they also do not receive the IME add-on
payment for Medicare Part C patient discharges under section
1886(d)(11) of the Act. Therefore, in the case of Medicare Part C
patients, there is no component of the hospital-specific rate that
already accounts for the additional costs that SCHs incur for their
Medicare Part C patients, and there is currently no payment mechanism
for SCHs paid based on their hospital-specific rate to receive the IME
add-on payment for Medicare Part C patients.
For the reasons specified below, effective for discharges occurring
in cost reporting periods beginning on or after October 1, 2014, we are
proposing: (1) To provide all SCHs that are subsection (d) teaching
hospitals IME add-on payments for applicable discharges of Medicare
Part C patients in accordance with section 1886(d)(11) of the Act,
regardless of whether the SCH is paid based on the Federal rate or its
hospital-specific rate; and (2) that, for purposes of the comparison of
payments based on the Federal rate and payments based on the hospital-
specific rate under section 1886(d)(5)(D) of the Act, IME payments
under section 1886(d)(11) of the Act for Medicare Part C patients will
no longer be included as part of the Federal rate payment. After the
higher of the Federal rate payment amount or the hospital-specific rate
payment amount is determined, any IME add-on payments under section
1886(d)(11) of the Act would be added to that payment for purposes of
determining the hospital's total payment amount.
As noted above, under section 1886(d)(5)(D) of the Act, SCHs are
paid based on their hospital-specific rate or the IPPS Federal rate,
whichever yields the higher payment for the hospital's cost reporting
period. For each cost reporting period, the MAC determines which of the
payment options will yield the higher aggregate payment. Interim
payments are automatically made on a claim-by-claim basis at the higher
rate using the best data available at the time the MAC makes the
payment determination for each discharge. However, it may not be
possible for the MAC to determine in advance precisely

[[Page 28093]]

which of the rates will yield the higher aggregate payment by year's
end. In many cases, it is not possible to forecast outlier payments or
the final amount of the DSH payment adjustment or the IME adjustment
until cost report settlement. As noted above, these adjustment amounts
are applicable only to payments based on the Federal rate and not to
payments based on the hospital-specific rate. The MAC makes a final
adjustment at cost report settlement after it determines precisely
which of the two payment rates would yield the higher aggregate payment
to the hospital for its cost reporting period. This payment methodology
makes SCHs unique because SCH payments can change on a yearly basis
from payments based on the hospital-specific rate to payments based on
the Federal rate, or vice versa.
As we stated earlier, section 1886(d)(11) of the Act provides for
an additional payment for each applicable discharge of any subsection
(d) teaching hospital for treating Medicare Part C patients. Section
1886(d)(11)(C) of the Act specifies that the amount of the payment
``shall be equal to the applicable percentage (as defined in subsection
(h)(3)(D)(ii)) of the estimated average per discharge amount that would
otherwise have been paid under paragraph (5)(B) if the individuals had
not been enrolled as described in subparagraph (B)'' (emphasis added).
Because an SCH that is paid based on its hospital-specific rate does
not receive any IME add-on payment for Medicare Part A patients as
provided under section 1886(d)(5)(B) of the Act because, generally, the
hospital-specific rate already reflects the additional costs that a
teaching hospital incurs for its Medicare Part A patients, CMS has
interpreted section 1886(d)(11)(C) of the Act to mean that an SCH that
is paid based on its hospital-specific rate also is not entitled to
receive an additional payment for discharges of Medicare Part C
patients under section 1886(d)(11) of the Act.
After further consideration of the language at section 1886(d)(11)
of the Act, we believe that the statute would allow an SCH that is paid
based on its hospital-specific rate to receive IME add-on payments for
its Medicare Part C patient discharges. Section 1886(d)(11)(A) of the
Act provides for an additional payment amount for each applicable
discharge of a Medicare Part C patient of a subsection (d) hospital
that has an approved medical residency training program. Section
1886(d)(11)(C) of the Act sets forth the amount of this additional
payment, by reference to the amount that would otherwise have been paid
under section 1886(d)(5)(B) of the Act. Although an SCH that is paid
based on its hospital-specific rate does not receive any amount under
section 1886(d)(5)(B) of the Act for discharges of Medicare Part A
patients, we believe that section 1886(d)(11)(C) of the Act can be
interpreted as simply establishing the methodology for calculating the
amount of the add-on payment, without limiting the applicability of the
add-on payment to those SCHs that are paid based on the Federal rate.
As noted earlier, in making the comparison of SCH payments under
the Federal rate and the hospital-specific rate under section
1886(d)(5)(D) of the Act, the aggregate Federal rate payments are based
on the IPPS standardized amount and include IME add-on payments for
both Medicare Part A and Medicare Part C patient discharges. Payments
based on the hospital-specific rate do not include the Medicare Part A
IME add-on payment under section 1886(d)(5)(B) of the Act, under the
rationale that, generally, the hospital-specific rate already reflects
the additional costs that a teaching hospital incurs for its Medicare
Part A patients. Payments based on the hospital-specific rate also do
not include the IME add-on payment for Medicare Part C patient
discharges under section 1886(d)(11) of the Act. As a result, under the
current methodology, if an SCH that is a teaching hospital is paid
based on its hospital-specific rate, it receives no IPPS payment that
accounts for the additional costs that a teaching hospital incurs for
its Medicare Part C patients.
In conjunction with our proposal to provide IME add-on payments
under section 1886(d)(11) of the Act to SCHs, regardless of whether the
SCH is paid based on the Federal rate or its hospital-specific rate, we
also believe that, for purposes of the comparison of payments under the
Federal rate and the hospital-specific rate for SCHs under section
1886(d)(5)(D) of the Act, it is no longer appropriate for IME add-on
payments under section 1886(d)(11) of the Act to be included as part of
the Federal rate payment. Therefore, we are proposing to no longer
include these payments in the comparison in order to more accurately
reflect comparable payments for Medicare Part A patient discharges. In
addition, because the IME add-on payment for Medicare Part C patient
discharges for a given SCH would be the same, regardless of whether it
is paid based on the Federal rate or its hospital-specific rate, there
would be no need to include the IME add-on payment for Medicare Part C
patient discharges in the comparison. This is because the Part C IME
adjustment is always multiplied by the Federal rate that is used under
section 1886(d)(5)(B) of the Act, regardless of whether the hospital-
specific rate is higher, in accordance with section 1886(d)(11) of the
Act, which states that the IME Part C add-on amount ``shall be equal to
the applicable percentage . . . of the estimated average per discharge
amount that would otherwise have been paid under paragraph (5)(B).''
In summary, effective with discharges occurring in cost reporting
periods beginning on or after October 1, 2014, we are proposing: (1) To
provide all SCHs that are subsection (d) teaching hospitals IME add-on
payments for Medicare Part C patient discharges in accordance with
section 1886(d)(11) of the Act; and (2) that, for purposes of the
comparison of payments based on the Federal rate and the hospital-
specific rate for SCHs under section 1886(d)(5)(D) of the Act, IME add-
on payments under section 1886(d)(11) of the Act for Medicare Part C
patient discharges will no longer be included in the aggregate payment
under the Federal rate. That is, for purposes of determining payment to
an SCH under section 1886(d)(5)(D) of the Act, we are proposing to
compare aggregate payments based on the Federal rate, including the IME
add-on payment for Medicare Part A patients (where applicable), but not
the IME add-on payment for Medicare Part C patients, to aggregate
payments based on the hospital-specific rate, which as explained
earlier, do not include any IME add-on payments for either Medicare
Part A or Part C patients. After the higher of the Federal rate payment
amount or the hospital-specific rate payment amount under section
1886(d)(5)(D) of the Act is determined, the Part C IME adjustment
factor would be multiplied by the Federal rate payment amount to
determine the add-on payment amount under section 1886(d)(11) of the
Act, and then any IME add-on payments under section 1886(d)(11) of the
Act would be added to the payment amount under section 1886(d)(5)(D) of
the Act for purposes of determining the hospital's total payment
amount. We are inviting public comments on both of these proposals and
any alternatives that we should consider.
3. Other Proposed Policy Changes Affecting IME
In section IV.K. of the preamble of this proposed rule, we present
other proposed policy changes relating to GME payments, which may also
apply to IME payments. We refer readers to

[[Page 28094]]

that section of the preamble of this proposed rule where we present the
proposed policies.

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

1. Background
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: The ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the DSH
statutory references (under section 1886(d)(5)(F) of the Act) to
``days'' apply only to hospital acute care inpatient days. Regulations
located at Sec. 412.106 govern the Medicare DSH payment adjustment and
specify how the DPP is calculated as well as how beds and patient days
are counted in determining the Medicare DSH payment adjustment. Under
Sec. 412.106(a)(1)(i), the number of beds for the Medicare DSH payment
adjustment is determined in accordance with bed counting rules for the
IME adjustment under Sec. 412.105(b).
2. Impact on Medicare DSH Payment Adjustment of Proposed Implementation
of New OMB Labor Market Delineations
As discussed in section III.B. of the preamble of this proposed
rule, we are proposing to implement the new OMB labor market area
delineations (which are based on 2010 Decennial Census data) for the FY
2015 wage index. This proposal also would have an impact on the
calculation of Medicare DSH payments to certain hospitals. Hospitals
that are designated as rural with less than 500 beds and that are not
rural referral centers (RRCs) are subject to a maximum DSH payment
adjustment of 12 percent. Accordingly, hospitals with less than 500
beds that are currently in urban counties that would become rural if we
adopt the new OMB delineations, and that do not become RRCs, would be
subject to a maximum DSH payment adjustment of 12 percent. (We note
that urban hospitals are only subject to a maximum DSH payment
adjustment of 12 percent if they have less than 100 beds.)
Under existing regulations at 42 CFR 412.102, a hospital located in
an area that is reclassified from urban to rural, as defined in the
regulations, may receive an adjustment to its rural Federal payment
amount for operating costs for two successive fiscal years.
Specifically, the regulations state that, in the first year after a
hospital loses urban status, the hospital will receive an additional
payment that equals two-thirds of the difference between the urban
standardized amount and disproportionate share payments as applicable
to the hospital before its redesignation from urban to rural and the
rural standardized amount and disproportionate share payments otherwise
applicable to the hospital subsequent to its redesignation from urban
to rural. In the second year after a hospital loses urban status, the
hospital will receive an additional payment that equals one-third of
the difference between the urban standardized amount and
disproportionate share payments applicable to the hospital before its
redesignation from urban to rural and the rural standardized amount and
disproportionate share payments otherwise applicable to the hospital
subsequent to its redesignation from urban to rural.
We note that we no longer make a distinction between the urban
standardized amount and the rural standardized amount. Rather,
hospitals receive the same standardized amount regardless of their
geographic designation. Accordingly, we are proposing to revise the
regulation at Sec. 412.102 to remove references to the urban and rural
standardized amounts.
The provisions of Sec. 412.102 would continue to apply with
respect to the calculation of the DSH payments to hospitals that are
currently located in urban counties that would become rural if we adopt
the new OMB delineations. Specifically, the regulations would state
that in the first year after a hospital loses urban status, the
hospital will receive an additional payment that equals two-thirds of
the difference between disproportionate share payments as applicable to
the hospital before its redesignation from urban to rural and the
disproportionate share payments otherwise applicable to the hospital
subsequent to its redesignation from urban to rural. In the second year
after a hospital loses urban status, the hospital will receive an
additional payment that equals one-third of the difference between the
disproportionate share payments applicable to the hospital before its
redesignation from urban to rural and the disproportionate share
payments otherwise applicable to the hospital subsequent to its
redesignation from urban to rural.
For the purposes of ratesetting, calculating budget neutrality, and
modeling payment impacts for this proposed rule, any hospital that was
previously urban but would be changed to rural status in FY 2015 as a
result of the proposed adoption of the new OMB labor market area
delineations would have its DSH payments modeled such that the payment
equals the amount of the rural disproportionate share payments plus
two-thirds of the difference between the urban disproportionate share
payments and the rural disproportionate share payments.
3. Payment Adjustment Methodology for Medicare Disproportionate Share
Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (Sec.
412.106)
a. General Discussion
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a new
section 1886(r) to the Act that modifies the methodology for computing
the

[[Page 28095]]

Medicare DSH payment adjustment beginning in FY 2014. For purposes of
this proposed rule, we refer to these provisions collectively as
section 3133 of the Affordable Care Act.
Medicare DSH adjustment payments are calculated under a statutory
formula that considers the hospital's Medicare utilization attributable
to beneficiaries who also receive Supplemental Security Income (SSI)
benefits and the hospital's Medicaid utilization. Beginning with
discharges in FY 2014, hospitals that qualify for Medicare DSH payments
under section 1886(d)(5)(F) of the Act receive 25 percent of the amount
they previously would have received under the statutory formula for
Medicare DSH payments. This provision applies equally to hospitals that
qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act
and those hospitals that qualify under the Pickle method under section
1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals under age 65 who are
uninsured, is available to make additional payments to each hospital
that qualifies for Medicare DSH payments and that has uncompensated
care. The payments to each hospital for a fiscal year are based on the
hospital's amount of uncompensated care for a given time period
relative to the total amount of uncompensated care for that same time
period reported by all hospitals that receive Medicare DSH payments for
that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for FY 2014 and each subsequent
fiscal year, a ``subsection (d) hospital'' that would otherwise receive
a ``disproportionate share hospital payment . . . made under subsection
(d)(5)(F)'' receives two separately calculated payments. Specifically,
section 1886(r)(1) of the Act provides that the Secretary shall pay to
such a subsection (d) hospital (including a Pickle hospital) 25 percent
of the amount the hospital would have received under section
1886(d)(5)(F) of the Act for disproportionate share hospital payments,
which represents ``the empirically justified amount for such payment,
as determined by the Medicare Payment Advisory Commission in its March
2007 Report to the Congress.'' We refer to this payment as the
``empirically justified Medicare DSH payment.''
In addition to this payment, section 1886(r)(2) of the Act provides
that, for FY 2014 and each subsequent fiscal year, the Secretary shall
pay to ``such subsection (d) hospital an additional amount equal to the
product of'' three factors. The first factor is the difference between
``the aggregate amount of payments that would be made to subsection (d)
hospitals under subsection (d)(5)(F) if this subsection did not apply''
and ``the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1)'' for each fiscal year. Therefore, this
factor amounts to 75 percent of the payments that would otherwise be
made under section 1886(d)(5)(F) of the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who are uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), minus 0.1
percentage points for FY 2014, and minus 0.2 percentage points for FYs
2015 through 2017. For FYs 2014 through 2017, the baseline for the
estimate of the change in uninsurance is fixed by the most recent
estimate of the Congressional Budget Office before the final vote on
the Health Care and Education Reconciliation Act of 2010, which is
contained in a March 20, 2010 letter from the Director of the
Congressional Budget Office to the Speaker of the House. (A link to
this letter is included in section IV.F.3.d.(2) of the preamble of this
proposed rule).
For FY 2018 and subsequent years, the second factor is 1 minus the
percent change in the percent of individuals who are uninsured, as
determined by comparing the percent of individuals ``who are uninsured
in 2013 (as estimated by the Secretary, based on data from the Census
Bureau or other sources the Secretary determines appropriate, and
certified by the Chief Actuary'' of CMS, and the percent of individuals
``who are uninsured in the most recent period for which data is
available (as so estimated and certified), minus 0.2 percentage points
for FYs 2018 and 2019.'' Therefore, for FY 2018 and subsequent years,
the statute provides some greater flexibility in the choice of the data
sources to be used for the estimate of the change in the percent of
uninsured individuals.
The third factor is a percent that, for each subsection (d)
hospital, ``represents the quotient of . . . the amount of
uncompensated care for such hospital for a period selected by the
Secretary (as estimated by the Secretary, based on appropriate data . .
.),'' including the use of alternative data ``where the Secretary
determines that alternative data is available which is a better proxy
for the costs of subsection (d) hospitals for . . . treating the
uninsured,'' and ``the aggregate amount of uncompensated care for all
subsection (d) hospitals that receive a payment under this
subsection.'' Therefore, this third factor represents a hospital's
uncompensated care amount for a given time period relative to the
uncompensated care amount for that same time period for all hospitals
that receive Medicare DSH payments in that fiscal year, expressed as a
percent. For each hospital, the product of these three factors
represents its additional payment for uncompensated care for the
applicable fiscal year. We refer to the additional payment determined
by these factors as the ``uncompensated care payment.''
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies for
implementing the required changes to the DSH payment methodology made
by section 3133 of the Affordable Care Act for FY 2014. In those rules,
we noted that, because section 1886(r) of the Act modifies the payment
required under section 1886(d)(5)(F) of the Act, it affects only the
DSH payment under the operating IPPS. It does not revise or replace the
capital IPPS DSH payment provided under the regulations at 42 CFR Part
412, Subpart M, which were established through the exercise of the
Secretary's discretion in implementing the capital IPPS under section
1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
``no administrative or judicial review under section 1869, section
1878, or otherwise'' of ``any estimate of the Secretary for purposes of
determining the factors described in paragraph (2),'' or of ``any
period selected by the Secretary'' for the purpose of determining those
factors. Therefore, there is no administrative or judicial review of
the estimates developed for purposes of applying the three factors used
to determine uncompensated care payments, or the periods selected in
order to develop such estimates.

[[Page 28096]]

b. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As indicated earlier, the payment methodology under section 3133 of
the Affordable Care Act applies to ``subsection (d) hospitals'' that
would otherwise receive a ``disproportionate share payment . . . made
under subsection (d)(5)(F).'' Therefore, eligibility for empirically
justified Medicare DSH payments is unchanged under section 3133 of the
Affordable Care Act. Consistent with the law, hospitals must receive
empirically justified Medicare DSH payments in a fiscal year to receive
an additional Medicare uncompensated care payment for that year.
Specifically, section 1886(r)(2) of the Act states that ``[i]n addition
to the payment made to a subsection (d) hospital under paragraph (1) .
. . the Secretary shall pay to such subsection (d) hospital an
additional amount . . .'' (emphasis supplied). Because paragraph (1)
refers to empirically justified Medicare DSH payments, the additional
payment under section 1886(r)(2) of the Act therefore, is limited to
hospitals that receive empirically justified Medicare DSH payments in
accordance with section 1886(r)(1) of the Act for the applicable fiscal
year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
provided that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). We indicated that our final determination on the
hospital's eligibility for uncompensated care payments would be based
on the hospital's actual DSH status on the cost report for that payment
year.
In the FY 2014 IPPS/LTCH PPS final rule, we also considered whether
several specific classes of hospitals are included within the scope of
section 1886(r) of the Act. As we specified in that final rule (78 FR
50623), subsection (d) Puerto Rico hospitals that are eligible for DSH
payments also are eligible to receive empirically justified Medicare
DSH payments and uncompensated care payments under the new payment
methodology.
In addition, in the FY 2014 IPPS/LTCH PPS final rule, we considered
whether Maryland hospitals that were paid under section 1814(b)(3) of
the Act, would be eligible to receive uncompensated care payments. We
explained that, under section 1814(b) of the Act, hospitals in the
State of Maryland were subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. Because
Maryland waiver hospitals were not paid under the IPPS (section 1886(d)
of the Act), in the FY 2014 IPPS/LTCH PPS final rule, we determined
that Maryland hospitals that operated under a waiver under section
1814(b)(3) of the Act were not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act (78 FR 50623). As
stated in section IV.H. of the preamble of this proposed rule,
effective January 1, 2014, the State of Maryland elected to no longer
have Medicare pay Maryland hospitals in accordance with section
1814(b)(3) of the Act and entered into an agreement with CMS that
Maryland hospitals would be paid under the Maryland All-Payor Model.
However, under the Maryland All-Payor Model, Maryland hospitals still
are not paid under the IPPS. Therefore, they remain ineligible to
receive empirically justified Medicare DSH payments or the
uncompensated care payments under section 1886(r) of the Act.
SCHs are paid based on their hospital-specific rate from certain
specified base years or the IPPS Federal rate, whichever yields the
greater aggregate payment for the hospital's cost reporting period. If
an SCH is paid under its hospital-specific rate, it is not eligible for
Medicare DSH payments. In order to implement the provisions of section
1886(r) of the Act, in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50624), we specified that we will continue to determine interim
payments for SCHs based on what we estimate and project their DSH
status to be prior to the beginning of the Federal fiscal year (based
on the best available data at that time), subject to settlement through
the cost report. We also specified that SCHs that receive interim
empirically justified Medicare DSH payments in a fiscal year would
receive interim uncompensated care payments for that fiscal year on a
per discharge basis, subject as well to settlement through the cost
report. Final eligibility determinations will be made at the end of the
cost reporting period at settlement, and both interim empirically
justified Medicare DSH payments and uncompensated care payments will be
adjusted accordingly. Therefore, we follow the same processes of
interim and final payments for SCHs that we follow for eligible IPPS
DSH hospitals generally.
MDHs are paid based on the IPPS Federal rate or, if higher, the
IPPS Federal rate plus 75 percent of the amount by which the Federal
rate is exceeded by the updated hospital-specific rate from certain
specified base years (76 FR 51684). The IPPS Federal rate used in the
MDH payment methodology is the same IPPS Federal rate that is used in
the SCH payment methodology. Uncompensated care payments to MDHs were
not explicitly addressed in the FY 2014 IPPS/LTCH PPS final rule
because, at the time of the publication of the final rule, the MDH
program was set to expire at the end of FY 2013. Since the publication
of the FY 2014 IPPS/LTCH PPS final rule, the MDH program was extended
from October 1, 2013, to March 31, 2014, under the Pathway for SGR
Reform Act (Pub. L. 113-67) and was further extended an additional year
from April 1, 2014, to March 31, 2015, by the Protecting Access to
Medicare Act of 2014 (Pub. L. 113-93). Because MDHs are paid under the
IPPS Federal rate and, therefore, are eligible to receive Medicare DSH
payments if their disproportionate patient percentage is at least 15
percent, we apply the same process to determine eligibility for
Medicare DSH and the uncompensated care payment as we do for all other
IPPS hospitals. That is, we make a determination concerning eligibility
for interim uncompensated care payments based on each hospital's
estimated DSH status for the applicable fiscal year (using the most
recent data that are available) and our final determination on the
hospital's eligibility for uncompensated care payments would be based
on the hospital's actual DSH status on the cost report for that payment
year. In addition, as we do for all IPPS hospitals, we would calculate
a numerator for Factor 3 for all MDHs, regardless of whether they are
projected to be eligible for DSH during the fiscal year, but the
denominator for Factor 3 would be based on the uncompensated care data
from the hospitals that we have projected to be eligible for DSH during
the fiscal year.
Furthermore, in the FY 2014 IPPS interim final rule with comment
period (79 FR 15027), which addressed MDH payments for the first 6
months of FY 2014, we established a policy of including a pro rata
share of the uncompensated care payment amount for that period as part
of the Federal rate payment in the comparison of payments under the
hospital-specific rate and the

[[Page 28097]]

Federal rate. Consistent with that policy, for MDH payments for the
first 6 months of FY 2015, a pro rata share of the uncompensated care
payment amount for that period will be included as part of the Federal
rate payment in the comparison of payments under the hospital-specific
rate and the Federal rate. That is, in making this comparison at cost
report settlement, we will include the pro rata share of the
uncompensated care payment amount that reflects the period of time the
hospital was paid under the MDH program for its discharges occurring on
or after October 1, 2014, and before April 1, 2015. Consistent with the
policy for hospitals with Medicare cost reporting periods that span
more than 1 Federal fiscal year, this pro rata share will be determined
based on the proportion of the applicable Federal fiscal year that is
included in that cost reporting period (78 FR 61192 through 61194). As
noted previously, section 106 of Public Law 113-93 provides for an
extension of the MDH program through March 31, 2015, only. Therefore,
beginning April 1, 2015, all hospitals that previously qualified for
MDH status will no longer have MDH status under current law.
IPPS hospitals that have elected to participate in the Bundled
Payments for Care Improvement initiative receive a payment that links
multiple services furnished to a patient during an episode of care. We
have stated in previous rulemaking that those hospitals continue to be
paid under the IPPS (77 FR 53342). Hospitals that elect to participate
in the initiative can still receive DSH payments while participating in
the initiative, if they otherwise meet the requirements for receiving
such payments. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50625),
we specified that we will apply the new DSH payment methodology to the
hospitals participating in this initiative, so that eligible hospitals
will receive empirically justified Medicare DSH payments and
uncompensated care payments.
Section 410A of the Medicare Modernization Act established the
Rural Community Hospital Demonstration Program. After the initial 5-
year period, the demonstration was extended for an additional 5-year
period by sections 3123 and 10313 of the Affordable Care Act. There are
23 hospitals currently participating in the demonstration. Under the
payment methodology provided in section 410A, participating hospitals
receive payment for Medicare inpatient services on the basis of a cost
methodology. Specifically, for discharges occurring in the hospitals'
first cost reporting period of the initial 5-year demonstration or the
first cost reporting period of the 5-year extension, the hospitals
participating in the demonstration receive payments for the reasonable
cost of providing such services. For discharges occurring in subsequent
cost reporting periods during the applicable 5-year period, hospitals
receive the lesser of the current year's reasonable cost-based amount,
or the previous year's amount updated by the percentage increase in the
IPPS market basket (the target amount). The instructions (Change
Request 5020 (April 14, 2006) and Change Request 7505 (July 22, 2011)
for the demonstration require that the MAC not pay Medicare DSH
payments in addition to the amount received under the reasonable cost-
based payment methodology. Because hospitals participating in the
demonstration do not receive DSH payments, we determined in the FY 2014
IPPS/LTCH PPS final rule that these hospitals also are excluded from
receiving empirically justified Medicare DSH payments and uncompensated
care payments under the new payment methodology (78 FR 50625).
c. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the DSH
payment that would otherwise be made under subsection (d)(5)(F) to a
subsection (d) hospital. Because section 1886(r)(1) of the Act merely
requires the program to pay a designated percentage of these payments,
without revising the criteria governing eligibility for DSH payments or
the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH
PPS final rule that we did not believe that it is necessary to develop
any new operational mechanisms for making such payments. Therefore, in
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this
provision simply by revising the claims payment methodologies to adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. We also made corresponding changes to the
hospital cost report so that these empirically justified Medicare DSH
payments can be settled at the appropriate level at the time of cost
report settlement. We provided more detailed operational instructions
and cost report instructions following issuance of the final rule that
can be found on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
d. Uncompensated Care Payments
As we have discussed earlier, section 1886(r)(2) of the Act
provides that, for each eligible hospital in FY 2014 and subsequent
years, the new uncompensated care payment is the product of three
factors. These three factors represent our estimate of 75 percent of
the amount of Medicare DSH payments that would otherwise have been
paid, an adjustment to this amount for the percent change in the
national rate of uninsurance compared to the rate of uninsurance in
2013, and each eligible hospital's estimated uncompensated care amount
relative to the estimated uncompensated care amount for all eligible
hospitals. Below we review the data sources and methodologies for
computing each of these factors, our final policies for FY 2014, and
our proposed policies for FY 2015.
(1) Proposed Calculation of Factor 1 for FY 2015
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that it is a factor ``equal to the difference between
(i) the aggregate amount of payments that would be made to subsection
(d) hospitals under subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the Secretary); and (ii)
the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1) for such a fiscal year (as so
estimated).'' Therefore, section 1886(r)(2)(A)(i) of the Act represents
the estimated Medicare DSH payment that would have been made under
section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for
such fiscal year. Under a prospective payment system, we would not know
the precise aggregate Medicare DSH payment amount that would be paid
for a Federal fiscal year until cost report settlement for all IPPS
hospitals is completed, which occurs several years after the end of the
Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act
provides authority to estimate this amount, by specifying that, for
each fiscal year to which the provision applies, such amount is to be
``estimated by the Secretary.'' Similarly, section 1886(r)(2)(A)(ii) of
the Act represents the estimated empirically justified Medicare DSH
payments to be made in a fiscal year, as prescribed under section
1886(r)(1) of the Act. Again, section

[[Page 28098]]

1886(r)(2)(A)(ii) of the Act provides authority to estimate this
amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for the
fiscal year, in the absence of the new payment provision; and (2) the
amount of empirically justified Medicare DSH payments that are made for
the fiscal year, which takes into account the requirement to pay 25
percent of what would have otherwise been paid under section
1886(d)(5)(F) of the Act. In other words, this factor represents our
estimate of 75 percent (100 percent minus 25 percent) of our estimate
of Medicare DSH payments that would otherwise be made, in the absence
of section 1886(r) of the Act, for the fiscal year.
In order to determine Factor 1 in the uncompensated care payment
formula, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through
50630) and in the FY 2014 IPPS interim final rule with comment period
(78 FR 61194), we adopted a policy under which we develop final
estimates of both the aggregate amount of Medicare DSH payments that
would be made in the absence of section 1886(r)(1) of the Act and the
aggregate amount of empirically justified Medicare DSH payments to
hospitals under section 1886(r)(1) of the Act prior to each fiscal year
to which the new provision applies. These estimates are not revised or
updated after we know the final Medicare DSH payments for the fiscal
year. Specifically, in order to determine the two elements of Factor 1
(Medicare DSH payments prior to the application of section 1886(r)(1)
of the Act, and empirically justified Medicare DSH payments after
application of section 1886(r)(1) of the Act), we use the most recently
available projections of Medicare DSH payments for the fiscal year, as
calculated by CMS' Office of the Actuary. The Office of the Actuary
projects Medicare DSH payments on a biannual basis, typically in
February of each year (based on data from December of the previous
year) as part of the President's Budget, and in July (based on data
from June) as part of the Midsession Review. The estimates are based on
the most recently filed Medicare hospital cost report with Medicare DSH
payment information, supplemental cost report data provided by Indian
Health Service (IHS) hospitals to CMS, and the most recent Medicare DSH
patient percentages and Medicare DSH payment adjustments provided in
the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2014 estimate,
the data are based on the December 2013 update of the Medicare Hospital
Cost Report Information System (HCRIS), supplemental cost report data
provided by IHS hospitals to CMS as of December 2013 and the FY 2014
IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction
with the publication of the FY 2014 IPPS/LTCH PPS final rule. For the
July 2014 estimate, we anticipate that the data will be based on the
March 2014 update of the HCRIS data, supplemental cost report data
provided by IHS hospitals to CMS as of March 2014, and the FY 2015
proposed rule's IPPS Impact file, published in conjunction with this
proposed rule (and which is available via the Internet on the CMS Web
site). For purposes of this proposed rule, we are using the February
2014 Medicare DSH estimates to calculate Factor 1 and to model the
proposed impact of this provision. For the final rule, we intend to use
the July 2014 Medicare DSH estimates to determine Factor 1 and to model
the impact of this provision. In addition, because SCHs paid under
their hospital-specific payment rate are excluded from the application
of section 1886(r) of the Act, we also exclude SCHs that are projected
to be paid under their hospital-specific rate from our Medicare DSH
estimates. Similarly, because Maryland hospitals participating in the
Maryland All-Payer Model and hospitals participating in the Rural
Community Hospital Demonstration do not receive DSH payments, we also
exclude these hospitals from our Medicare DSH estimates.
Using the data sources discussed above, the Office of the Actuary
uses the most recently submitted Medicare cost report data to identify
current Medicare DSH payments, supplemental cost report data provided
by IHS hospitals to CMS, and the most recent DSH payment adjustments
provided in the IPPS Impact File, and applies inflation updates and
assumptions for future changes in utilization and case-mix to estimate
Medicare DSH payments for the upcoming fiscal year. The February 2014
Office of the Actuary estimate for Medicare DSH payments for FY 2015,
without regard to the application of section 1886(r)(1) of the Act, is
$14.205 billion. This estimate excludes Maryland hospitals
participating in the Maryland All-Payer Model, SCHs paid under their
hospital-specific payment rate, and hospitals participating in the
Rural Community Hospital Demonstration as discussed above. Therefore,
based on this estimate, the estimate for empirically justified Medicare
DSH payments for FY 2015, with the application of section 1886(r)(1) of
the Act, is $3.551 billion (25 percent of the total amount estimated).
Under Sec. 412.l06(g)(1)(i) of the regulations, Factor 1 is the
difference between these two estimates of the Office of the Actuary.
Therefore, for the purpose of modeling Factor 1, we are proposing that
Factor 1 for FY 2015 would be $10.654 billion ($14.205 billion minus
$3.551 billion). We are inviting public comment on our proposed
calculation of Factor 1 for FY 2015.
(2) Proposed Calculation of Factor 2 for FY 2015
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides: ``For each of fiscal years 2014,
2015, 2016, and 2017, a factor equal to 1 minus the percent change in
the percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (I) who are
uninsured in 2013, the last year before coverage expansion under the
Patient Protection and Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment);
and (II) who are uninsured in the most recent period for which data is
available (as so calculated), minus 0.1 percentage points for fiscal
year 2014 and minus 0.2 percentage points for each of fiscal years
2015, 2016, and 2017.''
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of individuals under 65 without insurance in 2013 must be the
percent of such individuals ``who are uninsured in 2013, the last year
before coverage expansion under the Patient Protection and Affordable
Care Act (as calculated by the Secretary based on the most recent
estimates available from the Director of the Congressional Budget
Office before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 that, if determined in the affirmative,
would clear such Act for enrollment).'' The Health Care and Education
Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It
was passed in the House of Representatives on March 21, 2010, and by
the Senate on March 25, 2010. Because the House of Representatives was
the first House to vote on the Health Care and Education

[[Page 28099]]

Reconciliation Act of 2010 on March 21, 2010, we have determined that
the most recent estimate available from the Director of the
Congressional Budget Office ``before a vote in either House on the
Health Care and Education Reconciliation Act of 2010 . . .'' (emphasis
added) appeared in a March 20, 2010 letter from the director of the CBO
to the Speaker of the House. Therefore, we believe that only the
estimates in this March 20, 2010 letter meet the statutory requirement
under section 1886(r)(2)(B)(i)(I) of the Act. (To view the March 20,
2010 letter, we refer readers to the Web site at: https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
In its March 20, 2010 letter to the Speaker of the House of
Representatives, the CBO provided two estimates of the ``post-policy
uninsured population.'' The first estimate is of the ``Insured Share of
the Nonelderly Population Including All Residents'' (82 percent) and
the second estimate is of the ``Insured Share of the Nonelderly
Population Excluding Unauthorized Immigrants'' (83 percent). In the FY
2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate
that includes all residents, including unauthorized immigrants. We
stated that we believe this estimate is most consistent with the
statute which requires us to measure ``the percent of individuals under
the age of 65 who are uninsured,'' and provides no exclusions except
for individuals over the age of 65. In addition, we stated that we
believe that this estimate more fully reflects the levels of
uninsurance in the United States that influence uncompensated care for
hospitals than the estimate that reflects only legal residents. The
March 20, 2010 CBO letter reports these figures as the estimated
percentage of individuals with insurance. However, because section
1886(r)(2)(B)(i) of the Act requires that we compare the percent of
individuals who are uninsured in the applicable year with the percent
of individuals who were uninsured in 2013, in the FY 2014 IPPS/LTCH PPS
final rule, we used the CBO insurance rate figure and subtracted that
amount from 100 percent (that is the total population without regard to
insurance status) to estimate the 2013 baseline percent of individuals
without insurance. Therefore, for FYs 2014 through 2017, our estimate
of the uninsurance percentage for 2013 is 18 percent.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals ``who are
uninsured in the most recent period for which data is available (as so
calculated).'' In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634),
we used the same data source, CBO estimates, to calculate this percent
of individuals without insurance. In response to public comments, we
also agreed that we should normalize the CBO estimates, which are based
on the calendar year, for the Federal fiscal years for which each
calculation of Factor 2 is made (78 FR 50633). Therefore, in the FY
2014 IPPS/LTCH PPS final rule, we employed the most recently available
estimate, specifically CBO's May 2013 estimates of the effects of the
Affordable Care Act on health insurance coverage (which are available
at: https://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf) as amended by
CBO's July 2013 estimates of changes in estimates of the effects of
insurance coverage provisions in the Affordable Care Act issued in
conjunction with a memo regarding ``Analysis of the Administration's
Announced Delay of Certain Requirements Under the Affordable Care
Act,'' which are available at: https://www.cbo.gov/sites/default/files/cbofiles/attachments/44465-ACA.pdf. The CBO's May 2013 estimate of the
rate of insurance for CY 2013 was 80 percent, and for CY 2014 was 84
percent. Therefore, the calculation of Factor 2 for FY 2014, employing
a weighted average of the CBO projections for CY 2013 and CY 2014, was
as follows:
CY 2013 rate of insurance coverage (May 2013 CBO
estimate): 80 percent.
CY 2014 rate of insurance coverage (May 2013 CBO estimate,
updated with July 2013 CBO estimate): 84 percent.
FY 2014 rate of insurance coverage: (80 percent * .25) +
(84 percent * .75) = 83 percent.
Percent of individuals without insurance for 2013 (March
2010 CBO estimate): 18 percent.
Percent of individuals without insurance for FY 2014
(weighted average): 17 percent.

1-[verbar][(0.17-0.18)/0.18][verbar] = 1-0.056 = 0.944 (94.4 percent).
0.944 (94.4 percent)-0.001 (0.1 percentage points) = 0.943 (94.3
percent).
0.943 = Factor 2

Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we adopted
0.943 as the final determination of Factor 2 for FY 2014. In
conjunction with this determination, we also determined in the FY 2014
IPPS/LTCH PPS final rule and later revised in the FY 2014 IPPS interim
final rule with comment period (78 FR 61195) that the amount available
for uncompensated care payments for FY 2014 would be approximately
$9.046 billion (0.943 times our Factor 1 estimate of $9.593 billion).
For this FY 2015 proposed rule, we have used CBO's February 2014
estimates of the effects of the Affordable Care Act on health insurance
coverage (which are available at https://www.cbo.gov/publication/43900?utm_source=feedblitz&utm_medium=FeedBlitzEmail&utm_content=812526&utm_campaign=0). The CBO's February 2014 estimate of
individuals under the age of 65 with insurance in CY 2014 is 84
percent. Therefore, the CBO's most recent estimate of the rate of
uninsurance in CY 2014 is 16 percent (that is, 100 percent minus 84
percent.) Similarly, the CBO's February 2014 estimate of individuals
under the age of 65 with insurance in CY 2015 is 86 percent. Therefore,
the CBO's most recent estimate of the rate of uninsurance in CY 2015
available during the development of this proposed rule is 14 percent
(that is, 100 percent minus 86 percent.)
The calculation of the proposed Factor 2 for FY 2015, employing a
weighted average of the CBO projections for CY 2014 and CY 2015, is as
follows:
CY 2014 rate of insurance coverage (February 2014 CBO
estimate): 84 percent.
CY 2015 rate of insurance coverage (February 2014 CBO
estimate): 86 percent.
FY 2015 rate of insurance coverage: (84 percent * .25) +
(86 percent * .75) = 85.5 percent.
Percent of individuals without insurance for 2013 (March
2010 CBO estimate): 18 percent
Percent of individuals without insurance for FY 2015
(weighted average): 14.5 percent

1-[verbar][(0.145--0.18)/0.18][verbar] = 1-0.19444 = 0.80556 (80.556
percent)
0.80556 (80.556 percent)-0.002 (0.2 percentage points for FY 2015 under
section 1886(r)(2)(B)(i) of the Act) = 0.8036 (80.36 percent)
0.8036 = Factor 2

Therefore, we are proposing that Factor 2 for FY 2015 would be
0.8036. Our proposal for Factor 2 is subject to change if more recent
CBO estimates of the insurance rate become available at the time of the
preparation of the final rule. We are inviting public comments on our
proposed calculation of Factor 2 for FY 2015.

[[Page 28100]]

(3) Proposed Calculation of Factor 3 for FY 2015
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is
``equal to the percent, for each subsection (d) hospital, that
represents the quotient of (i) the amount of uncompensated care for
such hospital for a period selected by the Secretary (as estimated by
the Secretary, based on appropriate data (including, in the case where
the Secretary determines alternative data is available which is a
better proxy for the costs of subsection (d) hospitals for treating the
uninsured, the use of such alternative data)); and (ii) the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under this subsection for such period (as so
estimated, based on such data).''
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive DSH payments relative to the estimated
uncompensated care amount for all hospitals estimated to receive DSH
payments in the fiscal year for which the uncompensated care payment is
to be made. Factor 3 is applied to the product of Factor 1 and Factor 2
to determine the amount of the uncompensated care payment that each
eligible hospital will receive for FY 2014 and subsequent fiscal years.
In order to implement the statutory requirements for this factor of the
uncompensated care payment formula, it was necessary to determine: (1)
The definition of uncompensated care or, in other words, the specific
items that are to be included in the numerator (that is, the estimated
uncompensated care amount for an individual hospital) and denominator
(that is, the estimated uncompensated care amount for all hospitals
estimated to receive DSH payments in the applicable fiscal year); (2)
the data source(s) for the estimated uncompensated care amount; and (3)
the timing and manner of computing the quotient for each hospital
estimated to receive DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period ``based on
appropriate data.'' In addition, we note that the statute permits the
Secretary to use alternative data ``in the case where the Secretary
determines that alternative data is available,'' which is a better
proxy for the costs of subsection (d) hospitals for treating uninsured
individuals.
In the course of considering how to determine Factor 3 during the
rulemaking process for FY 2014, we considered defining the amount
uncompensated care for a hospital as the uncompensated care costs of
each hospital and considered potential data sources for those costs.
For purposes of selecting an appropriate data source for this possible
definition of uncompensated care costs, we reviewed the literature and
available data sources and determined that Worksheet S-10 of the
Medicare cost report could potentially provide the most complete data
for Medicare hospitals. (We refer readers to the report ``Improvements
to Medicare Disproportionate Share (DSH) Payments'' for a full
discussion and evaluation of the available data sources. The report is
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.) However, we noted
that Worksheet S-10 is a relatively new data source that has been used
for specific payment purposes only in relatively restricted ways (for
example, to provide a source of charity care charges in the computation
of EHR incentive payments (75 FR 44456)). We also noted that some
stakeholders have expressed concern that hospitals have not had enough
time to learn how to submit accurate and consistent data through this
reporting mechanism. Other stakeholders have maintained that some
instructions for Worksheet S-10 still require clarification in order to
ensure standardized and consistent reporting by hospitals. At the same
time, we noted that Worksheet S-10 is the only national data source
that includes data for all Medicare hospitals and is designed to elicit
data on uncompensated care costs. We discussed the possible use of data
reported on Worksheet S-10 to determine uncompensated care costs in
more detail in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27586).
Because of concerns regarding variations in the data reported on
Worksheet S-10 of the Medicare cost report and the completeness of
these data, we did not propose to use data from the Worksheet S-10 to
determine the amount of uncompensated care. However, we stated our
belief that Worksheet S-10 of the Medicare cost report would otherwise
be an appropriate data source to determine uncompensated care costs. In
particular, we noted that Worksheet S-10 was developed specifically to
collect information on uncompensated care costs in response to interest
by MedPAC and other stakeholders regarding the topic (for example,
MedPAC's March 2007 Report to Congress) and that it is not unreasonable
to expect information on the cost report to be used for payment
purposes. Furthermore, hospitals attest to the accuracy and
completeness of the information reported in the cost report at the time
of submission. We indicated that we expect reporting on Worksheet S-10
to improve over time, particularly in the area of charity care which is
already being used and audited for payment determinations related to
the EHR Incentive Program, and that we will continue to monitor these
data. Accordingly, we stated that we may proceed with a proposal to use
data on the Worksheet S-10 to determine uncompensated care costs in the
future, once hospitals are submitting accurate and consistent data
through this reporting mechanism.
As a result of our concerns regarding the data reported on
Worksheet S-10 of the Medicare cost report, we believed it was
appropriate to consider the use of alternative data, at least in FY
2014, the first year that this provision is in effect, and possibly for
additional years until hospitals have adequate experience reporting all
of the data elements on Worksheet S-10. We noted that this approach is
consistent with input we received from some stakeholders in response to
the CMS National Provider Call in January 2013, who stated their belief
that existing FY 2010 and FY 2011 data from the Worksheet S-10 should
not be used for implementation of section 1886(r) of the Act and who
requested the opportunity to resubmit the data once more specific
instructions were issued by CMS. Accordingly, we examined alternative
data sources that could be used to allow time for hospitals to gain
experience with and to improve the accuracy of their reporting on
Worksheet S-10 of the Medicare cost report. We stated in the FY 2014
IPPS/LTCH PPS final rule that we believe that data on utilization for
insured low-income patients can be a reasonable proxy for the treatment
costs of uninsured patients. Moreover, due to the concerns regarding
the accuracy and consistency of the data reported on the Worksheet S-
10, we also determined that these alternative data, which are currently
reported on the Medicare cost report, would be a better proxy for the
amount of uncompensated care provided by hospitals. Accordingly, in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we adopted the policy
of employing the utilization of insured low-income patients defined as

[[Page 28101]]

inpatient days of Medicaid patients plus inpatient days of Medicare SSI
patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i),
respectively, to determine Factor 3. We also indicated that we remained
convinced that the Worksheet S-10 could ultimately serve as an
appropriate source of more direct data regarding uncompensated care
costs for purposes of determining Factor 3 once hospitals are
submitting more accurate and consistent data through this reporting
mechanism. In the interim, we indicated that we would take steps such
as revising and clarifying cost report instructions, as appropriate. We
stated that it is our intention to propose introducing the use of the
Worksheet S-10 data for purposes of determining Factor 3 within a
reasonable amount of time.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have continued to evaluate and assess the comments we have received
from stakeholders about Worksheet S-10 as well as evaluate what changes
might need to be made to the instructions to make the data hospitals
submit more accurate and consistent across hospitals. Although we have
not yet developed revisions to the Worksheet S-10 instructions at this
time, we remain committed to making improvements to Worksheet S-10. For
that reason, we believe it would be premature to propose the use of
Worksheet S-10 data for purposes of determining Factor 3 for FY 2015.
Therefore, we are proposing to continue to employ the utilization of
insured low-income patients defined as inpatient days of Medicaid
patients plus inpatient days of Medicare SSI patients, as defined in
Sec. 412.106(b)(4) and Sec. 412.106(b)(2)(i), respectively, to
determine Factor 3 for FY 2015. Accordingly, we are proposing to revise
the regulations at 42 CFR 412.106(g)(1)(iii)(C) to state that, for FY
2015, CMS will base its estimates of the amount of hospital
uncompensated care on the most recent available data on utilization for
Medicaid and Medicare SSI patients, as determined by CMS in accordance
with paragraphs (b)(2)(i) and (b)(4) of that section of the
regulations. We are inviting public comments on this proposal, and we
will continue to work with the hospital community and others to develop
the appropriate clarifications and revisions to Worksheet S-10 of the
Medicare cost report for reporting uncompensated care data. In
particular, we are inviting public comments on what would be a
reasonable timeline for adopting Worksheet S-10 of the Medicare cost
report as the data source for determining Factor 3.
As we did for the FY 2014 IPPS/LTCH PPS proposed rule, we are
publishing on the CMS Web site a table listing Factor 3 for all
hospitals that we estimate would receive empirically justified Medicare
DSH payments in a fiscal year (that is, hospitals that we project would
receive interim uncompensated care payments during the fiscal year),
and for the remaining subsection (d) and subsection (d) Puerto Rico
hospitals that have the potential of receiving a DSH payment in the
event that they receive an empirically justified Medicare DSH payment
for the fiscal year as determined at cost report settlement. Hospitals
have 60 days from the date of public display of the IPPS/LTCH PPS
proposed rule to review these tables and notify CMS in writing of a
change in a hospital's subsection (d) hospital status, such as if a
hospital has closed or converted to a CAH.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we
considered public comments which recommended that we use the wage index
to adjust insured low-income days in determining Factor 3 in order to
account for the differences in ``purchasing power'' in different
regions of the country. With respect to these public comments, we
agreed that there may be regional variation in uncompensated care costs
due to regional variations in the costs of care generally. However, we
stated that we did not believe that there was sufficient basis for
believing that the wage index reflects the variations in uncompensated
care costs well enough to adopt it as the basis for adjusting Factor 3.
The wage index reflects the relative hospital wage level in the
geographic area of the hospital compared to the national average
hospital wage level. In computing the wage index, we derive an average
hourly wage for each labor market area (total wage costs divided by
total hours for all hospitals in the geographic area) and a national
average hourly wage (total wage costs divided by total hours for all
hospitals surveyed in the nation). A labor market area's wage index
value is the ratio of the area's average hourly wage to the national
average hourly wage. We note that, for FY 2014, 69.6 percent of the
standardized amount is considered to be the labor-related share and,
therefore, adjusted by the wage index. However, in addition to the
labor-related share of the standardized amount being adjusted by the
wage index, the entire standardized amount is also adjusted for the
relative weight of the MS-DRG for each individual patient. In other
words, the wage index only adjusts for a portion of the variation in
costs, and does not address variations in resource use and patient
severity. Therefore, we stated that we did not believe that there was
sufficient basis for believing that adjusting low-income patient days
by the wage index would better reflect variations in uncompensated care
costs.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have continued to consider whether to propose employing the wage index
to adjust insured low-income days in determining Factor 3. After this
consideration, we continue to believe that a wage index adjustment to
insured low-income days is not an appropriate measure to account for
variations in the costs of uncompensated care among hospitals. The
intensity of such care, and therefore the costs, may vary by hospital,
but we still lack convincing evidence that the wage index data are an
accurate measure of that intensity. Therefore, we are not proposing to
adopt such an adjustment to low-income days for purposes of calculating
Factor 3 in FY 2015.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we also
considered public comments that requested that we include insured low-
income days from exempt units (specifically, inpatient rehabilitation
units paid under the IRF PPS and inpatient psychiatric units paid under
the IPF PPS) of the hospital in the computation of Factor 3, in order
to better capture the treatment costs of the uninsured by the hospital.
In response to those public comments, we stated our belief that there
may be some merit to including insured low-income days from exempt
units of the hospital in order to better capture the full costs of the
treatment of the uninsured by the hospital insofar as those data may be
publicly available, subject to audit, and used for payment purposes. We
also indicated that we believed it would be prudent to consider the
degree to which these data meet these conditions before adopting this
recommendation. Therefore, we stated that we would consider including
this recommendation among our proposals in future rulemaking.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have conducted an analysis of the impact of adopting this
recommendation. That analysis has indicated that the inclusion of
Medicaid and Medicare-SSI days for exempt inpatient units does not
significantly change the distribution of uncompensated care payments to
hospitals, with the exception of a few hospitals with high utilization
associated with those exempt units that

[[Page 28102]]

would see increases in their uncompensated care payments. Furthermore,
Medicaid and SSI days for inpatient rehabilitation units have been
audited and are used for payment purposes under the IRF PPS;
specifically, these data are used to calculate the low-income payment
(LIP) adjustment under the IRF PPS. However, the data for inpatient
psychiatric units are not generally audited and have not been used
previously for payment purposes. Therefore, we are not proposing at
this time to include those days in the calculation of a hospital's
share of uncompensated care payments. As we indicated earlier, we
believe it would be appropriate to include such data in the calculation
of uncompensated care payments only insofar as those data may be
publicly available, subject to audit, and used for payment purposes.
The use of data for inpatient psychiatric units would fail the second
and third conditions. At the same time, we do not believe that
including only inpatient rehabilitation unit days without inpatient
psychiatric unit days would improve the accuracy of the uncompensated
care payment calculation. We also observe, as we have previously noted,
that the statutory references under section 1886(d)(5)(F) of the Act to
``days'' apply only to hospital acute care inpatient days. Section
412.106(a)(1)(ii) of the regulations therefore provides that, for
purposes of DSH payments, ``the number of patient days in the hospital
includes only those days attributable to units or wards of the hospital
providing acute care services generally payable under the prospective
payment system and excludes'' other days. In the absence of compelling
reasons to do otherwise, we believe it is preferable to maintain
consistency with this longstanding precedent in the context of this
temporary method for determining uncompensated care payments. However,
we are inviting public comments on this issue.
The statute also allows the Secretary the discretion to determine
the time periods from which we will derive the data to estimate the
numerator and the denominator of the Factor 3 quotient. Specifically,
section 1886(r)(2)(C)(i) of the Act defines the numerator of the
quotient as ``the amount of uncompensated care for such hospital for a
period selected by the Secretary. . . .'' (emphasis added). Section
1886(r)(2)(C)(ii) of the Act defines the denominator as ``the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under this subsection for such period'' (emphasis
added). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we
adopted a process of making interim payments with final cost report
settlement for both the empirically justified Medicare DSH payments and
the uncompensated care payments required by section 3133 of the
Affordable Care Act. Consistent with that process, we also determined
the time period from which to calculate the numerator and denominator
of the Factor 3 quotient in a way that would be consistent with making
interim and final payments. Specifically, we must have Factor 3 values
available for hospitals that we estimate will qualify for Medicare DSH
payments using the most recently available historical data and for
those hospitals that we do not estimate will qualify for Medicare DSH
payments but that may ultimately qualify for Medicare DSH payments at
the time of cost report settlement.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), therefore,
we adopted the policy to calculate the numerator and the denominator of
Factor 3 for hospitals based on the most recently available full year
of Medicare cost report data (including the most recently available
data that may be used to update the SSI ratios) with respect to a
Federal fiscal year. In other words, we use data from the most recently
available full year cost report for the Medicaid days and the most
recently available SSI ratios (that is, latest available SSI ratios
before the beginning of the Federal fiscal year) for the Medicare SSI
days. We noted that these data are publicly available, subject to
audit, and used for payment purposes. While we recognized that older
data also meet these criteria, we often use the most recently available
data for payment determinations. Furthermore, in the FY 2014 IPPS
interim final rule with comment period (78 FR 61195), we revised our
policy to also include supplemental cost report data submitted to CMS
only by IHS hospitals in order allow their Medicaid days to be used to
calculate Factor 3.
Therefore, for FY 2014, we used data from the most recently
available full year cost report for the Medicaid days and the most
recently available SSI ratios, which meant data from the 2010/2011 cost
reports for the Medicaid days, supplemental 2011 cost report data
submitted to CMS by IHS hospitals, and the FY 2011 SSI ratios for the
Medicare SSI days to estimate Factor 3 for FY 2014. For FY 2015, we are
again proposing to use data from the most recently available full year
cost report for the Medicaid days (that is, we are proposing to use the
2012 cost report, unless that cost report is unavailable or reflects
less than a full 12-month year; in the event the 2012 cost report is
for less than 12 months, we are proposing to use the cost report from
2012 or 2011 that is closest to being a full 12-month cost report),
supplemental cost report data submitted to CMS only by IHS hospitals
and the most recently available SSI ratios. For purposes of this
proposed rule, we are using data from the December 2013 update of the
2011/2012 Medicare cost reports for the Medicaid days and the FY 2011
SSI ratios for the Medicare SSI days. Consistent with our FY 2014 IPPS
interim final rule with comment period (78 FR 61195), for FY 2015, we
also are using supplemental cost report data provided by IHS hospitals
to CMS as of December 2013 in order to calculate the proposed Factor 3.
For the FY 2015 IPPS final rule, we intend to use the March 2014 update
of the 2011/2012 Medicare cost reports, supplemental cost report data
submitted to CMS by IHS hospitals as of March 2014, and the most
recently available SSI ratios (FY 2012 SSI ratios and, if not
available, the FY 2011 SSI ratios) to calculate Factor 3. We believe
the March update to the Medicare cost reports will be the most recently
available data to calculate Factor 3 at the time of publication of the
FY 2015 IPPS final rule. We believe this is consistent with CMS'
historical policy to use the best available data when setting the
payment rates and factors in both the proposed and final rules.
Furthermore, this is consistent with our approach in other areas of
IPPS, where we historically use the March update of cost report data
and MedPAR claims data to calculate IPPS relative weights, budget
neutrality factors, the outlier threshold, and the standardized amount
for the IPPS final rule. If we were to wait for a later update of the
cost report data to become available, this could cause delay of the
publication of the IPPS final rule.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642), we discussed
several specific issues concerning the use of cost report data to
determine Factor 3. One issue concerned the process and data to be
employed in determining Factor 3 in the case of hospital mergers.
Specifically, two hospitals that merged in 2011 with one surviving
provider number requested that we account for the merger by including
data from both hospitals' cost reports immediately prior to the merger
in the calculation of the Factor 3 amount. In that final rule, we had
calculated Factor 3 using only the surviving hospital's cost report
data and SSI ratio data. In the final rule (78 FR

[[Page 28103]]

50602), we responded to the public comment that Factor 3 would be
calculated based on the low-income insured patient days (that is,
Medicaid days and SSI days) under the surviving CCN, based on the most
recent available data for that CCN (for FY 2014, from the cost report
for 2011 or 2010). We noted that this was consistent with the treatment
of other IPPS payment factors, where data used to calculate a
hospital's Medicare DSH payment adjustment, CCRs for outlier payments,
and wage index values are tied to a hospital's CCN. Data associated
with a CCN that is no longer in use are not used to determine those
IPPS hospital payments under the surviving CCN.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have received additional input from hospitals that have undergone
mergers that suggest using only the surviving CCN produces an estimate
of the surviving hospital's uncompensated care burden that is lower
than warranted. For FY 2015, for example, Factor 3 of the uncompensated
care payment calculation would be determined using 2011/2012 cost
reports. As a result, for any mergers occurring between FY 2011 and FY
2015, Factor 3 of the uncompensated care payment for FY 2015 would
reflect only the data of the hospital with the surviving CCN, not the
combination of the data from the two hospitals that merged. We believe
that revising our methodology to incorporate data from both of the
hospitals that merged could improve our estimate of the uncompensated
care burden of the merged hospital. Accordingly, we are proposing to
revise our methodology for determining Factor 3 to incorporate data
from both merged hospitals until data for the merged hospitals become
available under the surviving CCN.
In addition, because the data systems used to calculate Factor 3 do
not identify hospitals that have merged, we also are proposing to
establish a process to identify hospitals that have merged after the
period of the historical data that are being used to calculate Factor
3, up to a point in time during ratesetting for that Federal fiscal
year. Under this approach, we would combine the data for the merged
hospitals to calculate Factor 3 of the uncompensated care payment.
Specifically, we are proposing that we would identify the hospitals
that merged after the period from which data are being used to
calculate Factor 3 (for FY 2015, 2012 and 2011) but before the
publication of each year's final rule. For purposes of this proposal,
we are defining a merger to be an acquisition where the Medicare
provider agreement of one hospital is subsumed into the provider
agreement of the surviving provider. We would not consider an
acquisition where the new owner voluntarily terminates the Medicare
provider agreement of the hospital it purchased by rejecting assignment
of the previous owner's provider agreement to be a merger. We believe
it is appropriate to combine data to calculate Factor 3 for a merged
hospital where the Medicare provider agreement of one hospital is
subsumed into the provider agreement of the surviving provider because,
in this type of acquisition as described in the September 6, 2013
Survey & Certification Memorandum S&C: 13-60-ALL (https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-60.pdf),
the buyer is subject to all applicable statutes and regulations and to
the terms and conditions under which the assigned agreement was
originally issued. These include, but are not limited to, Medicare
requirements to adjust payments to account for prior overpayments and
underpayments, even if they relate to a pre-acquisition period
(successor liability), and to adjust payments to collect civil monetary
penalties. Therefore, we believe it is appropriate to also retain the
data of the subsumed hospital to calculate the uncompensated care
payment for the merged hospital. Conversely, by rejecting assignment of
the Medicare provider agreement of the subsumed hospital, the surviving
provider has voluntarily terminated the Medicare provider agreement and
is precluded from having successor liability for Medicare overpayments
or underpayments that would have otherwise been made to the subsumed
provider. Furthermore, when the surviving hospital rejects automatic
assignment of the existing provider agreement, but wishes to
participate in the Medicare program, the merged hospital is considered
an initial applicant to the Medicare program. In an instance in which
the surviving provider has rejected assignment of the Medicare provider
agreement of the subsumed provider, it would not seem appropriate to
use data from the subsumed provider for purposes of Medicare payment,
including for the calculation of a hospital's uncompensated care
payment.
For FY 2015, we are proposing to identify mergers by querying the
Medicare contractors. We believe it is appropriate to obtain merger
information from the Medicare contractors, as a copy of each final
sales agreement/transaction indicating the effective date of the
acquisition is generally submitted to the Medicare contractors once an
acquisition is finalized. For the purpose of this proposed rule, we
requested that the Medicare contractors provide us with a list of
mergers that occurred between October 1, 2010 (the first day of FY
2011, which is the earliest date that would be included in any 2011
cost report data that are used to calculate a hospital's Factor 3)
through January 2014 (when we started preparing for the FY 2015 IPPS
proposed rule). On the basis of this information, we would then combine
the data elements of any hospitals that had merged to calculate the
uncompensated care payment for the merged hospital. Specifically, we
would combine the Medicaid days from the most recently available full
year cost reports and the SSI days from the most recently available SSI
ratios tied to the two CCNs prior to the merger to calculate the merged
hospital's Factor 3. For FY 2015, we would combine the Medicaid days
from either the 2011 or 2012 cost reports and would use the most
recently available SSI ratios available at the time the final rule is
developed.
In order to confirm these mergers and the accuracy of the data used
to determine each merged hospital's uncompensated care payment, we are
proposing to publish a table on the CMS Web site, in conjunction with
the issuance of the proposed and final rules for a fiscal year,
containing a list of the mergers that we are aware of and the computed
uncompensated care payment for each merged hospital. A copy of this
table is being published on the CMS Web site in conjunction with the
issuance of this proposed rule. The affected hospitals would then have
the opportunity to comment during the public comment period on the
accuracy of this information.
We are proposing to treat hospitals that merge after the
development of the final rule similar to new hospitals. For these newly
merged hospitals, we would not have data currently available to
calculate a Factor 3 amount that accounts for the merged hospital's
uncompensated care burden. In addition, we would not have data to
determine if the newly merged hospital is eligible for Medicare DSH
payment and, therefore, eligible for uncompensated care payments for
the applicable fiscal year because the only data we would have to make
this determination are those for the surviving CCN. Accordingly, we are
proposing to treat newly merged hospitals in a similar manner as new

[[Page 28104]]

hospitals, such that the newly merged hospital's final uncompensated
care payment would be determined at cost report settlement where the
numerator of the newly merged hospital's Factor 3 would be based on the
Medicaid days and SSI days reported on the cost report used for the
applicable fiscal year. We are proposing that the interim uncompensated
care payments for the newly merged hospitals would be based on only the
data of the surviving hospital's CCN at the time of the preparation of
the final rule for the applicable fiscal year. In other words, for
newly merged hospitals, eligibility to receive interim uncompensated
care payments and the amount of any interim uncompensated care payments
would be based on the Medicaid days from either the 2011 or 2012 cost
reports and the most recently available SSI ratios available at the
time the final rule is developed for only the surviving CCN. However,
at cost report settlement, we would determine the newly merged
hospital's final uncompensated care payments based on the Medicaid days
and SSI days reported on the cost report used for the applicable fiscal
year. That is, we would revise the numerator of Factor 3 for the newly
merged hospital to reflect the Medicaid and SSI days reported on the
cost report for the applicable fiscal year. We are inviting public
comment on our proposed change to the treatment of hospital mergers in
the calculation of a hospital's uncompensated care payment.

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

1. Background
Section 1885(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684.)) As we discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684), section 3124 of the Affordable
Care Act extended the expiration of the MDH program from the end of FY
2011 (that is, for discharges occurring before October 1, 2011) to the
end of FY 2012 (that is, for discharges occurring before October 1,
2012). Under prior law, as specified in section 5003(a) of Public Law
109-171 (DRA 2005), the MDH program was to be in effect through the end
of FY 2011 only.
Since the extension of the MDH program through FY 2012 provided by
section 3124 of the Affordable Care Act, the MDH program has been
further extended multiple times. First, section 606 of the ATRA of 2012
(Pub. L. 112-240) extended the MDH program through FY 2013 (that is,
for discharges occurring before October 1, 2013.) Second, section 1106
of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) extended the
MDH program through the first half of FY 2014 (that is, for discharges
occurring before April 1, 2014.) In the FY 2014 interim final rule with
comment period that appeared in the Federal Register on March 18, 2013
(79 FR 15025 through 15027), we discussed the expiration of the MDH
program on March 31, 2014, and explained how providers may be affected
by the 6-month extension of the MDH program under Public Law 113-67 and
described the steps to reapply for MDH status for FY 2014, as
applicable. Generally, a provider that was classified as an MDH as of
September 30, 2013, was reinstated as an MDH effective October 1, 2013,
with no need to reapply for MDH classification. However, if the MDH had
classified as an SCH or cancelled its rural classification under Sec.
412.103(g) effective on or after October 1, 2013, the effective date of
MDH status may not be retroactive to October 1, 2013. In the FY 2014
IPPS/LTCH PPS final rule (78 FR 50647 through 50649) and the FY 2014
interim final rule with comment period (79 FR 15025 through 15027), we
made conforming changes to the regulations at Sec. 412.108(a)(1) and
(c)(2)(iii) to reflect the extensions of the MDH program provided for
by the ATRA and Pathway for SGR Reform Act, respectively. Lastly, under
current law, section 106 of the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93) provides for a 1-year extension of the MDH
program effective from April 1, 2014 through March 31, 2015.
Specifically, section 106 of Public Law 113-93 amended sections
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking
``April 1, 2014'' and inserting ``April 1, 2015''. Section 106 of
Public Law 113-93 also made conforming amendments to sections
1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act.
We intend to address the extension of the MDH program for the
second half of FY 2014 (that is, from April 1, 2014 through September
30, 2014) under Public Law 113-93 in a separate Federal Register
notice. For additional information on the extensions of the MDH program
after FY 2012, we refer readers to the following rules: The FY 2013
IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53413 through
53414); the FY 2013 IPPS notice that appeared in the Federal Register
on March 7, 2013 (78 FR 14689); the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50647 through 50649); and the FY 2014 interim final rule with
comment period (79 FR 15025 through 15027).
2. Provisions of Public Law 113-93 for FY 2015
Prior to the enactment of Public Law 113-93, under section 1106 of
Public Law 113-67, the MDH program authorized by section 1886(d)(5)(G)
of the Act was set to expire midway through FY 2014. Section 106 of
Public Law 113-93 amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year
extension of the MDH program, effective from April 1, 2014 through
March 31, 2015. Section 106 of Public Law 113-93 also made conforming
amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the
Act.
In this proposed rule, we are proposing to make conforming changes
to the regulations at Sec. Sec. 412.108(a)(1) and (c)(2)(iii) to
reflect the statutory extension of the MDH program for the first 6
months of FY 2015 made by section 106 of Public Law 113-93.
3. Expiration of the MDH Program
Because section 106 of Public Law 113-93 extends the MDH program
through the first half of FY 2015 only, effective April 1, 2015, the
MDH program will no longer be in effect. Because the MDH program is not
authorized by statute beyond March 31, 2015, beginning April 1, 2015,
all hospitals that previously qualified for MDH status will no longer
have MDH status and will be paid based on the Federal rate. As noted
earlier, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through
53405), we revised our SCH policies to allow MDHs to apply for SCH
status and be paid as such under certain conditions, following
expiration of the MDH program at the end of FY 2012. We codified these
changes in the regulations at Sec. 412.92(b)(2)(i) and Sec.
412.92(b)(2)(v). For additional information, we refer readers to the FY
2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We
note that those same conditions apply to MDHs that intend to apply for
SCH status with the expiration of the MDH program on March 31, 2015.
Specifically, the existing regulations at Sec. 412.92(b)(2)(i) and
(b)(2)(v) allow for an effective date of approval of SCH status that is
the day following the expiration date of the MDH program. In accordance
with these regulations, in order for an MDH to receive SCH status

[[Page 28105]]

effective April 1, 2015, it must apply for SCH status at least 30 days
before the end of the MDH program; that is, the MDH must apply for SCH
status by March 1, 2015. The MDH also must request that, if approved as
an SCH, the SCH status be effective with the expiration of the MDH
program provision; that is, the MDH must request that the SCH status,
if approved, be effective April 1, 2015, immediately after its MDH
status expires with the expiration of the MDH program on March 31,
2015. We note that an MDH that applies for SCH status in anticipation
of the expiration of the MDH program would not qualify for the April 1,
2015 effective date upon approval if it does not apply by the March 1,
2015 deadline. The provider would instead be subject to the usual
effective date for SCH classification, that is, 30 days after the date
of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).

H. Hospital Readmissions Reduction Program: Proposed Changes for FY
2015 Through FY 2017 (Sec. Sec. 412.150 Through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new section 1886(q) to the
Act. Section 1886(q) of the Act establishes the ``Hospital Readmissions
Reduction Program,'' effective for discharges from an ``applicable
hospital'' beginning on or after October 1, 2012, under which payments
to those applicable hospitals may be reduced to account for certain
excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. In accordance with section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by a
hospital-specific adjustment factor that accounts for the hospital's
excess readmissions. Section 1886(q)(2) of the Act defines the base
operating DRG payment amount as ``the payment amount that would
otherwise be made under subsection (d) (determined without regard to
subsection (o) [the Hospital VBP Program]) for a discharge if this
subsection did not apply; reduced by . . . any portion of such payment
amount that is attributable to payments under paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d).'' Paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments,
IME payments, DSH adjustment payments, and add-on payments for low-
volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals, including policies for
SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53374), we finalized policies to implement the statutory
provisions related to the definition of ``base operating DRG payment
amount'' with respect to those hospitals.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. It states that the ratio is
``equal to 1 minus the ratio of--(i) the aggregate payments for excess
readmissions . . . and (ii) the aggregate payments for all discharges .
. . '' Section 1886(q)(3)(C) of the Act establishes the floor
adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014,
and 0.97 for FY 2015 and subsequent fiscal years.
Section 1886(q)(4) of the Act defines the terms ``aggregate
payments for excess readmissions'' and ``aggregate payments for all
discharges'' for an applicable hospital for the applicable period. The
term ``aggregate payments for excess readmissions'' is defined in
section 1886(q)(4)(A) of the Act as ``the sum, for applicable
conditions . . . of the product, for each applicable condition, of (i)
the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the excess readmissions ratio. . . for such hospital for such
applicable period minus 1.'' The ``excess readmissions ratio'' is a
hospital-specific ratio based on each applicable condition.
Specifically, section 1886(q)(4)(C) of the Act defines the excess
readmissions ratio as the ratio of actual-over-expected readmissions;
specifically, the ratio of ``risk-adjusted readmissions based on actual
readmissions'' for an applicable hospital for each applicable
condition, to the ``risk-adjusted expected readmissions'' for the
applicable hospital for the applicable condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition'' (which is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666)) is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) Readmissions .
. . represent conditions or procedures that are high volume or high
expenditures . . . and (ii) measures of such readmissions . . . have
been endorsed by the entity with a contract under section 1890(a) [of
the Act] . . . and such endorsed measures have exclusions for
readmissions that are unrelated to the prior discharge (such as a
planned readmission or transfer to another applicable hospital).''
Section 1886(q)(5)(B) of the Act also requires the Secretary, beginning
in FY 2015, ``to the extent practicable, [to] expand the applicable
conditions beyond the 3 conditions for which measures have been
endorsed . . . to the additional 4 conditions that have been identified
by the Medicare Payment Advisory Commission in its report to Congress
in June 2007 and to other conditions and procedures as determined
appropriate by the Secretary.''
Section 1886(q)(5)(C) of the Act defines ``applicable hospital,''
that is, a hospital subject to the Hospital Readmissions Reduction
Program, as a ``subsection (d) hospital or a hospital that is paid
under section 1814(b)(3) [of the Act], as the case may be.'' The term
``applicable period,'' as defined under section 1886(q)(5)(D) of the
Act, ``means, with respect to a fiscal year, such period as the
Secretary shall specify.'' As explained in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51671), the ``applicable period'' is the period
during which data are collected in order to calculate various ratios
and payment adjustments under the Hospital Readmissions Reduction
Program.
Section 1886(q)(6) of the Act sets forth the public reporting
requirements for hospital-specific readmission rates. Section
1886(q)(7) of the Act limits administrative and judicial review of
certain determinations made pursuant to section 1886(q) of the Act.
Finally, section 1886(q)(8) of the Act requires the Secretary to
collect data on readmission rates for all hospital

[[Page 28106]]

inpatients (not just Medicare patients) for a broad range of both
subsection (d) and non-subsection(d) hospitals, in order to calculate
the hospital-specific readmission rates for all such hospital
inpatients and to publicly report these ``all-patient'' readmission
rates.
2. Regulatory Background
The payment adjustment factor set forth in section 1886(q) of the
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51660 through 51676), we addressed the issues of
the selection of readmission measures and the calculation of the excess
readmissions ratio, which will be used, in part, to calculate the
readmissions adjustment factor. Specifically, in that final rule, we
finalized policies that relate to the portions of section 1886(q) of
the Act that address the selection of and measures for the applicable
conditions, the definitions of ``readmission'' and ``applicable
period,'' and the methodology for calculating the excess readmissions
ratio. We also established policies with respect to measures for
readmission for the applicable conditions and our methodology for
calculating the excess readmissions ratio.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized policies that relate to the portions of section
1886(q) of the Act that address the calculation of the hospital
readmission payment adjustment factor and the process by which
hospitals can review and correct their data. Specifically, in that
final rule, we addressed the base operating DRG payment amount,
aggregate payments for excess readmissions and aggregate payments for
all discharges, the adjustment factor, applicable hospital, limitations
on review, and reporting of hospital-specific information, including
the process for hospitals to review readmission information and submit
corrections. We also established a new Subpart I under 42 CFR part 412
(Sec. Sec. 412.150 through 412.154) to codify rules for implementing
the Hospital Readmissions Reduction Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through
50676), we finalized our policies that relate to refinement of the
readmissions measures and related methodology for the current
applicable conditions, expansion of the ``applicable conditions''
beginning for FY 2015, and clarification of the process for reporting
hospital-specific information, including the opportunity to review and
submit corrections. We also established policies related to the
calculation of the adjustment factor for FY 2014.
3. Overview of Proposals and Policies for the FY 2015 Hospital
Readmissions Reduction Program
In this proposed rule, we are--
Proposing to make refinements to the readmissions measures
and related methodology for FY 2015 and subsequent years (section
IV.H.4. of the preamble of this proposed rule);
Proposing to expand the scope of ``applicable conditions''
for FY 2017 to include coronary artery bypass graft (CABG) (section
IV.H.6. of the preamble of this proposed rule);
Discussing the maintenance of technical specifications for
quality measures (section IV.H.7. of the preamble of this proposed
rule);
Describing a waiver from the Hospital Readmissions
Reduction Program for hospitals formerly paid under section 1814(b)(3)
of the Act (Sec. 412.154(d)) (section IV.H.8. of the preamble of this
proposed rule);
Proposing to specify the adjustment factor floor for FY
2015 (section IV.H.9. of the preamble of this proposed rule);
Proposing to specify the applicable period for FY 2015
(section IV.H.10. of the preamble of this proposed rule);
Proposing to make changes to the calculation of the
aggregate payments for excess readmissions to include two additional
readmissions measures (chronic obstructive pulmonary disease (COPD) and
THA/TKA) (section IV.H.11. of the preamble of this proposed rule); and
Discussing whether to establish an exceptions process to
address hospitals with extraordinary circumstances (section IV.H.12. of
the preamble of this proposed rule).
4. Proposed Refinement of the Readmission Measures and Related
Methodology for FY 2015 and Subsequent Years Payment Determinations
a. Proposed Refinement of Planned Readmission Algorithm for Acute
Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN),
Chronic Obstructive Pulmonary Disease (COPD), and Total Hip
Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission
Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through
50655), we finalized for 2014 and subsequent years' payment
determinations the use of the CMS Planned Readmission Algorithm Version
2.1 in the AMI, HF, PN, COPD and THA/TKA readmission measures. The
algorithm identifies readmissions that are planned and occur within 30
days of discharge from the hospital. A complete description of the CMS
Planned Readmission Algorithm Version 2.1, which includes lists of
planned diagnoses and procedures, can be found on our Web site
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
NQF has endorsed the use of the algorithm for these measures.
Last year's stakeholder comments supported the incorporation of the
CMS Planned Readmission Algorithm Version 2.1 and suggested that we
update it on a regular basis. In the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50652), we agreed to continually review the CMS Planned
Readmission Algorithm and make updates as needed. Subsequently we have
identified and made improvements to the algorithm. We are proposing to
use the revised version, the CMS Planned Readmission Algorithm Version
3.0, for the AMI, HF, PN, COPD, and THA/TKA readmission measures for FY
2015 and subsequent payment determinations. We are also proposing to
use this algorithm for the CABG readmission measure proposed for
inclusion in the Hospital Readmissions Reduction Program starting in FY
2017.
Version 3.0 incorporates improvements that were made based on a
validation study of the algorithm. Researchers reviewed 634 patients'
charts at 7 hospitals, classified readmission as planned or unplanned
based on the chart review, and compared the results to the claims-based
algorithm's classification of the readmissions. The findings suggested
the algorithm was working well but could be improved.
Specifically, the study suggested the need to make small changes to
the tables of procedures and conditions used in the algorithm to
classify readmission as planned or unplanned. The algorithm uses the
Agency for Healthcare Research and Quality's (AHRQ's) Clinical
Classification Software (CCS) to group thousands of procedure and
diagnosis codes into fewer categories of related procedures or
diagnoses. The algorithm then uses four tables of procedures and
diagnoses categories and a flow diagram to classify tables as planned
or unplanned. For all measures, the first table identifies procedures
that, if present in a readmission, classify the readmission as planned.
The second table identifies primary discharge diagnoses that always
classify readmissions as planned. Because almost all planned admissions
are for

[[Page 28107]]

procedures or surgeries, a third table identifies procedures for which
patients are typically admitted; if any of these procedures are coded
in the readmission, we classify a readmission as planned as long as
that readmission does not have an acute (unplanned) primary discharge
diagnosis. The fourth table lists the acute (unplanned) primary
discharge diagnoses that disqualify readmissions that include one or
more of the potentially planned procedure in the third table as
planned. These tables are structured the same across all measures but
the specific procedure and conditions they contain vary slightly for
certain measures based on clinical considerations for each cohort. The
final proposed tables for each measure can be found on our Web site
under the Measure Methodology reports (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
Version 3.0 modifies two of these tables by removing or adding
procedures or conditions to improve the accuracy of the algorithm.
First, validation study revealed that the algorithm could be improved
by removing two procedure CCS categories from the third table, the
potentially planned procedure table: CCS 211--Therapeutic Radiation and
CCS 224--Cancer Chemotherapy. Typically, patients do not require
admission for scheduled Therapeutic Radiation treatments (CCS 211). The
study found that readmissions that were classified as planned because
they included Therapeutic Radiation were largely unplanned.
The algorithm was also more accurate when CCS 224--Cancer
Chemotherapy was removed from the potentially planned procedure table.
The second table of the algorithm classifies all readmissions with a
principal diagnosis of Maintenance Chemotherapy as planned. Most
patients who receive cancer chemotherapy have both a code for Cancer
Chemotherapy (CCS 224) and a principal discharge diagnosis of
Maintenance Chemotherapy (CCS 45). In the validation study, the
readmissions for patients who received Cancer Chemotherapy (CCS 224)
but who did not have a principal diagnosis of Maintenance Chemotherapy
were largely unplanned, so removing CCS 224 from the potentially
planned procedure table improved the algorithm's accuracy. Therefore,
Version 3.0 removes CCS 211 and CCS 224 from the list of potentially
planned procedures to improve the accuracy of the algorithm.
As noted above, the algorithm uses a table of acute principal
discharge diagnoses to help identify unplanned readmissions.
Readmissions that have a principal diagnosis listed in the table are
classified as unplanned, regardless of whether they include a procedure
in the potentially planned procedure table. The validation study
identified one diagnosis CCS that should be added to the table of acute
diagnoses to more accurately identify truly unplanned admissions as
unplanned: Hypertension with Complications (CCS 99). Hypertension with
complications is a diagnosis that is rarely associated with planned
readmissions.
In addition, the validation study identified a subset of ICD-9-CM
diagnosis codes within two CCS diagnosis categories that should be
added to the acute diagnosis table to improve the algorithm. CCS 149,
Pancreatic Disorders, includes the code for acute pancreatitis;
clinically there is no situation in which a patient with this acute
condition would be admitted for a planned procedure. Therefore, Version
3.0 adds the ICD-9 code for acute pancreatitis, 577.0, to the acute
primary diagnosis table to better identify unplanned readmissions.
Finally, CCS 149, Biliary Tract Disease, is a mix of acute and nonacute
diagnoses. Adding the subset of ICD-9-CM codes within this CCS group
that are for acute diagnoses to the list of acute conditions improves
the accuracy of the algorithm for these acute conditions while still
ensuring that readmissions for planned procedures, like
cholecystectomies, are counted accurately as planned. For more detailed
information on how the algorithm is structured and the use of tables to
identify planned procedures and diagnoses, we refer readers to
discussion of the CMS Planned Readmission Algorithm Version 2.1 in our
reports (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). As noted above, readers can find the specific
Version 3.0 tables for each measure in the measure updates and
specifications reports at the above link.
We invite public comment on these proposals.
b. Proposed Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort
In this proposed rule, for FY 2015 and subsequent years, we are
proposing to refine the measure cohort for the Elective Primary Total
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) All-Cause
Unplanned 30-Day Risk-Standardized Readmission Measure.
Currently, the THA/TKA Readmission Measure adopted for the Hospital
Readmissions Reduction Program is intended to only include patients who
have an elective THA or TKA. This measure therefore excludes patients
who have a principal discharge diagnosis of femur, hip, or pelvic
fracture on their index admission since hip replacement for hip
fracture is not an elective procedure. However, after hospitals
reviewed their hospital-specific THA/TKA Readmission Measure data
during the national dry run conducted during September and October of
2012, we learned that hospitals code hip fractures that occur during
the same admission as a THA as either a principal or secondary
diagnosis. According to feedback received from hospitals participating
in the dry run, the measure methodology failed to identify and
therefore appropriately exclude a small number of patients (that is,
0.42 percent of patients in 2009-2010 data) with hip fracture who had
non-elective total hip arthroplasty.
To ensure that all such hip fracture patients are excluded from the
measure, we are proposing to refine the measure to exclude patients
with hip fracture coded as either principal or secondary diagnosis
during the index admission. We believe this refinement is responsive to
comments from hospitals and will allow us to accurately exclude
patients who were initially admitted for a hip fracture and then
underwent total hip arthroplasty, making their procedure nonelective.
We invite public comments on this proposal.
c. Anticipated Effect of Proposed Refinements on Measures
The proposed refinement of the CMS Planned Readmission Algorithm
Version 2.1 to Version 3.0 would have had the following effects on the
measures based on our analyses of discharges between July 2009 and June
2012, if these changes had been applied for FY 2014. We note that these
statistics are for illustrative purposes only, and we are not proposing
to revise the measure calculations for the FY 2014 payment
determination. Rather, we are proposing to apply these changes to the
readmission measures for the FY 2015 payment determination and
subsequent years.
Among hospitals that were subject to the Hospital Readmissions
Reduction Program in FY 2014 (Table IV.H.1), the number of eligible
discharges based on

[[Page 28108]]

the July 2009 through June 2012 data were 494,121 discharges for AMI;
1,165,606 discharges for HF; 954,033 discharges for PN; 926,433
discharges for COPD; and 858,266 discharges for hip/knee.
The proposed 30-day readmission rate (excluding the planned
readmissions) would remain constant for AMI and COPD; increase by 0.1
percentage points for HF and PN; and increase by 0.4 percentage points
for hip/knee.
The new national readmission (unplanned) rate for each condition
would have been 17.9 percent for AMI; 23.0 percent for HF; 17.7 percent
for PN; 21.1 percent for COPD; and 5.27 percent for hip/knee.
The number of readmissions considered planned (and, therefore, not
counted as a readmission) would decrease by 319 for AMI; 1,313 for HF;
866 for PN, 547 for COPD; and 298 for hip/knee.
The proposed modification of the hip/knee measure cohort would have
had the following effects on the measure: the measure cohort would have
been reduced by 0.37 percent; the crude readmission rate would have
been reduced by 0.02 absolute percentage points; and the mean RSRR
would have been reduced by 0.03 absolute percentage points.

Table IV.H.1.--Comparison of Planned Readmission Algorithms V 2.1 and 3.0 for AMI/HF/PN/COPD/HK Readmission Measures
[Based on 2009-2012 discharges from 3,025 hospitals]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMI HF PN COPD Hip/Knee
---------------------------------------------------------------------------------------------------------------------------------
V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Discharges.......................................... 494,121 494,121 1,165,606 1,165,606 954,033 954,033 926,433 926,433 858,266 858,266
Number of Unplanned Readmissions.............................. 88,567 88,248 268,072 266,759 169,213 168,347 195,595 195,048 45,205 44,907
Readmission Rate.............................................. 17.9% 17.9% 23.0% 22.9% 17.7% 17.6% 21.1% 21.1% 5.27% 5.23%
Number of Planned Readmissions................................ 11,577 11,896 15,293 16,606 5,867 6,733 5,858 6,405 2,283 2,581
Planned Readmission Rate...................................... 2.3% 2.4% 1.3% 1.4% 0.6% 0.7% 0.6% 0.7% 0.3% 0.3%
% of Readmissions that are Planned............................ 11.6% 11.9% 5.4% 5.9% 3.4% 3.8% 2.9% 3.2% 4.8% 5.4%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. No Proposed Expansion of the Applicable Conditions for FY 2016
In FY 2014 IPPS/LTCH PPS final rule we finalized for FY 2015 two
new condition specific readmission measures: (1) Hospital-level 30-day
all-cause risk-standardized readmission rate following elective total
hip arthroplasty (THA) and total knee arthroplasty (TKA) (NQF
1551); (2) Hospital-level 30-day all-cause risk-standardized
readmission rate following chronic obstructive pulmonary disease (COPD)
(NQF 1891), bringing the total number of finalized applicable
conditions to five over the past two years of implementation. We also
noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657) that
commenters requested that we delay adding other condition-specific
measures. In view of these requests and our belief that it is
reasonable to allow more time for hospitals to become familiar with
these 5 applicable conditions, before adding other applicable
conditions we are not proposing any new applicable conditions for FY
2016.
6. Proposed Expansion of the Applicable Conditions for FY 2017 to
Include the Patients Readmitted Following Coronary Artery Bypass Graft
(CABG) Surgery Measure
a. Background
Under section 1886(q)(5)(B) of the Act, ``[b]eginning with FY 2015,
the Secretary shall, to the extent practicable, expand the applicable
conditions beyond the 3 conditions for which measures have been
endorsed as described in subparagraph (A)(ii)(I) . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission [MedPAC] in its report to Congress in June
2007, and to other conditions and procedures as determined appropriate
by the Secretary.'' The four conditions and procedures recommended by
MedPAC are: (1) Coronary artery bypass graft (CABG) surgery; (2)
chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary
intervention (PCI); and (4) other vascular conditions. Section
1886(q)(5)(A)(i) of the Act directs the Secretary, in selecting an
``applicable condition,'' to choose from among readmissions ``that
represent conditions or procedures that are high volume or high
expenditures under this title (or other criteria specified by the
Secretary).''
In accordance with section 1886(q)(5)(A) of the Act, effective for
the calculation of the readmissions payment adjustment factors in FY
2017, we are proposing to expand the scope of applicable conditions and
procedures to include patients readmitted following CABG surgery. This
proposal is consistent with the prior FY 2014 IPPS/LTCH PPS final rule
(78 FR 50657) where we indicated our intent to explore quality measures
that address CABG readmission rates. We describe this measure in detail
below.
We are proposing the inclusion of the condition of CABG
readmissions to the Hospital Readmissions Reduction Program based on
MedPAC's recommendations. For this condition, we developed a Hospital-
Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery
Bypass Graft (CABG) Surgery measure. The National Quality Forum (NQF)
Measure Applications Partnership (MAP) Hospital workgroup conditionally
supported this measure for use in the Hospital Readmissions Reduction
Program. The condition for support is based on attainment of NQF
endorsement. On February 5, 2014, we submitted the Hospital-Level 30-
Day All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft

[[Page 28109]]

(CABG) Surgery measure to NQF for endorsement.
The rationale for expanding the applicable conditions and the
measures used to estimate the excess readmissions ratio is described in
detail below.
b. Overview of the Proposed CABG Readmissions Measure: Hospital-Level,
30-Day, All-Cause, Unplanned Readmission Following Coronary Artery
Bypass Graft (CABG) Surgery
Among the seven conditions MedPAC identified in its 2007 Report to
Congress as having the highest potentially preventable readmission
rate, CABG had the highest rate of readmissions within 15 days
following discharge (13.5 percent) and second highest average Medicare
payment per readmission ($8,136).\27\ The annual cost to Medicare for
potentially preventable CABG readmissions was estimated at $151
million.\28\
---------------------------------------------------------------------------

\27\ Medicare Payment Advisory Committee. Report to the
Congress: Promoting Greater Efficiency in Medicare, 2007.
\28\ Ibid.
---------------------------------------------------------------------------

Evidence also shows variation in readmissions rates for patients
with CABG surgery, supporting the finding that opportunities exist for
improving care. The median, 30-day, risk-standardized readmission rate
among Medicare fee-for-service patients aged 65 or older hospitalized
for CABG in 2009 was 17.2 percent, and ranged from 13.9 percent to 22.1
percent across 1,160 hospitals.\29\ Although data documenting
readmission reductions in CABG are limited, there are data that support
CABG readmission as an important quality metric.\30\ Studying
readmission rates after CABG surgery in New York, Hannan, et al. found:
(1) Wide variation in readmission rates; (2) the most common cause of
readmission after CABG is complication related to the surgery; and (3)
that hospital-level variables such as use of cardiac rehabilitation and
length of stay influenced readmission rates.\31\ The authors also noted
that readmission rates were not closely correlated to mortality rates
and thus measuring readmission rates likely offers a complementary
metric intended to assess a different domain of quality. Mortality
measures are more likely to encourage improvements in clinical quality,
including rapid triage, effective safety practices, and early
intervention and coordination in the hospital. Readmission measures
place an increased emphasis on aspects of quality related to effective
transitions to the outpatient setting, clear communication with
patients and caregivers, and collaboration across communities and
providers. Together, these data suggest that reducing readmission rates
following CABG surgery is an important target for quality improvement.
In addition, inclusion of this measure in the Hospital Readmissions
Reduction Program aligns with CMS' Quality Strategy objectives to
promote successful transitions of care for patients from the acute care
setting to the outpatient setting, and to reduce short-term readmission
rates. In its final recommendations for rulemaking, the MAP
conditionally supported the inclusion of the proposed CABG measure
pending NQF endorsement and implementation. In order to address this
concern, we submitted the CABG readmission measure to NQF for
endorsement on February 5, 2014.
---------------------------------------------------------------------------

\29\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
\30\ Rumsfield J, Allen L. Reducing Readmission Rates: Does
Coronary Artery Bypass Graft Surgery Provide Clarity? JACC
Cardiovasc Interv. May 2011;4(5):2.
\31\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

We believe the proposed Hospital-Level, 30-Day, All-Cause,
Unplanned Readmission Measure Following CABG Surgery warrants inclusion
in the Hospital Readmissions Reduction Program for FY 2017, because it
meets the criteria in section 1886(q)(5)(A) of the Act, as a high cost,
high volume condition that was recognized by MedPAC Report to Congress
in 2007 as a specific medical condition to focus on for improving
readmission rates. As with other readmission measures, this measure
also excludes such unrelated readmissions as planned readmissions and
transfers to other hospitals. For these reasons we believe this measure
is appropriate for the Hospital Readmissions Reduction Program.
We invite public comments on this proposal.
c. Proposed Methodology for the CABG Measure: Hospital-Level, 30-Day,
All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft
(CABG) Surgery
The proposed CABG readmission measure assesses hospitals' 30-day,
all-cause risk-standardized rate of unplanned readmission following
admission for a CABG procedure. In general, the measure uses the same
approach to risk-adjustment and hierarchical logistic modeling (HLM)
methodology that is specified for the AMI, HF, PN, COPD and THA/TKA
readmission measures that we previously adopted for this program.
Information on how the measure employs HLM can be found in the 2012
CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). This
approach appropriately accounts for the types of patients a hospital
treats (that is, hospital case-mix), the number of patients it treats,
and the quality of care it provides. The HLM methodology is an
appropriate statistical approach to measuring quality based on patient
outcomes when the patients are clustered within hospitals (and,
therefore, the patients' outcomes are not statistically independent)
and sample sizes vary across hospitals. The measure methodology defines
hospital case-mix based on the clinical diagnoses provided in the
hospitals' claims for the hospitals' patient inpatient and outpatient
visits for the 12 months prior to the hospitalization for CABG, as well
as those present in the claims for care at admission. However, the
methodology specifically does not account for diagnoses present in the
index admission that may indicate complications rather than patient
comorbidities.
We discuss the measure methodology below.
(1) Data Sources
The proposed CABG readmission measure is based on data derived from
administrative claims. It uses Medicare administrative data from
hospitalizations for fee-for-service Medicare beneficiaries
hospitalized for a CABG procedure.
(2) Definition of Outcome
The proposed CABG readmission measure defines 30-day, all-cause
readmission as an unplanned subsequent inpatient admission to any
applicable acute care facility for any cause within 30 days of the date
of discharge from the index hospitalization. A number of studies
demonstrate that improvements in care at the time of discharge can
reduce 30-day readmission rates.^{32 33} Thirty days is

[[Page 28110]]

a meaningful timeframe for hospitals because readmissions are more
likely attributable to care received within the index hospitalization
and during the transition to the outpatient setting.
---------------------------------------------------------------------------

\32\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\33\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------

The proposed CABG readmission measure assesses all-cause unplanned
readmissions (excluding planned readmissions) rather than readmissions
for CABG only. We include all unplanned readmissions for several
reasons. First, from the patient perspective, a readmission for any
reason is likely to be an undesirable outcome of care, even though not
all readmissions are preventable. Second, limiting the measure to CABG-
related readmissions may focus quality improvement efforts too narrowly
rather than encouraging broader initiatives aimed at improving the
overall care within the hospital and care transitions from the hospital
setting. Moreover, it is often hard to exclude quality issues and
accountability for a readmission based on the documented cause of
readmission. For example, a patient who underwent a CABG surgery and
developed a hospital-acquired infection might ultimately be readmitted
for sepsis. It would be inappropriate to consider such a readmission to
be unrelated to the care the patient received for their CABG surgery.
Finally, while the measure does not presume that each readmission is
preventable, quality improvement interventions generally have shown
reductions in all types of readmissions.
The proposed measure does not count planned readmissions as
readmissions. Planned readmissions are identified in claims data using
the CMS Planned Readmission Algorithm Version 3.0 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. Version 2.1 of the algorithm was finalized for use in the
Hospital Readmissions Reduction Program in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50651 through 50655). We have since updated the
algorithm to Version 3.0 as part of yearly measure maintenance. The
proposed CABG readmission measure uses the planned readmission
algorithm, tailored for CABG patients. We adapted the algorithm for
this group of patients with input from Cardiothoracic surgeons and
other experts, narrowing the types of readmissions considered planned
since planned readmissions following CABG are less common and less
varied than among patients discharged from the hospital following a
medical admission. More detailed information on how the proposed CABG
readmission measure incorporates the CMS Planned Readmission Algorithm
Version 3.0 can be found in the 2012 CABG Readmission Measure
Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). For the
proposed CABG readmission measure, unplanned readmissions that fall
within the 30-day post-discharge timeframe from the index admission
would not be counted as readmissions for the index admission if they
were preceded by a planned readmission.
(3) Cohort of Patients
In order to include a clinically coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and non-cardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures; that is, CABG procedures performed without concomitant
high-risk cardiac and noncardiac procedures.\34\ Limiting the measure
cohort to ``isolated'' CABG patients is consistent with published
reports of CABG outcomes; therefore, the proposed measure cohort
considers only patients undergoing isolated CABG as eligible for
inclusion in the measure. We defined isolated CABG patients as those
undergoing CABG procedures without concomitant valve or other major
cardiac, vascular or thoracic procedures. In addition, our clinical
experts, consultants, and Technical Expert Panel (TEP) members agreed
that an isolated CABG cohort is a clinically coherent cohort suitable
for a risk-adjusted outcome measure. For detailed information on the
cohort definition, we refer readers to the 2012 CABG Readmission
Measure Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
---------------------------------------------------------------------------

\34\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

(4) Inclusion and Exclusion Criteria
The proposed CABG readmission measure includes hospitalizations for
patients who are 65 years of age or older at the time of index
admission and for whom there was a complete 12 months of Medicare fee-
for-service enrollment to allow for adequate data for risk adjustment.
The measure excludes the following admissions from the measure cohort:
(1) Admissions for patients who are discharged against medical advice
(excluded because providers do not have the opportunity to deliver full
care and prepare the patient for discharge); (2) admissions for
patients who die during the initial hospitalization (these patients are
not eligible for readmission); (3) admissions for patients with
subsequent qualifying CABG procedures during the measurement period (a
repeat CABG procedure during the measurement period very likely
represents a complication of the original CABG procedure and is a
clinically more complex and higher risk surgery; therefore, we select
the first CABG admission for inclusion in the measure and exclude
subsequent CABG admissions from the cohort); and (4) admissions for
patients without at least 30 days post-discharge enrollment in Medicare
fee-for-service (excluded because the 30-day readmission outcome cannot
be assessed in this group).
(5) Transferred Patients and Attribution of Readmission Outcome
Among medical conditions, such as AMI, heart failure and pneumonia,
transfers between acute care facilities can occur for a variety of
different reasons and it is likely that the discharging hospital has
the most influence over a patient's risk of readmission and therefore
the readmission outcome is appropriately assigned to the hospital that
discharges the patient. For that reason, the currently publicly
reported AMI, heart failure and pneumonia readmission measures
attribute the readmission outcome to the hospital discharging the
patient, even if that is not the hospital that initially admitted the
patient.
In contrast, following CABG surgery, transfer to another acute care
facility after CABG is most likely due to a complication of the CABG
procedure or the peri-operative care the patient received. Therefore,
the care provided by the hospital performing the CABG procedure likely
dominates readmission risk, even among transferred patients. This
viewpoint is supported by the high proportion of CABG readmissions for
diagnoses such as heart failure, pleural effusion and pneumonia and
endorsed by the clinical experts on both the Yale New Haven Hospital
Health Services Corporation, Center for Outcomes Research and
Evaluation (YNHHSC/CORE), and the Society of Thoracic Surgeons (STS)
CABG readmission measure development working groups

[[Page 28111]]

and our TEP. Therefore, for this measure, the readmission outcome is
attributed to the hospital performing the first (``index'') CABG, even
if this is not the discharging hospital. For example, a patient may be
admitted to hospital A for a CABG that qualifies them for inclusion in
the measure and is then transferred to hospital B. The initial
admission to hospital A and the admission to hospital B are considered
one acute episode of care, made up of two inpatient admissions. The
measure identifies transferred patients as those who are admitted to an
acute care hospital on the same day or following day of discharge from
an eligible admission.
(6) Risk-Adjustment
The proposed CABG readmission measure adjusts for differences
across hospitals in the level of risk their patients have for
readmission relative to patients cared for by other hospitals. The
measure uses administrative claims data to identify patient clinical
conditions and comorbidities to adjust patient risk for readmission
across hospitals, but does not adjust for potential complications of
care. The model does not adjust for socioeconomic status or race
because risk adjusting for these characteristics would hold hospitals
with a large proportion of patients of minority race or low
socioeconomic status to a different standard of care than other
hospitals. Rather, this measure seeks to illuminate quality
differences, and risk adjustment for socioeconomic status or race would
obscure such quality differences.
(7) Calculating the Excess Readmissions Ratio
The proposed CABG readmission measure uses the same methodology and
statistical modeling approach as the other Hospital Readmissions
Reduction Program measures. We published a detailed description of how
the readmission measures estimate the excess readmissions ratio in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381).
In summary, we are proposing to adopt the Hospital-Level, 30-Day,
All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft
(CABG) Surgery measure in the Hospital Readmissions Reduction Program
beginning in FY 2017.
We note that the set of hospitals for which this measure is
calculated for the Hospital Readmissions Reduction Program differs from
those used in calculations for the Hospital IQR Program. The Hospital
Readmissions Reduction Program includes only subsection (d) hospitals
as defined in 1886(d)(1)(B) of the Act (and, if not waived from
participating, hospitals paid under section 1814(b)(3) of the Act),
while the Hospital IQR Program calculations include non-IPPS hospitals
such as CAHs, cancer hospitals, and hospitals located in the
Territories of the United States. However, we believe that the CABG
readmissions measure is appropriate for use in both programs.
We invite public comment on this proposal.
7. Maintenance of Technical Specifications for Quality Measures
Technical specification of the re admission measures are provided
at our Web site in the Measure Methodology Reports (available at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). Additional
resources about the Hospital Readmissions Reduction Program and measure
technical specifications and methodology are on the QualityNet Web site
on the Resources Web page (available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995).
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF endorsed. As part of its regular
maintenance process for NQF-endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes
with NQF on an annual basis. NQF solicits information from measure
stewards for annual reviews, and it reviews measures for continued
endorsement in a specific 3-year cycle.
We note that NQF's annual or triennial maintenance processes for
endorsed measures may result in the NQF requiring updates to the
measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates required by
the NQF into the measure specifications we have adopted for the
Hospital Readmissions Program so that these measures remain up-to-date.
The NQF regularly maintains its endorsed measures through annual and
triennial reviews, which may result in the NQF requiring updates to the
measures. We note for this calendar year the AMI readmission measure is
undergoing the NQF maintenance endorsement process.
For the Hospital Readmissions Reduction Program, we are proposing
to follow the finalized processes outlined for addressing changes to
adopted measures in the Hospital IQR Program ``Maintenance of Technical
Specifications for Quality Measures'' section found in section
IX.A.1.b. of the preamble of this proposed rule.
We believe this proposal adequately balances our need to
incorporate NQF updates to NQF-endorsed Hospital Readmissions Reduction
Program measures in the most expeditious manner possible while
preserving the public's ability to comment on updates that so
fundamentally change an endorsed measure that it is no longer the same
measure that we originally adopted. We invite public comment on this
proposal.
8. Waiver From the Hospital Readmissions Reduction Program for
Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (Sec.
412.152 and Sec. 412.154(d))
The definition of ``applicable hospital'' under section
1886(q)(5)(C) of the Act also includes hospitals paid under section
1814(b)(3) of the Act. Section 1886(q)(2)(B)(ii) of the Act, however,
allows the Secretary to exempt such hospitals from the Hospital
Readmissions Reduction Program, provided that the State submit an
annual report to the Secretary describing how a similar program to
reduce hospital readmissions in that State achieves or surpasses the
measured results in terms of health outcomes and cost savings
established by Congress for the program as applied to ``subsection (d)
hospitals.''
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Act, as added by section 3021 of the Affordable
Care Act, which authorizes the testing of innovative payment and
service delivery models, including models that allow States to ``test
and evaluate systems of all-payer payment reform for the medical care
of residents of the State, including dual-eligible individuals.''
Section 1115A of the Act authorizes the Secretary to waive such
requirements of titles XI and XVIII of the Act as may be necessary
solely for purposes of carrying out section 1115A of the Act with
respect to testing models.

[[Page 28112]]

As part of this agreement, the State of Maryland also elected to no
longer have Medicare pay Maryland hospitals in accordance with section
1814(b)(3) of the Act. Therefore, section 1886(q)(2)(B)(ii) of the Act
is no longer applicable to Maryland hospitals. The effect of Maryland
hospitals no longer being paid under 1814(b)(3) of the Act is that they
are not entitled to be exempted from the Hospital Readmissions
Reduction Program under section 1886(q)(2)(B)(ii) of the Act and, but
for the model, would be included in the Hospital Readmissions Reduction
Program. In other words, the exemption from the Hospital Readmissions
Reduction Program under section 1814(b)(3) of the Act no longer
applies. However Maryland hospitals will not be participating in the
Hospital Readmissions Reduction Program because section 1886(q) and its
implementing regulations have been waived for purposes of the model,
subject to the terms of the agreement.
We are proposing to make conforming changes to the implementing
regulations to reflect this change. Under Sec. 412.152, we are
proposing to delete from the definition of an ``applicable hospital''
the following language: ``or a hospital in Maryland that is paid under
section 1814(b)(3) of the Act and that, absent the waiver specified by
section 1814(b)(3) of the Act, would have been paid under the hospital
inpatient prospective payment system.'' Under Sec. 412.154, we are
proposing to delete Sec. 412.154(d) in its entirety. We invite public
comment on these proposals.
9. Floor Adjustment Factor for FY 2015 (Sec. 412.154(c)(2))
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. Specifically, it states that
the ratio is ``equal to 1 minus the ratio of--(i) the aggregate
payments for excess readmissions . . . and (ii) the aggregate payments
for all discharges . . . .'' The calculation of this ratio is codified
at Sec. 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the
Act specifies the floor adjustment factor, which is set at 0.99 for FY
2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal
years. We codified the floor adjustment factor at Sec. 412.154(c)(2)
of the regulations (77 FR 53386).
Consistent with 1886(q)(3) of the Act, codified at Sec.
412.154(c)(2), the adjustment factor is either the greater of the ratio
or, for FY 2015 and subsequent fiscal years, a floor adjustment factor
of 0.97. Under our established policy, the ratio is rounded to the
fourth decimal place. In other words, for FY 2015 and subsequent fiscal
years, a hospital subject to the Hospital Readmissions Reduction
Program will have an adjustment factor that is between 1.0 and 0.9700.
10. Applicable Period for FY 2015
Under section 1886(q)(5)(D) of the Act, the Secretary has the
authority to specify the applicable period with respect to a fiscal
year under the Hospital Readmissions Reduction Program. We finalized
our policy to use 3 years of claims data to calculate the readmission
measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the
definition of ``applicable period'' in the regulations at 42 CFR
412.152 as the 3-year period from which data are collected in order to
calculate excess readmissions ratios and adjustments for the fiscal
year, which includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment.
Consistent with the definition at Sec. 412.152, we established
that the applicable period for FY 2014 under the Hospital Readmissions
Reduction Program is the 3-year period from July 1, 2009, to June 30,
2012. That is, we determined the excess readmissions ratios and
calculate the payment adjustment (including aggregate payments for
excess readmissions and aggregate payments for all discharges) for FY
2014 using data from the 3-year time period of July 1, 2009 to June 30,
2012, as this was the most recent available 3-year period of data upon
which to base these calculations (78 FR 50669).
In this proposed rule, for FY 2015, consistent with the definition
at Sec. 412.152, we are proposing an ``applicable period'' for the
Hospital Readmissions Reduction Program to be the 3-year period from
July 1, 2010 to June 30, 2013. In other words, we are proposing that
the excess readmissions ratios and the payment adjustment (including
aggregate payments for excess readmissions and aggregate payments for
all discharges) for FY 2015 would be calculated based on data from the
3-year time period of July 1, 2010 to June 30, 2013. We note that for
the purpose of modeling the readmissions payment adjustments for FY
2015 in this proposed rule, the excess readmissions ratios will be
based on the applicable period from FY 2014 (that is July 1, 2009 to
June 30, 2012) and the MedPAR claims data to calculate the readmissions
payment adjustments will be based on the proposed applicable period for
FY 2015 (that is July 1, 2010 to June 30, 2013).
We invite public comment on these proposals.
11. Proposed Inclusion of THA/TKA and COPD Readmissions Measures To
Calculate Aggregate Payments for Excess Readmissions Beginning in FY
2015
Under the Hospital Readmissions Reduction Program the ``base
operating DRG payment amount'' defined at Sec. 412.152 is used both to
determine the readmission adjustment factor that accounts for excess
readmissions under section 1886(q)(3) of the Act and to determine which
payment amounts will be adjusted to account for excess readmissions
under section 1886(q) of the Act. Consistent with section 1886(q)(2) of
the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53383), under the regulations at Sec. 412.152, we define the ``base
operating DRG payment amount'' and specify that it does not include
adjustments or add-on payments for IME, DSH, outliers and low-volume
hospitals as required by section 1886(q)(2) of the Act. Furthermore,
consistent with section 1886(q)(2)(B)(i) of the Act, for SCHs and for
MDHs for FY 2013, the definition of ``base operating DRG payment
amount'' at Sec. 412.152 excludes the difference between the
hospital's applicable hospital-specific payment rate and the Federal
payment rate.
For FY 2015 and subsequent years, for purposes of calculating the
payment adjustment factors and applying the payment methodology, we are
proposing that the base operating DRG payment amount for MDHs includes
the difference between the hospital-specific payment rate and the
Federal payment rate (as applicable).
Section 1886(q)(3)(B) of the Act specifies the ratio used to
calculate the adjustment factor under the Hospital Readmissions
Reduction Program. It states that the ratio is ``equal to 1 minus the
ratio of--(i) the aggregate payments for excess readmissions . . . and
(ii) the aggregate payments for all discharges. . . .'' The definition
of ``aggregate payments for excess readmissions'' and ``aggregate
payments for all discharges,'' as well as a methodology for calculating
the numerator of the ratio (aggregate payments for excess readmissions)
and the denominator of the ratio (aggregate

[[Page 28113]]

payments for all discharges) are codified at Sec. 412.154(c)(2) of the
regulations (77 FR 53387).
Section 1886(q)(4) of the Act sets forth the definitions of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' for an applicable hospital for the applicable
period. The term ``aggregate payments for excess readmissions'' is
defined in section 1886(q)(4)(A) of the Act as ``for a hospital for an
applicable period, the sum, for applicable conditions . . . of the
product, for each applicable condition, of (i) the base operating DRG
payment amount for such hospital for such applicable period for such
condition; (ii) the number of admissions for such condition for such
hospital for such applicable period; and (iii) the excess readmissions
ratio . . . for such hospital for such applicable period minus 1.'' We
codified this definition of ``aggregate payments for excess
readmissions'' under the regulations at Sec. 412.152 as the product,
for each applicable condition, of: (1) The base operating DRG payment
amount for the hospital for the applicable period for such condition;
(2) the number of admissions for such condition for the hospital for
the applicable period; and (3) the excess readmissions ratio for the
hospital for the applicable period minus 1 (77 FR 53675).
The excess readmissions ratio is a hospital-specific ratio
calculated for each applicable condition. Specifically, section
1886(q)(4)(C) of the Act defines the excess readmissions ratio as the
ratio of ``risk-adjusted readmissions based on actual readmissions''
for an applicable hospital for each applicable condition, to the
``risk-adjusted expected readmissions'' for the applicable hospital for
the applicable condition. The methodology for the calculation of the
excess readmissions ratio was finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51673). ``Aggregate payments for excess
readmissions'' is the numerator of the ratio used to calculate the
adjustment factor under the Hospital Readmissions Reduction Program (as
described in further detail later in this section).
The term ``aggregate payments for all discharges'' is defined at
section 1886(q)(4)(B) of the Act as ``for a hospital for an applicable
period, the sum of the base operating DRG payment amounts for all
discharges for all conditions from such hospital for such applicable
period.'' ``Aggregate payments for all discharges'' is the denominator
of the ratio used to calculate the adjustment factor under the Hospital
Readmissions Reduction Program. We codified this definition of
``aggregate payments for all discharges'' under the regulations at
Sec. 412.152 (77 FR 53387).
We finalized the inclusion of two additional applicable conditions,
COPD and THA/TKA, to the Hospital Readmissions Reduction Program
beginning for FY 2015 in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50657 through 50664). In this section, we discuss the proposed
methodology to include these two additional measures in the calculation
of the readmissions payment adjustment for FY 2015. Specifically, we
are proposing how the addition of COPD and THA/TKA applicable
conditions would be included in the calculation of the aggregate
payments for excess readmissions, which is the numerator of the
readmissions payment adjustment. We note that this proposal does not
alter our established methodology for calculating aggregate payments
for all discharges, that is, the denominator of the ratio (77 FR
53387).
As discussed above, when calculating the numerator (aggregate
payments for excess readmissions), we determine the base operating DRG
payments for the applicable period. ``Aggregate payments for excess
readmissions'' (the numerator) is defined as ``the sum, for applicable
conditions . . . of the product, for each applicable condition, of (i)
the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the excess readmissions ratio . . . for such hospital for such
applicable period minus 1.''
When determining the base operating DRG payment amount for an
individual hospital for such applicable period for such condition, we
use Medicare inpatient claims from the MedPAR file with discharge dates
that are within the same applicable period to calculate the excess
readmissions ratio. We use MedPAR claims data as our data source for
determining aggregate payments for excess readmissions and aggregate
payments for all discharges, as this data source is consistent with the
claims data source used in IPPS rulemaking to determine IPPS rates.
For FY 2015, we are proposing to use MedPAR claims with discharge
dates that are on or after July 1, 2010, and no later than June 30,
2013. Under our established methodology that we use the update of the
MedPAR file for each Federal fiscal year, which is updated 6 months
after the end of each Federal fiscal year within the applicable period,
as our data source (that is, the March updates of the respective
Federal fiscal year MedPAR files) for the final rules.
The FY 2010 through FY 2013 MedPAR data files can be purchased from
CMS. Use of these files allows the public to verify the readmissions
adjustment factors. Interested individuals may order these files
through the CMS Web site at: https://www.cms.hhs.gov/LimitedDataSets/ by
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web
page describes the files and provides directions and further detailed
instructions for how to order the data sets. Persons placing an order
must send the following: A Letter of Request, the LDS Data Use
Agreement and Research Protocol (refer to the Web site for further
instructions), the LDS Form, and a check for $3,655 to:
If using the U.S. Postal Service: Centers for Medicare and
Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
If using express mail: Centers for Medicare and Medicaid
Services, OFM/Division of Accounting-RDDC, Mailstop C-07-11,
7500 Security Boulevard, Baltimore, MD 21244-1850.
For this proposed rule, we are proposing to determine aggregate
payments for excess readmissions and aggregate payments for all
discharges using data from MedPAR claims with discharge dates that are
on or after July 1, 2010, and no later than June 30, 2013. However, we
note that for the purpose of modeling the proposed FY 2015 readmissions
payment adjustment factors for this proposed rule, we are using excess
readmissions ratios for applicable hospitals from the FY 2014 Hospital
Readmissions Reduction Program applicable period. For the final rule,
applicable hospitals will have had the opportunity to review and
correct data from the proposed FY 2015 applicable period of July 1,
2010 to June 30, 2013 before they are made public under our policy
regarding the reporting of hospital-specific information, which is
discussed later in this section.
In this proposed rule, for FY 2015, we are proposing to use MedPAR
data from July 1, 2010 through June 30, 2013. Specifically, in this
proposed rule, we are using the March 2011 update of the FY 2010 MedPAR
file to identify claims within FY 2010 with discharges dates that are
on or after July 1, 2010, the March 2012 update of the FY 2011 MedPAR
file to identify claims within FY 2011, the March 2013 update of the FY
2012 MedPAR file to identify claims within FY 2012, and the December
2013 update of the FY 2013 MedPAR file to identify claims within FY
2013 with

[[Page 28114]]

discharge dates no later than June 30, 2013. For the final rule, we are
proposing to use the same MedPAR files as listed above for claims
within FY 2010, FY 2011 and FY 2012. For claims within FY 2013, we are
proposing to use in the final rule the March 2014 update of the FY 2013
MedPAR file.
In order to identify the admissions for each condition, including
the two additional conditions THA/TKA and COPD, to calculate the
aggregate payments for excess readmissions for an individual hospital,
for FY 2015, we are proposing to identify each applicable condition
using the ICD-9-CM codes used to identify applicable conditions to
calculate the excess readmissions ratios. Under our existing policy, we
identify eligible hospitalizations and readmissions of Medicare
patients discharged from an applicable hospital having a principal
diagnosis for the measured condition in an applicable period (76 FR
51669). The discharge diagnoses for each applicable condition are based
on a list of specific ICD-9-CM codes for that condition. These codes
are posted on the QualityNet Web site at: https://www.QualityNet.org >
Hospital-Inpatient > Claims-Based Measures > Readmission Measures >
Measure Methodology.
In order to identify the applicable conditions to calculate the
aggregate payments for excess readmissions, for FY 2015, we are
proposing to identify the claim as an applicable condition consistent
with the methodology to identify conditions to calculate the excess
readmissions ratio. In other words, the applicable conditions of AMI,
HF and PN are identified for the calculation of aggregate payments for
excess readmissions if the ICD-9-CM code for that condition is listed
as the principal diagnosis on the claim.
In order to identify claims with the applicable condition of THA/
TKA, we are proposing that any claim that has the procedure codes for
THA/TKA listed in any diagnosis/procedure field of the claim would be
included in the calculation of aggregate payments for readmissions,
consistent with the methodology to calculate the excess readmissions
ratio for THA/TKA. In order to identify claims with the applicable
condition of COPD, we are proposing to identify claims that either have
the ICD-9-CM code for that condition is listed as the principal
diagnosis on the claim or has a principal diagnosis of some respiratory
failure along with secondary diagnosis of COPD.
Under our established methodology for calculating aggregate
payments for readmissions, admissions that are not considered index
admissions for the purpose of the readmissions measures are excluded
from the calculation of the excess readmissions ratio, and therefore
also are not considered admissions for the purposes of determining a
hospital's aggregate payments for excess readmissions (78 FR 50670
through 50876). With the addition of THA/TKA and COPD as applicable
conditions beginning in FY 2015, we are proposing to modify our current
methodology to identify the admissions included in the calculation of
``aggregate payments for excess readmissions'' for THA/TKA and COPD in
the same manner as the original applicable conditions (AMI, HF and PN).
That is, THA/TKA and COPD admissions that would not considered index
admissions in the readmissions measures also would not considered
admissions for the purposes of calculation a hospital's aggregate
payments for excess readmissions.
In this proposed rule, for FY 2015, we are proposing to continue to
apply the same exclusions to the claims in the MedPAR file as we
applied for FY 2014 (78 FR 50670 through 50673), and we are proposing
to apply those exclusions for the two additional applicable conditions,
THA/TKA and COPD. For FY 2015, in order to have the same types of
admissions to calculate aggregate payments for excess readmissions as
is used to calculate the excess readmissions ratio, we are proposing to
identify admissions for all five applicable conditions, AMI, HF, PN,
THA/TKA and COPD, for the purposes of calculating aggregate payments
for excess readmissions as follows:
We would exclude admissions that are identified as an
applicable condition if the patient died in the hospital, as identified
by the discharge status code on the MedPAR claim.
We would exclude admissions identified as an applicable
condition for which the patient was transferred to another provider
that provides acute care hospital services (that is, a CAH or an IPPS
hospital), as identified through examination of contiguous stays in
MedPAR at other hospitals.
We would exclude admissions identified as an applicable
condition for patients who are under the age of 65, as identified by
linking the claim information to the information provided in the
Medicare Enrollment Database.
For conditions identified as AMI, we would exclude claims
that are same day discharges, as identified by the admission date and
discharge date on the MedPAR claim.
We would exclude admissions for patients who did not have
Medicare Parts A and B FFS enrollment in the 12 months prior to the
index admission, based on the information provided in the Medicare
Enrollment Database.
We would exclude admissions for patients without at least
30 days post-discharge enrollment in Medicare Parts A and B fee-for-
service, based on the information provided in the Medicare Enrollment
Database.
We would exclude all multiple admissions within 30 days of
a prior index admission's discharge date, as identified in the MedPAR
file, consistent with how multiple admissions within 30 days of an
index admission are excluded from the calculation of the excess
readmissions ratio.
These exclusions are consistent with our current methodology, which
was established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50671).
In addition to the exclusions described above for all five
applicable conditions, for FY 2015, we are proposing the following
steps to identify admissions specifically for THA/TKA for the purposes
of calculating aggregate payments for excess readmissions:
We are proposing to exclude admissions for THA/TKA for all
transfer cases regardless of whether the discharge was a transfer to
another hospital or from another hospital, consistent with the
calculation of the excess readmissions ratio for THA/TKA.
We are proposing to exclude admissions for THA/TKA for
cases where the discharge includes a femur, hip, or pelvic fracture
coded in the principal or secondary diagnosis fields, consistent with
the calculation of the excess readmissions ratio for THA/TKA.
We are proposing to exclude admissions for THA/TKA for
cases where the discharge includes a mechanical complication coded in
the principal diagnosis field, consistent with the calculation of the
excess readmissions ratio for THA/TKA.
We are proposing to exclude admissions for THA/TKA for
cases where the discharge includes a malignant neoplasm of the pelvis,
sacrum, coccyx, lower limbs, or bone/bone marrow or a disseminated
malignant neoplasm coded in the principal diagnosis field, consistent
with the calculation of the excess readmissions ratio for THA/TKA.
We are proposing to exclude admissions for THA/TKA for
cases where the discharge includes more than two hip/knee procedures.
We are proposing to exclude admissions for THA/TKA for
cases that meet either any of the following conditions or following
procedures

[[Page 28115]]

concurrent with THA/TKA: revision procedures; partial hip arthroplasty
(PHA) procedures; resurfacing procedures; and removal of implanted
devices/prostheses.
Furthermore, we are proposing to only identify Medicare FFS claims
that meet the criteria (that is, claims paid for under Medicare Part C
(Medicare Advantage) would not be included in this calculation),
consistent with the methodology to calculate excess readmissions ratios
based solely on admissions and readmissions for Medicare FFS patients.
Therefore, consistent with our established methodology, for FY 2015, we
would exclude admissions for patients enrolled in Medicare Advantage as
identified in the Medicare Enrollment Database. This proposal is
consistent with how admissions for Medicare Advantage patients are
identified in the calculation of the excess readmissions ratios under
our established methodology. The tables below list the ICD-9-CM codes
we are proposing to use to identify each applicable condition to
calculate the aggregate payments for excess readmissions under this
proposal for FY 2015. The tables include the ICD-9-CM codes we are
proposing to use to identify the two conditions, THA/TKA and COPD,
added to the Hospital Readmissions Reduction Program beginning for FY
2015. These ICD-9-CM codes also would be used to identify the
applicable conditions to calculate the excess readmissions ratios,
consistent with our established policy (76 FR 51673 through 51676).

ICD-9-CM Codes To Identify Pneumonia (PN) Cases
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Code Description of code
----------------------------------------------------------------------------------------------------------------
480.0....................................... Pneumonia due to adenovirus.
480.1....................................... Pneumonia due to respiratory syncytial virus.
480.2....................................... Pneumonia due to parainfluenza virus.
480.3....................................... Pneumonia due to SARS-associated coronavirus.
480.8....................................... Viral pneumonia: pneumonia due to other virus not elsewhere
classified.
480.9....................................... Viral pneumonia unspecified.
481......................................... Pneumococcal pneumonia [streptococcus pneumoniae pneumonia].
482.0....................................... Pneumonia due to klebsiella pneumoniae.
482.1....................................... Pneumonia due to pseudomonas.
482.2....................................... Pneumonia due to hemophilus influenzae [h. influenzae].
482.30...................................... Pneumonia due to streptococcus unspecified.
482.31...................................... Pneumonia due to streptococcus group a.
482.32...................................... Pneumonia due to streptococcus group b.
482.39...................................... Pneumonia due to other streptococcus.
482.40...................................... Pneumonia due to staphylococcus unspecified.
482.41...................................... Pneumonia due to staphylococcus aureus.
482.42...................................... Methicillin Resistant Pneumonia due to Staphylococcus Aureus.
482.49...................................... Other staphylococcus pneumonia.
482.81...................................... Pneumonia due to anaerobes.
482.82...................................... Pneumonia due to escherichia coli [e.coli].
482.83...................................... Pneumonia due to other gram-negative bacteria.
482.84...................................... Pneumonia due to legionnaires' disease.
482.89...................................... Pneumonia due to other specified bacteria.
482.9....................................... Bacterial pneumonia unspecified.
483.0....................................... Pneumonia due to mycoplasma pneumoniae.
483.1....................................... Pneumonia due to chlamydia.
483.8....................................... Pneumonia due to other specified organism.
485......................................... Bronchopneumonia organism unspecified.
486......................................... Pneumonia organism unspecified.
487.0....................................... Influenza with pneumonia.
488.11...................................... Influenza due to identified novel H1N1 influenza virus with
pneumonia.
----------------------------------------------------------------------------------------------------------------

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

[[Page 28116]]

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

ICD-9-CM Codes To Identify Chronic Obstructive Pulmonary Disease (COPD) Cases
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Code Description of code
----------------------------------------------------------------------------------------------------------------
491.21...................................... Obstructive chronic bronchitis; With (acute) exacerbation; acute
exacerbation of COPD, decompensated COPD, decompensated COPD with
exacerbation.
491.22...................................... Obstructive chronic bronchitis; with acute bronchitis.
491.8....................................... Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis.
491.9....................................... Unspecified chronic bronchitis.
492.8....................................... Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar,
centrilobular, obstructive, panacinar, panlobular, unilateral,
vesicular. MacLeod's syndrome; Swyer-James syndrome; unilateral
hyperlucent lung.
493.20...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, unspecified.
493.21...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, with status asthmaticus.
493.22...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, with (acute) exacerbation.
496......................................... Chronic: nonspecific lung disease, obstructive lung disease,
obstructive pulmonary disease (COPD) NOS. NOTE: This code is not
to be used with any code from categories 491-493.
518.81 *.................................... Other diseases of lung; acute respiratory failure; respiratory
failure NOS.
518.82 *.................................... Other diseases of lung; acute respiratory failure; other pulmonary
insufficiency, acute respiratory distress.
518.84 *.................................... Other diseases of lung; acute respiratory failure; acute and
chronic respiratory failure.
799.1 *..................................... Other ill-defined and unknown causes of morbidity and mortality;
respiratory arrest, cardiorespiratory failure.
----------------------------------------------------------------------------------------------------------------
* Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22).

ICD-9-CM Codes To Identify Total Hip Arthroplasty/Total Knee Arthroplaty
(THA/TKA) Cases
------------------------------------------------------------------------
ICD-9-CM Code Description of code
------------------------------------------------------------------------
81.51............................ Total hip arthroplasty.
81.54............................ Total knee arthroplasty.
------------------------------------------------------------------------

For FY 2015, we are proposing to calculate aggregate payments for
excess readmissions, using MedPAR claims from July 1, 2010 to June 30,
2013, to identify applicable conditions based on the same ICD-9-CM
codes used to identify the conditions for the readmissions measures,
and to apply the proposed exclusions for the types of admissions
discussed above. To calculate aggregate payments for excess
readmissions, we are proposing to calculate the base operating DRG
payment amounts for all claims in the 3-year applicable period for each
applicable condition (AMI, HF, PN, COPD and THA/TKA) based on the
claims we have identified as described above. Once we have calculated
the base operating DRG amounts for all the claims for the five
applicable conditions, we are proposing to sum the base operating DRG
payments amounts by each condition, resulting in five summed amounts,
one amount for each of the five applicable conditions. We are proposing
to then multiply the amount for each condition by the respective excess
readmissions ratio minus 1 when that excess readmissions ratio is
greater than 1, which indicates that a hospital has performed, with
respect to readmissions for that applicable condition, worse than the
average hospital with similar patients. Each product in this
computation represents the payments for excess readmissions for that
condition. We are proposing to then sum the resulting products which
represent a hospital's proposed ``aggregate payments for excess
readmissions'' (the numerator of the ratio). Because this calculation
is performed separately for each of the five conditions, a hospital's
excess readmissions ratio must be less than or equal to 1 on each
measure to aggregate payments for excess readmissions (and thus a
payment reduction under the Hospital Readmissions Reduction Program).
We note that we are not proposing any changes to our existing
methodology to calculate ``aggregate payments for all discharges'' (the
denominator of the ratio).
We are proposing the following methodology for FY 2015 as displayed
in the chart below.

[[Page 28117]]

Formulas To Calculate the Readmissions Adjustment Factor
------------------------------------------------------------------------

-------------------------------------------------------------------------
Aggregate payments for excess readmissions = [sum of base operating DRG
payments for AMI x (Excess Readmissions Ratio for AMI-1)] + [sum of
base operating DRG payments for HF x (Excess Readmissions Ratio for HF-
1)] + [sum of base operating DRG payments for PN x (Excess Readmissions
Ratio for PN-1)] + [sum of base operating DRG payments for COPD) x
(Excess Readmissions Ratio for COPD-1)] + [sum of base operating DRG
payments for THA/TKA x (Excess Readmissions Ratio for THA/TKA-1)].
* Note, if a hospital's excess readmissions ratio for a condition is
less than/equal to 1, then there are no aggregate payments for excess
readmissions for that condition included in this calculation.
Aggregate payments for all discharges = sum of base operating DRG
payments for all discharges.
Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments
for all discharges).
Proposed Readmissions Adjustment Factor for FY 2015 is the higher of the
ratio or 0.9700.
------------------------------------------------------------------------
* Based on claims data from July 1, 2010 to June 30, 2013 for FY 2015.

We invite public comment on these proposals.
12. Hospital Readmissions Reduction Program Extraordinary Circumstances
Exceptions
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676), we indicated
that commenters had requested a potential waiver or exemption process
for hospitals located in areas that experience disasters or other
extraordinary circumstances, even though we had not proposed an
extraordinary circumstance exceptions/exemptions (ECE) policy for the
Hospital Readmissions Reduction Program. We noted that there are
several policy and operational considerations in developing a disaster
exemption process for the Hospital Readmissions Reduction Program.
We welcome public comment on whether an exemption process should be
implemented, and the policy and operational considerations for a
potential Hospital Readmissions Reduction Program ECE policy.

I. Hospital Value-Based Purchasing (VBP) Program

1. Statutory Background
Section 1886(o) of the Act, as added by section 3001(a)(1) of the
Affordable Care Act, requires the Secretary to establish a hospital
value-based purchasing program (the Hospital Value-Based Purchasing
(VBP) Program) under which value-based incentive payments are made in a
fiscal year to hospitals that meet performance standards established
for a performance period for such fiscal year. Both the performance
standards and the performance period for a fiscal year are to be
established by the Secretary.
Section 1886(o)(1)(B) of the Act states that the Hospital VBP
Program applies to payments for hospital discharges occurring on or
after October 1, 2012. In accordance with section 1886(o)(6)(A) of the
Act, we are required to make value-based incentive payments under the
Hospital VBP Program to hospitals that meet or exceed performance
standards for a performance period for a fiscal year. As further
required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each
hospital's value-based payment percentage on the hospital's Total
Performance Score (TPS) for a specified performance period. In
accordance with section 1886(o)(7) of the Act, the total amount
available for value-based incentive payments for a fiscal year will be
equal to the total amount of the payment reductions for all
participating hospitals for such fiscal year, as estimated by the
Secretary. For FY 2014, the available funding pool was equal to 1.25
percent of the base-operating DRG payments to all participating
hospitals, as estimated by the Secretary. The size of the applicable
percentage has increased to 1.50 percent for FY 2015 and will increase
to 1.75 percent for FY 2016, and to 2.0 percent for FY 2017 and
successive fiscal years.
Section 1886(o)(1)(C) of the Act generally defines the term
``hospital'' for purposes of the Hospital VBP Program as a subsection
(d) hospital (as that term is defined in section 1886(d)(1)(B) of the
Act), but excludes from the definition of the term ``hospital,'' with
respect to a fiscal year: (1) A hospital that is subject to the payment
reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital
IQR Program) for such fiscal year; (2) a hospital for which, during the
performance period for the fiscal year, the Secretary has cited
deficiencies that pose immediate jeopardy to the health or safety of
patients; and (3) a hospital for which there are not a minimum number
(as determined by the Secretary) of measures that apply to the hospital
for the performance period for the fiscal year involved, or for which
there are not a minimum number (as determined by the Secretary) of
cases for the measures that apply to the hospital for the performance
period for such fiscal year.
2. Overview of Previous Hospital VBP Program Rulemaking
We refer readers to the Hospital Inpatient VBP Program final rule
(76 FR 26490 through 26547), FY 2012 IPPS/LTCH PPS final rule (76 FR
51653 through 51660), CY 2012 OPPS/ASC final rule with comment period
(76 FR 74527 through 74547), FY 2013 IPPS/LTCH PPS final rule (77 FR
53567 through 53614), FY 2014 IPPS/LTCH PPS final rule (78 FR 50676
through 50707), and CY 2014 OPPS/ASC final rule with comment period (78
FR 75120 through 75121) for further descriptions of our policies for
the Hospital VBP Program.
We have also codified certain requirements for the Hospital VBP
Program at Sec. Sec. 412.160 through 412.167 of our regulations.
3. FY 2015 Payment Details
a. Payment Adjustments
Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce
the base operating DRG payment amount for a hospital for each discharge
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A)
of the Act, the sum total of these reductions in a fiscal year must
equal the total amount available for value-based incentive payments for
all eligible hospitals for the fiscal year, as estimated by the
Secretary. We finalized details on how we would implement these
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573) and refer readers to that rule for further details.
Under section 1886(o)(7)(C)(iii) of the Act, the applicable percent
for the FY 2015 Hospital VBP Program is 1.50 percent. Using the
methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53571 through 53573), we estimate that the total amount available for
value-based incentive payments for FY 2015 is $1.4 billion, based on
the December 2013 update of the FY 2013 MedPAR file. We intend to
update this estimate for the FY 2015 IPPS/LTCH PPS final rule, using
the March 2014 update of the FY 2013 MedPAR file.
As finalized in the FY 2013 IPPS/LTCH PPS final rule, as referenced
above, we will utilize a linear exchange function to translate this
estimated amount available into a value-based incentive payment
percentage for each hospital, based on its TPS. We will then calculate
a value-based incentive payment adjustment factor that will be applied
to the base operating DRG payment amount for each discharge occurring
in FY 2015, on a per-claim basis. We are publishing proxy value-

[[Page 28118]]

based incentive payment adjustment factors in Table 16 of this proposed
rule (which is available via the Internet on the CMS Web site). The
proxy factors are based on the TPSs from the FY 2014 Hospital VBP
Program. These FY 2014 performance scores are the most recently
available performance scores that hospitals have been given the
opportunity to review and correct. The slope of the linear exchange
function used to calculate those proxy value-based incentive payment
adjustment factors was 2.0952951561. This slope, along with the
estimated amount available for value-based incentive payments, is also
published in Table 16.
We intend to update this table as Table 16A in the final rule
(which will be available via the Internet on the CMS Web site) to
reflect changes based on the March 2014 update to the FY 2013 MedPAR
file. We also intend to update the slope of the linear exchange
function used to calculate those updated proxy value-based incentive
payment adjustment factors. The updated proxy value-based incentive
payment adjustment factors for FY 2015 will continue to be based on
historic FY 2014 Program TPSs because hospitals will not have been
given the opportunity to review and correct their actual TPSs for the
FY 2015 Hospital VBP Program until after the FY 2015 IPPS/LTCH PPS
final rule is published. After hospitals have been given an opportunity
to review and correct their actual TPSs for FY 2015, we will add Table
16B (which will be available via the Internet on the CMS Web site) to
display the actual value-based incentive payment adjustment factors,
exchange function slope, and estimated amount available for the FY 2015
Hospital VBP Program. We expect that Table 16B will be posted on the
CMS Web site in October 2014.
b. Base Operating DRG Payment Amount Definition for Medicare-Dependent
Small Rural Hospitals (MDHs)
Section 106 of Public Law 113-93, the Protecting Access to Medicare
Act of 2014 (PAMA), extended the MDH program through March 31, 2015. We
note that that the special treatment for MDHs under section
1886(o)(7)(D)(ii)(I) of the Act, with regard to definition of base
operating DRG payment amount, does not apply to discharges occurring
after FY 2013.
For FY 2015 and subsequent years, for purposes of calculating the
payment adjustment factors and applying the payment methodology, we are
proposing that the base operating DRG payment amount for MDHs will
include the difference between the hospital-specific payment rate and
the Federal payment rate (as applicable). We are also proposing to
revise the definition of base operating DRG payment amount in Sec.
412.160 paragraph (2) of our regulations to reflect this change. We
welcome comments on this proposal.
4. Measures for the FY 2017 Hospital VBP Program
a. Measures Previously Adopted
In the FY 2013 IPPS/LTCH PPS final rule, we finalized our proposal
to readopt measures from the prior program year for each successive
program year, unless proposed and finalized otherwise (for example,
because one or more of the measures is ``topped-out'' or for other
policy reasons). We stated our belief that this policy would facilitate
measure adoption for the Hospital VBP Program for future years, as well
as align the Hospital VBP Program with the Hospital IQR Program (77 FR
53592). The FY 2016 Hospital VBP Program includes the following
measures:

Finalized Measures for the FY 2016 Hospital VBP Program
------------------------------------------------------------------------

------------------------------------------------------------------------
Clinical Process of Care Domain
------------------------------------------------------------------------
AMI-7a............................... Fibrinolytic Therapy Received
Within 30 Minutes of Hospital
Arrival.
IMM-2................................ Influenza Immunization.
PN-6................................. Initial Antibiotic Selection for
CAP in Immunocompetent Patient.
SCIP-Inf-2........................... Prophylactic Antibiotic Selection
for Surgical Patients.
SCIP-Inf-3........................... Prophylactic Antibiotics
Discontinued Within 24 Hours
After Surgery End Time.
SCIP-Inf-9........................... Urinary Catheter Removed on
Postoperative Day 1 or
Postoperative Day 2.
SCIP-Card-2.......................... Surgery Patients on Beta-Blocker
Therapy Prior to Arrival Who
Received a Beta-Blocker During
the Perioperative Period.
SCIP-VTE-2........................... Surgery Patients Who Received
Appropriate Venous
Thromboembolism Prophylaxis
Within 24 Hours Prior to Surgery
to 24 Hours After Surgery.
------------------------------------------------------------------------
Patient Experience of Care Domain
------------------------------------------------------------------------
HCAHPS............................... Hospital Consumer Assessment of
Healthcare Providers and Systems
Survey.
------------------------------------------------------------------------
Outcome Domain
------------------------------------------------------------------------
CAUTI................................ Catheter-Associated Urinary Tract
Infection.
CLABSI............................... Central Line-Associated Blood
Stream Infection.
MORT-30-AMI.......................... Acute Myocardial Infarction (AMI)
30-day mortality rate.
MORT-30-HF........................... Heart Failure (HF) 30-day
mortality rate.
MORT-30-PN........................... Pneumonia (PN) 30-day mortality
rate.
PSI-90............................... Complication/patient safety for
selected indicators (composite).
SSI.................................. Surgical Site Infection:
Colon.
Abdominal
Hysterectomy.
------------------------------------------------------------------------
Efficiency Domain
------------------------------------------------------------------------
MSPB-1............................... Medicare Spending per
Beneficiary.
------------------------------------------------------------------------

[[Page 28119]]

b. Proposed Changes Affecting Topped Out Measures
(1) Proposed Removal of Six Topped-Out Measures
For the FY 2017 Hospital VBP Program measure set, we evaluated
whether any measures that we previously adopted are now ``topped out''
by focusing on two criteria: (1) National measure data showing
statistically indistinguishable performance levels at the 75th and 90th
percentiles; and (2) national measure data showing a truncated
coefficient of variation (TCV) less than 0.10. We refer readers to the
Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497)
for further discussion of these current ``topped-out'' criteria and to
our proposal below to modify the second criterion.
Based on our evaluation of the most recently available data, we
believe that PN-6, SCIP-Card-2, SCIP-Inf-2, SCIP-Inf-3, SCIP-Inf-9, and
SCIP-VTE-2 are all now ``topped-out.'' Therefore, we are proposing to
remove these six measures from the FY 2017 Hospital VBP measure set
because measuring hospital performance on these measures will have no
meaningful effect on a hospital's TPS. We believe that removing these
``topped-out'' measures will continue to ensure that we make valid
statistical comparisons through our finalized scoring methodology, and
will reduce the reporting burden on participating hospitals.
We welcome public comment on this proposal.
(2) Proposed Change to Truncated Coefficient of Variation Criterion to
Determine Whether a Measure is Topped Out
As stated above, we have adopted two criteria for determining the
``topped-out'' status of Hospital VBP Program measures:
Statistically indistinguishable performance at the 75th
and 90th percentiles; and
Truncated coefficient of variation < 0.10.
We are proposing to modify the second criterion to the following:
Truncated coefficient of variation <= 0.10.
The coefficient of variation (CV) is a common statistic that
expresses the standard deviation as a percentage of the sample mean in
a way that is independent of the units of observation. Applied to this
analysis, a large CV would indicate a broad distribution of individual
hospital scores, with large and presumably meaningful differences
between hospitals in relative performance. A small CV would indicate
that the distribution of individual hospital scores is clustered
tightly around the mean value, suggesting that it is not useful to draw
distinctions among individual hospitals' measure performance. By
proposing to change the truncated CV from ``less than'' to ``less than
or equal to'' 0.10 under our ``topped out'' test, we will better be
able to distinguish measures with significant variation in performance
among hospitals and more accurately apply determine what measures are
``topped out'' for purposes of the Program.
We welcome public comments on this proposal.
c. Proposed New Measures for the FY 2017 Hospital VBP Program
We considered if we should adopt additional measures for the FY
2017 Hospital VBP Program. We considered which measures are eligible
for adoption based on the statutory requirements, including
specification under the Hospital IQR Program and posting dates on the
Hospital Compare Web site, and our priorities for quality improvement
as outlined in the NQS (available for download at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf).
We believe that the following three proposed measures meet the
statutory requirements for inclusion in the FY 2017 Hospital VBP
Program. We also believe that these measures represent important
components of quality improvement in the acute inpatient hospital
setting.

(1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF
1716)

Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF
1716) is a risk-adjusted outcome measure monitoring hospital
onset of MRSA bloodstream infection events using the standardized
infection ratio (MRSA bacteremia SIR) among all inpatients in the
facility, and is reported via CDC's National Healthcare Safety Network
(NHSN). We adopted this measure beginning with the FY 2015 payment
determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51630), and initial measure data were posted on
Hospital Compare in December 2013.
We remain concerned about the persistent public health threat
presented by MRSA infections. According to a 2013 study available at
the NIH Web site, MRSA ``results in longer hospitalization, increased
expenses, and poorer patient prognosis,'' and MRSA ``has been swiftly
increasing worldwide over the past several decades.'' \35\ As we noted
in the FY 2012 IPPS/LTCH PPS final rule, invasive MRSA infections may
cause about 18,000 deaths during a hospital stay a year.\36\
---------------------------------------------------------------------------

\35\ Tatokoro et al. BMC Urology 2013, 13:35. Available at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3720197/pdf/1471-2490-13-35.pdf.
\36\ Catherine Liu, Arnold Bayer, et al., Clinical practice
Guidelines for the treatment of Methicillin-Resistant Staphylococcus
aureus Infections in Adult and Children. Infectious Disease Society
of America 2011; 52:e18.
---------------------------------------------------------------------------

The MAP supported the direction of the MRSA bacteremia measure for
inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report:
2013 Recommendations on Measures Under Consideration by HHS found at
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. The MAP noted that the
measure addresses an NQS priority not adequately addressed in the
program measure set, the measure should be applied following public
reporting on Hospital Compare, and that the most recent version of the
NQF-endorsed measure should be applied.
We believe that this measure is eligible for the Hospital VBP
Program based on the MAP recommendation, our adoption of the most
recent NQF-endorsed version under the Hospital IQR Program, and our
posting of measure data on Hospital Compare. Based on the continued
danger that MRSA infections present to patients and to the public
health, we further believe that this measure is appropriate for the
Hospital VBP Program. Therefore, we are proposing to adopt the MRSA
bacteremia measure for the FY 2017 Hospital VBP Program, and we are
proposing to place the measure into the Safety domain.
We invite public comment on this proposal.

(2) Clostridium difficile Infection (NQF 1717)

Clostridium difficile Infection (NQF 1717) is a risk-
adjusted outcome measure monitoring hospital onset of C. difficile
infection events using the standardized infection ratio (C. difficile
SIR) among all inpatients in the facility, and is reported via CDC's
NHSN. We adopted this measure for the FY 2015 payment determination
under the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51630 through 51631), and initial measure data were posted on
Hospital Compare in December 2013.
As with MRSA infections, we are concerned about the seriousness of
C. difficile infections. According to a 2012

[[Page 28120]]

study, ``infection with Clostridium difficile is associated with poor
outcomes for patients. Previous work has determined that, regardless of
baseline risk of death, for every 10 patients that acquire C. difficile
in hospital, 1 patient will die. Clostridium difficile is also
associated with increased health care costs. One of the primary
mechanisms by which C. difficile increases costs is by increasing the
length of time patients spend in hospital.'' \37\ As we stated in the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 51631), C.
difficile infections have become more frequent, more severe, and more
difficult to treat in recent years. Each year, tens of thousands of
people in the United States get sick from C. difficile, including some
otherwise healthy people who are not hospitalized or taking
antibiotics.
---------------------------------------------------------------------------

\37\ Forster et al. ``The effect of hospital-acquired infection
with Clostridium difficile on length of stay in hospital.'' Canadian
Medical Association Journal, January 10, 2012. Available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3255231/pdf/1840037.pdf.
---------------------------------------------------------------------------

The MAP supported the direction of the C. difficile infection
measure for inclusion in the Hospital VBP Program in the MAP Pre-
Rulemaking Report: 2013 Recommendations on Measures Under Consideration
by HHS found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. The MAP noted that the
measure addresses an NQS priority not adequately addressed in the
program measure set, the measure should be applied following public
reporting on Hospital Compare, and that the most recent version of the
NQF-endorsed measure should be applied.
We believe that this measure is eligible for the Hospital VBP
Program based on the MAP recommendation, our adoption of the most
recent NQF-endorsed version under the Hospital IQR Program, and our
posting of measure data on Hospital Compare, as well as the continued
danger that C. difficile infections present to patients and the public
health. Therefore, we are proposing to adopt the C. difficile SIR
measure for the FY 2017 Hospital VBP Program, and we are proposing to
place the measure into the Safety domain.
We invite public comment on this proposal.

(3) PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF
0469)

PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF
0469) is a chart-abstracted measure that we adopted beginning
with the FY 2015 payment determination for the Hospital IQR Program in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53530).
Initial measure data were posted on Hospital Compare in December 2013.
Although this is a chart-abstracted measure, we finalized our policy in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53529) that
this measure would be collected in aggregated numerator, denominator,
and exclusion counts per hospital via a Web-based tool, instead of
collecting patient-level data from hospitals.
As we described in the FY 2013 IPPS/LTCH PPS final rule referenced
above, the Strong Start Initiative (https://www.innovation.cms.gov/initiatives/strong-start/) was launched to help reduce early elective
births. At launch, the HHS Secretary stated that more than half a
million infants are born prematurely in America each year. Fortunately,
the early elective birth rate has steadily decreased. In 2012, the
number of early elective births had decreased to approximately 456,000
or 11.55 percent of the total number of births.\38\ Early elective
births may require additional medical attention and early intervention
services. Research indicates that elective deliveries before 39 weeks
increase the risk of significant complications for mother and baby, as
well as long-term health problems. ^{39 40 41 42} Early
elective births are a public health problem that has significant
consequences for families well into a child's life.
---------------------------------------------------------------------------

\38\ Martin, JA, Hamilton, BE, Osterman, MJK, Curtin, SC,
Mathews, TJ. (2013). Births: Final data for 2012. Natl Vital Stat
Rpt. 62(9). Retrieved from https://www.cdc.gov/nchs/data/nvsr/nvsr62/nvsr62_09.pdf.
\39\ Glantz, J. (Apr. 2005). Elective induction vs. spontaneous
labor associations and outcomes. J Reprod Med. 50(4):235-40.
\40\ Vardo, J., Thornburg, L., Glantz J., (2011). Maternal and
neonatal morbidity among nulliparous women undergoing elective
induction of labor. J. report med. 56(1-2): 25-30.
\41\ Tita, A., Landon, M., Spong, C., Lai, Y., Leveno, K.,
Varner, M., et al. (2009). Timing of elective repeat cesarean
delivery at term and neonatal outcomes. [Electronic Version]. NEJM.
360:2, 111-120.
\42\ Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., &
Meyers, J. (2009). Neonatal and maternal outcomes associated with
elective delivery. [Electronic Version]. Am J Obstet Gynecol.
200:156.e1-156.e4.
---------------------------------------------------------------------------

As a public campaign to reduce early elective births, the Strong
Start Initiative's objective is to test ways to reverse this trend by
helping provide expectant mothers with the care they need for a healthy
delivery and a healthy baby, and by focusing on reducing early elective
deliveries, which can lead to a variety of health problems for mothers
and infants.
The Strong Start Initiative cuts across many agencies within HHS
and involves external organizations including the March of Dimes, and
the American College of Obstetricians and Gynecologists (ACOG). We
believe that a reduction in the number of nonmedically indicated
elective deliveries at >=37 to <39 weeks gestation will result in a
substantial decrease in neonatal morbidity and mortality, as well as a
significant savings in healthcare costs. In addition, the rate of
cesarean sections should decrease with fewer elective inductions,
resulting in decreased length of stay and healthcare costs.
The MAP supported adoption of the PC-01 Elective Delivery measure
for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking
Report: 2013 Recommendations on Measures Under Consideration by HHS
found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. The MAP noted that the
measure addresses an NQS priority not adequately addressed in the
program measure set.
We are proposing to adopt this measure for the Hospital VBP Program
and we are proposing to place the measure into the Clinical Care--
Process domain because we believe this measure furthers the NQS's
three-part aim of better health care for individuals, better health for
populations, and lower costs for health care. In addition, although the
PC-01 measure captures data from all applicable patients, we also
believe that the measure is specifically relevant to the nearly 2
million Medicare beneficiaries who are aged 44 and under, most of who
are dual eligible beneficiaries, who have the potential to be impacted
by early elective births. In 2011, Medicare paid for roughly 14,000
births.
We welcome public comment on this proposal.
d. Proposed Adoption of the Current CLABSI Measure (NQF 0139)
for the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50682 and 50686), we
adopted the CLABSI measure for the FY 2016 Hospital VBP Program. We
stated our belief that adopting the current CLABSI measure is
consistent with the MAP's recommendations in the MAP Pre-Rulemaking
Report: 2013 Recommendations on Measures Under Consideration by HHS
found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746, to use the standardized
infection ratio version of the measure until the reliability-adjusted
CLABSI

[[Page 28121]]

measure is NQF-endorsed. We have stated our intent to consider adopting
the reliability-adjusted CLABSI measure in future rulemaking.
The reliability-adjusted standardized infection ratio (SIR) is an
outcome measure that summarizes the healthcare-associated infection
experience by type of infection (for example, central-line associated
bloodstream infection, surgical site infection) for individual
hospitals. The reliability-adjusted measure enables more meaningful
statistical differentiation between hospitals by accounting for
differences in patient case-mix, exposures to medical devices or
procedures (for example, central line days, surgical procedure volume),
and unmeasured factors that are not reflected in the unadjusted SIR and
that cause variation in outcomes between hospitals. Accounting for
these sources of variability enables better measure discrimination
between hospitals and leads to more reliable quality measurements.
However, in the absence of NQF endorsement of the reliability-
adjusted measure and any additional MAP recommendations, and unless and
until the Hospital IQR Program adopts the reliability adjustments, we
believe we may only consider the current version of the CLABSI measure
for adoption under the Hospital VBP Program. We continue to believe
that the CLABSI measure encourages hospitals to minimize infection
events that present significant health risks to patients. Therefore, we
are proposing to adopt the current version of the CLABSI measure for
the FY 2017 Hospital VBP Program and subsequent years. If a
reliability-adjusted version of the measure becomes available to us in
the future, we will consider adopting it.
We welcome public comment on this proposal.
e. Summary of Previously Adopted and Proposed New Measures for the FY
2017 Hospital VBP Program
The following table outlines the measures for the FY 2017 Hospital
VBP Program that we are readopting, as well as those measures we are
proposing to adopt. As discussed further below, this table includes the
FY 2017 domains in which we would place the previously adopted
measures, as well as the proposed domains in which we would place the
newly proposed measures.

Previously Adopted and Proposed New Measures for the FY 2017 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Measure Description Domain
----------------------------------------------------------------------------------------------------------------
CAUTI *............................ Catheter-Associated Urinary Tract Safety.
Infection (NQF 0138).
CLABSI **.......................... Central Line-Associated Blood Stream Safety.
Infection (NQF 0139).
C. difficile ***................... Clostridium difficile Infection (NQF Safety.
1717).
MRSA ***........................... Methicillin-Resistant Staphylococcus Safety.
aureus Bacteremia (NQF 1726).
PSI-90 *........................... Complication/patient safety for selected Safety.
indicators (composite) (NQF 0531).
SSI *.............................. Surgical Site Infection: (NQF 0753).
Colon...........................
Abdominal Hysterectomy..........
MORT-30-AMI *...................... Acute Myocardial Infarction (AMI) 30-day Clinical Care--Outcomes.
mortality rate (NQF 0230).
MORT-30-HF *....................... Heart Failure (HF) 30-day mortality rate Clinical Care--Outcomes.
(NQF 0229).
MORT-30-PN *....................... Pneumonia (PN) 30-day mortality rate (NQF Clinical Care--Outcomes.
0468).
AMI-7a *........................... Fibrinolytic Therapy Received Within 30 Clinical Care--Process.
Minutes of Hospital Arrival (NQF 0164).
IMM-2 *............................ Influenza Immunization (NQF 1659).
PC-01 ***.......................... Elective Delivery Prior to 39 Completed Clinical Care--Process.
Weeks Gestation (NQF 0469).
MSPB-1 *........................... Medicare Spending per Beneficiary (NQF Efficiency and Cost Reduction.
2158).
HCAHPS *........................... Hospital Consumer Assessment of Patient and Caregiver Centered
Healthcare Providers and Systems Survey Experience of Care/Care
(NQF 0166). Coordination.
----------------------------------------------------------------------------------------------------------------
* Measures readopted for the FY 2017 Hospital VBP Program.
** Measure adopted for the FY 2016 Hospital VBP Program but not previously subject to automatic readoption.
*** Measures proposed for the FY 2017 Hospital VBP Program.

5. Proposed Additional Measures for the FY 2019 Hospital VBP Program
a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following
Elective Primary Total Hip Arthroplasty (THA) and Total Knee
Arthroplasty (TKA)
Hospital-level Risk-Standardized Complication Rate (RSCR) Following
Elective Primary Total Hip Arthroplasty (THA) and Total Knee
Arthroplasty (TKA) (NQF 1550) is an outcome measure that we
adopted beginning with the FY 2015 payment determination under the
Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53516 through 53518). The measure assesses complications occurring
after THA and TKA surgery from the date of the index admission to 90
days post date of the index admission. The outcome is one or more of
the following complications: Acute myocardial infarction, pneumonia, or
sepsis/septicemia within 7 days of admission; surgical site bleeding,
pulmonary embolism or death within 30 days of admission; or mechanical
complications, periprosthetic joint infection or wound infection within
90 days of admission. We posted THA/TKA measure data on the Hospital
Compare Web site in December 2013. We refer readers to the FY 2013
IPPS/LTCH PPS final rule and to the THA/TKA complication methodology
report (https://qualitynet.org/dcs/
BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890067881&blobheade
r=multipart%2Foctet-stream&blobheadername1=Content-

[[Page 28122]]

Disposition&blobheadervalue1=attachment%3Bfilename%3DTHK--
CmpMsrUpdtSpecs--080113.pdf&blobcol=urldata&blobtable=MungoBlobs) for
additional details on the THA/TKA measure.
We continue to believe that measuring and reporting risk-
standardized complication rates will inform health care providers about
opportunities to improve care, strengthen incentives for quality
improvement, and promote improvements in the quality of care received
by patients and in the outcomes they experience. We believe that THA/
TKA is an important measure of clinical outcomes, and we therefore are
proposing to adopt it for the FY 2019 Hospital VBP Program and
subsequent years. The MAP supported the adoption of the measure for
inclusion in the Hospital VBP Program in its MAP Pre-Rulemaking Report:
2013 Recommendations on Measures Under Consideration by HHS found at
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746, noting it addresses a high-
volume elective procedure with variation in performance. We are
proposing to adopt this measure for FY 2019 based on the length of the
measure's reporting period and the time necessary to complete scoring
calculations. Because it is an outcome measure, we are proposing to
place it in the Clinical Care--Outcomes domain.
We welcome public comments on this proposal.
b. PSI-90 Measure
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698), we declined
to finalize the PSI-90 measure for the FY 2019 Hospital VBP Program in
order to adopt a more recent baseline period than would have been
possible at that time. However, we did not intend to signal that we
would not adopt the PSI-90 measure for FY 2019 and subsequent years. We
continue to believe that adopting this AHRQ PSI composite measure
provides strong incentives for hospitals to ensure that patients are
not harmed by the medical care they receive, which is a critical
consideration in quality improvement. In order to clarify the measure's
status under the Hospital VBP Program and ensure that there is no
confusion about our intent, we are proposing to readopt the PSI-90
measure for FY 2019 Hospital VBP Program and subsequent years.
We welcome public comments on this proposal.
6. Possible Measure Topics for Future Program Years
a. Care Transition Measure (CTM-3) Items for HCAHPS Survey
We are considering proposing to add the Care Transition Measure
from the Hospital Consumer Assessment of Healthcare Providers and
Systems (HCAHPS) Survey to the Patient and Caregiver Centered
Experience of Care/Care Coordination (PEC/CC) domain of the FY 2018
Hospital VBP Program. We seek public comments on this topic.
The Care Transition Measure (CTM) was added to the HCAHPS Survey of
hospital inpatients in January 2013 (77 FR 53513 through 53516). Three
items were added to the HCAHPS Survey to create the new Care Transition
Measure composite. After collecting four quarters of data on these
items (January 2013 through December 2013), we intend to publicly
report CTM scores for the first time on our Hospital Compare Web site
in October 2014.
Once the Care Transition Measure has been publicly reported on
Hospital Compare for one year, in accordance with the statutory
requirements of the Hospital VBP Program, we are considering proposing
to adopt CTM as the ninth dimension of the HCAHPS survey in the PEC/CC
domain for the FY 2018 Hospital VBP Program. We intend to propose that
the PEC/CC domain in the FY 2018 Hospital VBP Program would have a
baseline period of January 1, 2014 through December 31, 2014, and a
performance period of January 1, 2016 through December 31, 2016.
Currently, the PEC/CC domain (formerly known as the Patient
Experience of Care domain) is comprised of eight dimensions of the
HCAHPS Survey. Scoring in this domain is based on two elements: the
HCAHPS Base Score and HCAHPS Consistency Points Score. For additional
information on the calculation of the PEC/CC domain score, we refer
readers to ``A Step-by-Step Guide to Calculating the Patient Experience
of Care Domain Score in the Hospital Value-Based Purchasing FY 2013
Actual Percentage Payment Summary Report,'' at: https://www.hcahpsonline.org/HospitalVBP.aspx.
We specifically seek public comments on how the new CTM dimension
should be included in the scoring methodology that we have adopted for
the PEC/CC domain. In accordance with the finalized Hospital VBP
Program scoring methodology for other domains, we are considering the
``normalization'' approach, which would introduce only minor changes to
the original scoring formula, as follows.
For purposes of the HCAHPS Base Score, the new CTM dimension would
be calculated in the same manner as the eight existing HCAHPS
dimensions; for further details, we refer readers to ``A Step-by-Step
Guide to Calculating the Patient Experience of Care Domain Score in the
Hospital Value-Based Purchasing FY 2013 Actual Percentage Payment
Summary Report,'' at: https://www.hcahpsonline.org/HospitalVBP.aspx. For
each of the nine dimensions, Achievement Points (0-10 points) and
Improvement Points (0-9 points) would be calculated, the larger of
which will be summed across the nine dimensions to create a pre-
normalized HCAHPS Base Score (0-90 points, as compared to 0-80 points
when only eight dimensions were included). The pre-normalized HCAHPS
Base Score would then be multiplied by 8/9 (0.88888) and rounded
according to standard rules (values of 0.5 and higher are rounded up,
values below 0.5 are rounded down) to create the normalized HCAHPS Base
Score. Each of the nine dimensions would be of equal weight, so that,
as before, the normalized HCAHPS Base Score would range from 0 to 80
points.
HCAHPS Consistency Points would then be calculated in the same
manner as before and would continue to range from 0 to 20 points. The
Consistency Points Score would now consider scores across all nine of
the PEC/CC domain dimensions, whereas before it considered only the
eight dimensions that preceded the CTM measure.
The final element of the scoring formula would be the sum of the
HCAHPS Base Score and the HCAHPS Consistency Points Score and would
range from 0 to 100 points, as before.
We welcome public comments on this approach to including the CTM-3
dimension in the PEC/CC domain score.
b. Possible Future Efficiency and Cost Reduction Domain Measure Topics
In the interest of expanding the Efficiency domain to include a
more robust measure set, including measures that supplement the
Medicare Spending per Beneficiary (MSPB) measure with more condition
and/or treatment specific episodes, as well as facilitating alignment
with the Physician Value-Based Payment Modifier (VM) Program, we are
considering proposing to add new episode-based payment measures to the
Hospital VBP Program through future rulemaking. Expanding the
Efficiency domain to include such measures would create incentives for
coordination between hospitals and physicians to optimize the care they
provide to Medicare beneficiaries and

[[Page 28123]]

would increase alignment between the Hospital VBP and Physician VM
Programs. Any future Hospital VBP Program measures would first be
finalized for inclusion in the Hospital IQR Program and included on the
Hospital Compare Web site for one year, as required by section
1886(o)(2)(C) of the Act.
The six episode-based standardized payment measures we are
considering are discussed below and are similar in many ways to the
NQF-endorsed MSPB measure already included in the Efficiency domain.
Like the MSPB measure, these episode-based standardized payment
measures would include services initiated during an episode that spans
from 3 days prior to a hospital admission through 30 days post-
discharge from the hospital. We would sum the standardized Medicare
payment amounts for Part A and Part B services provided during this
timeframe and attribute them to the hospital at which the index
admission occurred. Medicare payments included in these episode-based
measures would be standardized according to the CMS standardization
methodology finalized for the MSPB measure in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51626).
Episodes in the six new measures would be risk-adjusted in a manner
similar to the MSPB measure risk adjustment methodology finalized in
the FY 2013 IPPS/LTCH PPS final rule (76 FR 51625 through 51626). The
difference between the risk adjustment approaches stems from the fact
that MSPB episodes are standardized at the Major Diagnostic Category
(MDC) level, whereas two of the new episode-based measures, the hip
episode measure and the knee episode measure, represent conditions that
are in the same MDC. Accordingly, the new episode-based measures would
be individually risk-adjusted at the specific episode type level, in
order to recognize the distinctions.
The payment standardization methodology is available in the
document entitled ``CMS Price Standardization'' and the MSPB risk
adjustment methodology is included in the document entitled ``MSPB
Measure Information Form,'' both available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. The risk adjustment methodology specific to these six episode-
based standardized payment measures can be found on the CMS Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-purchasing. Risk adjustment and payment
standardization would allow us to compare performance on these measures
across hospitals.
In contrast to the MSPB measure, we would only include Medicare
payments for services that are clinically related to the health
conditions treated during the hospital stay that triggered the episode.
The aim of including these episode-based payment measures in the
Hospital VBP Program would be to differentiate between hospitals that
provide care efficiently (that is, high quality care at a lower cost to
Medicare). We believe that risk-adjusted standardized Medicare payments
are an appropriate indicator of efficiency as they allow us to compare
hospitals without regard to such factors as geography and teaching
status. This comparison is particularly important with clinically
coherent episodes because it distinguishes the degree to which practice
pattern variation influences the cost of care. We believe that creating
incentives for appropriately reducing practice pattern variation is an
important part of our aims to lower the cost of care appropriately and
create better coordinated care for Medicare beneficiaries.
Another notable difference between the episode-based measures we
are considering and the MSPB measure occurs when, during the 30 days
following discharge from an index admission, a beneficiary is
readmitted for a condition that is clinically related to the index
admission and that also triggers an episode-based cost measure episode.
For example, if a beneficiary were discharged after a hip replacement,
then readmitted for a revision 15 days later, the standardized Medicare
payments associated with the revision would count toward the initial
hip replacement/revision episode and would also trigger a new hip
replacement/revision episode where the index admission would be that
for the revision. Details of which admissions would begin a new episode
and contribute to a preceding episode may be found at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-purchasing.
We are considering three medical and three surgical episodes for
the initial expansion of the Efficiency domain. The medical episodes
would address the following conditions: (1) Kidney/urinary tract
infection; (2) cellulitis; and (3) gastrointestinal hemorrhage. A
medical episode would be `triggered' by an inpatient claim with a
specified MS-DRG. The surgical episodes currently under consideration
are (1) hip replacement/revision; (2) knee replacement/revision; and
(3) lumbar spine fusion/refusion. A surgical episode would be triggered
when an inpatient claim has one of the specified MS-DRGs and at least
one of the procedure codes specified for that episode. We welcome
public comment on the three medical and three surgical conditions that
we are considering as new episode-based measures for initial expansion
of the Efficiency domain.
There are a number of other types of episodes that could also meet
the episode selection criteria we describe below, including those
related to heart and lung (for example, heart failure and pneumonia).
We note that we are exploring data related to episodes for these types
of conditions under the Physician VM Program. We welcome comment
regarding the applicability of episode-based measures for these or
other conditions for future expansion of the Efficiency domain.
In selecting the six conditions around which we would develop
episode measures for future expansion of the Efficiency domain, we
considered the following five criteria: (1) The condition constitutes a
significant share of Medicare payments for hospitalized patients during
and surrounding the hospital stay; (2) the degree to which clinical
experts consulted for this project agree that standardized Medicare
payments for services provided during the episode can be linked to the
care provided during the hospitalization; (3) episodes of care for the
condition are comprised of a substantial proportion of payments for
post-acute care, indicating episode payment differences are driven by
utilization outside of the MS-DRG payment; (4) episodes of care for the
condition reflect high variation in post-discharge payments, enabling
differentiation between hospitals; and, (5) the medical condition is
managed by general medicine physicians or hospitalists and the surgical
conditions are managed by surgical subspecialists, enabling comparison
between similar practitioner types within each episode measure.
For analysis purposes, the five selection criteria were applied to
2012 Medicare acute inpatient hospital data in a hierarchical manner,
to prioritize the inpatient conditions. After the selection criteria
were applied, we narrowed the medical and surgical episodes to those
episodes that are less complex, in order to allow CMS and hospitals to
gain experience with this new measure type. Full details of the

[[Page 28124]]

episode selection criteria are available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-purchasing. We welcome public comments on the
episode selection criteria we utilized.
Complete episode specifications, including the MS-DRG and ICD-9-CM
procedure codes used to identify each of the episodes, details of
episode construction methodology, and information on the clinical
expert reviewers for this project are available on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-purchasing. We welcome public comments on these
specifications and the construction of the six episode-based payment
measures that we are considering.
7. Previously Adopted and Proposed Performance Periods and Baseline
Periods for the FY 2017 Hospital VBP Program
a. Background
Section 1886(o)(4) of the Act requires the Secretary to establish a
performance period for the Hospital VBP Program for a fiscal year that
begins and ends prior to the beginning of such fiscal year. We refer
readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689 through
50692) and the CY 2014 OPPS/ASC final rule with comment period (78 FR
75020 through 75021) for the performance periods and baseline periods
for the Clinical Process of Care, Patient Experience of Care, Outcome,
and Efficiency domains for the FY 2016 Hospital VBP Program.
As discussed further below, in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50702 through 50704), we adopted new NQS-based quality domains
for FY 2017, and we are proposing to adopt performance and baseline
periods using those new domains for the FY 2017 Hospital VBP Program.
b. Previously Adopted Baseline and Performance Periods for the FY 2017
Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694
and 50698 through 50699), because of the time needed to process measure
data for the three 30-day mortality measures (Clinical Care--Outcomes
domain) and the PSI-90 measure (also referred to in previous rulemaking
as the AHRQ patient safety PSI-90 composite measure) (Safety domain),
and in consideration of our policy goal to collect enough data to
generate the most reliable scores possible, we adopted performance
periods and performance standards for the 30-day mortality measures for
FY 2017, FY 2018, and FY 2019, and for the PSI-90 measure for FY 2017
and FY 2018.
c. Proposed Clinical Care--Process Domain Performance Period and
Baseline Period for the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month
performance period for the FY 2016 Clinical Process of Care domain
measures of CY 2014 (January 1, 2014 through December 31, 2014). We
also adopted a corresponding 12-month baseline period of CY 2012
(January 1, 2012, through December 31, 2012), for purposes of
calculating improvement points and performance standards.
Based on our review of FY 2013 and FY 2014 Hospital VBP performance
period denominator data, we continue to believe that a 12-month
performance period provides us with reliable and sufficient data for
scoring Clinical Care--Process domain measures under the Hospital VBP
Program. These data are available for public review on our Hospital
Compare Web site. We are therefore proposing to adopt a 12-month
performance period for FY 2017 Clinical Care--Process domain measures
(including the proposed PC-01 measure) of CY 2015 (January 1, 2015,
through December 31, 2015). We also are proposing to adopt a
corresponding 12-month baseline period of CY 2013 (January 1, 2013,
through December 31, 2013) for purposes of calculating improvement
points and calculating performance standards.
We invite public comment on these proposals.
d. Proposed Patient and Caregiver-Centered Experience of Care/Care
Coordination (PEC/CC) Domain Performance Period and Baseline Period for
the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689), we adopted a
12-month performance period for FY 2016 Patient Experience of Care
domain measures of CY 2014, or January 1, 2014 through December 31,
2014, for the FY 2016 Hospital VBP Program. We also adopted a
corresponding 12-month baseline period of CY 2012 (January 1, 2012
through December 31, 2012), for purposes of calculating improvement
points and calculating performance standards. We continue to believe
that a 12-month performance period provides us sufficient HCAHPS data
on which to score hospital performance, which is an important goal both
for CMS and for stakeholders.
We are proposing to adopt a 12-month performance period for the FY
2017 PEC/CC domain of CY 2015 (January 1, 2015 through December 31,
2015). We also are proposing to adopt a corresponding 12-month baseline
period of CY 2013 (January 1, 2013 through December 31, 2013) for
purposes of calculating improvement points and calculating performance
standards.
We invite public comment on these proposals.
e. Proposed Safety Domain Performance Period and Baseline Period for
NHSN Measures for the FY 2017 Hospital VBP Program
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
75121), for the three NHSN HAI measures that we have adopted for the FY
2016 Hospital VBP Program (CAUTI, CLABSI, and SSI), we adopted an FY
2016 performance period of CY 2014 (January 1, 2014 through December
31, 2014), with a corresponding baseline period of CY 2012 (January 1,
2012 through December 31, 2012) for purposes of calculating improvement
points and calculating performance standards.
We continue to believe that a 12-month performance period provides
us with sufficient data on which to score hospital performance on NHSN
measures in the Safety domain. We also note that 12-month performance
and baseline periods are consistent with the reporting periods used for
these measures under the Hospital IQR Program (78 FR 50689). Therefore,
for the FY 2017 NHSN measures in the Safety domain (including the
proposed CLABSI, C. difficile infection and MRSA bacteremia measures),
we are proposing to adopt a performance period of CY 2015 (January 1,
2015 through December 31, 2015), and a corresponding baseline period of
CY 2013 (January 1, 2013 through December 31, 2013) for purposes of
calculating improvement points and calculating performance standards.
We invite public comment on these proposals.
f. Proposed Efficiency and Cost Reduction Domain Performance Period and
Baseline Period for the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month
performance period for the MSPB measure for the FY 2016 Hospital VBP
Program of CY 2014 (January 1, 2014, through December 31, 2014), with a

[[Page 28125]]

corresponding baseline period of CY 2012 (January 1, 2012, through
December 31, 2012). This performance and baseline period enable us to
collect sufficient measure data, while allowing time to calculate and
incorporate MSPB measure data into the Hospital VBP Program scores in a
timely manner.
We are proposing to adopt a 12-month performance period for the FY
2017 Efficiency and Cost Reduction domain of CY 2015 (January 1, 2015
through December 31, 2015), with a corresponding baseline period of CY
2013 (January 1, 2013 through December 31, 2013). We note that this
proposed performance and baseline period aligns with the performance
and baseline periods for Clinical Care--Process, PEC/CC, and certain
Safety measures under the new domain structure.
We invite public comments on these proposals.
g. Summary of Previously Adopted and Proposed Performance Periods and
Baseline Periods for the FY 2017 Hospital VBP Program
The table below summarizes the proposed baseline and performance
periods for the FY 2017 Hospital VBP Program (with previously adopted
baseline and performance periods for the mortality and AHRQ PSI
composite (PSI-90) measures noted).

Previously Adopted and Proposed Performance and Baseline Periods for the
FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Safety:
PSI-90*........ October 1, October 1,
2010-June 30, 2012 2013-June 30,
*. 2015.*
January 1,
2013-December 31,
2013.
NHSN (CAUTI, .................... January 1,
CLABSI, SSI, C. 2015-December 31,
difficile Infection, 2015.
MRSA Bacteremia).
Clinical Care--Outcomes:....
Mortality *.... October 1, October 1,
(MORT-30-AMI,........... 2010-June 30, 2012 2013-June 30,
*. 2015.*
MORT-30-HF,
MORT-30-PN)
Clinical Care--Process:
(AMI-7a, IMM-2, January 1, 2013- January 1, 2015-
PC-01). December 31, 2013. December 31, 2015.
Efficiency and Cost January 1, 2013- January 1, 2015-
Reduction (MSPB-1). December 31, 2013. December 31, 2015.
Patient and Caregiver- January 1, 2013- January 1, 2015-
Centered Experience of Care/ December 31, 2013. December 31, 2015.
Care Coordination (HCAHPS).
------------------------------------------------------------------------
* Previously adopted performance and baseline periods.

We note that we intend to propose additional baseline and
performance periods for the FY 2018 Hospital VBP Program in future
rulemaking.
8. Previously Adopted and Proposed Performance Periods and Baseline
Periods for Certain Measures for the FY 2019 Hospital VBP Program
a. Previously Adopted and Proposed Performance Period and Baseline
Period for the FY 2019 Hospital VBP Program for Clinical Care--Outcomes
Domain Measures
As described above, we have previously adopted the FY 2019
performance and baseline periods for the three 30-day mortality
measures that we have adopted for the former Outcome domain and that we
have since placed into the Clinical Care--Outcomes domain under the new
domain structure.
In this proposed rule, we are proposing to adopt the THA/TKA
measure for the FY 2019 Hospital VBP Program and to place that measure
in the Clinical Care--Outcomes domain. THA/TKA is reported to the
Hospital IQR Program for 36-month time periods. However, we do not
believe that we can feasibly adopt a 36-month performance period for
this measure and adopt it for the FY 2019 Hospital VBP Program. Based
on the time needed to complete measure calculations and performance
scoring, we believe that we must conclude the performance period for
this measure by June 30, 2017. We believe that a 30-month performance
period will result in sufficiently reliable quality measure data for
purposes of Hospital VBP Program scoring, and our analysis of historic
data supports our belief that comparisons between a 36-month baseline
period and a 30-month performance period will not result in significant
differences in measure scores. Further, adopting this proposed
performance period would enable us to include the measure in the FY
2019 Hospital VBP Program, which would ensure that hospitals continue
focusing on measures of outcomes under the Hospital VBP Program and
that we continue transitioning the Hospital VBP Program from its
initial focus on process measures to outcome measures.
We note that we have proposed below to adopt a 36-month performance
period for the THA/TKA measure for the FY 2020 Hospital VBP Program. We
have examined the correlation between hospitals' performance on the
THA/TKA measure for 30-month and 36-month periods, and we believe that
the 30-month period meets our standard for moderate reliability of
quality measure data during the specified time period. However, as with
the 30-day mortality and PSI-90 measures, we are attempting to align
performance periods under the Hospital VBP Program with reporting
periods under the Hospital IQR Program, while introducing measures
covering important clinical topics into the Hospital VBP Program as
quickly as possible. We believe that our proposal for a 30-month
performance period for this measure for the FY 2019 Hospital VBP
Program allows us to bring the measure into the Program in FY 2019 and
to accomplish that alignment beginning with the FY 2020 Hospital VBP
Program.
Therefore, we are proposing to adopt an FY 2019 performance period
of January 1, 2015, through June 30, 2017, for the THA/TKA measure.
Further, we are proposing to adopt an FY 2019 baseline period for this
measure of July 1, 2010 to June 30, 2013, for purposes of calculating
performance standards and awarding improvement points.
We welcome public comments on these proposals.

[[Page 28126]]

b. Proposed Performance Period and Baseline Period for the PSI-90
Safety Domain Measure for the FY 2019 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 5094),
we adopted performance periods and baseline periods for the PSI-90
measure for the FY 2017 and FY 2018 Hospital VBP Programs. We adopted
this policy in light of the time needed to process measure data and our
policy goal to collect enough data to generate the most reliable
measure scores possible. We stated our belief that aligning the
Hospital VBP Program performance periods with the Hospital IQR Program
reporting period duration would allow hospitals to review Hospital
Compare measure rates when they are updated and incorporate this
information into their quality improvement efforts, rather than having
to wait until the Hospital VBP Program provides its scoring reports to
hospitals. We stated our further belief that aligning the Hospital IQR
Program and the Hospital VBP Program in this manner will minimize the
burden on participating hospitals by aligning the time periods during
which they must monitor their performance on this measure.
We did not finalize a baseline period and performance period for
the AHRQ PSI-90 measure for FY 2019 in that final rule (78 FR 50692
through 50694). We stated that, by declining to finalize the measure's
FY 2019 performance and baseline periods in that final rule, we would
be able to adopt a more recent baseline period than we initially
proposed. We stated that we intended to propose baseline and
performance periods for the AHRQ PSI measure for the FY 2019 Hospital
VBP Program in future rulemaking.
We continue to believe that we should adopt performance and
baseline periods of 24 months for the PSI-90 measure. Therefore, we are
proposing to adopt an FY 2019 performance period for the PSI-90 measure
of July 1, 2015 through June 30, 2017, with a corresponding 24-month
baseline period of July 1, 2011 through June 30, 2013, for purposes of
calculating performance standards and awarding improvement points.
We welcome public comments on these proposals.
c. Summary of Previously Adopted and Proposed Performance Periods and
Baseline Periods for Certain Measures for the FY 2019 Hospital VBP
Program
The following table summarizes previously adopted and proposed
performance and baseline periods for the FY 2019 Hospital VBP Program:

Previously Adopted and Proposed Performance and Baseline Periods for Certain Measures for the FY 2019 Hospital
VBP Program
----------------------------------------------------------------------------------------------------------------
Domain Baseline period Performance period
----------------------------------------------------------------------------------------------------------------
Safety:
PSI-90...................... July 1, 2011-June July 1, 2015-June 30, 2017.
30, 2013.
Clinical Care-Outcomes:
Mortality *................. July 1, 2009-June July 1, 2010-June 30, 2013.
30, 2012 *.
(MORT-30-AMI,
MORT-30-HF,
MORT[dash]30-PN)
THA/TKA..................... July 1, 2010-June January 1, 2015-June 30, 2017.
30, 2013 *.
----------------------------------------------------------------------------------------------------------------
* Previously adopted performance and baseline periods.

We welcome public comment on these proposals.
9. Proposed Performance Period and Baseline Period for the Clinical
Care--Outcomes Domain for the FY 2020 Hospital VBP Program
As described above with respect to the mortality measures, in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694), we
adopted performance periods and baseline periods for the three 30-day
mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP
Programs. We adopted this policy in light of the time needed to process
measure data and to ensure that we collect enough measure data for
reliable performance scoring, as described further above. We continue
to believe that we should adopt 36-month performance and baseline
periods for the mortality measures when possible to accommodate those
durations.
We believe that a similar rationale applies to the new THA/TKA
measure that we are proposing to adopt for the Clinical Care--Outcomes
domain for the FY 2019 Hospital VBP Program, and which, under our
policy of measure readoption, we generally would readopt for the FY
2020 Hospital VBP Program if finalized. As stated above, we have
examined the correlation between hospitals' performance on the THA/TKA
measure for 30-month and 36-month periods, and we believe that the 30-
month period meets our standard for moderate reliability of quality
measure data during the specified time period. However, as with the 30-
day mortality and PSI-90 measures, we are attempting to align
performance periods under the Hospital VBP Program with reporting
periods under the Hospital IQR Program, while introducing measures
covering important clinical topics into the Program as quickly as
possible. We believe that our proposal for a 30-month performance
period for this measure for FY 2019 allows us to accomplish that
alignment beginning with the FY 2020 Program.
Therefore, we are proposing to adopt a 36-month performance period
for the measures in the Clinical Care--Outcomes domain in the FY 2020
Hospital VBP Program (including the proposed THA/TKA measure for FY
2020, if that measure is adopted for the FY 2020 Hospital VBP Program)
of July 1, 2015 through June 30, 2018, with a corresponding 36-month
baseline period of July 1, 2010 through June 30, 2013, for purposes of
calculating performance standards and awarding improvement points.
The following table summarizes the proposed performance and
baseline period for the Clinical Care--Outcomes domain for the FY 2020
Hospital VBP Program:

[[Page 28127]]

Proposed Performance and Baseline Period for the Clinical Care--Outcomes
Domain for the FY 2020 Hospital VBP Program
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Clinical Care--Outcomes:
Mortality (MORT-30 July 1, July 1,
AMI, MORT-30-HF, MORT-30- 2010-June 30, 2015-June 30,
PN). 2013. 2018.
THA/TKA............ July 1, July 1,
2010-June 30, 2015-June 30,
2013. 2018.
------------------------------------------------------------------------

We welcome public comment on these proposals.
10. Proposed Performance Standards for the Hospital VBP Program
a. Background
Section 1886(o)(3)(A) of the Act requires the Secretary to
establish performance standards for the measures selected under the
Hospital VBP Program for a performance period for the applicable fiscal
year. The performance standards must include levels of achievement and
improvement, as required by section 1886(o)(3)(B) of the Act, and must
be established and announced not later than 60 days before the
beginning of the performance period for the fiscal year involved, as
required by section 1886(o)(3)(C) of the Act. We refer readers to the
Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513)
for further discussion of achievement and improvement standards under
the Hospital VBP Program.
In addition, when establishing the performance standards, section
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate
factors, such as: (1) Practical experience with the measures, including
whether a significant proportion of hospitals failed to meet the
performance standard during previous performance periods; (2)
historical performance standards; (3) improvement rates; and (4) the
opportunity for continued improvement.
b. Performance Standards for the FY 2016 Hospital VBP Program
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through
53604), we adopted performance standards for FY 2015 and certain FY
2016 Hospital VBP Program measures. We also finalized our policy to
update performance periods and performance standards for future
Hospital VBP Program years via notice on the CMS Web site or another
publicly available Web site.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through
50698), we revised our regulatory definitions of ``achievement
threshold'' and ``benchmark'' at Sec. 412.160 and adopted performance
standards for additional FY 2016 Hospital VBP Program measures. We also
adopted an interpretation of ``achievement threshold'' and
``benchmark'' under Sec. 412.160 to not include the numerical values
that result when the performance standards are calculated. We further
adopted a policy under which we may update a measure's performance
standards for a fiscal year once if we identify data issues,
calculation errors, or other problems that would significantly affect
the displayed performance standards. We refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50695 through 50698) for the complete
set of FY 2016 performance standards.
c. Previously Adopted Performance Standards for the FY 2017, FY 2018,
and FY 2019 Hospital VBP Programs
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698 through
50699), we adopted performance standards for the three 30-day mortality
measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs
and for the PSI-90 measure for the FY 2017 and FY 2018 Hospital VBP
Programs. We refer readers to that final rule for those performance
standards.
d. Proposed Additional Performance Standards for the FY 2017 Hospital
VBP Program
In accordance with our finalized methodology for calculating
performance standards (discussed more fully in the Hospital Inpatient
VBP Program final rule (76 FR 26511 through 26513)), we are proposing
to adopt the following additional performance standards for the FY 2017
Hospital VBP Program. We note that the numerical values for the
performance standards displayed below represent estimates based on the
most recently available data, and we intend to update the numerical
values in the FY 2015 IPPS/LTCH PPS final rule. We note further that
the MSPB measure's performance standards are based on performance
period data; therefore, we are unable to provide numerical equivalents
for the standards at this time.
We note further that the performance standards for the NHSN
measures (CAUTI, SSI, and proposed CLABSI, MRSA Bacteremia, and C.
difficile Infection), the PSI-90 measure, and the MSPB measure are
calculated with lower values representing better performance, in
contrast to other measures, on which higher values indicate better
performance. As discussed further in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50684), the performance standards for SSI are computed
separately for each measure stratum, and we will award achievement and
improvement points to each stratum separately, then compute a weighted
average of the points awarded to each stratum by predicted infections.

Previously Adopted and Proposed Performance Standards for the FY 2017 Hospital VBP Program: Safety, Clinical
Care--Outcomes, Clinical Care--Process, and Efficiency and Cost Reduction Measures
----------------------------------------------------------------------------------------------------------------
Measure ID Description Achievement threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Safety Measures
----------------------------------------------------------------------------------------------------------------
CAUTI......................... Catheter-Associated Urinary 0.8371................ 0.0000
Tract Infection.
CLABSI........................ Central Line-Associated Blood 0. 4483............... 0.0000
Stream Infection.
C. difficile.................. Clostridium difficile Infection. 0.7927................ 0.0000
MRSA bacteremia............... Methicillin-Resistant 0.8613................ 0.0000
Staphylococcus aureus
Bacteremia.

[[Page 28128]]

PSI-90 *...................... Complication/patient safety for 0.577321 *............ 0.397051 *
selected indicators (composite)
*.
SSI........................... Surgical Site Infection.........
Colon................ 0.7117....... 0.0000
Abdominal 0.7509....... 0.0000
Hysterectomy.
----------------------------------------------------------------------------------------------------------------
Clinical Care--Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI *................. Acute Myocardial Infarction 0.851458 *............ 0.871669 *
(AMI) 30-day mortality rate *.
MORT-30-HF *.................. Heart Failure (HF) 30-day 0.881794 *............ 0.903985 *
mortality rate *.
MORT-30-PN *.................. Pneumonia (PN) 30-day mortality 0.882986 *............ 0.908124 *
rate *.
----------------------------------------------------------------------------------------------------------------
Clinical Care--Process Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a........................ Fibrinolytic Therapy Received 0.954545.............. 1.000000
Within 30 Minutes of Hospital
Arrival.
IMM-2......................... Influenza Immunization.......... 0.995882.............. 1.000000
PC-01......................... Elective Delivery Prior to 39 0.031250.............. 1.000000
Completed Weeks Gestation.
----------------------------------------------------------------------------------------------------------------
Efficiency and Cost Reduction Measure
----------------------------------------------------------------------------------------------------------------
MSPB-1........................ Medicare Spending per Median Medicare Mean of the lowest
Beneficiary. Spending per decile Medicare
Beneficiary ratio Spending per
across all hospitals Beneficiary ratios
during the across all hospitals
performance period. during the
performance period.
----------------------------------------------------------------------------------------------------------------
* Previously adopted performance standards.

Proposed Performance Standards for the FY 2017 Hospital VBP Program Patient and Caregiver-Centered Experience of
Care/Care Coordination Domain
----------------------------------------------------------------------------------------------------------------
Achievement Benchmark
HCAHPS survey dimension Floor (percent) threshold (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.................................... 56.90 78.08 86.41
Communication with Doctors................................... 62.03 80.43 88.71
Responsiveness of Hospital Staff............................. 36.46 64.83 79.62
Pain Management.............................................. 49.47 70.20 78.18
Communication about Medicines................................ 42.89 62.82 73.15
Hospital Cleanliness & Quietness............................. 43.46 65.26 79.06
Discharge Information........................................ 61.86 85.59 91.04
Overall Rating of Hospital................................... 35.00 69.81 84.27
----------------------------------------------------------------------------------------------------------------

We note that we intend to propose additional performance standards
for the FY 2018 Hospital VBP Program in future rulemaking.
We welcome public comments on these proposed performance standards.
e. Proposed Performance Standards for the FY 2019 and FY 2020 Hospital
VBP Programs
As discussed further above, we have adopted certain Safety and
Clinical Care--Outcomes domain measures for future program years in
order to ensure that we can adopt performance periods and baseline
periods of sufficient length for performance scoring purposes. We are
also proposing to adopt the PSI-90 measure in the Safety domain and the
THA/TKA measure in the Clinical Care--Outcomes domain for the FY 2019
Hospital VBP Program. We note that, as described above with respect to
the NHSN measures, the PSI-90 measure, and the MSPB measure, for the
THA/TKA measure, better performance is represented by lower values.
Therefore, we are proposing to adopt the following performance
standards for the FY 2019 Hospital VBP Program:

[[Page 28129]]

Previously Adopted and Proposed Performance Standards for Certain Safety and Clinical Care--Outcomes Domain
Measures for the FY 2019 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI-90............................. Complication/patient safety for selected 0.840421 0.589716
indicators (composite).
----------------------------------------------------------------------------------------------------------------
Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI *...................... Acute Myocardial Infarction (AMI) 30-day * 0.850671 * 0.873263
mortality rate *.
MORT-30-HF *....................... Heart Failure (HF) 30-day mortality rate * 0.883472 * 0.908094
*.
MORT-30-PN *....................... Pneumonia (PN) 30-day mortality rate *... * 0.882334 * 0.907906
THA/TKA............................ Hospital-level Risk-Standardized 0.032521 0.022895
Complication Rate Following Elective
Primary Total Hip Arthroplasty (THA) And/
Or Total Knee Arthroplasty (TKA).
----------------------------------------------------------------------------------------------------------------
* Previously adopted performance standards.

We welcome public comments on these proposed performance standards.
We also are proposing to adopt the following performance standards
for the FY 2020 Hospital VBP Program:

Proposed Performance Standards for Clinical Care--Outcomes Domain Measures for the FY 2020 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Clinical Care--Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI........................ Acute Myocardial Infarction (AMI) 30-day 0.853511 0.875840
mortality rate.
MORT-30-HF......................... Heart Failure (HF) 30-day mortality rate. 0.881394 0.905962
MORT-30-PN......................... Pneumonia (PN) 30-day mortality rate..... 0.882281 0.909460
THA/TKA............................ Hospital-level Risk-Standardized 0.032521 0.022895
Complication Rate Following Elective
Primary Total Hip Arthroplasty (THA) And/
Or Total Knee Arthroplasty (TKA).
----------------------------------------------------------------------------------------------------------------

We welcome public comments on these proposed performance standards.
f. Proposed Technical Updates Policy for Performance Standards
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through
50698), we revised our regulatory definitions of ``achievement
threshold'' and ``benchmark'' at Sec. 412.160 and adopted performance
standards for additional FY 2016 Hospital VBP Program measures. We also
adopted an interpretation of ``achievement threshold'' and
``benchmark'' under Sec. 412.160 to not include the numerical values
that result when the performance standards are calculated. We further
adopted a policy under which we may update a measure's performance
standards for a fiscal year once if we identify data issues,
calculation errors, or other problems that would significantly change
the displayed performance standards.
Our historic practice has been to display Hospital VBP Program
performance standards' numerical values in rulemaking. We adopted this
practice for the convenience of the public. Although we have typically
expressed the performance standards for each Hospital VBP measure as a
numerical value prior to the start of the performance period for that
measure, we do not display numerical values for the MSPB measure
because the measure is constructed as a measure of costs attributable
to patient care during a specified episode of care during the
performance period itself (77 FR 53601). We have stated that with
respect to the MSPB measure, we do not believe it is helpful for
hospitals to be compared against performance standards constructed from
baseline period data given the potential changes in market forces and
utilization practices that occur over time.
Further, during the long interval between the time we first display
the performance standards for all measures but the MSPB measure and the
time that we calculate the achievement and improvement scores for those
measures based on actual hospital performance, one or more of those
measures might have been technically updated in a way that inhibits our
ability to ensure that we are making appropriate comparisons between
the baseline and performance period. For example, the software used to
calculate the PSI-90 measure is regularly updated to incorporate coding
changes, refinements based on the consensus development process, and
refinements to improve specificity and sensitivity. The statistical
modeling we use to adjust measure calculations for PSI-90 and HCAHPS
also needs to be periodically updated to incorporate coefficient
factors that more properly account for patient mix (both measures) and
the HCAHPS survey data collection mode (HCAHPS survey). These types of
technical updates do not substantively affect the measure rate
calculation methodology, but they do sometimes affect our ability to
make appropriate comparisons between the baseline and performance
period if, for example, the baseline performance standards are
tabulated using one version of the software and hospital performance
during subsequent performance periods is tabulated with another
version. We believe that in order to make the most accurate comparison
of hospital performance across time, we should use the most updated
version of the measure that is available at the time we calculate that
performance because the updated version will produce the most valid
measure rates.

[[Page 28130]]

Further, as part of its regular maintenance process for NQF-
endorsed performance measures, NQF requires measure stewards to submit
annual measure maintenance updates and undergo maintenance of
endorsement review every 3 years. In the measure maintenance process,
the measure steward (owner/developer) is responsible for updating and
maintaining the currency and relevance of the measure and will confirm
existing or minor specification changes with NQF on an annual basis.
NQF solicits information from measure stewards for annual reviews, and
it reviews measures for continued endorsement in a specific 3-year
cycle.
The NQF's annual or triennial maintenance processes for endorsed
measures may result in the NQF requiring updates to the measures in
order to maintain endorsement status. We believe that it is important
to incorporate nonsubstantive updates required by the NQF, as well as
nonsubstantive updates made to other measures, into the measure
specifications we have adopted for the Hospital VBP Program so that
these measures remain up-to-date and ensure that we make fair
comparisons between the performance and baseline periods that we adopt
under the Program. We also recognize that some updates to measures are
substantive in nature and might not be appropriate for adoption without
further rulemaking.
With respect to what constitutes substantive versus nonsubstantive
changes to measures, we would make this determination on a case-by-case
basis. Examples of nonsubstantive changes to measures might include
updated diagnosis or procedure codes, medication updates for categories
of medications, broadening of age ranges, and exclusions for a measure
(such as the addition of a hospice exclusion to the 30-day mortality
measures). We believe that nonsubstantive changes may include updates
to measures based upon changes to guidelines upon which the measures
are based.
Therefore, we are proposing to amend the definition of
``performance standards'' under Sec. 412.160 to enable us to update
performance standards' numerical values to incorporate nonsubstantive
technical updates that are made to Hospital VBP Program measures
between the time that they are adopted for a particular program year
and the time that we actually calculate hospital performance on those
measures after the performance period for the program year has
concluded. Further, we are proposing to inform hospitals of these
technical updates through postings on our Hospital VBP Program Web
site, the QualityNet Web site, other educational outreach efforts, and/
or the scoring reports that we provide for each program year. We note
that these proposals, if finalized, may have the effect of superseding
the performance standards that we establish prior to the start of the
performance period for the affected measures, but we believe them to be
necessary to ensure that the performance standards in the Hospital VBP
Program's scoring calculations enable the fairest comparisons between
performance measured during the baseline period and performance period.
We would continue to use rulemaking to adopt substantive updates to
the measures we have adopted for the Hospital VBP Program. Examples of
changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure, or when a standard of performance assessed by a measure
becomes more stringent (for example: changes in acceptable timing of
medication, procedure/process, or test administration). We also note
that the NQF process incorporates an opportunity for public comment and
engagement in the measure maintenance process.
We are also proposing to include in our revised definition of
``performance standards'' under Sec. 412.160 of our regulations the
policy we adopted in the FY 2013 IPPS/LTCH final rule to update the
performance standards once if we identify data issues, calculation
errors, or other problems that would significantly change the standards
(78 FR 50695). We are proposing to make this change so that our
policies governing updates to the performance standards appear
together.
We welcome public comments on these proposals. We also specifically
seek public comments on what we should consider to be substantive
changes in measures' performance standards, including whether or not we
should consider certain changes in performance standards as a result of
technical or non-substantive updates to be substantive.
g. Request for Public Comments on ICD-10-CM/PCS Transition
The ICD-10-CM/PCS transition is scheduled to take place on October
1, 2015. After that date, we will collect nonelectronic health record-
based quality measure data coded only in ICD-10-CM/PCS. Even though we
expect that the endorsement status of the measures we have adopted for
the Hospital VBP Program will remain the same, we are concerned that
the transition to a new coding system might have unintended
consequences on quality measure data denominators, statistical
adjustment coefficients, and measure rates. We are concerned about the
possible impacts on the Hospital VBP Program, and request public
comments on how we should accommodate the transition.
Specifically, we request comments on how, if at all, we should
adjust performance scoring under the Hospital VBP Program to
accommodate quality data coded under ICD-10-CM/PCS, or otherwise ensure
fair and accurate comparisons under the Hospital VBP Program once the
transition date has passed. For example, we could consider analyzing
the effects of the ICD-10-CM/PCS transition on hospitals' measured
performance and, if substantive differences result, retrospectively
adjusting performance standards in order to ensure that they accurately
reflect the underlying methodology. We could also consider performing
similar adjustments to hospitals' measure rates, measure scores, or
TPSs once our analysis is completed. We also might consider scoring
hospitals only on achievement if analysis indicates that we are unable
to reliably and validly calculate improvement scores when comparing
ICD-9-CM based baseline period data to ICD-10-CM/PCS based performance
period data. However, while we intend to analyze the effects of the
ICD-10-CM/PCS transition on hospitals' performance, we do not have the
necessary data for all hospitals at this time.
We intend to take two steps to analyze ICD-10-CM/PCS potential
impact before receiving ICD-10-CM/PCS-based fall 2015 discharge data in
May 2016. First, we will assess measure specifications to qualitatively
assess impact to measure denominators after CMS releases ICD-10-CM/PCS-
based measure specifications in the future. Second, we intend to
voluntarily solicit information from no more than 9 hospitals before
October 1, 2015 to estimate the impact of ICD-10-CM/PCS on their
Hospital VBP measure rates and denominator counts. We intend to use
this information to inform both proposed and future Hospital VBP
Program policy and measures.
We welcome public comments on this topic.
11. Proposed FY 2017 Hospital VBP Program Scoring Methodology
a. Proposed General Hospital VBP Program Scoring Methodology
In the Hospital Inpatient VBP Program final rule (76 FR 26514), we
adopted a

[[Page 28131]]

methodology for scoring clinical process of care, patient experience of
care, and outcome measures. As noted in that rule, this methodology
outlines an approach that we believe is well understood by patient
advocates, hospitals, and other stakeholders because it was developed
during a lengthy process that involved extensive stakeholder input, and
was based on a scoring methodology we presented in a report to
Congress. We also noted in that final rule that we had conducted
extensive additional research on a number of other important
methodology issues to ensure a high level of confidence in the scoring
methodology. In addition, we believe that, for reasons of simplicity,
transparency, and consistency, it is important to score hospitals using
the same general methodology each year, with appropriate modifications
to accommodate new domains and measures. We finalized a similar scoring
methodology for the MSPB measure in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51654 through 51656).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604 through
53605), for the FY 2015 Hospital VBP Program, we finalized our proposal
to use these same general scoring methodologies to score hospital
performance for the FY 2015 Hospital VBP Program. In that rule, we
stated that we believe these scoring methodologies continue to
appropriately capture hospital quality as reflected by the finalized
quality measure sets. We also noted that readopting the finalized
scoring methodology from prior program years represents the simplest
and most consistent policy for providers and the public. In the FY 2014
IPPS/LTCH PPS final rule (78 FR 50699), we readopted the finalized
general scoring methodology adopted for the FY 2015 Hospital VBP
Program for the FY 2016 Hospital VBP Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through
50704), we adopted new quality domains based on the NQS for FY 2017 and
subsequent years.
We continue to agree with the reasoning for the scoring methodology
outlined in the FY 2013 IPPS/LTCH PPS final rule and summarized above.
Therefore, we are proposing to adopt the general scoring methodology
adopted for the FY 2016 Hospital VBP Program for the FY 2017 Hospital
VBP Program, with appropriate modifications to accommodate the new
quality domains that we have previously adopted. These proposed
modifications to our scoring methodology are limited to reclassified
quality domains, new placements for measures within those domains, and
domain weighting. We discuss below a proposal to revise the finalized
domain weighting for FY 2017.
We welcome public comment on this proposal.
b. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for
Hospitals That Receive a Score on All Domains
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through
50704), we adopted our proposal to align the Hospital VBP Program's
quality measurement domains with the NQS' quality priorities, with
certain modifications. We adopted this realignment beginning with the
FY 2017 Hospital VBP Program. We also adopted the following domains and
domain weights for the FY 2017 Hospital VBP Program for hospitals that
receive a score in all newly aligned domains.

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

However, as discussed in more detail above, we are proposing to
remove six ``topped out'' measures from the FY 2017 Clinical Care--
Process subdomain. We believe that the proposed substantial reduction
in the number of measures adopted for the Clinical Care--Process
subdomain, if finalized, warrants reconsideration of the finalized
domain weighting for FY 2017 that we adopted in the FY 2014 IPPS/LTCH
PPS final rule.
As described in more detail above, we are proposing to re-adopt the
CLABSI measure and to adopt two new measures (MRSA Bacteremia and C.
difficile Infection) for the Safety domain for FY 2017 Hospital VBP
Program and subsequent years, and, if finalized, they would raise the
total number of measures in this domain for FY 2017 to six. Because we
are proposing to make changes in the number of measures in only two
domains (Safety and Clinical Care), we focused our proposed domain
weighting changes in this proposed rule on these domains only. Because
we continue to believe that hospitals should be provided strong
incentives to perform well on measures of patient safety, in view of
the new measures we are proposing to add to that domain, we are
proposing to revise the previously finalized domain weighting for the
FY 2017 Hospital VBP Program for hospitals receiving a score on all
newly aligned domains as follows:

Proposed Revised Domain Weights for the FY 2017 Hospital VBP Program for
Hospitals Receiving a Score on All Newly Aligned Domains
------------------------------------------------------------------------
Domain Weight
------------------------------------------------------------------------
Safety............................................ 20 percent.
Clinical Care: 30 percent.
Clinical Care--Outcomes.............. 25
percent.
Clinical Care--Process............... 5
percent.
Efficiency and Cost Reduction..................... 25 percent.

[[Page 28132]]

Patient and Caregiver Centered Experience of Care/ 25 percent.
Care Coordination.
------------------------------------------------------------------------

We welcome public comments on this proposal.
c. Proposed Domain Weighting for the FY 2017 Hospital VBP Program for
Hospitals Receiving Scores on Fewer Than Four Domains
In prior program years, we finalized a policy that hospitals must
have received domain scores on all finalized domains in order to
receive a TPS. However, because the Hospital VBP Program has evolved
from its initial two domains to an expanded measure set with additional
domains, we considered whether it was appropriate to continue this
policy.
Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606
through 53607), we finalized our proposal that, for the FY 2015
Hospital VBP Program and subsequent years, hospitals with sufficient
data to receive at least two out of the four domain scores that existed
for the FY 2015 Hospital VBP Program (that is, sufficient cases and
measures to receive a domain score on at least two domains) will
receive a TPS. We also finalized our proposal that, for hospitals with
at least two domain scores, TPSs would be reweighted proportionately to
the scored domains to ensure that the TPS is still scored out of a
possible 100 points and that the relative weights for the scored
domains remain equivalent to the weighting which occurs when there are
scores in all four domains. We believe that this approach allows us to
include relatively more hospitals in the Hospital VBP Program while
continuing to focus on reliably scoring hospitals on their quality
measure performance.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through
50702), we continued this approach for the FY 2016 Hospital VBP Program
and subsequent fiscal years for purposes of eligibility for the program
even though, based on the NQS, we adopted four NQS-based domains for
the FY 2017 Hospital VBP Program (78 FR 50702 through 50704), which
include the subdivided Clinical Care domain.
In light of the four NQS-based domains we have adopted, we have
reconsidered the appropriate minimum number of domains (that is, the
number of domains on which hospitals must receive scores) in order to
receive a TPS. We are concerned that requiring just two out of the four
NQS-based domains in order to receive a TPS may be insufficient to
ensure robust quality measurement under the Hospital VBP Program.
Further, given the transition to NQS-based domains that we have
adopted, we believe an additional independent analysis of appropriate
minimum numbers of domains under the new domain structure is
appropriate. We commissioned that analysis from our Reports & Analytics
contractor for the Hospital VBP Program. The results of that analysis
informed our proposal below, and we intend to post a summary of the
reliability and minimum numbers analysis on the CMS Web site during the
public comment period. We believe that requiring three out of the four
NQS-based domains appropriately balances our desire to be as inclusive
as possible with Hospital VBP Program requirements while ensuring that
TPSs under the Program are sufficiently reliable.
Therefore, we are proposing to require that, for the FY 2017
Hospital VBP Program and subsequent years, hospitals must receive
domain scores on at least three quality domains in order to receive a
TPS. For purposes of the Clinical Care domain score, we are proposing
to consider either the Clinical Care--Process or Clinical Care--Outcome
subdomains as one domain in order to meet this proposed requirement. By
adopting this policy, we believe we will continue to allow as many
hospitals as possible may participate in the program while ensuring
that reliable TPSs result. However, we would only reweight hospitals'
TPSs once, and will therefore not reallocate the Clinical Care--Process
and Clinical Care--Outcome subdomains' weighting within the Clinical
Care domain if a hospital does not have sufficient data for one of the
subdomains. For example, a hospital receiving domain scores on all
domains except the Clinical Care--Process subdomain would not have the
5 percent weighting from the Clinical Care--Process subdomain
reallocated entirely to the Clinical Care--Outcome subdomain. Instead,
the 5 percent weighting from the Clinical Care--Process subdomain would
be proportionately reallocated across all domains.
We welcome public comments on this proposal.
12. Proposed Minimum Numbers of Cases and Measures for the FY 2016 and
FY 2017 Hospital VBP Program's Quality Domains
a. Previously Adopted Minimum Numbers of Cases and FY 2016 Proposed
Minimum Numbers of Cases
In the Hospital Inpatient VBP Program final rule (76 FR 26527
through 26531), we adopted minimum numbers of at least 10 cases on at
least 4 measures for hospitals to receive a Clinical Process of Care
domain score. In the same final rule, we adopted a minimum number of
100 HCAHPS surveys for a hospital to receive a Patient Experience of
Care domain score. In the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74532 through 74534), we adopted a minimum number of 10
cases for the mortality measures that we adopted for FY 2014. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a
new minimum number of 25 cases for the mortality measures for FY 2015.
In the same final rule, we adopted a minimum number of 25 cases for the
MSPB measure (77 FR 53609 through 53610), a minimum of three cases for
any underlying indicator for the PSI-90 measure based on AHRQ's measure
methodology (77 FR 53608 through 53609), and a minimum of one predicted
infection for NHSN-based surveillance measures based on CDC's minimum
case criteria (77 FR 53608 through 53609). However, we note that we
adopted these case minimums for FY 2015 only, although we intended to
adopt them for FY 2015 and subsequent years. We continue to believe
that the finalized minimum numbers of cases described above are
appropriate and provide sufficiently reliable data for scoring purposes
under the Hospital VBP Program. Therefore, we are proposing to adopt
the specified case minimums for the FY 2016 Hospital VBP Program and
subsequent years.
We welcome public comment on this proposal. We note that we are
proposing below to specify minimum numbers of measures for the FY 2017
Hospital VBP Program and subsequent years based on the new domain
structure.

[[Page 28133]]

b. Proposed Minimum Number of Measures--Safety Domain
As described in more detail above, we have proposed to adopt six
quality measures in the Safety domain for the FY 2017 Hospital VBP
Program. Of these measures, five are NHSN-based surveillance measures,
and one is the PSI-90 measure. After consideration of these measures
and of previous independent analyses of the necessary minimum number of
measures adopted for the Outcome domain, whose measures formed the
basis for part of the new Safety domain, we are proposing to adopt a
minimum number of three measures for the Safety domain for FY 2017 and
subsequent years. We believe this proposal balances our desire to be as
inclusive as possible with the Hospital VBP Program and the need for
reliable quality measurement data on which to base TPSs. We would also
like to clarify that we will continue to score hospitals on NHSN
measures if, as we discussed with respect to the CLABSI measure (77 FR
53608) and the SSI measure (78 FR 50684), the hospital has met CDC's
minimum case criteria, or one predicted infection during the applicable
period.
We welcome public comments on this proposal.
c. Proposed Minimum Number of Measures--Clinical Care Domain
(1) Background
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a new domain
structure for the FY 2017 Hospital VBP Program and subsequent years
based on the National Quality Strategy. In that final rule, we adopted
a Clinical Care domain that was subdivided into the Clinical Care--
Process and Clinical Care--Outcomes subdomains. We adopted these
subdomains in order to ensure that we place the appropriate domain
weighting on measures of clinical processes and measures of clinical
outcomes. We believe the same consideration is appropriate for
determining minimum numbers of measures for each subdomain, and based
on prior independent analyses conducted of the appropriate minimum
numbers for the Clinical Process of Care and Outcome domains whose
measures formed the basis for the new Clinical Care domain, are
proposing separate minimum numbers for each of these subdomains below.
As described further above, we also attempted to balance our desire to
be as inclusive as possible with the Hospital VBP Program and the need
for reliable quality measurement data on which to base Total
Performance Scores.
(2) Clinical Care--Outcomes Subdomain
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707), we adopted a
minimum number of two measures in the former Outcome domain. We stated
our belief that this minimum number is appropriate for the expanded
Outcome domain that formed the basis for the Clinical Care--Outcomes
subdomain because adding measure scores beyond the minimum number of
measures has the effect of enhancing the domain score's reliability.
As noted above, the Clinical Care--Outcomes subdomain now contains
the three 30-day mortality measures, and based on previous independent
analysis of the appropriate minimum number of measures for the Outcome
domain that formed the basis for the Clinical Care--Outcomes domain
(available on our Web site at: https://cms.hhs.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/Downloads/HVBP_Measure_Reliability-.pdf), we continue to
believe that a minimum number of two measures within the subdomain
appropriately balances scoring reliability with inclusiveness under the
Program. As noted above, we intend to post a summary of the reliability
and minimum numbers analysis on the CMS Web site during the public
comment period. Therefore, we are proposing to adopt a minimum number
of two measures in the Clinical Care--Outcomes subdomain for FY 2017
and subsequent years.
We welcome public comment on this proposal.
(3) Clinical Care--Process Subdomain
We have reconsidered the finalized minimum number of measures given
the significant reduction in Clinical Care--Process measures due to
``topped-out'' removals that we are proposing in this proposed rule. We
are concerned that requiring hospitals to report on all three proposed
Clinical Care--Process measures for the FY 2017 Hospital VBP Program,
or even requiring two out of three measures, could prevent a
significant proportion of participating hospitals from receiving a
Clinical Care--Process subdomain score. We are aware that relatively
few hospitals report data for the AMI-7a measure, and the proposed PC-
01 measure will only include hospitals that provide maternity services.
In accordance with our preference for including as many hospitals as
possible in the Hospital VBP Program while ensuring the reliability of
the domain score and based on a prior independent analysis conducted
with respect the Clinical Process of Care domain that formed the basis
for the Clinical Care--Process domain, we are proposing to require
hospitals to report a minimum of one measure in the Clinical Care--
Process subdomain for the FY 2017 Hospital VBP Program and subsequent
years to receive a domain score.
We welcome public comment on this proposal.
d. Proposed Minimum Number of Measures--Efficiency and Cost Reduction
Domain
Because the MSPB measure remains the only measure within the
Efficiency and Cost Reduction domain for FY 2017, we are proposing to
require that hospitals receive a MSPB measure score in order to receive
an Efficiency and Cost Reduction domain score. If we adopt additional
measures for this domain in the future, we will consider if we should
revisit this policy.
We welcome public comments on this proposal.
e. Proposed Minimum Number of Measures--Patient and Caregiver Centered
Experience of Care/Care Coordination (PEC/CC) Domain
As with the MSPB measure adopted for the Efficiency and Cost
Reduction domain described further above, we have not adopted
additional measures for the PEC/CC domain. Because the HCAHPS survey
measure remains the only measure within the PEC/CC domain for FY 2017,
we are proposing to require that hospitals receive a HCAHPS survey
measure score in order to receive a PEC/CC domain score. If we adopt
additional measures for this domain in the future, we will consider if
we should revisit this policy.
We welcome public comments on this proposal.
13. Applicability of the Hospital VBP Program to Maryland Hospitals
Section 1886(o)(1)(C) of the Act specifies the hospitals for which
the Hospital VBP Program applies. Specifically, the term ``hospital''
is defined under section 1886(o)(1)(C)(i) of the Act as a ``subsection
(d) hospital (as defined in section 1886(d)(1)(B) [of the Act]).''.
Section 1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to
the definition of the term ``hospital'' with respect to a fiscal year.
Section 1886(o)(1)(C)(iv) of the Act states that in the case of a
hospital that is paid under section 1814(b)(3) of the Act, the
Secretary may exempt the hospital from the Hospital VBP Program if the
State submits an annual report to the Secretary describing how a
similar program in the State for a participating

[[Page 28134]]

hospital or hospitals achieves or surpasses the measured results in
terms of patient health outcomes and cost savings established under the
Hospital VBP Program. We have interpreted the reference to section
1814(b)(3) of the Act to mean those Maryland hospitals that were paid
under section 1814(b)(3) of the Act and that, absent the ``waiver''
provided by section 1814(b)(3) of the Act, would have been paid under
the IPPS.
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Act, as added by section 3021 of the Affordable
Care Act, which authorizes the testing of innovative payment and
service delivery models, including models that allow States to ``test
and evaluate systems of all-payer payment reform for the medical care
of residents of the State, including dual-eligible individuals.''
Section 1115A of the Act authorizes the Secretary to waive such
requirements of titles XI and XVIII of the Act as may be necessary
solely for purposes of carrying out section 1115A of the Act with
respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare pay Maryland hospitals in accordance with
section 1814(b)(3) of the Act. Maryland also represented that it is no
longer in continuous operation of a demonstration project reimbursement
system since July 1, 1977, as specified under section 1814(b)(3) of the
Act. Because Maryland hospitals are no longer paid under section
1814(b)(3) of the Act, they are no longer subject to those provisions
of the Act and related implementing regulations that are specific to
hospitals paid under section 1814(b)(3)of the Act, including but not
limited to section 1886(o)(1)(C)(iv) of the Act, which provides an
exemption for hospitals paid under section 1814(b)(3) of the Act from
the application of the Hospital VBP Program if the State which is paid
under that section meets certain requirements.
In order to implement the Maryland All-Payer Model, we have waived
certain provisions of the Act, and the corresponding implementing
regulations, as set forth in the agreement between CMS and Maryland and
subject to Maryland's compliance with the terms of the agreement. The
effect of Maryland hospitals no longer being paid under 1814(b)(3) is
that they are not entitled to be exempted from the Hospital VBP Program
under section 1886(o)(1)(C)(iv) of the Act and, but for the model,
would be included in the Hospital VBP Program. In other words, although
the exemption from the Hospital VBP Program no longer applies, Maryland
hospitals will not be participating in the Hospital VBP Program because
section 1886(o) of the Act and its implementing regulations have been
waived for purposes of the model, subject to the terms of the
agreement.
Accordingly, we are proposing to make conforming revisions to Sec.
412.160, in the definition of ``base-operating DRG payment amount'' and
to Sec. 412.161, which describes the applicability of the Hospital VBP
Program. We are proposing to delete references in these regulations to
hospitals paid under section 1814(b)(3) of the Act because, at this
time, there are no hospitals paid under that section.
We welcome public comment on these proposals.
14. Disaster/Extraordinary Circumstance Exception Under the Hospital
VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50704 through
50706), we adopted a disaster/extraordinary circumstance exception. We
refer readers to that final rule for the policy's details.
We note that we are currently in the process of revising the
Extraordinary Circumstances/Disaster Extension or Waiver Request form,
previously approved under OMB control number 0938-1171.

J. Proposed Changes to the Hospital-Acquired Condition (HAC) Reduction
Program

1. Background
We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50707 through 50708) for a general overview of the
HAC Reduction Program.
2. Statutory Basis for the HAC Reduction Program
Section 3008 of the Affordable Care Act added section 1886(p) to
the Act to provide an incentive for applicable hospitals to reduce the
incidence of HACs. Section 1886(p) of the Act requires the Secretary to
make an adjustment to payments to ``applicable hospitals'' effective
beginning on October 1, 2014 and for subsequent programs years. Section
1886(p)(1) of the Act sets forth the requirements by which payments to
``applicable hospitals'' will be adjusted to account for HACs with
respect to discharges occurring during FY 2015 or later. The amount of
payment shall be equal to 99 percent of the amount of payment that
would otherwise apply to such discharges under section 1886(d) or
1814(b)(3) of the Act, as applicable. Section 1886(p)(2)(A) of the Act
defines ``applicable hospitals'' as subsection (d) hospitals that meet
certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these
criteria and specifies that the payment adjustment would apply to an
applicable hospital that ranks in the top quartile (25 percent) of all
subsection (d) hospitals, relative to the national average, of
conditions acquired during the applicable period, as determined by the
Secretary. Section 1886(p)(2)(B)(ii) of the Act requires the Secretary
to establish and apply a risk-adjustment methodology.
Sections 1886(p)(3) and (p)(4) of the Act define ``hospital-
acquired conditions'' and ``applicable period'', respectively. The term
``hospital-acquired condition'' means ``a condition identified in
subsection 1886(d)(4)(D)(iv) of the Act and any other condition
determined appropriate by the Secretary that an individual acquires
during a stay in an applicable hospital, as determined by the
Secretary.'' The term ``applicable period'' means, with respect to a
fiscal year, a period specified by the Secretary.
Section 1886(p)(5) of the Act requires that, prior to FY 2015 and
each subsequent fiscal year, the Secretary provides the delivery of
confidential reports to applicable hospitals with respect to HACs of
the applicable hospital during the applicable period. Section
1886(p)(6)(A) of the Act sets forth the reporting requirements by which
the Secretary would make information available to the public regarding
HACs for each applicable hospital. Section 1886(p)(6)(B) of the Act
requires the Secretary to ensure that an applicable hospital has the
opportunity to review, and submit corrections for, the information to
be made public with respect to the HACs of the applicable hospital
prior to such information being made public. Section 1886(p)(6)(C) of
the Act requires that, once corrected, the HAC information be posted on
the Hospital Compare Web site on the Internet in an easily
understandable format.
Section 1886(p)(7) of the Act limits administrative and judicial
review of certain determinations made pursuant to section 1886(p) of
the Act. These determinations include what qualifies

[[Page 28135]]

as an applicable hospital, the specifications of a HAC, the Secretary's
determination of an applicable period, the provision of confidential
reports submitted to the applicable hospital, and the information
publically reported on the Hospital Compare Web site.
3. Implementation of the HAC Reduction Program for FY 2015
a. Overview
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through
50729), we presented the general framework for implementation of the
HAC Reduction Program for the FY 2015 implementation. We included the
following provisions for the program: (a) The relevant definitions
applicable to the program; (b) the payment adjustment under the
program; (c) the measure selection and conditions for the program,
including a risk-adjustment and scoring methodology; (d) performance
scoring; (e) the process for making hospital-specific performance
information available to the public, including the opportunity for a
hospital to review the information and submit corrections; and (f)
limitation of administrative and judicial review.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967), we
established the rules governing the payment adjustment under the HAC
Reduction Program at Subpart I of 42 CFR Part 412 (Sec. Sec. 412.170
and 412.172). We also amended existing Sec. 412.150 (the section that
describes the basis and scope of Subpart I of Part 412, which contains
the regulations governing adjustments to the base operating DRG payment
amounts under the IPPS for inpatient operating costs) to incorporate
the basis and scope of Sec. Sec. 412.170 and 412.172 for the HAC
Reduction Program.
In accordance with the provisions of section 1886(p) of the Act, in
the FY 2014 IPPS/LTCH PPS final rule, we included, under Sec. 412.170,
definitions for the terms ``hospital-acquired condition,'' ``applicable
hospital,'' and ``applicable time period'' (78 FR 50967). In Sec.
412.170, we defined ``hospital-acquired condition'' as a condition as
described in section 1886(d)(4)(D)(iv) of the Act and any other
condition determined appropriate by the Secretary that an individual
acquires during a stay in an applicable hospital, as determined by the
Secretary. We defined an ``applicable hospital'' as ``a hospital
described in section 1886(d)(1)(B) of the Act (including a hospital in
Maryland that is paid under section 1814(b)(3) of the Act and that,
absent the waiver specified by section 1814(b)(3) of the Act, would
have been paid under the hospital inpatient prospective payment system)
as long as the hospital meets the criteria specified under Sec.
412.172(e)'' (78 FR 50967). We specified that this definition does not
include hospitals and hospital units excluded from the IPPS, such as
LTCHs, cancer hospitals, children's hospitals, IRFs, IPFs, CAHs, and
Puerto Rico hospitals. We defined the ``applicable period'' as, with
respect to a fiscal year, the 2-year period (as specified by the
Secretary) from which data are collected in order to calculate the
Total HAC Score for the HAC Reduction Program.
Below we summarize the specific provisions for the HAC Reduction
Program that were established in the FY 2014 IPPS/LTCH PPS final rule
for implementation in FY 2015.
b. Payment Adjustment Under the HAC Reduction Program, Including
Exemptions
(1) Basic Payment Adjustment
Section 1886(p)(1) of the Act sets forth the requirements by which
payments to ``applicable hospitals'' will be adjusted to account for
HACs with discharges beginning on October 1, 2014. Section 1886(p)(1)
of the Act specifies that the amount of payment shall be equal to 99
percent of the amount of payment that would otherwise apply to such
discharges under section 1886(d) or 1814(b)(3) of the Act, as
applicable. As specified in the statute, this payment adjustment is
calculated and made after payment adjustments under sections 1886(o)
and 1886(q) of the Act, the Hospital VBP Program and the Hospital
Readmissions Reduction Program respectively, are calculated and made.
(We note that the Hospital VBP Program is discussed in section IV.I. of
the preamble of this proposed rule and the Hospital Readmissions
Reduction Program is discussed in section IV.H. of the preamble of this
proposed rule.) Section 1886(p)(2)(A) of the Act defines ``applicable
hospitals'' as subsection (d) hospitals that meet certain criteria.
Section 1886(p)(2)(B)(i) of the Act defines these criteria and
specifies that the payment adjustment would apply to an applicable
hospital that ranks in the top quartile (25 percent) of all subsection
(d) hospitals, relative to the national average of hospitals that
report conditions acquired during the applicable period, as determined
by the Secretary.
Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR50967), we
specified in Sec. 412.172(b) of the regulations that, for applicable
hospitals, beginning with discharges occurring during FY 2015, the
amount of payment under Sec. 412.172, or section 1814(b)(3) of the
Act, as applicable, for such discharges shall be equal to 99 percent of
the amount of payment that would otherwise apply to such discharges
under Sec. 412.172, or section 1814(b)(3) of the Act. This amount of
payment will be determined after the application of the payment
adjustment under the Hospital Readmissions Reduction Program under
Sec. 412.154, and the adjustment made under the Hospital VBP Program
under Sec. 412.162, and section 1814(l)(4) but without regard to this
section 1886(p) of the Act.
(2) Applicability to Maryland Hospitals
Section 1886(p)(2)(c) of the Act specifies that the Secretary may
exempt hospitals paid under 1814(b)(3) ``from the application of this
subsection if the State which is paid under such section submits an
annual report to the Secretary describing how a similar program in the
state for a participating hospital or hospitals achieves or surpasses
the measured results in terms of patient health outcomes and cost
savings established under this subsection.'' Accordingly, a program
established by the State of Maryland that could serve to exempt
hospitals in the State from the HAC Reduction Program would focus on
hospitals operating under the waiver provided by section 1814(b)(3) of
the Act, that is, those hospitals that would otherwise have been paid
by Medicare under the IPPS, absent this provision. As we stated in
section IV.J.3. of the preamble of this proposed rule, because
hospitals paid under section 1814(b)(3) of the Act are subsection (d)
hospitals, they are included in determining ``applicable hospitals''
(subject to the payment adjustment under the HAC Reduction Program),
and unless the Secretary exempts these hospitals from the application
of payment adjustments under the HAC Reduction Program under the
authority of section 1886(p)(2)(C) of the Act, they are considered to
be ``applicable hospitals'' (subject to the payment adjustments in the
HAC Reduction Program) under the HAC Reduction Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967 through
50968), we established criteria for evaluation to determine whether
Maryland will be exempted from the application of the payment
adjustments under the HAC Reduction Program for a given fiscal year.
Under Sec. 412.172(c), we specified that ``CMS will determine whether
to exempt Maryland hospitals that are paid under section 1814(b)(3) of
the Act and not under the hospital inpatient

[[Page 28136]]

prospective payment system. . . .'' and that, absent the provisions of
section 1814(b)(3) of the Act, to make payment under section 1886(d) of
the Act exempt from the application of payment adjustments under the
HAC Reduction Program, provided that the State submits an annual report
to the Secretary describing how a similar program to reduce hospital
acquired conditions in that State achieves or surpasses the measured
results in terms of health outcomes and cost savings for the HAC
Reduction Program as applied to hospitals described in section
1886(d)(1)(B) of the Act. We specified in the regulations that ``CMS
will establish criteria for evaluation of Maryland's annual report to
the Secretary to determine whether Maryland will be exempted from the
application of payment adjustments under this program for a given
fiscal year.'' We also specified that Maryland's annual report to the
Secretary and request for exemption from the HAC Reduction Program must
be resubmitted and reconsidered annually. We provided that, for FY
2015, Maryland must submit a preliminary report to us by January 15,
2014 and a final report to us by June 1, 2014.
We noted that our criteria to evaluate Maryland's program is for FY
2015, the first year of the payment adjustment under the HAC Reduction
Program, and that our evaluation criteria may change through notice and
comment rulemaking as this program evolves.
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Social Security Act (``Act''), as added by section
3021 of the Affordable Care Act, which authorizes the testing of
innovative payment and service delivery models, including models that
allow states to ``test and evaluate systems of all-payer payment reform
for the medical care of residents of the State, including dual eligible
individuals.'' Section 1115A of the Act authorizes the Secretary to
waive such requirements of titles XI and XVIII of the Act as may be
necessary solely for purposes of carrying out Section 1115A with
respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare reimburse Maryland hospitals in accordance with
section 1814(b)(3) of the Act. Maryland also represented that it is no
longer in continuous operation of a demonstration project reimbursement
system since July 1, 1977, as specified under Section 1814(b)(3) of the
Act. Because Maryland hospitals are no longer reimbursed under section
1814(b)(3) of the Act, they are no longer subject to those provisions
of the Act and related implementing regulations that are specific to
section 1814(b)(3) hospitals, including but not limited to section
1886(p)(2)(C) of the Act, which provides exemptions for hospitals paid
under section 1814(b)(3) from the application of the HAC Reduction
Program.
However, in order to implement the Maryland All-Payer Model, CMS
has waived certain provisions of the Act for Maryland hospitals,
including section 1886(p), and the corresponding implementing
regulations, as set forth in the agreement between CMS and Maryland and
subject to Maryland's compliance with the terms of the agreement. In
other words, although section 1886(p)(2)(C) of the Act no longer
applies to Maryland hospitals, Maryland hospitals will not be
participating in the HAC Reduction Program because section 1886(p) of
the Act and its implementing regulations have been waived for purposes
of the model, subject to the terms of the agreement. Consequently, we
are proposing that the Total HAC scores for Maryland hospitals will not
be included when identifying the top quartile of all hospitals with
respect to their Total HAC Score during the applicable period.
As a result of changes to the status of Maryland hospitals under
1814(b)(3) of the Act described above, we are proposing conforming
changes to these regulations and seek public comment on this proposal.
Specifically, we are proposing to remove the entire contents of
paragraph (c) under Sec. 412.172 and reserve the paragraph (c)
designation.
c. Measure Selection and Conditions, Including a Risk-Adjustment
Scoring Methodology
(1) General Selection of Measures
We are not proposing any new measures for the HAC Reduction Program
in this FY 2015 proposed rule. Although we are not required under
section 1886(p) of the Act to address specific measure scoring
methodologies and domain weights regarding the HAC Reduction Program in
notice-and-comment rulemaking, as required under the Hospital VBP
program, we believe that it is important to set forth such scoring
methodologies for each individual HAC measure, in order for the public
to understand how the measures adopted in previous rulemaking relate to
the performance methodology used to determine the applicable hospitals
subject to the payment adjustment under the HAC Reduction Program.
However, below we set forth the specific measure scoring methodology
and domain weights regarding the HAC Reduction Program for FY 2015 as
finalized in the FY 2014 IPPS/LTCH PPS final rule.
(2) Updates on AHRQ PSI-90, and CDC NHSN CLABSI and CAUTI Measures
For FY 2015, we will keep the AHRQ PSI-90 composite measure (in
Domain 1) that we adopted in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50717) as it is currently endorsed by NQF. However, we note that the
AHRQ PSI-90 composite measure is currently undergoing NQF maintenance
review. The PSI-90 composite consists of eight component indicators:
PSI-3 Pressure ulcer rate; PSI-6 Iatrogenic pneumothorax rate; PSI-7
Central venous catheter-related blood stream infections rate; PSI-8
Postoperative hip fracture rate; PSI-12 Postoperative PE/DVT rate; PSI-
13 Postoperative sepsis rate; PSI-14 Wound dehiscence rate; and PSI-15
Accidental puncture & laceration rate. AHRQ is considering the addition
of PSI-9 (Perioperative hemorrhage rate), PSI-10 (Perioperative
physiologic metabolic derangement rate) and PSI-11 (Post-operative
respiratory failure rate) or a combination of these three measures into
the PSI-90 composite. We consider the inclusion of measures in the PSI-
90 composite to be a significant change to the PSI-90 composite that we
finalized in the FY 2014 IPPS/LTCH PPS final rule. Should the changes
be significant, we will issue notice-and-comment rulemaking prior to
requiring reporting of this composite.
Similarly, the CDC NHSN Catheter-Associated Urinary Tract Infection
(CAUTI) and Central Line-Associated Blood Stream Infection (CLABSI)
measures in Domain 2 that we adopted in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50717) for FY 2015 also are currently undergoing NQF
maintenance review. Should the changes be significant, we will issue
notice-and-comment rulemaking prior to requiring reporting of the
changes made to CDCs NHSN CLABSI and CAUTI measures. For FY 2015, we
will keep CDC's NHSN CAUTI and CLABSI measures in Domain 2 as they are
currently endorsed.

[[Page 28137]]

(3) Measure Selection
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized
the following measures for selection: (i) The AHRQ PSI-90 composite
measure for Domain 1 and the CDC NHSN measures CAUTI and CLABSI for
Domain 2 for FY 2015; (ii) addition of CDC NHSN Surgical Site Infection
(SSI) measure for FY 2016; and (iii) addition of CDC NHSN Methicillin-
Resistant Staphylococcus aureus (MRSA) Bactremia and C. difficile
measures for FY 2017. Several of these measures are already part of the
Hospital IQR Program and are reported on the Hospital Compare Web site.
(4) Measure Risk-Adjustment Methodology
In the FY 2014 IPPS/LTCH PPS final rule, we established that we
will use the existing measure-level risk-adjustment that is already
part of the methodology for the individual measures for Domains 1 and 2
in order to fulfill this requirement (78 FR 50719). We codified the use
of this methodology under Sec. 412.172(d) of the regulations. The AHRQ
PSI-90 composite measure and the CDC NHSN measures selected for the
program are risk-adjusted and reliability-adjusted. Specifically, risk
factors such as the patient's age, gender, comorbidities, and
complications will be considered in the calculation of the measure
rates so that hospitals serving a large proportion of sicker patients
are not unfairly penalized. We noted that the risk-adjustment
methodology for these measures meets NQF endorsement criteria. We
believe that such risk-adjustment is appropriate, pursuant to section
1886(p) of the Act.
We will continue to examine the impact of the additional measures
in the program, and propose refinements to the program if necessary.
Should changes to the risk-adjustment models for the measures be
adopted during NQF endorsement maintenance processes, we will propose
adopting these changes as soon as possible through rulemakings.
(5) Measure Calculations
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717 through
50719), we established that we will perform measure calculations for
the AHRQ PSI-90 composite measure under Domain 1 and the CDC NHSN
measures under Domain 2. We stated that measure calculations for the
AHRQ PSI-90 composite measures included using ICD-9-CM diagnosis and/or
procedure codes and, for the principal and secondary diagnoses, a
present on admission (POA) indicator value associated with all
diagnoses on the claim. We also stated that subsection (d) Maryland
hospitals paid under the waiver at section 1814(b)(3) of the Act also
must report on whether a diagnosis is present on admission (78 FR
50718). (As noted in section IV.J.3.b.(2) of the preamble of this
proposed rule, in order to implement the new Maryland All-Payer Model,
Maryland elected to no longer have Medicare payment made to Maryland
hospitals in accordance with section 1814(b)(3) of the Act, effective
January 1, 2014. Although CMS has waived certain provisions of the Act
for Maryland hospitals as set forth in the agreement between CMS and
Maryland and subject to Maryland's compliance with the terms of the
agreement, CMS has not waived the POA indicator reporting requirement.
In other words, the changes to the status of Maryland hospitals under
section 1814(b)(3) of the Act as described above do not in any way
change the POA indicator reporting requirement for Maryland hospitals.)
We also finalized that the same rules under the Hospital IQR Program be
applied to determine how the AHRQ PSI-90 composite measure and CDC NHSN
measures are applied and calculated.
(6) Applicable Time Period
In the FY 2014 IPPS/LTCH final rule (78 FR 50717), we adopted a 2-
year applicable period to collect data that would be used to calculate
the Total HAC Score for FY 2015. For Domain 1 (AHRQ PSI-90 composite
measure), we established a 2-year data period to calculate the measures
based on recommendations from AHRQ, the measure developer, as we
believed that the 24-month data period will provide hospitals and the
general public the most current data available. The 24-month data
period also will allow time to complete the complex calculation process
for these measures, to perform comprehensive quality assurance to
enhance the accuracy of measure results, and to disseminate
confidential reports on hospital-level results to individual hospitals.
As such, for FY 2015, we will use the 24-month period from July 1,
2011 through June 30, 2013 as the applicable time period for the AHRQ
PSI-90 composite measure. The claims for all Medicare FFS beneficiaries
discharged during this period will be included in the calculation of
measure results for FY 2015. This includes claims data from the 2011,
2012, and 2013 Inpatient Standard Analytic Files (SAFs).
The CDC NHSN measures, CAUTI and CLABSI, are currently collected
and calculated on a quarterly basis. However, for the purpose of the
HAC Reduction Program, we will use 2 years of data to calculate the
Domain 2 score. For FY 2015, we will use calendar years 2012 and 2013
for the HAC Reduction Program. As noted above, we codified the
definition of ``applicable time period'' in the FY 2014 IPPS/LTCH PPS
final rule at Sec. 412.170.
d. Criteria for Applicable Hospitals and Performance Scoring Policy
The HAC Reduction Program does not contain specific statutory
directives on scoring methods, as found with other programs. Therefore,
our main concern when establishing scoring methods for the HAC
Reduction Program was to align with existing scoring methodologies in
similar hospital programs. Accordingly, in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50721), we finalized a scoring methodology that
aligns with the achievement scoring methodology currently used under
the Hospital VBP Program (78 FR 27629). We believe aligning the scoring
methodologies reduces confusion associated with multiple scoring
methodologies. Additionally, we note that alignment benefits the
hospital stakeholders who have prior experience with the Hospital VBP
Program.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629), we
proposed to implement a methodology for assessing the top quartile of
applicable hospitals for HACs based on performance standards, where we
would score each hospital based on whether they fall in the top
quartile for each applicable measure and where in the top quartile they
fall. In addition, we proposed to calculate a Total HAC Score for each
hospital by summing the hospital's performance score on each measure
within a domain to determine a score for each domain, then multiplying
each domain score by a proposed weight (Domain 1--AHRQ Patient Safety
Indicators 50 percent, Domain 2--CDC NHSN Measures 50 percent), and
adding together the weighted domain scores to determine the Total HAC
Score.
We reviewed the public input on the proposed 75th percentile
benchmark. Several commenters requested that a change to the proposed
minimum benchmark for scoring each measure was necessary. We agreed
with these commenters, and in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50722), we modified our proposal and established that the scoring
will begin at the minimum value for each measure rather than the 75th
percentile. The methodology finalized in the FY 2014

[[Page 28138]]

IPPS/LTCH PPS final rule will assess the top quartile of applicable
hospitals for HACs based on the Total HAC Score. The support for Domain
2 measures in general, coupled with multiple recommendations, and
specifically those from MedPAC, to provide more weight to Domain 2
measures led us to conclude that such scoring changes are necessary.
Therefore, we finalized a different weight for each Domain than
originally proposed (78 FR 50721).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722), we further
specified that we will calculate a Total HAC Score for each hospital by
using the hospital's performance score on each measure within a domain
to determine a score for each domain, then multiply each domain score
by the following weights: Domain 1--(AHRQ PSI-90 composite measure), 35
percent; and Domain 2--(CDC NHSN measures), 65 percent; and combine the
weighted domain scores to determine the Total HAC Score (Sec.
412.172(e)(3)). We use each hospital's Total HAC Score to determine the
top quartile of subsection (d) hospitals (applicable hospitals) that
are subject to the payment adjustment beginning with discharges on or
after October 1, 2014. With respect to a subsection (d) hospital, we
identify the top quartile of all hospitals that are subsection (d)
hospitals with respect to their rate of HACs during the applicable
period (Sec. 412.172(e)(1)). We use a Total HAC Score to identify
applicable hospitals and identify the 25 percent of hospitals with the
highest Total HAC Scores as applicable hospitals (Sec. 412.172(e)(2)).
We finalized the PSI-90 composite measure for Domain 1. Because
hospitals may not have complete data for every AHRQ indicator in the
composite measure for this Domain 1 measure, we finalized the same
methodology used for the Hospital VBP Program to determine the minimum
number of indicators with complete data to be included in the
calculation of the Domain measure.
Additionally, we finalized the following rules to determine the
number of AHRQ indicators to be included in the calculation for a
hospital's Domain 1 score. In this discussion, ``complete data'' refers
to whether a hospital has enough eligible discharges to calculate a
rate for a measure. Complete data for the AHRQ PSI-90 composite measure
means the hospital has three or more eligible discharges for at least
one component indicator. Specifically--
If a hospital does not have ``complete data'' for the PSI-90
composite, we will not calculate a Domain 1 score for that hospital.
If a hospital has ``complete data'' for at least one indicator for
the AHRQ PSI-90 composite, we will calculate a Domain 1 score.
The calculation of the SIR for the CDC measures requires that the
facility have a [gteqt] 1 predicted HAI event. The predicted number of
events is calculated using the national HAI rate and the denominator
counts (that is, number of device days, procedure days, or patient days
depending on the HAI). In the event an SIR cannot be calculated because
the facility has <1 predicted infection, Domain 1 scores exclusively
will be used to calculate a HAC score. In other words, we will exclude
from the overall HAC score calculation any measure for which an SIR
cannot be calculated for the reason set out above.
Because of the differences among the measures for the HAC Reduction
Program and the distribution of measure results, simply adding up the
measure results to calculate the domain or Total HAC Score will make
the scores less meaningful to hospitals and the general public. As a
result, as we indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50720 through 50725), points will be assigned to hospitals' performance
for each measure. This approach aligns with the Hospital VBP Program
for measuring hospital achievement. In particular, the Hospital VBP
Program assigns up to 10 points for each measure based on a hospital's
performance result for that measure for a given time period. We note
that, for the HAC Reduction Program, unlike the Hospital VBP Program
where a higher score means better performance, the more points a
hospital receives on a measure corresponds with a poorer score
performance. For the HAC Reduction Program, we finalized use of a
slightly different methodology for scoring points, depending on the
specific measure (Table C in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50723), which is also included below). Specifically--
For the AHRQ Patient Safety for Selected Condition (PSI-
90) composite in Domain 1, point assignment will be based on a
hospital's score for the composite measure.
For the PSI-90 composite measure, 1 to 10 points will be
assigned to the hospital.
For the CDC NHSN measures in Domain 2, point assignment
for each measure will be based on the SIR for that measure.
For each SIR, 1 to 10 points will be assigned to the
hospital for each measure (CAUTI and CLABSI for FY 2015).
The Domain 2 score will consist of the average of points
assigned to the SIR (CAUTI and CLABSI for FY 2015).

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

For all measures finalized for the HAC Reduction Program, we will
use the following rules to determine the number of points assigned to a
measure (78 FR 50723 through 50725). Based on the distribution for PSI-
90 rates for all the hospitals, we will divide the results into
percentiles in increments of 10 with the lowest percentile ranges
meaning better performance. Hospitals with PSI-90 rates within the
lowest tenth percentile will be given one point; those with PSI-90
rates within the second lowest percentile range (between the 11th and
20th percentile) will be given 2 points, and so forth.

Figure A--Point Assignment for Hospital A's PSI-90 Score
------------------------------------------------------------------------
Then assign
If Hospital A's PSI-90 rate falls into this percentile this number of
points
------------------------------------------------------------------------
1st-10th................................................ 1
11th-20th............................................... 2
21st-30th............................................... 3

[[Page 28139]]

31st-40th............................................... 4
41st-50th............................................... 5
51st-60th............................................... 6
61st-70th............................................... 7
71st-80th............................................... 8
81st-90th............................................... 9
91st-100th.............................................. 10
------------------------------------------------------------------------

For Domain 2, we will obtain measure results that hospitals
submitted to the CDC NHSN for the Hospital IQR Program. The CDC NHSN
HAI measures capture adverse events that occurred within intensive care
units (ICUs), including pediatric and neonatal units. For the Hospital
IQR Program, hospitals that elected to participate in the reporting
program (that is, had an active IQR pledge), but did not have ICUs, can
apply for an ICU waiver so that they will not be subject to the 2-
percent payment reduction for nonsubmission of quality reporting data.
In the FY 2014 IPPS/LTCH PPS final rule, we noted in the second
quarter of 2012, among the 3,321 IPPS hospitals with an active IQR
pledge for data submission, 377 (or 10.1 percent) applied and received
an ICU waiver. At the same time, 2,939 hospitals (88.5 percent) of the
IPPS hospitals did not have an ICU waiver and submitted data for the
CDC HAI CLABSI measure, while 4 hospitals (0.1 percent) that had no ICU
waiver failed to submit data to the NHSN. For the same quarter, of the
3,321 IPPS hospitals with an active IQR pledge, 2,935 (88.4 percent)
that did not have an ICU waiver submitted data for the CDC HAI CAUTI
measure, whereas 8 hospitals (0.2 percent) did not submit data. Because
data availability for the two CDC HAI measures impact the score for
Domain 2 and eventually the Total HAC Score, we aim to encourage
hospitals with an ICU that did not submit data to begin data
submission, and to reward hospitals that have already submitted data to
continue data submission for all the CDC HAI measures. To this end, we
finalized the following rules (Figure B in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50724), which is included below):
If a hospital has an ICU waiver for the CDC HAI measures,
we will use only the Domain 1 score to calculate its Total HAC Score.
If a hospital does not have an ICU waiver for a CDC HAI
measure:
[cir] If the hospital does not submit data for the CDC HAI
measures, we will assign 10 points to that measure for that hospital.
[cir] If the hospital does submit data for at least one CDC NHSN
measure:
[ssquf] If there are ``complete data'' (that is, enough adverse
events to calculate the SIR) for at least one measure, we will use
those data to calculate a Domain 2 score and use the hospital's Domain
1 and Domain 2 scores to calculate the Total HAC Score.
[ssquf] If there are not enough adverse events to calculate the SIR
for any of the measures, we will use only the hospital's Domain 1 score
to calculate its Total HAC Score.
BILLING CODE 4120-01-P

[[Page 28140]]

[GRAPHIC] [TIFF OMITTED] TP15MY14.001

BILLING CODE 4120-01-C
(1) Clarification of Finalized Measure Result Scoring for FY 2015 and
Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we finalized
for the HAC Reduction Program a scoring methodology that divides the
measure results into percentiles in increments of 10 and assigns points
(1 to 10) in accordance with the percentile into which the hospital's
measure result falls. Our preliminary analysis of the measures showed
that multiple hospitals had the same measure results, and that in
certain instances, the number of hospitals with the same measure
results exceeded the number of hospitals for their appropriate
percentile. Consequently a few hospitals with the same measure results
fall into

[[Page 28141]]

the next higher percentile. In these instances, we will assign the same
point for all hospitals with the same measure results, and that point
will be based on the prior or the lowest appropriate percentile.
For example, if, for the CAUTI measure, 13 percent of hospitals
have an SIR of 0, we will assign a point of 1 to all 13 percent of
hospitals, even though, arguably, 10 percent of them fall into the
first percentile, and 3 percent of the 13 percent fall into the second
percentile. Because each percentile range ideally represents 10 percent
of hospitals, we will assign a point of 2 to the remaining 7 percent of
hospitals in the second percentile because their SIR is larger than 0.
We believe this is the most favorable method for scoring measure
results for hospitals. We note that randomly assigning some hospitals
with the same SIR a higher (for example, less favorable) score would be
both arbitrary and capricious, which are prohibited by the
Administrative Procedure Act.
(2) Proposed Clarification of FY 2015 Finalized Narrative of Rules To
Calculate the Total HAC Score
In the FY 2014 IPPS/LTCH PPS final rule, we finalized a series of
rules to determine how to calculate the Domain 2 score and ultimately
the Total HAC Score when there were waivers for the collection of CDC
NHSN HAI measures (78 FR 50723). We also illustrated and finalized
these rules in Figure B of the final rule (78 FR 50724). We are
proposing to clarify that the narrative for Figure B should also
include ``other waivers'' that waive hospitals from collecting CDC HAI
measure data. The clarified rules that we are proposing are as follows
for the collection of CDC HAI measures:
If a hospital has an ICU waiver or other waiver for the
CDC NHSN HAI measures, we will use only the Domain 1 score to calculate
its Total HAC Score.
If a hospital does not have an ICU waiver or other waiver
for the CDC HAI measures:
[cir] If the hospital does not submit data for the CDC HAI
measures, we will assign 10 points to that measure for that hospital.
[cir] If the hospital does submit data for at least one CDC NHSN
measure:
[ssquf] If there are ``complete data'' (that is, enough adverse
events to calculate the SIR) for at least one measure, we will use
those data to calculate a Domain 2 score and use the hospital's Domain
1 and Domain 2 scores to calculate the Total HAC Score.
[ssquf] If there are not enough adverse events to calculate the SIR
for any of the measures, we will use only the hospital's Domain 1 score
to calculate its Total HAC Score.
As discussed earlier, if a hospital has enough data to calculate
the PSI-90 composite score for Domain 1 and ``complete data'' for at
least one measure in Domain 2, the scores of the two domains will
contribute to the Total HAC Score at 35 percent for Domain 1 and 65
percent for Domain 2. However, if a hospital does not have enough data
to calculate the PSI-90 composite score for Domain 1 but it has
``complete data'' for at least one measure in Domain 2, its Total HAC
Score will depend entirely on its Domain 2 score. Similarly, if a
hospital has ``complete data'' to calculate the PSI-90 composite score
in Domain 1 but none of the measures in Domain 2, its Total HAC Score
will be based entirely on its Domain 1 score. If the hospital does not
have ``complete data'' to calculate the PSI-90 composite score for
Domain 1 or any of the measures in Domain 2, we will not calculate a
Total HAC Score for this hospital.
e. Reporting Hospital-Specific Information, Including the Review and
Correction of Information
(1) Confidential Reports to Applicable Hospitals
Section 1886(p)(5) of the Act requires the Secretary to provide
confidential reports to the applicable hospitals with respect to HACs.
To meet the requirements under section 1886(p)(5) of the Act, in the FY
2014 IPPS/LTCH PPS final rule, we finalized the provision of
confidential reports for the HAC Reduction Program to include
information related to claims-based measure data for the PSI measures,
the domain score for each domain, and the Total HAC Score (78 FR
50725). We noted that we use chart-abstracted measures in the HAC
Reduction Program, and such information will be contained in the
reports hospitals currently receive as part of the Hospital IQR Program
and can be reviewed and corrected through the process specified for
that program. We stated that we believe that this method would reduce
the burden on hospitals, by alleviating the need to correct data
present in two different programs.
(2) Availability of Information to the Public
Section 1886(p)(6)(A) of the Act requires the Secretary to ``make
information available to the public regarding HAC rates of each
subsection (d) hospital'' under the HAC Reduction Program. Section
1886(p)(6)(C) of the Act requires the Secretary to post the HAC
information for each applicable hospital on the Hospital Compare Web
site in an easily understood format. Section 1886(p)(6)(B) of the Act
also requires the Secretary to ``ensure that an applicable hospital has
the opportunity to review, and submit corrections for, the HAC
information to be made public for each hospital.''
To meet the requirements under section 1886(p)(6)(C) of the Act, in
the FY 2014 IPPS/LTCH PPS final rule, we finalized policies that the
following information will be made public on the Hospital Compare Web
site relating to the HAC Reduction Program: (1) Hospital scores with
respect to each measure; (2) each hospital's domain specific score; and
(3) the hospital's Total HAC Score (78 FR 50725).
(3) Review and Correction of Information
Section 1886(p)(6)(B) of the Act requires the Secretary to ensure
that each hospital has the opportunity to review and submit corrections
for the information to be made available to the public with respect to
each hospital under section 1886(p)(6)(A) of the Act prior to such
information being made available to the public.
In the FY 2014 IPPS/LTCH PPS final rule, we codified the reporting
of hospital-specific information at Sec. 412.172(f) (78 FR 50968), in
which CMS will make information available to the public regarding HAC
rates of all hospitals described in section 1886(d)(1)(B) of the Act,
including hospitals in Maryland paid under section 1814(b)(3) of the
Act, under the HAC Reduction Program (paragraph (f)). As noted in
section IV.J.3.b.(2) of the preamble of this proposed rule, in order to
implement the new Maryland All-Payer Model, Maryland elected to no
longer have Medicare pay Maryland hospitals in accordance with section
1814(b)(3) of the Act, effective January 1, 2014.
In summary, we established that CMS will provide each hospital with
confidential hospital-specific reports and discharge level information
used in the calculation of its Total HAC Score (paragraph (f)(1) of
Sec. 412.172). Hospitals will have a period of 30 days after receipt
of the information provided under paragraph (f)(1) to review and submit
corrections for the hospital-acquired conditions domain score for each
condition that is used to calculate the Total HAC Score for the fiscal
year. The administrative claims data used to calculate a hospital's
Total HAC Score for those conditions for a fiscal year will not be
subject to review and correction

[[Page 28142]]

(paragraph (f)(2)). CMS will post the Total HAC Score for the
applicable conditions for a fiscal year for each applicable hospital on
the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50725 through 50728) for detailed
discussions of the above provisions.
(4) Preliminary Analysis of the HAC Reduction Program
In order to model estimated payment changes for this FY 2015 IPPS/
LTCH PPS proposed rule, we conducted a preliminary analysis of the HAC
Reduction Program using currently available historical data as a proxy
for the actual data that will be used to determine hospital performance
under the program. The results of this preliminary analysis can be
found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/ under the FY 2015 IPPS
Proposed Rule Home Page link as Table 17.--FY 2015 Preliminary Analysis
of the Hospital-Acquired Condition Reduction Program. When the actual
data for the performance periods finalized in the FY 2014 IPPS/LTCH PPS
rule for each measure are available, hospitals will have an opportunity
to review and submit corrections as discussed in section IV.J.3.e.(3)
of the preamble of this proposed rule.
f. Limitation on Administrative and Judicial Review
Section 1886(p)(7) of the Act provides that there will be no
administrative or judicial review under Section 1869 of the Act, under
Section 1878 of the Act, or otherwise for any of the following:
The criteria describing an applicable hospital under
section 1886(p)(2)(A) of the Act.
The specification of hospital acquired conditions under
section 1886(p)(3) of the Act.
The specification of the applicable period under section
1886(p)(4) of the Act.
The provision of reports to applicable hospitals under
section 1886(p)(5) of the Act.
The information made available to the public under section
1886(p)(6) of the Act.
In the FY 2014 IPPS/LTCH PPS final rule, we included these
statutory provisions under Sec. 412.172(g) of the regulations (78 FR
50729 and 50968). We note that section 1886(p)(6) of the Act requires
the Secretary to make information available to the public regarding HAC
scores of each applicable hospital under the HAC Reduction Program.
Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure
that an applicable hospital has the opportunity to review, and submit
corrections for, the information to be made available to the public,
prior to that information being made public. We believe that the review
and correction process explained above in section IV.I.3.e. of the
preamble of this proposed rule will provide hospitals with the
opportunity to correct data prior to its release on the Hospital
Compare Web site.
4. Proposed Maintenance of Technical Specifications for Quality
Measures
Technical specifications of the HAC measures for the Agency for
Health Research and Quality (AHRQ) Patient Safety Indicator 90 (PSI-90)
in Domain 1 can be found at AHRQ's Web site at: https://qualityindicators.ahrq.gov/Modules/PSI_TechSpec.aspx. Technical
specifications for the CDC NHSN's HAI measures in Domain 2 can be found
at CDC's NHSN Web site at: https://www.cdc.gov/nhsn/acute-care-hospital/. Both Web sites provide measure updates and other
information necessary to guide hospitals participating in the
collection of HAC Reduction Program data.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF-endorsed. As part of its regular
maintenance process for NQF-endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes
with NQF on an annual basis. NQF solicits information from measure
stewards for annual reviews, and it reviews measures for continued
endorsement in a specific 3-year cycle.
We note that NQF's annual or triennial maintenance processes for
endorsed measures may result in the NQF requiring updates to the
measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates required by
the NQF into the measure specifications we have adopted for the HAC
Reduction Program, so that these measures remain up-to-date.
For the HAC Reduction Program, we are proposing to follow the
finalized processes outlined for addressing changes to adopted measures
in the Hospital IQR Program ``Maintenance of Technical Specifications
for Quality Measures'' section found in section IX.A.1.b. of the
preamble of this proposed rule.
We believe this proposal adequately balances our need to
incorporate updates to HAC Reduction Program measures in the most
expeditious manner possible while preserving the public's ability to
comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted. We
invite public comments on this proposal.
5. Extraordinary Circumstances Exceptions/Exemptions
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50711), we indicated
that we had received public comments requesting a potential waiver or
exemption process for hospitals located in areas that experience
disasters or other extraordinary circumstances (EC), even though we did
not propose an extraordinary circumstance exceptions/exemptions (ECE)
policy for the HAC Reduction Program. We stated in the FY 2014 IPPS/
LTCH PPS final rule that we were reviewing this issue and might
consider such a proposal in future rulemaking. We also noted that
should we consider a policy we intend to focus on several policy and
operational considerations in developing a disaster exemption process
for the HAC Reduction Program. We welcome public comments on whether an
exemption process should be implemented and the policy and operational
considerations for a potential HAC Reduction Program ECE policy.
6. Implementation of the HAC Reduction Program for FY 2016
a. Measure Selection and Conditions, Including a Risk-Adjustment
Scoring Methodology
(1) General Selection of Measures
In the FY 2014 IPPS/LTCH PPS final rule, we finalized measures for
FY 2015 and onwards, but only finalized a scoring methodology for FY
2015 for the HAC Reduction Program (78 FR 50712 through 50713). We are
not proposing any new additional measures for the HAC Reduction Program
for FY 2016 in this proposed rule. We note that AHRQ's PSI-90 Composite
measure and CDC's NHSN CLABSI (NQF 0138) and CAUTI (NQF
0139) measures were submitted in January 2014 and December
2013, respectively, as part of the NQF maintenance endorsement process.
As noted in the FY 2014 IPPS/

[[Page 28143]]

LTCH PPS final rule (78 FR 50719), should changes to the risk-
adjustment models for the measures be adopted during NQF endorsement
maintenance processes, CMS will adopt these changes as soon as
possible. Finally, although we are not required under section 1886(p)
of the Act to address specific measure scoring methodologies regarding
the HAC Reduction Program in notice-and-comment rulemaking, as required
under the Hospital VBP Program, we believe that it is important to set
forth such scoring methodologies for each individual HAC measure, in
order for the public to understand how the measures discussed and
finalized in this year's rulemaking relate to the performance
methodology used to determine the applicable hospitals subject to the
payment adjustment under the HAC Reduction Program.
(2) Measure Selection and Scoring Methodology for FY 2016
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50713), we finalized
for FY 2016 and onwards CDC's NHSN Surgical Site Infection measure (NQF
0753) and its measure methodology. The SSI and other measure
specifications are available at: https://www.qualityforum.org/QPS/QPSTool.aspx. To locate a specific measure, search by the NQF number:
(1) for the SSI measure use NQF 0753; (2) for the CLABSI
measure use NQF 0139; and (3) for the CAUTI measure use NQF
0138. For SSI updates related to CMS programs and the use of
CDC's NHSN measures, we refer readers to the Web site at: https://www.cdc.gov/nhsn/acute-care-hospital/ssi. The SSI measure explanation
of SIR in the NHSN e-newsletter is available at: https://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
CDC's SSI measure was finalized as a Domain 2 measure in the
calculation of the Total HAC Score. We are not proposing to change
CDC's measure methodology for the SSI measure.
b. Measure Risk-Adjustment
In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure
risk-adjustment for AHRQ's PSI-90 Composite for Domain 1 and the risk-
adjustment for CDC's NHSN measures for Domain 2. In this proposed rule,
we are not proposing any risk-adjustment changes for any of the
measures finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50718
through 50719).
c. Measure Calculations
In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure
calculations for AHRQ's PSI-90 Composite measure for Domain 1 and the
measure calculations for CDC's NHSN measures for Domain 2. In this
proposed rule, we are not proposing any measure calculation changes for
any of the measures finalized in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50718 through 50719).
d. Applicable Time Period
In the FY 2014 IPPS/LTCH PPS final rule, we finalized and codified
policy at Sec. 412.170 that there will be a 2-year applicable time
period to collect data used to calculate the Total HAC Score (78 FR
50717).
For the Domain 1 AHRQ PSI-90 Composite measure, we are proposing
for FY 2016 a 24-month period from July 1, 2012 through June 30, 2014
as the applicable time period. The claims for all Medicare FFS
beneficiaries discharged during this period would be included in the
calculation of measure results for FY 2016. This includes claims data
from the 2012, 2013, and 2014 Inpatient Standard Analytic Files (SAFs).
The Domain 2 CDC NHSN measures (CAUTI, CLABSI, and SSI) are
currently collected and calculated on a quarterly basis. However, for
the purpose of the HAC Reduction Program, we will use 2 years of data
to calculate the Domain 2 score. For FY 2016, we are proposing to use
calendar years 2013 and 2014 for all three Domain 2 measures in the HAC
Reduction Program.
e. Criteria for Applicable Hospitals and Performance Scoring
For FY 2016, we are proposing a change to the scoring methodology
of the Total HAC Score. This proposal is intended to address the
implementation of CDC's NHSN SSI measure in Domain 2 finalized for
implementation in FY 2016.
(1) Finalized Scoring Methodology for Domains 1 and 2 for FY 2015
We finalized a scoring methodology for the Total HAC Score in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50722). This finalized scoring
methodology is similar to the achievement scoring methodology currently
used under the Hospital VBP Program. With respect to an applicable
hospital, we finalized that CMS will identify the top quartile of all
hospitals with respect to their Total HAC Score during the applicable
period (Sec. 412.170). In addition, we finalized that the Total HAC
Score will be determined by the following three steps: (1) Each measure
result will be scored as outlined in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50723); (2) Domain scores will be determined by the scores
assigned to the measures within the domain; and (3) the Total HAC Score
will be determined by the sum of the weighted domains. For FY 2015, the
Total HAC Score is the sum of the Domain 1 score multiplied by 35
percent plus the Domain 2 score multiplied by 65 percent. For further
details of the general scoring methodology finalized for the HAC
Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50719 through 50725).
(2) Proposed Scoring Methodology of Domain 2 and New Weighting of
Domains 1 and 2 for FY 2016
We are proposing to adjust the scoring methodology of Domain 2 and
the weighting of Domains 1 and 2 beginning in FY 2016 due to the
addition of CDC's NHSN SSI measure. For the scoring of CDC's NHSN SSI
measure, we are proposing an identical process of assigning points to
the SSI measure results. We note that the SSI measure, reported via
CDC's NHSN, is currently specified under the Hospital IQR program and
is restricted to colon procedures (including incision, resection or
anastomosis of the large intestine and large-to-small and small-to-
large bowel anastomosis), and abdominal hysterectomy procedures
including those performed by laparoscope. The SSI measure assesses SSIs
based on the type of surgery procedures (that is, the SSI measure is
stratified into infections that occur with colonic procedures and those
that occur in abdominal hysterectomy procedures). We also note that
patient age and a preoperative health score are risk factors taken into
account using the Standardized Infection Ratio (SIR) (78 FR 20625). Use
of an SIR is consistent with CDC's NHSN CLABSI and CAUTI measures that
also report SIRs. In order to calculate an SSI measure score for Domain
2, we are proposing to calculate an abdominal hysterectomy procedure
SSI SIR and a colonic procedure SSI SIR and pool both SIRs for each
hospital. We are proposing pooling the abdominal hysterectomy SSI SIR
and colonic procedure SSI SIR as this would provide a single SSI SIR,
which is consistent with reporting a single SSI SIR as meant by design
of the NQF endorsed measure (NQF 0753), and would allow a
risk-adjusted weighting of the surgical volume among the two
procedures. We are proposing that a pooled SSI SIR for an applicable
hospital is the sum of all observed infections among abdominal
hysterectomy and colonic procedures divided by the sum of all predicted

[[Page 28144]]

infections among abdominal hysterectomy and colonic procedures
performed at the applicable hospital. The pooled SSI SIR would be
scored in the same manner as all measures finalized for the HAC
Reduction Program (refer to Figure A in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50723), which is also included above in this proposed
rule). To determine a Domain 2 score, we are proposing taking the
average of the three CDC HAI SIR scores. We noted in the FY 2014 IPPS/
LTCH PPS final rule that there will be instances in which applicable
hospitals may not have data on all four measures and therefore a set of
rules was finalized to determine how to score each Domain. We are
proposing to follow the same finalized rules used to determine scoring
of Domains 1 and 2 (FY 2014 IPPS/LTCH PPS final rule (78 FR 50723
through 50725)0 and the proposed changes in section IV.I.6.b. of this
proposed rule. We invite public comments on this proposal.
In addition, for FY 2016 we are proposing to weight Domain 1 at 25
percent, and Domain 2 at 75 percent. We are proposing to decrease
Domain 1's weight from 35 percent to 25 percent for two reasons. First,
with the implementation of CDC's SSI measure, we believe the weighting
of both domains needs to be adjusted to reflect the addition of a
fourth measure; and second, in keeping with public comments from the FY
2014 IPPS/LTCH PPS final rule, MedPAC and others stated that Domain 2
should be weighted more than Domain 1. Finally, the Total HAC Score for
applicable hospitals would be the sum of the weighted scores from
Domain 1 (weighted at 25 percent) and Domain 2 (weighted at 75
percent). We invite public comments on this proposal.
f. Proposed Rules To Calculate the Total HAC Score for FY 2016
We are proposing to adopt the ``Proposed Clarification of FY 2015
Finalized Narrative of Rules to Calculate the Total HAC Score'' as
discussed in section IV.I.3.e. of the preamble of this proposed rule.
We invite public comments on this proposal.
7. Future Considerations for the Use of Electronically Specified
Measures
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data submitted to CMS for the Hospital
IQR Program. CMS has become aware of some hospitals and health systems
that have developed or adopted a methodology to identify and measure
all-cause harm through their electronic health record (EHR) systems.
Some hospitals and health systems are able to use the results of these
electronic measures to address adverse events at the point of care and
to track improvement over time. Many of these measures capture a broad
range of common hospital-acquired conditions that may not be captured
by existing national measures (examples include measures of adverse
drug events and hypoglycemia). Given that these measures are captured
using clinical data from EHR systems, collection of HAC data will allow
CMS to align measures across multiple settings.
We are seeking comment as to whether the use of a standardized
electronic composite measure of all-cause harm should be used in the
HAC reduction program in future years in addition to, or in place of,
claims-based measures assessing HACs. We welcome any suggestions of
specific all-cause harm electronic measures, including detailed measure
specifications. Specifically, we invite public comments on the
feasibility and the perceived value of such a measure, and what would
be the most appropriate weighting of this measure in the Total HAC
Performance Score. In addition, we are requesting suggestions on the
timeframe for which such standardized electronic composite measure of
all-cause harm should be proposed.
We intend for the future direction of electronic quality measure
reporting to significantly enhance the tracking of HACs under the HAC
Reduction Program. We will continue to work with measure stewards and
developers to develop new measure concepts, and conduct pilot,
reliability and validity testing as part of efforts to promote the
adoption of Certified Electronic Health Record Technology in hospitals.

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

1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and as currently implemented in the regulations at 42 CFR
413.75 through 413.83, establishes a methodology for determining
payments to hospitals for the direct costs of approved graduate medical
education (GME) programs. Section 1886(h)(2) of the Act sets forth a
methodology for the determination of a hospital-specific base-period
per resident amount (PRA) that is calculated by dividing a hospital's
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is,
for most hospitals, the hospital's cost reporting period beginning in
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base
year PRA is updated annually for inflation. In general, Medicare direct
GME payments are calculated by multiplying the hospital's updated PRA
by the weighted number of FTE residents working in all areas of the
hospital complex (and at nonprovider sites, when applicable), and the
hospital's Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment
known as the indirect medical education (IME) adjustment under the
hospital inpatient prospective payment system (IPPS) for hospitals that
have residents in an approved GME program, in order to account for the
higher indirect patient care costs of teaching hospitals relative to
nonteaching hospitals. The regulations regarding the calculation of
this additional payment are located at 42 CFR 412.105. The hospital's
IME adjustment applied to the DRG payments is calculated based on the
ratio of the hospital's number of FTE residents training in either the
inpatient or outpatient departments of the IPPS hospital to the number
of inpatient hospital beds.
The calculation of both direct GME and IME payments is affected by
the number of FTE residents that a hospital is allowed to count.
Generally, the greater the number of FTE residents a hospital counts,
the greater the amount of Medicare direct GME and IME payments the
hospital will receive. Therefore, Congress, through the Balanced Budget
Act of 1997 (Pub. L. 105-33), established a limit on the number of
allopathic and osteopathic residents that a hospital may include in its
FTE resident count for direct GME and IME payment purposes. Under
section 1886(h)(4)(F) of the Act, for cost reporting periods beginning
on or after October 1, 1997, a hospital's unweighted FTE count of
residents for purposes of direct GME may not exceed the hospital's
unweighted FTE count for direct GME in its most recent cost reporting
period ending on or before December 31, 1996. Under section
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for
IME during that cost reporting period is

[[Page 28145]]

applied effective for discharges occurring on or after October 1, 1997.
Dental and podiatric residents are not included in this statutorily
mandated cap.
The Affordable Care Act made a number of statutory changes relating
to the determination of a hospital's FTE resident count for direct GME
and IME payment purposes and the manner in which FTE resident limits
are calculated and applied to hospitals under certain circumstances.
Regulations implementing these changes are discussed in the November
24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53416).
2. Proposed Changes in the Effective Date of the FTE Resident Cap, 3-
Year Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap
for New Programs in Teaching Hospitals
Section 1886(h)(4)(H)(i) of the Act requires the Secretary to
establish rules for calculating the direct GME caps for new teaching
hospitals that are training residents in new medical residency training
programs established on or after January 1, 1995. Under section
1886(d)(5)(B)(viii) of the Act, such rules also apply to the
establishment of a hospital's IME cap on the number of FTE residents
training in new programs. We implemented these statutory requirements
in rules published in the August 29, 1997 Federal Register (62 FR 46002
through 46008) and in the May 12, 1998 Federal Register (63 FR 26323
through 26325 and 26327 through 26336). Generally, under existing
regulations at 42 CFR 413.79(e)(1) (for direct GME) and 42 CFR
412.105(f)(1)(vii) (for IME), if a hospital did not train any
allopathic or osteopathic residents in its most recent cost reporting
period ending on or before December 31, 1996, and it begins to
participate in training residents in a new medical residency training
program (allopathic or osteopathic) on or after January 1, 1995, the
hospital's unweighted FTE resident cap (which would otherwise be zero)
may be adjusted based on the sum of the product of the highest number
of FTE residents in any program year during the third year of the first
new program's existence, for each new residency training programs
established during that 3-year period, and the minimum accredited
length for each type of program. The number of FTE resident cap slots
that a teaching hospital receives for each new program may not exceed
the number of accredited slots that are available for each new program.
Once a hospital's FTE resident cap is established, no subsequent cap
adjustments may be made for new programs, unless the teaching hospital
is a rural hospital. A rural hospital's FTE resident caps may be
adjusted for participation in subsequent new residency training
programs. A hospital that did not train any allopathic or osteopathic
residents in its most recent cost reporting period ending on or before
December 31, 1996, may only receive a permanent FTE resident cap
adjustment for training residents in a truly ``new'' residency training
program; no permanent cap adjustment would be given for training
residents associated with an existing program. That is, if a hospital
that did not train any allopathic or osteopathic residents in its most
recent cost reporting period ending on or before December 31, 1996,
serves as a training site for residents in a program that exists or
existed previously at another teaching hospital that remains open, that
``new'' teaching hospital does not receive a ``new program'' cap
adjustment because it is not participating in training residents in a
truly ``new'' program. However, it may be possible for that ``new''
teaching hospital to receive a temporary cap adjustment if it enters
into a Medicare GME affiliation agreement with the existing teaching
hospital as specified at Sec. 413.79(f) (for direct GME) and Sec.
412.105(f)(1)(vi) (for IME). (For a detailed discussion of the
distinctions between a new medical residency training program and an
existing medical residency training program, we refer readers to the
August 27, 2009 final rule (74 FR 43908 through 43920). For a detailed
discussion regarding participation in Medicare GME affiliation
agreements, we refer readers to 74 FR 43574.)
For new programs started prior to October 1, 2012, hospitals that
did not yet have an FTE resident cap established had a ``3-year
window'' in which to participate in and ``grow'' new programs, before
the FTE resident caps for IME and direct GME were permanently set for
the hospital beginning with the fourth program year of the first new
program start. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415
through 53425), we revised the regulations at Sec. 413.79(e) to
increase the cap-building period for new programs from 3 years to 5
years. That is, for a hospital that did not yet have an FTE resident
cap established, the hospital's FTE resident cap is effective beginning
with the sixth program year of the first new program's existence. This
revised policy is effective for urban hospitals that first begin to
participate in training residents in their first new program on or
after October 1, 2012, and for rural hospitals that start a new program
on or after October 1, 2012. In that final rule, we also finalized a
methodology used to calculate a cap adjustment for an individual
hospital if residents in a new program rotate to more than one hospital
(or hospitals). The methodology is based on the sum of the products of
the following three factors: (1) The highest total number of FTE
residents trained in any program year, during the fifth year of the
first new program's existence at all of the hospitals to which the
residents in that program rotate; (2) the number of years in which
residents are expected to complete the program, based on the minimum
accredited length for each type of program; and (3) the ratio of the
number of FTE residents in the new program that trained at the hospital
over the entire 5-year period to the total number of FTE residents that
trained at all hospitals over the entire 5-year period. Finally, we
made minor revisions to the regulation text at Sec. Sec. 413.79(e)(2)
through (e)(4) for purposes of maintaining consistency throughout Sec.
413.79(e). We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53415 through 53425) for further details regarding the methodology
for calculating the FTE resident caps.
While the FY 2013 IPPS/LTCH PPS final rule discussed the
methodology for calculating the FTE resident caps to be effective
beginning with the sixth program year of the first new program's
existence, for hospitals that do not yet have FTE resident caps
established, that final rule did not discuss when the 3-year rolling
average for IME and direct GME or the intern- and resident-to-bed (IRB)
ratio cap for IME is effective for FTE residents training in new
programs. The regulations regarding the 3-year rolling average and the
IRB ratio cap with respect to new medical residency training programs
were established in the following Federal Register rules: the FY 1998
IPPS final rule with comment period (62 FR 46002 through 46008); the
May 12, 1998 final rule (63 FR 26323 through 26325 and 26327 through
26336); FY 2000 IPPS final rule (64 FR 41518 through 41523); and the FY
2002 IPPS final rule (66 FR 39878 through 39883). Specifically, the
regulations at Sec. 412.105(f)(1)(v) regarding the 3-year rolling
average and new medical residency training programs for IME state: ``If
a hospital qualified for an adjustment to the limit established under
paragraph (f)(1)(iv) of this section for new medical residency programs
created under paragraph (f)(1)(vii) of

[[Page 28146]]

this section, the count of residents participating in new medical
residency training programs above the number included in the hospital's
FTE count for the cost reporting period ending during calendar year
1996 is added after applying the averaging rules in this paragraph
(f)(l)(v) for a period of years. Residents participating in new medical
residency training programs are included in the hospital's FTE count
before applying the averaging rules after the period of years has
expired. For purposes of this paragraph, for each new program started,
the period of years equals the minimum accredited length for each new
program. The period of years for each new program begins when the first
resident begins training in each new program.'' In addition, the
regulations for the interaction of the IRB ratio cap and new medical
residency training programs for IME at Sec. 412.105(a)(1)(ii) state:
``The exception for new programs described in paragraph (f)(1)(vii) of
this section applies to each new program individually for which the
full-time equivalent cap may be adjusted based on the period of years
equal to the minimum accredited length of each new program.''
The regulations at Sec. 413.79(d)(5) regarding the interplay of
the 3-year rolling average with new medical residency training programs
for direct GME similarly state: ``If a hospital qualifies for an
adjustment to the limit established under paragraph (c)(2) of this
section for new medical residency programs created under paragraph (e)
of this section, the count of the residents participating in new
medical residency training programs above the number included in the
hospital's FTE count for the cost reporting period ending during
calendar year 1996 is added after applying the averaging rules in this
paragraph (d), for a period of years. Residents participating in new
medical residency training programs are included in the hospital's FTE
count before applying the averaging rules after the period of years has
expired. For purposes of this paragraph (d), for each new program
started, the period of years equals the minimum accredited length for
each new program. The period of years begins when the first resident
begins training in each new program.''
Therefore, the FTE resident caps for IME and direct GME are always
effective beginning with the start of the sixth program year of the
first new program started for urban hospitals that do not yet have FTE
resident caps established (Sec. 413.79(e)(1)(iii)), and for rural
hospitals, beginning with the start of the sixth program year of each
new individual program started (Sec. 413.79(e)(3)), regardless of the
fact that other new programs may have started after the start of the
first new program. However, the timing of when the 3-year rolling
average for IME and direct GME and the IRB ratio cap for IME are first
applied is dependent upon the minimum accredited length of each new
program started within the 5-year window. For example, new teaching
Hospital A participates in training residents in new medical residency
training programs for the first time beginning on July 1, 2013. On July
1, 2013, Hospital A participates in training residents in a new family
medicine program (minimum accredited length is 3 years), on July 1,
2014, it also participates in training residents in a new sports
medicine fellowship (minimum accredited length is 1 year), and on July
1, 2015, it also participates in training residents in a new general
surgery program (minimum accredited length is 5 years). For the purpose
of establishing Hospital A's FTE resident caps, the 5-year growth
window for Hospital A closes on June 30, 2018, and the IME and direct
GME FTE resident caps for Hospital A are effective on July 1, 2018, the
beginning of the sixth program year of the first new program's
existence; that is, family medicine. However, the 3-year rolling
average and the IRB ratio cap are effective at different points in
time. Because the family medicine residency is 3 years in length, FTE
residents in the new family medicine program are subject to the 3-year
rolling average and the IRB ratio cap beginning on July 1, 2016.
Because the sports medicine fellowship is a 1-year program, and it
started on July 1, 2014, the number of sports medicine FTE residents
must be included in the 3-year rolling average and is subject to the
IRB ratio cap effective on July 1, 2015. Lastly, the FTE residents in
the new general surgery program would only be subject to the rolling
average and the IRB ratio cap effective July 1, 2020. The Medicare cost
report worksheets on CMS Form 2552-10 for IME (Worksheet E, Part A) and
for direct GME (Worksheet E-4) currently can accommodate reporting of
FTE residents separately based on whether those FTE residents are in
new medical residency training programs and are not subject to the FTE
resident cap (line 16 of Worksheet E, Part A, and line 15 of Worksheet
E-4). However, these cost report worksheets are not designed to
accommodate reporting of FTE residents that are exempt from the FTE
resident cap, but are subject to the rolling average and IRB ratio cap,
because the ``period of years'' equal to the minimum accredited length
of each new program started has already expired. The reverse also may
occur, as in the example above with the new general surgery program
started by Hospital A, where the FTE resident caps are effective July
1, 2018, but the number of FTE residents in the general surgery program
would not be subject to the rolling average or the IRB ratio cap until
July 1, 2020. Complicating matters further is the fact that, while the
effective dates of these policies associated with new medical residency
training program FTE residents are effective on a program year basis
(that is, July 1), many teaching hospitals do not have a fiscal year
that begins on July 1. Therefore, under the existing policy, the number
of FTE residents needs to be prorated, and special accommodations need
to be made to calculate the portion of FTE residents that are subject
to the FTE resident cap, the 3-year rolling average, and the IRB ratio
cap for the respective portions of the hospital's cost reporting period
occurring on and after July 1. Integrating the rolling average, the IRB
ratio cap, and the FTE resident caps for residents in new medical
residency training programs in an accurate manner on the Medicare cost
report has proved challenging to the point where we have had to deal
with each instance brought to our attention by the new teaching
hospital or by a Medicare contractor on an individual and manual basis
(in order to ensure application of a consistent methodology). In fact,
the Medicare cost report instructions direct the hospital to do the
following: for CMS Form 2552-10, Worksheet E, Part A, line 10--``. . .
Contact your contractor for instructions on how to complete this line
if you have a new program for which the period of years is less than or
more than three years. . . .''; for CMS Form 2552-10, Worksheet E-4,
line 6--``. . . Contact your contractor for instructions on how to
complete this line if you have a new program for which the period of
years is less than or greater than 3 years. . . .''
The Medicare contractors, in turn, have been instructed to contact
CMS for instructions on how to report the number of FTE residents that
are still within the ``period of years'' of the new program. The
``three years'' referenced in the Form 2552-10 cost report instructions
are based on the 3-year growth window for new medical residency
training programs that is in effect for new programs started prior to
October 1, 2012, when, within the 3-year growth window, new teaching
hospitals also may have started new

[[Page 28147]]

medical residency training programs with different minimum accredited
lengths. (We note that while the previous Form 2552-96 cost report did
not include the same instructions, CMS did deal with the reporting of
the number of FTE residents in new medical residency training programs
on an individual basis when requests for assistance were brought to its
attention.) However, these instructions also apply for new medical
residency training programs started with different minimum accredited
lengths on and after October 1, 2012.
In this proposed rule, we are proposing to simplify and streamline
the timing of when FTE residents in new medical residency training
programs are subject to the FTE resident cap, the 3-year rolling
average, and the IRB ratio cap, both for urban teaching hospitals that
have not yet had FTE resident caps established under Sec. 413.79(e)(1)
and for rural teaching hospitals that may or may not have FTE resident
caps established under Sec. 413.79(e)(3). That is, we are proposing
that the methodology for calculating the FTE resident caps for
hospitals that participate in training residents in new medical
residency training programs would continue to be the same methodology
instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through
53425) for new medical residency training programs started on or after
October 1, 2012, specified at Sec. 413.79(e)(1). However, once the FTE
resident caps are calculated, we are proposing to change the timing of
when the FTE resident caps would be effective, to synchronize the
effective dates and the application of the 3-year rolling average and
the IRB ratio cap with each applicable hospital's fiscal year begin
date. Specifically, we are proposing that the FTE resident caps would
continue to be calculated as finalized in the FY 2013 IPPS/LTCH PPS
final rule--the methodology is based on the sum of the products of the
following three factors: (1) The highest total number of FTE residents
trained in any program year, during the fifth year of the first new
program's existence at all of the hospitals to which the residents in
that program rotate; (2) the number of years in which residents are
expected to complete the program, based on the minimum accredited
length for each type of program; and (3) the ratio of the number of FTE
residents in the new program that trained at the hospital over the
entire 5-year period to the total number of FTE residents that trained
at all hospitals over the entire 5-year period. However, once
calculated in this manner, we are proposing that, instead of the FTE
resident caps being effective beginning with the sixth program year of
the first new program start, those FTE resident caps, rolling average,
and IRB ratio cap would be effective beginning with the applicable
hospital's cost reporting period that precedes the start of the sixth
program year of the first new program started. Using the example of
Hospital A that we presented earlier, assume Hospital A has a January 1
to December 31 cost reporting year. The first new program started,
family medicine, was started on July 1, 2013. A sports medicine
fellowship and a general surgery program also were started timely
within the 5-year growth window. Hospital A has 5 program years to grow
its FTE resident caps, from July 1, 2013 through June 30, 2018. The FTE
resident caps would be calculated based on the 5 program years in
accordance with the methodology established at Sec. 413.79(e)(1) in
the FY 2013 IPPS/LTCH PPS final rule; therefore, the hospital would
wait until after June 30, 2018 to obtain the FTE counts to calculate
the FTE resident caps. However, we are proposing that those IME and
direct GME FTE resident caps, once calculated after June 30, 2018,
instead of being effective on July 1, 2018, would be effective at the
beginning of Hospital A's cost reporting period that precedes July 1,
2018; that is, the FTE resident caps for Hospital A would be effective
permanently on January 1, 2018, the start of Hospital A's cost
reporting period that precedes the start of the sixth program year of
the first new program started. The hospital could file its fiscal year
end December 31, 2018 cost report including the FTE resident caps
applicable to the entire cost reporting period accordingly.
As noted earlier, we are proposing that, for all new medical
residency training programs in which the hospital participates during
the 5-year growth window, the FTEs in those new programs also would be
subject to the 3-year rolling average and the IRB ratio cap
simultaneously with the effective date of the FTE resident caps, at the
beginning of the applicable hospital's cost reporting period that
precedes the beginning of the sixth program year of the first new
program started. Again, using the example of Hospital A that we
presented earlier, the FTE residents in the family medicine program,
the sports medicine fellowship, and the general surgery program would
all be subject to the 3-year rolling average and IRB ratio cap
beginning on January 1, 2018. With regard to reporting on the Medicare
cost report, for Hospital A's fiscal year end dates of December 31,
2013 through and including December 31, 2017, we are proposing that the
number of FTE residents in the family medicine program, the sports
medicine fellowship, and the general surgery program would be reported
so as not to be included in the IME rolling average or the IRB ratio
cap, and so as not to be included in the direct GME rolling average.
(On the CMS Form 2552-10, for Hospital A's fiscal year end dates of
December 31, 2013 through and including December 31, 2017, this means
that the number of FTE residents in the family medicine program, the
sports medicine fellowship, and the general surgery program would be
reported on Worksheet E, Part A, line 16, and on Worksheet E-4, line
15). However, on Hospital A's cost report for fiscal year ending
December 31, 2018, the number of FTE residents in these three programs
would be subject to the FTE resident cap, the 3-year rolling average,
and the IRB ratio cap, and would be reported accordingly. (On the CMS
Form 2552-10, for Hospital A's cost report for fiscal year ending
December 31, 2018, this means that none of the FTE residents in these
three programs would be reported on Worksheet E, Part A, line 16 for
IME, and Worksheet E-4, line 15 for direct GME. Instead, all of the FTE
residents would be reported on Worksheet E, Part A, line 10 for IME,
and Worksheet E-4, line 6 for direct GME, in order to be subject to the
FTE resident cap, the 3-year rolling average, and the IRB ratio cap.)
We note that once the 3-year rolling average is effective in that cost
reporting period that includes the sixth program year of the first new
program started, the number of FTE residents in the new programs also
must be reported both as part of the prior year FTE resident counts and
the penultimate FTE resident counts, in order to effectuate the 3-year
rolling average calculation on the IME Worksheet E, Part A, and the
direct GME Worksheet E-4, respectively.
In the example that we presented earlier, Hospital A has a fiscal
year that begins on January 1. If Hospital A's fiscal year begin date
would have been October 1, then, as proposed, while the sixth program
year of the first new program started would still be July 1, 2018, the
FTE residents caps, the 3-year rolling average, and the IRB ratio cap
would be effective on October 1, 2017, the fiscal year begin date that
precedes July 1, 2018, the sixth program year. If Hospital A's fiscal
year begin date would have been July 1, the FTE

[[Page 28148]]

residents caps, the 3-year rolling average, and the IRB ratio cap would
instead be effective on July 1, 2017, the fiscal year begin date that
precedes July 1, 2018, the sixth program year.
We understand that this proposal, if finalized, would reduce the
amount of time that the new medical residency training programs would
be exempt from the FTE resident caps. However, even though we are
proposing to make the effective date of the FTE resident caps earlier
than under current policy, because we also are proposing that the
calculation of the FTE resident caps would still be based on the
highest total number of FTE residents trained in any program year,
during the fifth year of the first new program's existence at all of
the hospitals to which the residents in that program rotate, a new
teaching hospital would still have the full 5 program years to grow its
program(s), and its FTE resident caps would reflect a full 5 years of
growth. Therefore, because, by the fifth program year, a program
should, in most typical circumstances, have grown to its full capacity,
barring unusual circumstances, the FTE resident caps that would take
effect under the proposed policy at the beginning of the fiscal year
that precedes the sixth program year should accommodate the FTE
resident count training in the fifth and subsequent program years.
Therefore, we believe that this proposal to streamline and synchronize
the effective dates of the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap not only is easier to comprehend and to
implement, but also is reasonable and equitable in its effect on the
IME and direct GME payments of hospitals establishing FTE resident
caps. Specifically, if this proposal is finalized, there would no
longer be a need for CMS Form 2552-10, Worksheet E, Part A, line 10 and
Worksheet E-4, line 6 to instruct hospitals to contact their contractor
for instructions on how to complete those lines, as both hospitals and
Medicare contractors would understand how to report the number of FTE
residents in new programs, even when those programs have different
accredited lengths. Instead, hospitals and Medicare contractors would
follow the methodology instituted in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53415 through 53425) to calculate the FTE resident caps for
new medical residency training programs started on or after October 1,
2012, and once the FTE resident caps are calculated, hospitals and
Medicare contractors would implement the FTE resident caps, the 3-year
rolling average, and the IRB ratio cap effective beginning with the
applicable hospital's cost reporting period that precedes the start of
the sixth program year of the first new program started. Under this
proposed methodology, FTE residents and FTE resident caps would no
longer need to be prorated, and we would no longer need to make special
accommodations to calculate the portion of FTE residents that are
subject to the FTE resident cap, the 3-year rolling average, and the
IRB ratio cap for the respective portions of the hospital's cost
reporting period occurring on and after July 1. The existing CMS Form
2552-10 already accommodates this proposed methodology, unlike the
complicated process currently in place. Thus, clarity, efficiency, and
payment accuracy would be improved for hospitals, contractors, and CMS.
With regard to rural hospitals that, under Sec. 413.79(e)(3) of
the regulations, may receive FTE resident cap adjustments at any time
for participating in training residents in new programs, we are
proposing a similar policy, with modifications reflecting the fact that
each new program in which the rural hospital participates receives its
own 5-year growth window before the rural hospital's FTE resident cap
is adjusted based on that new program. That is, we are proposing that,
for rural hospitals, the FTE resident caps, the 3-year rolling average,
and the IRB ratio cap for each new program started would be effective
beginning with the applicable hospital's cost reporting period that
precedes the start of the sixth program year of each new program
started. For example, rural Hospital B has a fiscal year that begins on
January 1. It starts a family medicine program on July 1, 2013, and a
general surgery program on July 1, 2016. The sixth program year for the
family medicine program begins on July 1, 2018. The sixth program year
for the general surgery program begins on July 1, 2021. With regard to
Medicare cost reporting, during Hospital B's fiscal years end dates of
December 31, 2013 through and including December 31, 2017, the number
of family medicine FTE residents would be reported so as not to be
included in the IME 3-year rolling average or the IRB ratio cap, and so
as not to be included in the direct GME 3-year rolling average. (This
means that on CMS Form 2552-10, during Hospital B's fiscal year end
dates of December 31, 2013 through and including December 31, 2017, the
number of family medicine FTE residents would be reported on Worksheet
E, Part A, line 16 for IME, and on Worksheet E-4, line 15, for direct
GME. Instead, the number of family medicine FTE residents would be
reported on Worksheet E, Part A, line 16, and Worksheet E-4, line 15.)
Then, beginning with Hospital B's cost report for fiscal year ending
December 31, 2018, the number of FTE residents in only the family
medicine program would be subject to the FTE residents caps, the 3-year
rolling average, and the IRB ratio cap, and would be reported
accordingly in order to be subject to the FTE resident cap, the 3-year
rolling average, and the IRB ratio cap. (This means that on CMS Form
2552-10, beginning with Hospital B's cost report ending December 31,
2018, the number of family medicine FTE residents would be reported on
Worksheet E, Part A, line 10 for IME, and Worksheet E-4, line 6 for
direct GME.) Because the general surgery program started on July 1,
2016, for Hospital B's fiscal year end dates of December 31, 2016
through and including fiscal year end date of December 31, 2020, the
number of general surgery FTE residents would be reported (on Worksheet
E, Part A, line 16) so as not to be included in the IME 3-year rolling
average or the IRB ratio cap, and (on Worksheet E-4, line 15), so as
not to be included in the direct GME 3-year rolling average. Then,
beginning with Hospital B's cost report for fiscal year ending December
31, 2021, the number of FTE residents in the general surgery program
would be subject to the FTE resident caps, the 3-year rolling average,
and the IRB ratio cap, and would be reported accordingly (on Worksheet
E, Part A, line 10 for IME, and Worksheet E-4, line 6 for direct GME),
in order to be subject to the FTE resident cap, the 3-year rolling
average, and the IRB ratio cap. We note that once the 3-year rolling
average is effective in that cost reporting period that includes the
sixth program year of each new program started, the number of FTE
residents in the new programs also must be reported as part of the
prior year FTE resident counts, and the penultimate FTE resident
counts, in order to effectuate the 3-year rolling average calculation
on the IME Worksheet E, Part A, and the direct GME Worksheet E-4,
respectively.
We are proposing that this policy regarding the effective dates of
the FTE residency caps, the 3-year rolling average, and the IRB ratio
cap for FTE residents in new medical residency training programs would
be consistent with the methodology for calculation of the FTE resident
caps as described in the FY 2013 IPPS/LTCH PPS final rule, and
implemented in the regulations at

[[Page 28149]]

Sec. Sec. 413.79(e)(1) and (e)(3). That is, because the policy
providing a 5-year growth period for establishing the FTE resident caps
(Sec. Sec. 413.79(e)(1) and (e)(3)) is effective for new programs
started on or after October 1, 2012, this proposal is effective for
urban hospitals that first begin to participate in training residents
in their first new medical residency training program, and for rural
hospitals, on or after October 1, 2012. We also are proposing to revise
the regulations for IME and direct GME, respectively, at Sec.
412.105(a)(1)(ii) for the IME IRB ratio cap, at Sec. 412.105(f)(1)(v)
for the IME 3-year rolling average, and at Sec. 413.79(d)(5) for the
direct GME 3-year rolling average to reflect that the exception from
the IRB ratio cap and the 3-year rolling average for new programs
applies to each new program individually during the cost reporting
periods prior to the beginning of the applicable hospital's cost
reporting period that precedes the start of the sixth program year of
the first new program started, for hospitals for which the FTE cap may
be adjusted in accordance with Sec. 413.79(e)(1), and prior to the
beginning of the applicable hospital's cost reporting period that
precedes the start of the sixth program year of each individual new
program started, for hospitals for which the FTE cap may be adjusted in
accordance with Sec. 413.79(e)(3). After the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the first new program started for hospitals for which the FTE cap
may be adjusted in accordance with Sec. 413.79(e)(1), and after the
applicable hospital's cost reporting period that precedes the start of
the sixth program year of each individual new program started for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e)(3), FTE residents participating in new medical
residency training programs are included in the hospital's IRB ratio
cap and the 3-year rolling average.
3. Proposed Changes to IME and Direct GME Policies as a Result of New
OMB Labor Market Area Delineations
a. New Program FTE Resident Cap Adjustment for Rural Hospitals
Redesignated as Urban
As stated earlier in this proposed rule, under existing
regulations, a new teaching hospital that starts training residents for
the first time on or after October 1, 2012, has 5 years from when it
first begins training residents in its first new program to build its
FTE resident cap. If the teaching hospital is a rural teaching
hospital, it can continue to receive permanent cap adjustments for
training residents in new programs after the initial 5-year cap-
building period that applies to new teaching hospitals ends. (We refer
readers to section IV.K.2. of the preamble of this proposed rule for a
discussion of our proposal to change the effective dates for when the
FTE resident cap, the 3-year rolling average, and the IRB ratio cap are
applied to new teaching hospitals and to new programs at rural teaching
hospitals.)
In section III.B. of the preamble of this proposed rule, we discuss
the policies we are proposing to implement as a result of the new OMB
labor market area delineations announced in the February 28, 2013 OMB
Bulletin No. 13-01. As a result of the new OMB delineations, some
teaching hospitals may be redesignated from being located in a rural
area to an urban area, thereby losing their ability to increase their
FTE resident caps for new programs started after their initial 5-year
cap-building period ends. We have been asked whether a rural teaching
hospital that already has a cap and is redesignated as urban while it
is in the process of establishing another new program(s) can still
receive a permanent cap adjustment for that new program(s). We believe
that because the hospital had already started training residents in the
new program(s) while it was rural, the former rural hospital should be
permitted to continue building its new program(s) and receive a
permanent FTE resident cap adjustment for that new program(s).
Therefore, we are proposing to revise the regulations to allow a
hospital that was rural as of the time it started training residents in
a new program(s) and is redesignated as urban for Medicare payment
purposes during its cap-building period for that program(s) to be able
to continue building that program(s) for the remainder of the cap-
building period and receive a permanent FTE resident cap adjustment for
that new program(s). Once the cap-building period for the new
program(s) that was started while the hospital was still rural expires,
the teaching hospital that has been redesignated as urban would no
longer be able to receive any additional permanent cap adjustments. We
are proposing that the teaching hospital must be actively training
residents in the new program while it is still rural, that is, prior to
the redesignation taking effect, in order for the hospital to continue
receiving a cap adjustment for the new program. For example, if a rural
hospital begins training residents in a new internal medicine program
on July 1, 2013, and begins training residents in a new general surgery
program on July 1, 2014, and the rural hospital is redesignated as
urban effective on October 1, 2014, the teaching hospital would be able
to continue receiving a cap adjustment for both the new internal
medicine program and the new general surgery program after it has been
redesignated as urban. However, if the rural hospital is redesignated
as urban effective on October 1, 2014, and started training residents
in a new internal medicine program on July 1, 2013, but did not start
training residents in a new general surgery program while it was still
rural, that is, prior to October 1, 2014, the teaching hospital would
receive a permanent cap adjustment for the new internal medicine
program, but would not receive a cap adjustment for the new general
surgery program. We are proposing to revise the regulations at Sec.
412.105(f)(1)(iv)(D) for IME and Sec. 413.79(c)(6) for direct GME to
implement this proposed change. We are proposing that these regulatory
revisions be effective for cost reporting periods beginning on or after
October 1, 2014. The proposed regulations at Sec. 412.105(f)(1)(iv)(D)
read as follows: ``A rural hospital redesignated as urban after
September 30, 2004, as a result of the most recent census data and
implementation of the new labor market area definitions announced by
OMB on June 6, 2003, may retain the increases to its FTE resident cap
that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this
section while it was located in a rural area. Effective for cost
reporting periods beginning on or after October 1, 2014, if a rural
hospital is redesignated as urban due to the most recent OMB standards
for delineating statistical areas adopted by CMS and was training
residents in a new program prior to the redesignation becoming
effective, the redesignated urban hospital may retain any existing
increases to its FTE resident cap and receive an increase to its FTE
resident cap for the new program in which it was training residents
when the redesignation became effective, in accordance with paragraph
(f)(1)(vii) of this section.'' The proposed regulations at Sec.
413.79(c)(6) read as follows: ``A rural hospital redesignated as urban
after September 30, 2004, as a result of the most recent census data
and implementation of the new MSA definitions announced by OMB on June
6, 2003, may retain the increases to its FTE resident cap that it
received under paragraphs (c)(2)(i), (e)(1)(iii), and (e)(3) of this
section while it was located in a rural area. Effective for cost
reporting

[[Page 28150]]

periods beginning on or after October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, and was training
residents in a new program prior to the redesignation becoming
effective, the redesignated urban hospital may retain any existing
increases to its FTE resident cap, and receive an increase to its FTE
resident cap for the new program in which it was training residents
when the redesignation became effective, in accordance with paragraph
(e) of this section.''
b. Participation of Redesignated Hospital in Rural Training Track
To encourage the training of residents in rural areas, section
407(c) of Public Law 106-113 amended section1886(h)(4)(H) of the Act to
add a provision that, in the case of a hospital that is not located in
a rural area (an urban hospital) that establishes separately accredited
approved medical residency training programs (or rural tracks) in a
rural area or has an accredited training program with an integrated
rural track, the Secretary shall adjust the urban hospital's cap on the
number of FTE residents under subparagraph (F), in an appropriate
manner in order to encourage training of physicians in rural areas.
Section 407(c) of Public Law 106-113 was made effective for direct GME
payments to hospitals for cost reporting periods beginning on or after
April 1, 2000, and for IME payments applicable to discharges occurring
on or after April 1, 2000. We refer readers to the August 1, 2000
interim final rule with comment period (65 FR 47033 through 47037) and
the FY 2002 IPPS final rule (66 FR 39902 through 39909) where we
implemented section 407(c) of Public Law 106-113.
The regulations at Sec. 413.79(k) specify that, subject to certain
criteria, an urban hospital may count the FTE residents in the rural
track in addition to those FTE residents subject to its cap up to a
``rural track FTE limitation'' for that hospital. In the FY 2006 IPPS
final rule, we revised the regulations at Sec. 413.79(k) to add a new
paragraph (7) to state that if an urban hospital had established a
rural track program with a rural hospital and that hospital
subsequently becomes urban due to the implementation of the new labor
market area definitions announced by OMB on June 6, 2003, the urban
hospital may continue to adjust its FTE resident limit for rural track
programs established before the implementation of the new labor market
area definitions. We also stated that, in order for the urban hospital
to receive a cap adjustment for a new rural track program, the urban
hospital must establish a rural track program with hospitals that are
designated rural based on the most recent geographical location
designations adopted by CMS (70 FR 47456; 47489).
As discussed earlier in this section, we are proposing to
implement, effective October 1, 2014, the new OMB labor market area
delineations announced in the February 28, 2013 OMB Bulletin No. 13-01.
As a result of the new delineations, certain areas can be redesignated
from urban to rural or from rural to urban, which may, in turn, affect
GME policies that require the participation of rural teaching
hospitals. For example, as noted above, in order for an urban teaching
hospital to receive a FTE resident cap adjustment for training
residents in a rural track, the residents must rotate for more than
one-half of the duration of the program to a rural hospital(s) or rural
nonprovider(s) site. We have received a question as to what happens to
a rural track when a rural hospital that is participating as the rural
site is redesignated as urban, while the rural track for the urban
hospital is in the process of being established. That is, what happens
to the rural track when the rural hospital is redesignated as urban
during the period that is used to establish the urban hospital's rural
track FTE limitation, prior to the effective date of the urban
hospital's rural track FTE limitation being established?
Existing regulations at Sec. 413.79(k)(7) address the scenario
where a rural hospital that is participating as the rural site is
redesignated as urban, after the rural track FTE limitation for the
urban hospital has already become effective. Specifically, the
regulations at Sec. 413.79(k)(7) state that if an urban hospital had
established a rural track with a hospital located in a rural area and
that rural area subsequently becomes an urban area due to the most
recent census data and implementation of new labor market area
definitions announced by OMB June 6, 2003, the urban hospital may
continue to adjust its FTE resident limit for the rural track programs
established prior to the adoption of the new labor market area
definitions. Therefore, consistent with the existing regulations at
Sec. 413.79(k)(7) and with our proposal to allow rural hospitals
redesignated as urban to continue receiving a FTE resident cap
adjustment for new programs that started while the redesignated
hospital was still rural, we are proposing to revise the existing
regulations applicable to urban hospitals generally. Specifically, we
are proposing to address the status of the ``original'' urban
hospital's rural track FTE limitation, in the situation where a rural
hospital that is participating in the original urban hospital's rural
track is located in an area redesignated by OMB as urban during the 3-
year period that is used to calculate the urban hospital's rural track
FTE limitation. We are proposing that, in these situations, the
original urban hospital's opportunity to receive a rural track FTE
limitation would not be negatively impacted by the fact that the rural
hospital with which it has partnered to be the rural site for its rural
training track is located in an area redesignated by OMB as urban
during the 3-year period that is used to calculate the urban hospital's
rural track FTE limitation. That is, we are proposing that the original
urban hospital may receive a rural track FTE limitation for that new
rural track program.
With regard to the status of the rural hospital that is partnered
with the urban hospital to serve as a rural training site for the rural
training track program, as mentioned earlier, existing regulations at
Sec. 413.79(k)(7) address the scenario where a rural hospital that is
participating as the rural site is redesignated as urban, after the
rural track FTE limitation for the urban hospital has already become
effective. (We note that we are proposing to apply the existing policy
at Sec. 413.79(k)(7), which applies to redesignations that occurred on
June 6, 2003, in a similar manner, to redesignations announced by OMB
after June 6, 2003, as well.) In addition, we are proposing that once
the rural hospital is redesignated as located in an urban area due to
the implementation of the new OMB labor market area delineations,
regardless of whether that redesignation occurs during the 3-year
period that is used to establish the rural track FTE limitation for the
urban hospital, or after the 3-year period that is used to establish
the rural track FTE limitation for the urban hospital, the redesignated
urban hospital can no longer qualify as the rural site and the
``original'' urban hospital would not be able to count those residents
under its rural track FTE limitation if it continues to use the
redesignated urban hospital as the rural site for purposes of the rural
track. However, because the redesignated urban hospital was rural when
residents started training in the rural track, we are proposing to
provide for a 2-year transition period during which either of the
following two conditions must be met in order for the ``original''
urban hospital to be able to count the residents under its rural track
FTE limitation

[[Page 28151]]

when the 2-year transition period ends: (1) the redesignated newly
urban hospital must reclassify back to rural under Sec. 412.103 of the
regulations; or (2) the ``original'' urban hospital must find a new
geographically rural site to participate as the rural site for purposes
of the rural track. We note that we are proposing to apply these two
criteria both in the case where the rural hospital is redesignated as
urban after the urban hospital already has its rural track FTE limit
established, and also in the case where the rural hospital is
redesignated as urban during the 3-year period when the rural track
program is still growing, prior to the rural track FTE limit being
established. This 2-year transition period would begin when new OMB
labor market area delineations take effect for Medicare payment
purposes and would end exactly 2 years from that date. During this 2-
year transition period, we would hold the ``original'' urban hospital
harmless and would pay the ``original'' urban hospital for the FTE
residents in the rural track. At the end of the 2-year transition
period, in order for the urban hospital to receive payment for a rural
track program under Sec. 413.79(k)(1) or (k)(2), either the
redesignated urban hospital must be granted reclassification as rural
under Sec. 412.103 or the ``original'' urban hospital must already be
training FTE residents at a geographically rural site. We note that,
because the rural reclassification provision of Sec. 412.103 only
applies to IPPS hospitals and for purposes of section 1886(d) of the
Act, it only applies to IPPS hospitals for IME payment purposes and not
for direct GME payment purposes because direct GME is authorized under
section 1886(h) of the Act. Therefore, if the redesignated hospital
reclassifies as rural under Sec. 412.103, the ``original'' urban
hospital would only be able to count FTE residents towards its rural
track FTE limitation for IME payment purposes, but not for direct GME
payment purposes. In addition, we note that this discussion has
centered on the scenario where a rural hospital that is the rural site
for purposes of the rural track has been redesignated as urban. Under
such a scenario, the redesignated urban hospital does have an option to
reclassify as rural. However, as noted above, the reclassification only
applies to IPPS hospitals for IME payment purposes. If a nonprovider
site is functioning as the rural site under Sec. 413.79(k)(2) for
purposes of the rural track and the area where that nonprovider site is
located is redesignated as urban, the nonprovider site would not have
the option of reclassifying as rural and, therefore, the ``original''
urban hospital would be required to find a new geographically rural
site within the 2-year transition period in order for the ``original''
urban hospital to receive payment for a rural track program under Sec.
413.79(k)(1) or (k)(2).
The following examples illustrate how the proposed policy would be
applied to a rural track in which the rural site is a hospital and the
rural hospital has been redesignated as urban:
An urban teaching hospital and a rural teaching hospital
are participating in training residents in a new rural track program
that begins July 1, 2014. Effective October 1, 2014, the rural hospital
is redesignated as urban. We are proposing that the timeframe for the
urban hospital to build the rural track program for purposes of
calculating its rural track FTE limitation would continue to be through
June 30, 2017. During the time period of October 1, 2014 to September
30, 2016, the redesignated urban hospital would continue participating
as a rural hospital and the urban hospital would count FTE residents it
is training that are in the rural track for IME and direct GME.
However, in order for the ``original'' urban hospital to continue to
get paid for its rural track program after September 30, 2016, then, by
September 30, 2016, the redesignated urban hospital must either
reclassify as rural under Sec. 412.103 of the regulations for purposes
of IME payment only, or the urban hospital must find a new
geographically rural hospital or nonprovider site to train the
residents in the rural track for more than one-half of their training.
If neither of these conditions is met, by September 30, 2016, the
``original'' urban hospital would not able to receive payment for that
specific program as a rural training track under Sec. 413.79(k)(1) or
(k)(2) because it would no longer meet the requirement that more than
one-half of the training must be provided in a rural setting.
Another scenario could be one in which the rural hospital
is redesignated as urban after the 3-year cap-building period for the
rural track has passed. For example, the rural track program began July
1, 2007, but effective October 1, 2014, the rural hospital is
redesignated as urban. We are proposing in this scenario that, by
September 30, 2016, either the redesignated urban hospital must
reclassify to rural under Sec. 412.103 for purposes of IME payment
only, or the ``original'' urban hospital must find a new geographically
rural site that can participate as the rural site for purposes of the
rural track. If neither of these conditions is met by September 30,
2016, the ``original'' urban hospital would not be able to receive
payment for that specific program as a rural track under Sec.
413.79(k)(1) or (k)(2) because it would no longer meet the requirement
that more than one-half of the training must be provided in a rural
setting.
We note that if the ``original'' urban hospital was not able to
meet one of the two proposed conditions noted earlier in this section
by the end of the 2-year transition period, but at some point later is
able to meet one of the two proposed conditions, we are proposing that
the ``original'' urban hospital would be able to ``revive'' and use its
already established rural track FTE limitation from that point forward.
In the instance where the ``original'' urban hospital's rural track FTE
limitation was not set because the hospital was not able to meet one of
the two proposed conditions by the end of the 2-year transition period,
which fell within the 3-year cap-building timeframe, but at some point
later is able to meet one of the two proposed conditions, we are
proposing that the ``original'' urban hospital would be able to have a
rural track FTE limitation calculated and established based on the
highest number of FTE residents in any program year training in the
rural track in the third year of the program, even if during the third
year of the program, the ``original'' urban hospital was not in
compliance with the two proposed conditions. Consistent with similar
policy discussed in the FY 2002 IPPS final rule (66 FR 39905), it would
be the responsibility of the hospitals involved to provide the
necessary information regarding the rotations of the residents in the
third program year to the Medicare contractor in order for the
calculation to be completed and the rural track FTE limit to be set.
In summary, we are proposing that any time a rural hospital
participating in a rural track is in an area redesignated by OMB as
urban after residents started training in the rural track and during
the 3-year period that is used to calculate the urban hospital's rural
track FTE limitation, the urban hospital may receive a cap adjustment
for that rural track after it has been redesignated as urban.
Furthermore, we are proposing that, regardless of whether the
redesignation of the rural hospital occurs during the 3-year period
that is used to calculate the urban hospital's rural track FTE
limitation, or after the 3-year period used to calculate the urban
hospital's rural track FTE limitation, the redesignated urban hospital
can continue to be considered a rural hospital for purposes of the
rural track

[[Page 28152]]

for up to 2 years. However, by the end of those 2 years, either the
redesignated urban hospital must reclassify as rural under Sec.
412.103 for purposes of IME payment only (in addition, this
reclassification option only applies to IPPS hospitals, not nonprovider
sites) or the ``original'' urban hospital must have found a new site in
a geographically rural area that will serve as the rural site for
purposes of the rural track in order for the ``original'' urban
hospital to receive payment under Sec. 413.79(k)(1) or (k)(2).
We are proposing to revise the regulations at Sec. 413.79(k)(7) to
implement these provisions and to establish that these changes would be
effective for cost reporting periods beginning on or after October 1,
2014. The proposed regulations at Sec. 413.79(k)(7) read as follows:
``(i) Effective for cost reporting periods beginning prior to October
1, 2014, if an urban hospital had established a rural track training
program under the provisions of this paragraph (k) with a hospital
located in a rural area and that rural area subsequently becomes an
urban area due to the most recent census data and implementation of the
new labor market area definitions announced by OMB on June 6, 2003, the
urban hospital may continue to adjust its FTE resident limit in
accordance with this paragraph (k) for the rural track programs
established prior to the adoption of such new labor market area
definitions. In order to receive an adjustment to its FTE resident cap
for a new rural track residency program, the urban hospital must
establish a rural track program with hospitals that are designated
rural based on the most recent geographical location designations
adopted by CMS. (ii) Effective for cost reporting periods beginning on
or after October 1, 2014, if an urban hospital had started a rural
track training program under the provisions of this paragraph (k) with
a hospital located in a rural area and, during the 3-year period that
is used to calculate the urban hospital's rural track FTE limit, that
rural area subsequently becomes an urban area due to the most recent
OMB standards for delineating statistical areas adopted by CMS and the
most recent Census Bureau data, the urban hospital may continue to
adjust its FTE resident limit in accordance with this paragraph (k) and
subject to paragraph (k)(7)(iii) for the rural track programs
established prior to the adoption of such new OMB standards for
delineating statistical areas. (iii) Effective for cost reporting
periods beginning on or after October 1, 2014, if an urban hospital had
established a rural track training program under the provisions of this
paragraph (k) with a hospital located in a rural area and that rural
area subsequently becomes an urban area due to the most recent OMB
standards for delineating statistical areas adopted by CMS and the most
recent Census Bureau data, regardless of whether the redesignation of
the rural hospital occurs during the 3-year period that is used to
calculate the urban hospital's rural track FTE limit, or after the 3-
year period used to calculate the urban hospital's rural track FTE
limit, the urban hospital may continue to adjust its FTE resident limit
in accordance with this paragraph (k) based on the rural track programs
established prior to the change in the hospital's geographic
designation. In order for the urban hospital to receive or use the
adjustment to its FTE resident cap for training FTE residents in the
rural track residency program that was established prior to the most
recent OMB standards for delineating statistical areas adopted by CMS,
one of the following two conditions must be met by the end of a 2-year
period that begins when the most recent OMB standards for delineating
statistical areas are adopted by CMS: The hospital that has been
redesignated from rural to urban must reclassify as rural under Sec.
412.103 of this chapter, for purposes of IME only; or the urban
hospital must find a new site that is geographically rural consistent
with the most recent geographical location delineations adopted by CMS.
In order to receive an adjustment to its FTE resident cap for an
additional new rural track residency program, the urban hospital must
establish a rural track program with sites that are geographically
rural based on the most recent geographical location delineations
adopted by CMS.''
We also have determined that there is an outdated, incorrect
reference included in the definition of ``Rural track FTE limitation''
under Sec. 413.75(b). The reference included in the definition is
``Sec. 413.79(l)''. The correct reference is ``Sec. 413.79(k)''.
Therefore, we are proposing to make a technical correction to the
definition of ``Rural track FTE limitation'' so that it reads ``means
the maximum number of residents (as specified in Sec. 413.79(k))
training in a rural track residency program that an urban hospital may
include in its FTE count and that is in addition to the number of FTE
residents already included in the hospital's FTE cap.''
4. Proposed Clarification of Policies on Counting Resident Time in
Nonprovider Settings Under Section 5504 of the Affordable Care Act
In the November 24, 2010 final rule with comment period (75 FR
71808, 72134 through 72141, and 72153), we implemented section 5504 of
the Affordable Care Act regarding counting resident time in nonprovider
settings. We also mentioned the scope of section 5504 of the Affordable
Care Act in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27638) and
final rule (78 FR 50735). Section 5504(a) of the Affordable Care Act
made changes to section 1886(h)(4)(E) of the Act to reduce the costs
that hospitals must incur for residents training in nonprovider sites
in order to count the FTE residents for purposes of Medicare direct GME
payments on a prospective basis. Notably, section 5504(a)(3) of the
Affordable Care Act amended the Act effective for ``cost reporting
periods beginning on or after July 1, 2010,'' for direct GME, to permit
hospitals to count the time that a resident trains in activities
related to patient care in a nonprovider site in its FTE count if the
hospital incurs the costs of the residents' salaries and fringe
benefits for the time that the resident spends training in the
nonprovider site. Section 5504(b)(2) of the Affordable Care Act made
similar changes to section 1886(d)(5)(B)(iv) of the Act for IME payment
purposes, with the provision being effective for discharges occurring
on or after July 1, 2010, for IME. In connection with those periods and
discharges, if more than one hospital incurs the residency training
costs in a nonprovider setting, under certain circumstances, sections
5504(a)(3) and (b)(2) of the Affordable Care Act allow each hospital to
count a proportional share of the training time that a resident spends
training in that setting, as determined by a written agreement between
the hospitals. When Congress enacted section 5504 of the Affordable
Care Act, it retained the statutory language which provides that a
hospital can only count the time so spent by a resident under an
approved medical residency training program in its FTE count if that
one single hospital by itself ``incurs all, or substantially all, of
the costs for the training program in that setting.'' In doing so,
Congress also revised the statutory language in sections 5504(a)(1) and
(b)(1) to explicitly make this longstanding substantive standard and
requirement applicable to ``cost reporting periods beginning before
July 1, 2010'' for direct GME, and to ``discharges occurring on

[[Page 28153]]

or after October 1, 1997, and before July 1, 2010,'' for IME (sections
1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act). Beginning at
least as early as 1988, the Secretary consistently noted in the
preamble of various rules that the statute only allowed a hospital to
count the time that its residents spent training in a nonprovider site
in the FTE resident count for direct GME and IME purposes if that
single hospital incurred ``all of substantially all'' of the costs of
the training program in that setting. For a full discussion of the
longstanding substantive standard and requirement that a hospital can
only count residents training if that one single hospital incurs all or
substantially all of the costs for the training, we refer readers to
the discussion in the November 24, 2010 final rule with comment period
(75 FR 72134 through 72141), in the May 11, 2007 final rule (72 FR
26953 and 26969), and in the August 1, 2003 final rule (68 FR 45439).
Section 5504(c) of the Affordable Care Act specifies that the
amendments made by the provisions of sections 5504(a) and (b) ``shall
not be applied in a manner that requires reopening of any settled
hospital cost reports as to which there is not a jurisdictionally
proper appeal pending as of the date of the enactment of this Act on
the issue of payment for indirect costs of medical education . . . or
for direct graduate medical education costs. . . .'' The date of
enactment of the Affordable Care Act was March 23, 2010.
In the November 24, 2010 final rule with comment period, we revised
the regulations at Sec. 412.105(f)(1)(ii)(E) for IME and Sec. Sec.
413.78(f) and (g) for direct GME to reflect the changes made by section
5504 of the Affordable Care Act. Section 413.78(g) is the implementing
regulation that corresponds to the statutory amendments set forth in
sections 5504(a)(3) and (b)(2) of the Affordable Care Act. The
introductory regulatory language of Sec. 413.78(g) explicitly states
that paragraph (g) governs only ``cost reporting periods beginning on
or after July 1, 2010.'' Paragraph (g)(5) of Sec. 413.78 also
expressly states that the paragraph is limited to ``cost reporting
periods beginning on or after July 1, 2010.'' Accordingly, we have
repeatedly stated, and we believe that the existing regulation makes
plain, that paragraph (g) of Sec. 413.78 ``is explicitly made
applicable only to `cost reporting periods beginning on or after July
l, 2010,' whereas earlier cost reporting periods are governed by other
preceding paragraphs of Sec. 413.78'' (78 FR 50735). In addition, we
also revised the definition of ``all or substantially all of the costs
for the training program in the nonhospital setting'' in the
regulations at Sec. 413.75(b) to reflect that both the statute and
regulations require that, for cost reporting periods beginning on and
after July 1, 2007 and before July 1, 2010, one hospital must by itself
incur ``all or substantially all of the costs'' of the residents
training in the nonprovider site in order for the hospital to receive
Medicare IME and direct GME payment for that training. Finally, we also
revised the IME regulations at Sec. 412.105 to reflect these statutory
amendments, by incorporating by reference Sec. 413.78(g).
Despite the fact that sections 5504(a) and (b) of the Affordable
Care Act provide clear effective dates with respect to the amendments
provided therein to sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the
Act, and that the preamble discussion of the implementation of these
provisions and further discussion of the statutory amendments in the
November 24, 2010 final rule with comment period and in the August 19,
2013 final rule provide further explanation that, specifically, nothing
in section 5504(c) overrides those effective date (75 FR 72136), we
have received questions about the applicability of section 5504(c) and
the associated regulation text at Sec. 413.78(g)(6). Specifically,
questions have been raised with respect to the applicability of
sections 5504(c) of the Affordable Care Act and Sec. 413.78(g)(6) of
the regulations to periods prior to July 1, 2010, particularly if a
hospital had, as of March 23, 2010, appealed an IME or direct GME issue
for a settled cost reporting period occurring prior to July 1, 2010. As
noted earlier, section 5504(c) of the Affordable Care Act provides that
the amendments made by the provisions of sections 5504(a) and (b)
``shall not be applied in a manner that requires reopening of any
settled hospital cost reports as to which there is not a
jurisdictionally proper appeal pending as of . . . [March 23, 2010] on
the issue of payment for indirect costs of medical education . . . or
for direct graduate medical education costs. . . .''
Upon revisiting the existing regulation text, we determined that
Sec. 413.78(g)(6) was not written in a manner that is as consistent
with section 5504(c) of the Affordable Care Act and reflective of our
reading of that provision and our policy as it could be. Specifically,
Sec. 413.78(g)(6) states, ``The provisions of paragraphs (g)(1)(ii),
(g)(2), (g)(3), and (g)(5) of this section cannot be applied in a
manner that would require the reopening of settled cost reports, except
those cost reports on which there is a jurisdictionally proper appeal
pending on direct GME or IME payments as of March 23, 2010.'' In this
proposed rule, we are reiterating our existing interpretation of the
statutory amendments made by sections 5504(a), (b), and (c) of the
Affordable Care Act and also proposing to clarify the regulation text
implementing these provisions by revising the language at Sec.
413.78(g)(6) to read more consistently with the language in section
5504(c) of the Affordable Care Act and to ensure no further confusion
with respect to the applicability of section 5504(c) of the Affordable
Care Act and Sec. 413.78(g)(6) of the regulations.
We believe that sections 5504(a) and (b) of the Affordable Care Act
contained three primary directives (a fourth regarding recordkeeping
requirement is tangential to this discussion): (1) Under sections
5504(a)(1) and (b)(1) of the Affordable Care Act (sections
1886(h)(4)(E)(i) and 1886(d)(5)(B)(iv)(I) of the Act), for ``cost
reporting periods beginning before July 1, 2010'' for direct GME, and
for ``discharges occurring on or after October 1, 1997, and before July
1, 2010'' for IME, these sections explicitly retained the statutory
language that provides that a hospital can only count the time so spent
by a resident under an approved medical residency training program in
its FTE count if a hospital by itself ``incurs all, or substantially
all, of the costs for the training program in that setting''; (2) under
sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections
1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ``cost
reporting periods beginning on or after July 1, 2010'' for direct GME,
and for ``discharges occurring on or after July 1, 2010'' for IME,
these sections eliminated the ``all or substantially all'' requirement,
instead requiring a hospital to incur the residents' salaries and
fringe benefits for the time spent at the nonprovider site; and (3)
under sections 5504(a)(3) and (b)(2) of the Affordable Care Act
(sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for
``cost reporting periods beginning on or after July 1, 2010'' for
direct GME, and for ``discharges occurring on or after July 1, 2010''
for IME, these sections created a new provision with regard to allowing
more than one hospital to share the costs of residents training in a
nonprovider setting under certain circumstances, in order for each
hospital to count a proportional share of the FTE training time in the
nonprovider setting.
Separately from sections 5504(a) and (b) of the Affordable Care
Act, section 5504(c) of the Affordable Care Act, as mentioned earlier,
specifies that the

[[Page 28154]]

amendments made by the provisions of sections 5504(a) and (b) ``shall
not be applied in a manner that requires reopening of any settled
hospital cost reports as to which there is not a jurisdictionally
proper appeal pending as of'' March 23, 2010, the date of the enactment
of the Affordable Care Act, on the issue of payment for IME and direct
GME. When we proposed to implement section 5504(c) in the August 3,
2010 proposed rule (75 FR 46385) and when we implemented section
5504(c) in the November 24, 2010 final rule with comment period (75 FR
72136), we had to consider what new meaning it was adding to sections
5504(a) and (b) of the Affordable Care Act because unlike, for example,
section 5505 of the Affordable Care Act which has an effective date
prior to enactment of the Affordable Care Act and, therefore, would
apply to prior cost reporting periods, section 5504's applicable
effective date for the new standards it creates was July 1, 2010, a
date that came after enactment of the Affordable Care Act and was fully
prospective. As we stated in the November 24, 2010 final rule with
comment period (75 FR 72136), ``Section 5504(c) is fully prospective
with an explicit effective date of July 1, 2010, for the new standards
it creates. Nothing in section 5504(c) overrides that effective date.
Section 5504(c) merely notes that the usual discretionary authority of
Medicare contractors to reopen cost reports is not changed by the
provisions of section 5504; it simply makes clear that Medicare
contractors are not required by reason of section 5504 to reopen any
settled cost report as to which a provider does not have a
jurisdictionally proper appeal pending. It does not require reopening
in any circumstance; and the new substantive standard is, in any event,
explicitly prospective. We believe if Congress had wanted to require
such action or to apply the new standards to cost years or discharges
prior to July 1, 2010, it would have done so in far more explicit
terms.'' We also noted in that rule (75 FR 72139) that ``[the] statute
does not provide CMS discretion to allow the counting of resident time
spent in shared nonprovider site rotations for cost reporting periods
beginning prior to July l, 2010.'' We continue to believe that Congress
was clear in amending sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of
the Act to provide for new standards to be applied only prospectively,
effective for cost reporting periods beginning on or after, and
discharges occurring on or after, July 1, 2010. We also continue to
believe that the plain meaning of section 5504(c) of the Affordable
Care Act is that the Secretary is not required to reopen a cost report
when there is no jurisdictionally proper appeal pending as of March 23,
2010, the date of the enactment of the Affordable Care Act, on the
issue of payment for IME and direct GME. Therefore, we believe that
section 5504(c) of the Affordable Care Act is merely a confirmation of
the Secretary's existing discretionary authority in one particular
context, and that sections 5504(a) and (b) of the Affordable Care Act
and their effective dates become all the more prominent, and are not
affected by section 5504(c).
As noted earlier, we revised the regulations at Sec.
412.105(f)(1)(ii)(E) for IME, and Sec. 413.78(g) for direct GME, to
reflect the changes made by section 5504 of the Affordable Care Act in
the November 24, 2010 final rule with comment period. We reiterate here
that the introductory language of Sec. 413.78(g) explicitly states
that paragraph (g) governs only ``cost reporting periods beginning on
or after July 1, 2010'' and paragraph (g)(5) also expressly states that
the paragraph is limited to ``cost reporting periods beginning on or
after July 1, 2010'' (78 FR 50735 and 78 FR 27639). As we noted before,
we believe that the paragraphs of the regulations which precede
paragraph (g), particularly paragraphs (c) through (f), consistent with
the statute, make clear that a hospital may only count the time so
spent by a resident under an approved medical residency training
program in its FTE count, in connection with its pre-July l, 2010 cost
reporting periods and pre-July l, 2010 patient discharges, if that one
single hospital by itself ``incurs all, or substantially all, of the
costs for the training program in that setting.'' Separately, we
believe that the new standards set forth in sections 5504(a)(3) and
(b)(2) of the Affordable Care Act and implemented by regulation at
Sec. Sec. 413.78(g) and 412.105(f)(1)(ii)(E), allowing cost sharing
under certain circumstances do not ever apply to pre-July 1, 2010 cost
reporting periods and pre-July l, 2010 patient discharges. Moreover, we
continue to believe the language in paragraph (g)(6) (along with the
remainder of paragraph (g)) only applies to cost reporting periods
beginning on or after July 1, 2010 and does not apply retroactively to
cost reporting periods beginning before July 1, 2010. We had intended
that the language under Sec. 413.78(g) do no more than simply
paraphrase the language in section 5504(c) of the Affordable Care Act.
Accordingly, we believe that it is apparent that the provisions of
sections 5504(a)(3) and (b)(2) of the Affordable Care Act are not to be
applied prior to July l, 2010, irrespectively of whether a hospital may
have had a jurisdictionally proper appeal pending as of March 23, 2010,
on an IME or direct GME issue from a cost reporting period occurring
prior to July 1, 2010.
In this proposed rule, we are reiterating our existing
interpretation of the statutory amendments made by sections 5504(a) and
(b) of the Affordable Care Act and also are proposing to clarify the
regulatory text that implements these provisions by revising the Sec.
413.78(g)(6) to be more consistent with the language at section 5504(c)
of the Affordable Care Act. We are proposing to revise the regulatory
language to read as follows: ``The provisions of paragraphs (g)(1)(ii),
(g)(2), (g)(3), and (g)(5) of this section shall not be applied in a
manner that requires reopening of any settled cost reports as to which
there is not a jurisdictionally proper appeal pending as of March 23,
2010, on direct GME or IME payments. Cost reporting periods beginning
before July 1, 2010 are not governed by paragraph (g) of this
section.'' The IME regulations at Sec. 412.105(f)(1)(ii)(E) include a
reference to Sec. 413.78(g)(6); therefore, no proposed change is
needed to this section.
5. Proposed Changes to the Review and Award Process for Resident Slots
Under Section 5506 of the Affordable Care Act
In the past, if a teaching hospital closed, its direct GME and IME
FTE resident cap slots would be ``lost'' because those cap slots are
associated with a specific hospital's Medicare provider agreement,
which would be retired upon the hospital's closure. Under existing
regulations at Sec. 413.79(h) for direct GME and Sec.
412.105(f)(1)(ix) for IME, a hospital that is training FTE residents at
or in excess of its FTE resident caps and takes in residents displaced
by the closure of another teaching hospital may receive a temporary
increase to its FTE resident caps so that it may receive direct GME and
IME payment associated with those displaced FTE residents. However,
those temporary FTE resident caps are tied to those specific displaced
FTE residents, and the temporary caps expire when those displaced
residents complete their training program.
Section 5506 of the Affordable Care Act amended section
1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the
Secretary to establish a process by regulation under which, in the
event a teaching hospital closes, the

[[Page 28155]]

Secretary will permanently increase the FTE resident caps for hospitals
that meet certain criteria up to the number of the closed hospital's
FTE resident caps. The Secretary is directed to ensure that the
aggregate number of FTE resident cap slots distributed shall be equal
to the aggregate number of slots in the closed hospital's direct GME
and IME FTE resident caps, respectively. For a detailed discussion of
the regulations implementing section 5506 of the Affordable Care Act,
we refer readers to the November 24, 2010 final rule with comment
period (75 FR 72212 through 72238) and the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53434 through 53448).
a. Effective Date of Slots Awarded Under Section 5506 of the Affordable
Care Act
In distributing slots permanently under the provisions of section
5506 of the Affordable Care Act, section 5506(d) provides that ``the
Secretary shall give consideration to the effect of the amendments made
by this section on any temporary adjustment to a hospital's FTE cap
under Sec. 413.79(h) . . . (as in effect on the date of enactment of
this Act) in order to ensure that there is no duplication of FTE slots
. . .'' In consideration of this statutory language, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53437), we stated that in distributing
slots permanently under section 5506, we would be cognizant of the
number of FTE residents for whom a temporary FTE cap adjustment was
provided under existing regulations at Sec. 413.79(h), and when those
residents will complete their training, at which point the temporary
slots associated with those displaced residents would then be available
for permanent redistribution. Therefore, in initially developing
ranking criteria and application materials that we would use to award
available slots, we considered how to interpret this statutory language
at section 5506(d) of the Affordable Care Act within the context of our
existing GME regulations and section 5506's amendment to section
1886(h) of the Act generally.
In the November 24, 2010 final rule with comment period and the FY
2013 IPPS/LTCH PPS final rule (75 FR 72216 and 77 FR 53436,
respectively), we discussed the various ranking criteria that we would
use for hospitals applying for slots from closed hospitals. Currently,
if after distributing the slots from a closed hospital to increase the
FTE caps for applying hospitals that fall within Ranking Criteria One,
Two, and Three, there are still excess slots available and any of those
excess slots are associated with displaced residents for whom temporary
cap adjustments under Sec. 413.79(h) are in place, any slots awarded
to hospitals that fall within Ranking Criteria Four through Eight are
permanently assigned only once the displaced residents have completed
their training and the temporary cap adjustments associated with those
residents have expired. That is, in applying the requirement for ``no
duplication of FTE slots'' set forth in section 5506(d), we currently
consider all temporary cap adjustments received by hospitals on a
national basis and not specifically the hospital that is applying for
cap slots under section 5506, when deciding the effective date for
slots permanently awarded to hospitals applying under Ranking Criteria
Four through Eight. Specifically, in the November 24, 2010 final rule
with comment period, we stated that we believe the ``no duplication of
FTE slots'' requirement applies across all hospitals. Therefore,
although a hospital may not have received a temporary cap adjustment
under Sec. 413.79(h), other hospitals may have taken in residents and
received temporary cap adjustments for the same program, and we
believed that the appropriate policy was to delay the slots associated
with that program from being permanently distributed until it is known
that any and all temporary cap adjustments for those slots have expired
(75 FR 72227) Applying this policy to an example, if Hospital A is
training displaced residents and is receiving a temporary cap
adjustment under Sec. 413.79(h) for training those residents and
Hospital B, which is not receiving a temporary cap adjustment for
training any displaced residents, has applied under Ranking Criterion
Five to expand its internal medicine program, as explained in the
November 24, 2010 final rule with comment period, we would only award
permanent slots under section 5506 to Hospital B on a flow basis; that
is, effective after each displaced resident completes his/her training,
and, therefore, the temporary cap adjustments associated with that
resident expire at Hospital A.
However, the policy of applying the ``no duplication of FTE slot''
requirement at section 5506(d) of the Affordable Care Act to all
hospitals rather than simply to each specific hospital that is applying
for slots has thus far proven to be a very complex process due to the
number of displaced residents and the timing of multiple graduation
dates which must be tracked and considered when awarding slots on a
permanent basis. We believe this practice has delayed the awarding of
slots and is also unnecessarily burdensome for hospitals applying under
Ranking Criteria Four through Eight that are not receiving any cap
adjustments for training displaced residents under Sec. 413.79(h). We
believe the current policy that we apply for ``no duplication of FTE
slots'' is unnecessarily burdensome for these hospitals because,
instead of receiving their permanent slots under section 5506 as soon
as possible, the hospitals may receive their section 5506 awards with
staggered effective dates due to the graduation dates of displaced FTE
residents training at other hospitals that did receive temporary
adjustments under Sec. 413.79(h). While we believe that awarding
permanent slots to a hospital that is simultaneously receiving a
temporary cap adjustment for training displaced FTE residents under
Sec. 413.79(h) would clearly be a duplication of FTE slots and
contrary to the statutory directive, we believe there is flexibility in
interpreting this statutory language and that the statute does not
require such a policy to be applied to hospitals that are not receiving
temporary cap adjustments under Sec. 413.79(h). Furthermore, in
considering the specific statutory language regarding ``no duplication
of FTE slots,'' section 5506(d) in part provides that ``The Secretary
of Health and Human Services shall give consideration to the effect of
the amendments made by this section on any temporary adjustment to a
hospital's FTE cap under section 413.79(h) of title 42, Code of Federal
Regulations (as in effect on the date of enactment of this Act) in
order to ensure that there is no duplication of FTE slots.'' Because
this language refers to ``a hospital,'' we believe the statute provides
us with the flexibility to apply the ``no duplication of FTE slots''
requirement on a hospital-specific basis, considering separately
whether each hospital did or did not receive a temporary cap adjustment
under Sec. 413.79(h), rather than on a national all-hospital basis.
Bearing in mind the statutory language and our experience to date in
awarding slots as well as the unnecessary burden placed on hospitals
that are receiving section 5506 slots, but are not receiving temporary
cap adjustments under Sec. 413.79(h), we believe it is appropriate to
propose a policy that would provide for a more efficient and faster
method for awarding of slots to hospitals applying under Ranking
Criteria Four through Eight. Therefore, we are proposing that,
effective for section 5506 application

[[Page 28156]]

rounds announced on or after October 1, 2014, for purposes of applying
the requirement for ``no duplication of FTE slots,'' we would only
require that there be no duplication of FTE slots on a hospital-
specific basis. That is, in determining the effective date for slots
awarded permanently under section 5506, we would only be concerned with
whether the hospital that is applying for slots is also receiving a
temporary cap adjustment under Sec. 413.79(h) for training displaced
residents. When awarding slots to the applying hospital, we would not
be concerned whether any other hospital is receiving a temporary cap
adjustment for training displaced residents under Sec. 413.79(h). For
example, if Hospital A is receiving a temporary cap adjustment under
Sec. 413.79(h) for training displaced residents in its general surgery
program but is applying under Ranking Criterion Five to start a
pediatrics program and Hospital B is not receiving a temporary cap
adjustment for training displaced residents and is applying under
Ranking Criterion Eight to expand a cardiology program, in awarding
section 5506 slots, we would only allow Hospital A to receive a
permanent adjustment to its FTE cap for training residents in its
pediatrics program once its temporary adjustments for the displaced
residents training in the general surgery program have expired. We
would not consider displaced residents when awarding section 5506 slots
to Hospital B.
In conjunction with our proposal to interpret the ``no duplication
of FTE slots'' requirement to apply on a hospital-specific basis to
hospitals that are receiving temporary cap adjustments under Sec.
413.79(h), we are proposing to amend the effective dates of section
5506 slots received under Ranking Criteria Four through Eight for those
hospitals that are not receiving temporary cap adjustments under Sec.
413.79(h). (We refer readers to section IV.K.5.c. of the preamble of
this proposed rule where we discuss our proposal to amend Ranking
Criteria Seven and Eight.) Existing policy requires that slots awarded
under Ranking Criteria Four through Eight for expanding an existing
residency training program or starting a new residency training program
are effective the later of when a hospital can demonstrate to the MAC
that the slots associated with a new program or program expansion are
actually filled and, therefore, are needed as of a particular date
(usually July 1, possibly retroactive), or the July 1 after displaced
residents complete their training. If a hospital is awarded slots under
Ranking Criterion Eight for cap relief, slots are effective the date of
CMS' award announcement, or the July 1 after displaced residents
complete their training, whichever is later. However, because we are
proposing an alternative approach to interpreting section 5506(d) that
would permit us to apply the ``no duplication of FTE slots''
requirement on a hospital-specific basis, we are proposing to change
the effective date for slots received under Ranking Criteria Four
through Eight so that if a hospital is not receiving a temporary cap
adjustment under Sec. 413.79(h), the slots awarded under section 5506
would be effective when the hospital can demonstrate to its MAC that
the slots needed for a new program or program expansion are actually
filled and, therefore, are needed as of a particular date (usually July
1, possibly retroactive). If a hospital is awarded slots under Ranking
Criteria Four through Eight and is receiving a temporary cap adjustment
to train displaced residents under Sec. 413.79(h), the current policy
would apply such that the slots are awarded on a permanent basis, the
later of when a hospital can demonstrate to the MAC that the slots
associated with a new program or program expansion are actually filled
and, therefore, are needed as of a particular date (usually July 1,
possibly retroactive), or the July 1 after an equivalent amount of a
displaced FTE resident(s) complete their training. For example, assume
in a hypothetical situation that there is a closed teaching hospital,
and that another hospital takes in two displaced FTE residents, for
which the hospital is receiving a temporary cap adjustment under Sec.
413.79(h). One resident is graduating on June 30, 2016, and the second
resident is graduating on June 30, 2018. Assume that when the section
5506 Round is announced, the hospital also applies for two slots to
expand an internal medicine program under Ranking Criterion Five. In
January of 2017, CMS awards two permanent slots to the hospital under
Ranking Criterion Five. For the program year starting July 1, 2017, the
hospital successfully demonstrates to the MAC that it filled the two
additional internal medicine positions. Because one displaced FTE
resident already graduated on June 30, 2016, the MAC may approve one
slot on a permanent basis effective July 1, 2017. However, the hospital
would have to wait until July 1, 2018, to receive from the MAC the
permanent slot for the second displaced internal medicine resident
because the second displaced FTE resident is not graduating until June
30, 2018.
We are not proposing any changes to the effective date for slots
awarded under Ranking Criterion One, Ranking Criterion Two, or Ranking
Criterion Three. Consistent with existing policy, if a hospital is
applying under Ranking Criterion One or Ranking Criterion Three and is
not receiving a temporary cap adjustment for training displaced
residents under Sec. 413.79(h), the effective date of the section 5506
slots is the date of the hospital closure. If a hospital is applying
under Ranking Criterion One or Ranking Criterion Three and is receiving
a temporary cap for training displaced residents under Sec. 413.79(h),
the effective date of the section 5506 slots is after the displaced
resident(s) graduate. If a hospital is receiving a temporary cap for
training displaced residents under Sec. 413.79(h), and is applying
under Ranking Criterion One or Ranking Criterion Three and is also
separately applying under Ranking Criterion Four or subsequent Ranking
Criteria, for slots awarded under Ranking Criteria One or Three, the
effective date of the section 5506 slots is after the displaced
resident(s) graduate. For slots awarded under Ranking Criteria Four or
subsequent Ranking Criteria, the slots are awarded the later of when a
hospital can demonstrate to the MAC that the slots associated with a
new program or program expansion are actually filled and, therefore,
are needed as of a particular date (usually July 1, possibly
retroactive), or the July 1 after an equivalent amount of a displaced
FTE resident(s) at the hospital complete their training. Therefore, for
such a hospital, the effective dates of slots awarded under Ranking
Criteria One/Three, and Ranking Criteria Four through Eight might
coincide. Also, consistent with existing policy, if a hospital is
applying under Ranking Criterion Two, the effective date of the
permanent award of section 5506 slots is the date of the hospital
closure. We discuss these existing policies in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53437 through 53445).
The following list includes the current and proposed ranking
criteria along with the current and proposed effective dates.
Current Ranking Criterion One: The applying hospital is
requesting the increase in its FTE resident cap(s) because it is
assuming (or assumed) an entire program (or programs) from the hospital
that closed, and the applying hospital is continuing to operate the
program(s) exactly as it had been operated by the hospital that closed

[[Page 28157]]

(that is, same residents, possibly the same program director, and
possibly the same (or many of the same) teaching staff).
Proposed Ranking Criterion One: The applying hospital is
requesting the increase in its FTE resident cap(s) because it is
assuming (or assumed) an entire program (or programs) from the hospital
that closed, and the applying hospital is continuing to operate the
program(s) exactly as it had been operated by the hospital that closed
(that is, same residents, possibly the same program director, and
possibly the same (or many of the same) teaching staff). The applying
hospital's FTE resident caps were erroneously reduced by CMS under
section 1886(h)(8)(A)(i) of the Act, contrary to the statutory
exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central
Office was made aware of the error prior to posting of the FY 2015 IPPS
proposed rule on the CMS Web site. (This language reflects the proposed
modification of Ranking Criterion One. We refer readers to section
IV.K.5.c. of the preamble of this proposed rule where we discuss this
proposed modification.)
[cir] Current Policy: If the hospital is receiving a temporary cap
adjustment, slots are effective the day after the graduation date(s) of
actual displaced resident(s). If the hospital is not receiving a
temporary cap adjustment, slots are effective with the date of the
hospital closure.
[cir] Proposed Policy: No change.
Current Ranking Criterion Two: The applying hospital was
listed as a participant of a Medicare GME affiliated group on the most
recent Medicare GME affiliation agreement of which the closed hospital
was a member before the hospital closed, and under the terms of that
Medicare GME affiliation agreement, the applying hospital received
slots from the hospital that closed, and the applying hospital will use
the additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
Clarified Ranking Criterion Two: The applying hospital was
listed as a participant of a Medicare GME affiliated group on the most
recent Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed, and under the terms of that Medicare GME
affiliation agreement or emergency Medicare GME affiliation agreement,
the applying hospital received slots from the hospital that closed, and
the applying hospital will use the additional slots to continue to
train at least the number of FTE residents it had trained under the
terms of the Medicare GME affiliation agreement, or emergency Medicare
GME affiliation agreement. If the most recent Medicare GME affiliation
agreement or emergency Medicare GME affiliation agreement of which the
closed hospital was a member before the hospital closed was with a
hospital that itself has closed or is closing, preference would be
given to an applying hospital that was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement. (This language reflects our
clarification in this proposed rule regarding inclusion of emergency
Medicare GME affiliation agreements in Ranking Criterion Two. We refer
readers to section IV.K.5.d. of the preamble of this proposed rule
where we discuss this clarification.)
[cir] Current Policy: Slots are effective with the date of the
hospital closure.
[cir] Proposed Policy: No change.
Ranking Criterion Three: The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs).
[cir] Current Policy: If the hospital is receiving temporary cap
adjustment, slots are effective the day after the graduation date(s) of
actual displaced resident(s). If the hospital is not receiving a
temporary cap adjustment, slots are effective with the date of the
hospital closure.
[cir] Proposed Policy: No change.
Ranking Criterion Four: The program does not meet Ranking
Criteria 1, 2, or 3, and the applying hospital will use additional
slots to establish a new or expand an existing geriatrics residency
program.
Ranking Criterion Five: The program does not meet Ranking
Criteria 1 through 4, the applying hospital is located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
Ranking Criterion Six: The program does not meet Ranking
Criteria 1 through 5, and the applying hospital is not located in a
HPSA, and will use all the additional slots to establish or expand a
primary care or general surgery residency program.
Current Ranking Criterion Seven: The applying hospital
will use additional slots to establish or expand a primary care or
general surgery program, but the program does not meet Ranking
Criterion 5 or 6 because the hospital is also separately applying under
Ranking Criterion 8 for slots to establish or expand a nonprimary care
or nongeneral surgery program and/or for cap relief.
Proposed Ranking Criterion Seven: The applying hospital
will use additional slots to establish or expand a primary care or
general surgery program, but the program does not meet Ranking
Criterion 5 or 6 because the hospital is also separately applying under
Ranking Criterion 8 for slots to establish or expand a nonprimary care
or nongeneral surgery program. (This language reflects our proposal in
this proposed rule to revise Ranking Criteria Seven and Eight. We refer
readers to section IV.K.5.c. of the preamble of this proposed rule
where we discuss our proposals to amend Ranking Criteria Seven and
Eight.)
[cir] Current Policy for Ranking Criteria Four through Seven: The
later of when the hospital can demonstrate to the MAC that the slots
associated with a new program or program expansion are actually filled,
and therefore, are needed as of a particular date (usually July 1,
possibly retroactive), or the July 1 after displaced residents complete
their training.
[cir] Proposed Policy for Ranking Criterion Four through Proposed
Ranking Criterion Seven: If the hospital is receiving a temporary cap
adjustment for training displaced residents, the later of when the
hospital can demonstrate to the MAC that the slots associated with a
new program or program expansion are actually filled, and therefore,
are needed as of a particular date (usually

[[Page 28158]]

July 1, possibly retroactive), or the July 1 after displaced residents
complete their training. If the hospital is not receiving a temporary
cap adjustment, when the hospital can demonstrate to the MAC that the
slots needed for a new program or program expansion are actually
filled, and therefore, are needed as of a particular date (usually July
1, possibly retroactive).
Current Ranking Criterion Eight: The program does not meet
Ranking Criteria 1 through 7, and the applying hospital will use
additional slots to establish or expand a nonprimary care or a
nongeneral surgery program or for cap relief.
Proposed Ranking Criterion Eight: The program does not
meet Ranking Criteria 1 through 7, and the applying hospital will use
additional slots to establish or expand a nonprimary care or a
nongeneral surgery program. (This language reflects our proposal in
this proposed rule to revise Ranking Criterion Eight. We refer readers
to section IV.K.5.c. of the preamble of this proposed rule where we
discuss our proposals to amend Ranking Criterion Eight.)
[cir] Current Policy: If slots are for starting or expanding a
nonprimary care or nongeneral surgery program, the effective date is
same as that for Ranking Criteria Four through Seven. If slots are for
cap relief (under current policy), the effective date is the effective
date of CMS' award announcement, or after displaced residents complete
their training, whichever is later.
[cir] Proposed Policy for Proposed Ranking Criterion Eight: If the
hospital is receiving a temporary cap adjustment for training displaced
residents, the later of when the hospital can demonstrate to the MAC
that the slots associated with a new program or program expansion are
actually filled and, therefore, are needed as of a particular date
(usually July 1, possibly retroactive), or the July 1 after displaced
residents complete their training. If the hospital is not receiving a
temporary cap adjustment, when the hospital can demonstrate to the MAC
that the slots needed for a new program or program expansion are
actually filled, and therefore, are needed as of a particular date
(usually July 1, possibly retroactive).
In summary, we are proposing that, effective for section 5506
application rounds announced on or after October 1, 2014, the statutory
provision at section 5506(d) requiring the Secretary to consider
temporary cap adjustments under Sec. 413.79(h) and to ensure no
duplication of FTE slots, be interpreted in a manner such that the
requirement for ``no duplication of FTE slots'' is applied on a
hospital-specific basis rather than across all hospitals receiving
temporary cap adjustments under Sec. 413.79(h). Consistent with this
proposed change, we are proposing to amend the effective date for slots
received under Ranking Criteria Four through Eight so that if a
hospital is not receiving a temporary cap adjustment under Sec.
413.79(h), the slots awarded under section 5506 would be effective when
the hospital can demonstrate to its MAC that the slots needed for a new
program or program expansion are actually filled and, therefore, are
needed as of a particular date (usually July 1, possibly retroactive).
b. Proposal To Remove Seamless Requirement
Under current policy, if a hospital is applying under Ranking
Criterion One or Three, the hospital must show that it is seamlessly
replacing displaced FTE residents with new FTE residents once the
displaced residents graduate (75 FR 72219 and 72221 through 72222). We
have stated that in instances where a hospital seamlessly operates an
entire program or part of a program from the closed hospital (or takes
over an entire program prior to the hospital's closure), such a
hospital is demonstrating a strong commitment to maintain GME programs
in the community for the long term and should we awarded slots under
higher ranking criteria (75 FR 72216). Therefore, we required that, in
order to receive slots under Ranking Criterion One and Three, the
applying hospital must demonstrate that upon graduation of the
displaced FTE residents that it is training, the slots held by those
displaced FTEs are seamlessly replaced with new FTE residents (75 FR
72219 and 72221 through 72222). In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53441), in response to concerns associated with the seamless
requirement and timeline used by the National Resident Match Program or
other resident match services, we revised the seamless requirement. We
stated that in the instance where a teaching hospital closed after
December 31 of an academic year, in order for a hospital to qualify
under Ranking Criterion One or Three for cap slots associated with
displaced FTE residents who will graduate June 30 of the academic year
in which the applying hospital took in the displaced FTE residents, the
applying hospital must be able to demonstrate that it will fill slots
vacated by displaced FTE residents by July 1 of the second academic
year following the hospital closure. However, in the instance where a
teaching hospital closed before December 31 of an academic year, in
order for a hospital to qualify under Ranking Criterion One or Three
for cap slots associated with displaced FTE residents who will graduate
June 30 of the academic year in which the applying hospital took in the
displaced FTE residents, the applying hospital must be able to
demonstrate that it will seamlessly fill slots vacated by displaced FTE
residents by that July 1; that is, the day immediately after the June
30 that the displaced FTE residents graduate (77 FR 53441 through
53442). We also revised the CMS Application Form to instruct a hospital
applying under Ranking Criterion One or Three to list the names and
graduation dates of specific displaced residents who, upon their
graduation, have been or will be seamlessly replaced by new residents
(77 FR 53446). Because Ranking Criteria One and Three fall under
Demonstrated Likelihood Criterion 2, the hospital is taking over all of
part of an existing residency program from the closed hospital, or
expanding an existing residency training program, the requirement to
include a list with the names and graduation dates of specific
displaced residents who have been or will be seamlessly replaced was
added under Demonstrated Likelihood Criterion 2 on the CMS Application
Form.
In addition to the match deadlines associated with the National
Resident Matching Program and match deadlines associated with matching
into osteopathic programs, we have recently been made aware of other
match deadlines associated with certain fellowship programs. From the
experience we have had so far in reviewing section 5506 applications,
where we have observed the complexity of tracking various match
deadlines as well as the intersection between these deadlines and when
the section 5506 awards are announced by CMS, we are proposing to
remove the seamless requirement for slots awarded under Ranking
Criterion One and Three effective for section 5506 application rounds
announced on or after October 1, 2014. We are not proposing to make any
other additional changes to Ranking Criterion One or Three; that is,
the hospital must still be training displaced residents and must either
take over or have taken over an entire program from the closed hospital
and continue operating that program in the same manner in which it was
operated by the closed hospital or the hospital must take over part of
a closed hospital's program and permanently expand its own program as a
result of training displaced

[[Page 28159]]

residents. Hospitals would continue to be required to submit supporting
documentation when applying under Ranking Criterion One or Three that
indicates that they have made a commitment to take over the closed
hospital's program or that they have made the commitment to permanently
expand their own residency training program resulting from taking over
part of a closed hospital's program.
In determining the effective date of slots awarded under Ranking
Criterion One or Three where the hospital has been training residents
that were displaced by the closed hospital and receiving a temporary
cap adjustment under Sec. 413.79(h), the hospital would work with its
MAC to determine when it could be permanently awarded the slots based
on the graduation dates of the displaced residents it is training.
Consistent with our proposal, we are proposing to remove the following
requirement under Demonstrated Likelihood Criterion 2 on the CMS
Application Form: ``Hospitals applying for slots under option (a) which
correlates to Ranking Criterion 1 or (b) which correlates to Ranking
Criterion 3 must list the names and graduation dates of specific
displaced residents who, upon their graduation, have been or will be
seamlessly replaced by new residents. The list may be added as an
attachment to this application.'' We are proposing to replace this
requirement with the following requirement under Demonstrated
Likelihood Criteria 1 and 2'' ``Please indicate Y or N: As of the time
of submitting this application, are you receiving a temporary cap
adjustment for IME and/or direct GME under 42 CFR 413.79(h) for
residents displaced by the closure of the hospital subject to this
Round of section 5506? (Y/N)'' so that we are aware which hospitals are
receiving temporary cap adjustments for training displaced residents
under Sec. 413.79(h), and when we award slots, we would know which
hospitals to instruct to work with their MACs to determine when the
slots could be permanently awarded to them based on the graduation
dates of the displaced residents they are training.
In summary, we are proposing to remove the seamless requirement
currently included as part of Ranking Criterion One or Three. We also
are proposing to remove from the CMS Application Form, the following
requirement: ``Hospitals applying for slots under option a) which
correlates to Ranking Criterion 1 or b) which correlates to Ranking
Criterion 3 must list the names and graduation dates of specific
displaced residents who, upon their graduation, have been or will be
seamlessly replaced by new residents. This list may be added as an
attachment to this application.''
c. Proposed Revisions to Ranking Criteria One, Seven, and Eight for
Applications Under Section 5506
In the November 24, 2010 final rule with comment period (75 FR
72223), we finalized the Ranking Criteria within each of the three
first statutory priority categories (that is, same or contiguous CBSAs,
same State, and same region) to be used to rank applications for
assignment of slots under section 5506 of the Affordable Care Act. For
each application, we assigned slots based on Ranking Criteria, with
Ranking Criterion One being the highest ranking and Ranking Criterion
Seven being the lowest. For a detailed discussion of the ranking
categories, we refer readers to the November 24, 2010 final rule with
comment period (75 FR 72212 through 72240).
After reviewing applications submitted during the first section
5506 application process (those applications that were due to CMS on
April 1, 2011), we observed that the overwhelming majority of
applications fell under Ranking Criterion Seven; that is, the applying
hospital seeks the slots for purposes that do not fit into any of
Ranking Criterion One through Ranking Criterion Six. These applications
included applications from hospitals that applied for FTE cap slots for
both primary care and/or general surgery and for nonprimary care
specialties as well as applications for general cap relief. The sheer
number of applications we received under Ranking Criterion Seven
indicate a need to further prioritize among the applicants that would
have qualified under Ranking Criterion Seven. Therefore, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53434 through 53437), we finalized
changes to the Ranking Criteria, replacing Ranking Criterion Seven with
two separate Ranking Criteria (Ranking Criterion Seven and Ranking
Criterion Eight) resulting in a total of eight Ranking Criteria. Under
the Ranking Criteria, as modified by the FY 2013 IPPS/LTCH PPS final
rule, a hospital that is applying both for the purpose of establishing
or expanding primary care or general surgery programs, and in addition
is requesting slots for the purpose of establishing or expanding
nonprimary care or nongeneral surgery programs and/or for cap relief
must submit an application requesting additional FTE slots for its
primary care or general surgery programs under Ranking Criterion Seven.
The hospital's request for additional FTE slots to establish or expand
a nonprimary care or nongeneral surgery program and/or for additional
FTE slots for cap relief would then be made under Ranking Criterion
Eight. Prior to this change, if a hospital applied for additional FTE
slots to establish or expand both a primary care or general surgery
program in addition to a nonprimary care or nongeneral surgery program
and/or for additional FTE slots for cap relief, all of its applications
(with the exception of Ranking Criteria One through Three) would fall
under Ranking Criteria Seven. For a complete list of the Ranking
Criteria, we refer readers to section IV.K.5.a. of the preamble of this
proposed rule, which discusses the background for preservation of
resident cap positions from closed hospitals under section 5506 of the
Affordable Care Act.
After reviewing applications and making awards under several more
rounds of section 5506 applications, we have observed that, as hospital
closings continue to occur, there has been a significant increase in
the time between a hospital's closure and the announcement of section
5506 awards by CMS. We believe that this delay is partly due to the
administratively burdensome task of processing, reviewing, and
responding to such a large number of applications for each hospital
closure, or each round of section 5506 awards. When implementing
section 5506 in the November 24, 2010 final rule with comment period
(75 FR 72212 through 72249), we initially envisioned the reviewing of
applications and awarding of section 5506 FTE slots as being a more
streamlined and expedient process. However, as a practical matter, we
have found that process has been much more resource and time intensive
than we had originally anticipated. This is partly due to the time and
resources needed to properly apply the process established by CMS in
reviewing section 5506 applications and awarding FTE cap slots. Since
the initial implementation of section 5506, we have attempted to be
responsive to these unexpected delays by refining the ranking criteria
to make the review process less administratively burdensome. However,
these changes did not alleviate the process to the desired extent.
Furthermore, we have observed that, while many of the applications
submitted to CMS are applications requesting FTE slots for purposes of
general cap relief, we have more often than not awarded no slots at all
for cap relief. This is due in large part to the limited number of
slots

[[Page 28160]]

available (many of the closed teaching hospitals did not have large FTE
resident caps) and an overwhelming demand for those slots from
applicants who apply for FTE slots for reasons other than cap relief.
Since we finalized the modified Ranking Criterion Seven and added
Ranking Criterion Eight in the FY 2013 IPPS/LTCH PPS final rule, we
have announced three new rounds of section 5506 applications due to the
closures of six hospitals. We have received a total of 424 applications
from hospitals seeking cap relief. Of those 424 applications, only 6
applications were ultimately awarded FTE slots, which is only 1.42
percent of the total cap relief applications. We believe that the ratio
of cap relief awardees to cap relief applications does not warrant the
administrative burden and the delay in announcements of section 5506
awards that result from the large number of cap relief applications
submitted to CMS that are invariably denied. Therefore, in an effort to
streamline the review process and to facilitate publishing section 5506
awards in a more timely manner, we are proposing to modify Ranking
Criterion Eight so that Ranking Criterion Eight would only apply to
hospitals seeking FTE slots to establish or expand a nonprimary care or
nongeneral surgery program. Ranking Criterion Eight would no longer be
applicable to hospitals seeking FTE cap slots for cap relief. Our
proposal to eliminate section 5506 awards of FTE slots for cap relief
is consistent with current policy goals to increase training in primary
care and general surgery. By proposing to eliminate awarding of FTE
slots for residents that are already being trained by a hospital, there
will be more FTE resident slots available to award to other hospitals
seeking to establish or expand a primary care or general surgery
program under Ranking Criteria Four through Seven.
Accordingly, we are proposing to revise Ranking Criterion Eight so
that it reads as follows:
Proposed Ranking Criterion Eight: The program does not meet Ranking
Criteria 1 through 7, and the applying hospital will use additional
slots to establish or expand a nonprimary care or a nongeneral surgery
program.
In light of the modifications we are proposing to Ranking Criterion
Eight, we believe it is also necessary to modify the language of
proposed Ranking Criterion Seven to specify the types of applications
that would properly be made under this Ranking Criterion; that is, we
are proposing to remove the reference to cap relief from Ranking
Criterion Seven so that it read as follows:
Proposed Ranking Criterion Seven: The applying hospital will use
additional slots to establish or expand a primary care or general
surgery program, but the program does not meet Ranking Criterion 5 or 6
because the hospital is also separately applying under Ranking
Criterion 8 for slots to establish or expand a nonprimary care or
nongeneral surgery program.
Separately, we also are proposing a change related to Ranking
Criterion One. Current ranking Criterion One is for an applying
hospital that assumed an entire program or programs from the hospital
that closed. We are proposing to revise Ranking Criterion One to
provide priority to hospitals in one scenario. Section 5503 of the
Affordable Care Act amended section 1886(h) of the Act by adding new
paragraph (8), which provided for the permanent reduction and
distribution of residency slots. Section 1886(h)(8)(A)(ii) of the Act
provides specific exceptions to the application of the reduction at
section 1886(h)(8)(A)(i) of the Act, and expressly states:
``Exceptions--This subparagraph shall not apply to (I) a hospital
located in a rural area (as defined in subsection (d)(2)(D)(ii)) with
fewer than 250 acute care inpatient beds.'' The November 24, 2010 final
rule with comment period (75 FR 72147) describes the agency's
interpretation of this statutory provision. As of the time that this
proposed rule is posted on the CMS Web site, we are aware of one
instance in which CMS erroneously reduced a hospital's FTE resident cap
contrary to this statutory exception. We are proposing to amend Ranking
Criterion One under section 5506 to provide priority to a hospital
which had FTE resident cap slots erroneously removed under section 5503
contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of
the Act. We are proposing to revise Ranking Criterion One as follows:
[ballot] Ranking Criterion One. The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program(s)
exactly as it had been operated by the hospital that closed (that is,
same residents, possibly the same program director, and possibly the
same (or many of the same) teaching staff). The applying hospital's FTE
resident caps were erroneously reduced by CMS under section
1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at
section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was
made aware of the error prior to posting of the FY 2015 IPPS proposed
rule on the CMS Web site.
d. Clarification to Ranking Criterion Two Regarding Emergency Medicare
GME Affiliation Agreements
Ranking Criterion Two gives preference to applying hospitals that
received slots under the terms of a Medicare GME affiliation agreement
from the closed hospital. Under section 1886(h)(4)(H)(ii) of the Act,
hospitals may form a Medicare GME affiliated group and elect to
aggregate their respective FTE resident caps and apply them on an
aggregate basis. The regulations at 42 CFR 413.75(b) and 413.79(f)
implemented this statutory provision, providing specific rules for
sharing FTE resident cap slots among members of the Medicare GME
affiliated group, one such rule being that member hospitals must have a
``shared rotational arrangement.'' A ``shared rotational arrangement''
is defined at 42 CFR 413.75(b) as a residency training program under
which a resident(s) participates in training at two or more hospitals
in that program. Specifically, Ranking Criterion Two states the
following:
Ranking Criterion Two. The applying hospital was listed as a
participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
A question has been raised as to whether hospitals that were
members of an emergency Medicare GME affiliation agreement with the
closed hospital prior to its closure may be considered under Ranking
Criterion Two as well. The regulations at 42 CFR 413.79(f)(7)

[[Page 28161]]

govern emergency Medicare GME affiliation agreements, which are
applicable in the instance where a statutory section 1135 waiver is
invoked. In this situation, due to emergency conditions, the ``home''
hospital is unable to continue to train its residents. Therefore, under
the terms of the emergency Medicare GME affiliation agreement, the
``home'' hospital may agree to temporarily transfer FTE resident cap
slots to ``host'' hospitals that would train the displaced residents
during the emergency period.
In the November 24, 2010 final rule with comment period (75 FR
72216), we stated that ``section 1886(h)(4)(H)(vi) of the Act, as added
by section 5506(a) of the Affordable Care Act, directs the Secretary to
give preference to hospitals that are members of the same affiliated
group as the hospital that closed. We believe that, generally, if the
applying hospital was affiliated to receive slots from the hospital
that closed, then the applying hospital was relying on that number of
FTE resident slots that it received in order to maintain its fair share
of the cross-training of the residents in the jointly operated
programs. In the absence of those slots received from the closed
hospital, the applying hospital may not be able to continue training
that number of FTE residents, and those same residents would not only
be displaced from the closed hospital, but might essentially become
`displaced' from the affiliated hospitals in which they were used to
doing a portion of their training. Accordingly, we proposed this
ranking criterion to allow hospitals that were affiliated with the
closed hospitals to at least maintain their fair share of the training
of the residents in the programs that they had jointly operated with
the closed hospital.''
In determining whether Ranking Criterion Two may encompass
emergency Medicare GME affiliation agreements, we considered the key
differences and similarities between regular Medicare GME affiliation
agreements and emergency Medicare GME affiliation agreements. Regarding
the differences, in the case of emergency affiliations, there may not
have been historical cross-training or jointly operated programs
between the applicant hospital and the hospital that closed.
Furthermore, after the natural disaster that precipitates the section
1135 waiver, the ``home'' hospital would be in no condition to train
its share of residents, which is why the ``shared rotational
arrangement'' requirements at 42 CFR 413.79(f)(2) for regular Medicare
GME affiliation agreements are waived for emergency Medicare GME
affiliation agreements. However, it is often true with emergency
affiliations that a hospital agrees to take over the training of the
hospital in need, ``receiving'' FTE cap slots and residents from the
``home'' hospital, thereby creating the training relationship. In the
event where, following the disaster that triggers the section 1135
waiver, a hospital should actually close, the ``host'' hospital that
accepted the residents perhaps might even continue to train its share
of the residents in the program after the hospital closes. Therefore,
emergency affiliation agreements are similar to regular affiliation
agreements in that the ``host'' hospital received FTE cap slots from
the ``home'' hospital to train the ``home'' hospital's residents.
Further, in the event that the ``home'' hospital closes, triggering a
Round of section 5506, the ``host'' hospital also would need those FTE
cap slots in order to continue training the share of its program for
which it had taken responsibility under the emergency Medicare GME
affiliation agreement before the ``home'' hospital closed.
As we stated in the November 24, 2010 final rule with comment
period (75 FR 72219 through 72220), ``we believe the intent of section
5506 is to promote continuity and limit disruption in residency
training. In that light, we believe it is logical to give preference to
a hospital that received slots under the terms of the Medicare GME
affiliation agreement so that the hospital could continue to train at
least the number of FTE residents it had trained under the terms of the
Medicare GME affiliation agreement, avoiding the displacement of even
more residents. . . .'' We further stated that we ``. . . are only
giving preference to hospitals that received slots from the closed
hospital under the terms of the Medicare GME affiliation agreement, so
that the hospital could continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. . . .'' Finally, we stated ``that the hospital
or hospitals that were most recently affiliated with and received slots
from the closed hospital would have the most immediate need for those
slots.''
While the circumstances may vary, we believe that ``host''
hospitals under emergency Medicare GME affiliation agreements could
fulfill much of the same role as hospitals that received slots from the
hospital that closed under regular Medicare GME affiliation agreements.
That is, continuity of training would be encouraged and disruption
would be mitigated, to the extent that the ``host'' hospital could
document to CMS that it would continue to ``train at least the number
of FTE residents it had trained under the terms of the'' emergency
Medicare GME affiliation agreement, and in doing so, would demonstrate
it has the ``most immediate need for those slots'' as compared to
another hospital. Given these similarities between regular Medicare GME
affiliation agreements and emergency Medicare GME affiliation
agreements, we believe that the existing Ranking Criterion Two may be
read to already encompass emergency Medicare GME affiliation
agreements. Accordingly, we are clarifying the existing Ranking
Criterion Two to include emergency Medicare GME affiliation agreements,
to read as follows:
[ballot] Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed, and under the terms of that Medicare GME
affiliation agreement or emergency Medicare GME affiliation agreement,
the applying hospital received slots from the hospital that closed, and
the applying hospital will use the additional slots to continue to
train at least the number of FTE residents it had trained under the
terms of the Medicare GME affiliation agreement, or emergency Medicare
GME affiliation agreement. If the most recent Medicare GME affiliation
agreement or emergency Medicare GME affiliation agreement of which the
closed hospital was a member before the hospital closed was with a
hospital that itself has closed or is closing, preference would be
given to an applying hospital that was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement.
We are making these changes to Ranking Criterion Two in the Section
5506 Application Form.
We are including below a revised Section 5506 Application Form that
reflects all of the proposed changes discussed above.

[[Page 28162]]

CMS Application Form

As Part of the Application for the Increase in a Hospital's FTE Cap(s)
under Section 5506 of the Affordable Care Act: Preservation of FTE Cap
Slots from Teaching Hospitals that Close

Directions: Please fill out the information below for each residency
program for which the applicant hospital intends to use the increase in
its FTE cap(s). If the hospital is applying for slots for a particular
program, but the requested slots in that program qualify under two
different ranking criteria, submit two separate application forms
accordingly. If the hospital is applying for slots associated with a
Medicare GME affiliation agreement with a hospital that closed, that
application must be submitted separately from an individual program
request.

NAME OF HOSPITAL:------------------------------------------------------

MEDICARE PROVIDER NUMBER (CCN):----------------------------------------

NAME OF MEDICARE CONTRACTOR:-------------------------------------------

-----------------------------------------------------------------------
CORE-BASED STATISTICAL AREA (CBSA in which the hospital is physically
located--write the 5 digit code here):---------------------------------

COUNTY NAME (in which the hospital is physically located):-------------

Complete the following, as applicable:

1. Name of Specialty Training Program:---------------------------------

2. Medicare GME Affiliated Group:--------------------------------------

(Check one): [ballot] Allopathic Program [ballot] Osteopathic Program
NUMBER OF FTE SLOTS REQUESTED FOR SPECIFIC PROGRAM (OR OVERALL IF
SEEKING SLOTS ASSOCIATED WITH A MEDICARE GME AFFILIATED GROUP) AT YOUR
HOSPITAL:
Direct GME:--------
IME:--------

Section A: Demonstrated Likelihood Criteria (DLC) of Filling the FTE
Slots

The applicant hospital must provide documentation to demonstrate
the likelihood of filling requested slots under section 5506 within the
3 academic years immediately following the application deadline to
receive slots after a particular hospital closes. Please indicate the
specific use for which you are requesting an increase in your
hospital's FTE cap(s). If you are requesting an increase in the
hospital's FTE cap(s) for a combination of DLC1, DLC2, or DLC3, you
must complete a separate CMS Application Form for each DLC and specify
the distinct criterion from the list below within each Form.

Demonstrated Likelihood Criterion 1: Establishing a New Residency
Program

The hospital does not have sufficient room under its direct GME FTE
cap or IME FTE cap, or both, and will establish a new residency program
in the specialty.
Please indicate Y or N: As of the time of submitting this
application, are you receiving a temporary cap adjustment for IME and/
or direct GME under 42 CFR 413.79(h) for residents displaced by the
closure of the hospital subject to this Round of section 5506? (Y/N)--
------
The hospital must check at least one of the following:
Application for approval of the new residency program has been
submitted to the ACGME, AOA or the ABMS (The hospital must attach a
copy.)
The hospital has submitted an institutional review document or
program information form concerning the new program in an application
for approval of the new program. (The hospital must attach a copy.)
The hospital has received written correspondence from the ACGME,
AOA or ABMS acknowledging receipt of the application for the new
program, or other types of communication from the accrediting bodies
concerning the new program approval process (such as notification of
site visit). (The hospital must attach a copy.)
The hospital has other documentation demonstrating that it has made
a commitment to start a new program (The hospital must attach a copy.)

Demonstrated Likelihood Criterion 2: Taking Over All or Part of an
Existing Residency Program from the Closed Hospital, or Expanding an
Existing Residency Program

The hospital does not have sufficient room under its direct GME FTE
cap or IME FTE cap, or both, and (a) has permanently taken over the
closed hospital's entire residency program, or (b) is permanently
expanding its own previously established and approved residency program
resulting from taking over part of a residency program from the closed
hospital, or (c) is permanently expanding its own existing residency
program.
Please indicate Y or N: As of the time of submitting this
application, are you receiving a temporary cap adjustment for IME and/
or direct GME under 42 CFR 413.79(h) for residents displaced by the
closure of the hospital subject to this Round of section 5506? (Y/N) --
------
The hospital must check at least one of the following:
Application for approval to take over the closed hospital's
residency program has been submitted to the ACGME, AOA, or the ABMS, or
approval has been received from the ACGME, AOA, or the ABMS. (The
hospital must attach a copy.)
Application for approval of an expansion of the number of approved
positions in its residency program resulting from taking over part of a
residency program from the closed hospital has been submitted to the
ACGME, AOA or the ABMS, or approval has been received from the ACGME,
AOA, or the ABMS. (The hospital must attach a copy.)
Application for approval of an expansion of the number of approved
positions in its residency program has been submitted to the ACGME, AOA
or the ABMS, or approval has been received from the ACGME, AOA, or the
ABMS. (The hospital must attach a copy.)
The hospital currently has unfilled positions in its residency
program that have previously been approved by the ACGME, AOA, or the
ABMS, and is now seeking to fill those positions. (The hospital must
attach documentation clearly showing its current number of approved
positions, and its current number of filled positions).
The hospital has submitted an institutional review document or
program information form concerning the program in an application for
approval of an expansion to the program (The hospital must attach a
copy).

Demonstrated Likelihood Criterion 3: Receiving Slots by Virtue of
Medicare GME Affiliated Group Agreement or Emergency Medicare GME
Affiliated Group Agreement With Closed Hospital

The hospital was listed as a participant of a Medicare GME
affiliated group on the most recent Medicare GME affiliation agreement
or emergency Medicare GME affiliation agreement of which the closed
hospital was a member before the hospital closed, and under the terms
of that Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement, the applying hospital received slots from the
hospital that closed, and the applying hospital will use the additional
slots to continue to train at least the number of FTE residents it had
trained under the terms of the Medicare GME affiliation agreement or
emergency Medicare GME affiliation agreement. If the most recent
Medicare GME affiliation agreement or emergency Medicare

[[Page 28163]]

GME affiliation agreement of which the closed hospital was a member
before the hospital closed was with a hospital that itself has closed
or is closing, the applying hospital was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement. (Copies of EACH of the following
must be attached.)
Copies of the recent Medicare GME affiliation agreement (or
emergency Medicare GME affiliation agreement) of which the applying
hospital and the closed hospital were a member of before the hospital
closed.
Copies of the most recent accreditation letters for all of the
hospital's training programs in which the hospital had a shared
rotational arrangement (as defined at Sec. 413.75(b)) with the closed
hospital.

Section B. Level Priority Category

(Place an ``X'' in the appropriate box that is applicable to the
level priority category that describes the applicant hospital.)
First, to hospitals located in the same core-based statistical area
(CBSA) as, or in a CBSA contiguous to, the hospital that closed.
Second, to hospitals located in the same State as the closed
hospital.
Third, to hospitals located in the same region as the hospital that
closed.
Fourth, if the slots have not yet been fully distributed, to
qualifying hospitals in accordance with the criteria established under
section 5503, ``Distribution of Additional Residency Positions''

Section C. Ranking Criteria

(Place an ``X'' in the box for each criterion that is appropriate
for the applicant hospital and for the program for which the increase
in the FTE cap is requested.)
[ballot] Ranking Criterion One. The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program(s)
exactly as it had been operated by the hospital that closed (that is,
same residents, possibly the same program director, and possibly the
same (or many of the same) teaching staff). The applying hospital's FTE
resident caps were erroneously reduced by CMS under section
1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at
section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was
made aware of the error prior to posting of the FY 2015 IPPS proposed
rule on the CMS Web site.
Ranking Criterion Two. The applying hospital was listed as a
participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed, and under the terms of that Medicare GME
affiliation agreement or emergency Medicare GME affiliation agreement,
the applying hospital received slots from the hospital that closed, and
the applying hospital will use the additional slots to continue to
train at least the number of FTE residents it had trained under the
terms of the Medicare GME affiliation agreement, or emergency Medicare
GME affiliation agreement. If the most recent Medicare GME affiliation
agreement or emergency Medicare GME affiliation agreement of which the
closed hospital was a member before the hospital closed was with a
hospital that itself has closed or is closing, preference would be
given to an applying hospital that was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement.
Ranking Criterion Three. The applying hospital took in residents
displaced by the closure of the hospital, but is not assuming an entire
program or programs, and will use the additional slots to continue
training residents in the same programs as the displaced residents,
even after those displaced residents complete their training (that is,
the applying hospital is permanently expanding its own existing
programs).
Ranking Criterion Four. The program does not meet Ranking Criteria
1, 2, or 3, and the applying hospital will use additional slots to
establish a new or expand an existing geriatrics residency program.
[ballot] Ranking Criterion Five: The program does not meet Ranking
Criteria 1 through 4, the applying hospital is located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
Ranking Criterion Six: The program does not meet Ranking Criteria 1
through 5, and the applying hospital is not located in a HPSA, and will
use all the additional slots to establish or expand a primary care or
general surgery residency program.
Ranking Criterion Seven: The applying hospital will use additional
slots to establish or expand a primary care or general surgery program,
but the program does not meet Ranking Criterion 5 or 6 because the
hospital is also separately applying under Ranking Criterion 8 for
slots to establish or expand a nonprimary care or non-general surgery
program.
Ranking Criterion Eight: The program does not meet Ranking Criteria
1 through 7, and the applying hospital will use additional slots to
establish or expand a nonprimary care or a nongeneral surgery program.

Application Process and CMS Central Office Mailing Address for
Receiving Increases in FTE Resident Caps

In order for hospitals to be considered for increases in their FTE
resident caps, each qualifying hospital must submit a timely
application. The following information must be submitted on
applications to receive an increase in FTE resident caps:
[ssquf] The name and Medicare provider number, and Medicare
contractor (to which the hospital submits its cost report) of the
hospital.
The total number of requested FTE resident slots for direct GME or
IME, or both.
A completed copy of the CMS Application Form for each residency
program for which the hospital intends to use the requested increase in
FTE residents.
Source documentation to support the assertions made by the hospital
on the CMS Application Form.
FTE resident counts for direct GME and IME and FTE resident caps
for direct GME and IME reported by the hospital in the most recent as-
filed cost report. Include copies of Worksheets E, Part A, and E-4.
An attestation, signed and dated by an officer or administrator of
the hospital who signs the hospital's Medicare cost report, with the
following information:

``I hereby certify that I understand that misrepresentation or
falsification of any information contained in this application may be
punishable by criminal, civil, and administrative action, fine and/or
imprisonment under

[[Page 28164]]

federal law. Furthermore, I understand that if services identified in
this application were provided or procured through payment directly or
indirectly of a kickback or were otherwise illegal, criminal, civil,
and administrative action, fines and/or imprisonment may result. I also
certify that, to the best of my knowledge and belief, it is a true,
correct, and complete application prepared from the books and records
of the hospital in accordance with applicable instructions, except as
noted. I further certify that I am familiar with the laws and
regulations regarding Medicare payment to hospitals for the training of
interns and residents.''

CMS Central Office Mailing Address
Centers for Medicare & Medicaid Services (CMS)
Director, Division of Acute Care
7500 Security Boulevard
Mailstop C4-08-06
Baltimore, MD 21244-1850
6. Proposed Clarification and Policy Change Applicable To Direct GME
Payments to Federally Qualified Health Centers (FQHCs) and Rural Health
Clinics (RHCs) for Training Residents in Approved Programs
Under section 1886(k) of the Act, and as implemented in the
regulations at 42 CFR 405.2468(f), federally qualified health centers
(FQHCs) and rural health clinics (RHCs) may receive payment for the
costs of direct GME for training residents in an approved program under
certain circumstances. Specifically, the regulations at Sec.
405.2468(f)(1) state: ``Effective for that portion of cost reporting
periods occurring on or after January 1, 1999, if an RHC or an FQHC
incurs `all or substantially all' of the costs for the training program
in the nonhospital setting as defined in Sec. 413.75(b) of this
chapter, the RHC or FQHC may receive direct graduate medical education
payment for those residents.'' We refer readers to the July 31, 1998
final rule (63 FR 40986) for a detailed discussion of this longstanding
policy. As noted earlier, the regulatory text of Sec. 405.2468(f)(1)
incorporates the definition of ``all or substantially all of the costs
for the training program in a nonhospital setting'' that is defined at
Sec. 413.75(b), as part of a number of definitions applicable
generally to hospital direct GME payments and those regulations at
Sec. 413.76 through Sec. 413.83. Section 413.75(b) is based on the
statutory provision at section 1886(h)(4)(E) of the Act, which
establishes the requirements that hospitals must meet in order to
receive direct GME payment for residents training in nonprovider
settings.
The statutory use of the phrase ``all or substantially all of the
costs for the training program in that setting'' is located in section
1886(h)(4)(E) of the Act, as added by section 9314 of the Omnibus
Budget Reconciliation Act of 1986 (Pub. L. 99-509) (OBRA `86). For a
detailed discussion of the implementation of section 9314 of OBRA `86,
we refer readers to the September 29, 1989 final rule (54 FR 40292).
Section 1886(h)(4)(E) of the Act, as added by OBRA '86, established the
requirements that hospitals must meet in order to receive direct GME
payment for residents training in nonprovider settings. However,
section 5504(a) of the Affordable Care Act made changes to section
1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur
for residents training in nonprovider sites in order to count the FTE
residents for purposes of direct GME payments. In making these changes
to section 1886(h)(4)(E) of the Act, section 5504(a) of the Affordable
Care Act amended the Act prospectively, effective with ``cost reporting
periods beginning on or after July 1, 2010'' for direct GME, by
removing the phrase ``all or substantially all of the costs for the
training program in that setting'' and instead permitting hospitals to
count the time that residents train in activities related to patient
care in a nonprovider site if the hospital incurs the costs of the
residents' salaries and fringe benefits for the time that the resident
spends training in the nonprovider site. In effect, this amendment
reduced the costs that hospitals must incur for residents training in
nonprovider settings.
Based on this statutory amendment, in the November 24, 2010 final
rule with comment period (75 FR 72134), we revised the regulations at
Sec. 412.105(f)(1)(ii)(E) for IME and Sec. Sec. 413.78(f) and (g) for
direct GME to reflect the changes made by section 5504(a) of the
Affordable Care Act. In addition, we revised the regulatory definition
of ``all or substantially all of the costs for the training program in
the nonhospital setting'' in order to implement the statutory amendment
and apply the effective date as set forth in the statute to cost
reporting periods beginning on or after July 1, 2010. Specifically, the
regulations at Sec. 413.75(b), which define ``all or substantially all
of the costs for the training program in the nonhospital setting'' were
revised as follows:
``(1) Effective on or after January 1, 1999 and for cost reporting
periods beginning before July 1, 2007, the residents' salaries and
fringe benefits (including travel and lodging where applicable) and the
portion of the cost of teaching physicians' salaries and fringe
benefits attributable to direct graduate medical education (GME); and
``(2) Effective for cost reporting periods beginning on or after
July 1, 2007 and before July 1, 2010, at least 90 percent of the total
of the costs of the residents' salaries and fringe benefits (including
travel and lodging where applicable) and the portion of the cost of
teaching physicians' salaries attributable to nonpatient care direct
GME activities.''
Ultimately, with regard to the costs that hospitals must incur for
residents training in nonprovider sites in order to count the FTE
residents for purposes of direct GME payments, the phrase ``all or
substantially all of the costs for the training program in the
nonhospital setting'' no longer applies, effective for cost reporting
periods beginning on and after July 1, 2010.
In the November 24, 2010 final rule with comment period (75 FR
72134), we amended the regulations applicable to direct GME payments to
hospitals at Sec. Sec. 413.75(b) and 413.78(g) to reflect the changes
made by section 5504(a) of the Affordable Care Act. However, at that
time, we inadvertently did not make conforming changes to the
regulations at Sec. 405.2468(f)(1) to clarify the requirements that
FQHCs and RHCs must meet in order to receive direct GME payment for
training residents in their facilities. Therefore, in compliance with
our longstanding policy that FQHCs and RHCs must meet the same
requirements applicable to teaching hospitals for direct GME payments
with respect to training residents in nonprovider settings, in this
proposed rule, we are providing clarification that, based on statutory
amendments discussed earlier, the applicable policy cross-referenced in
Sec. 405.2468(f)(1) has changed for cost reporting periods beginning
on or after July 1, 2010. In addition, to ensure statutory and
regulatory consistency, we are proposing to revise the regulations at
Sec. 405.2468(f)(1) to add a sentence at the end of the paragraph as
follows: ``However, in connection with cost reporting periods for which
`all or substantially all of the costs for the training program in the
nonhospital setting' is not defined in Sec. 413.75(b) of this chapter,
if an RHC or an FQHC incurs the salaries and fringe benefits (including
travel and lodging where applicable) of residents training at the RHC
or FQHC, the RHC or FQHC may receive direct graduate medical education
payment for those residents.''

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L. Rural Community Hospital Demonstration Program

1. Background
Section 410A(a) of Public Law 108-173 required the Secretary to
establish a demonstration program to test the feasibility and
advisability of establishing ``rural community'' hospitals to furnish
covered inpatient hospital services to Medicare beneficiaries. The
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient
hospital services furnished to Medicare beneficiaries. A rural
community hospital, as defined in section 410A(f)(1), is a hospital
that--
Is located in a rural area (as defined in section
1886(d)(2)(D) of the Act) or is treated as being located in a rural
area under section 1886(d)(8)(E) of the Act;
Has fewer than 51 beds (excluding beds in a distinct part
psychiatric or rehabilitation unit) as reported in its most recent cost
report;
Provides 24-hour emergency care services; and
Is not designated or eligible for designation as a CAH
under section 1820 of the Act.
Section 410A(a)(4) of Public Law 108-173 specified that the
Secretary was to select for participation no more than 15 rural
community hospitals in rural areas of States that the Secretary
identified as having low population densities. Using 2002 data from the
U.S Census Bureau, we identified the 10 States with the lowest
population density in which rural community hospitals were to be
located in order to participate in the demonstration: Alaska, Idaho,
Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota,
Utah, and Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of
the United States: 2003).
CMS originally solicited applicants for the demonstration in May
2004; 13 hospitals began participation with cost reporting periods
beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals
withdrew from the program and converted to CAH status. This left nine
hospitals participating at that time. In 2008, we announced a
solicitation for up to six additional hospitals to participate in the
demonstration program. Four additional hospitals were selected to
participate under this solicitation. These four additional hospitals
began under the demonstration payment methodology with the hospital's
first cost reporting period starting on or after July 1, 2008. At that
time, 13 hospitals were participating in the demonstration.
Five hospitals (3 of the hospitals were among the 13 hospitals that
were original participants in the demonstration program and 2 of the
hospitals were among the 4 hospitals that began the demonstration
program in 2008) withdrew from the demonstration program during CYs
2009 and 2010. (Three of these hospitals indicated that they would be
paid more for Medicare inpatient hospital services under the rebasing
option allowed under the SCH methodology provided for under section 122
of the Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275). One hospital restructured to become a CAH, and one
hospital closed.) In CY 2011, one hospital that was among the original
set of hospitals that participated in the demonstration withdrew from
the demonstration. These actions left seven of the originally
participating hospitals (that is, hospitals that were selected to
participate in either 2004 or 2008) participating in the demonstration
program as of June 1, 2011.
Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148) amended section 410A of Public Law 108-173, which established the
rural community hospital demonstration program. Sections 3123 and 10313
of the Affordable Care Act changed the rural community hospital
demonstration program in several ways. First, the Secretary is required
to conduct the demonstration program for an additional 5-year period
that begins on the date immediately following the last day of the
initial 5-year period. Further, the Affordable Care Act requires, in
the case of a rural community hospital that is participating in the
demonstration program as of the last day of the initial 5-year period,
the Secretary to provide for the continued participation of such rural
hospital in the demonstration program during the 5-year extension,
unless the hospital makes an election, in such form and manner as the
Secretary may specify, to discontinue participation (section
410A(g)(4)(A) of Pub. L. 108-173, as added by section 3123(a) of the
Affordable Care Act and further amended by section 10313 of such Act).
In addition, the Affordable Care Act provides that, during the 5-
year extension period, the Secretary shall expand the number of States
with low population densities determined by the Secretary to 20
(section 410A(g)(2) of Pub. L. 108-173, as added by section 3123(a) and
amended by section 10313 of the Affordable Care Act). Further, the
Secretary is required to use the same criteria and data that the
Secretary used to determine the States under section 410A(a)(2) of
Public Law 108-173 for purposes of the initial 5-year period. The
Affordable Care Act also allows not more than 30 rural community
hospitals in such States to participate in the demonstration program
during the 5-year extension period (section 410A(g)(3) of Pub. L. 108-
173, as added by section 3123(a) of the Affordable Care Act and as
further amended by section 10313 of such Act).
We published a solicitation for applications for additional
participants in the rural community hospital demonstration program in
the Federal Register on August 30, 2010 (75 FR 52960). Applications
were due on October 14, 2010. The 20 States with the lowest population
density that were eligible for the demonstration program are: Alaska,
Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census
Bureau, Statistical Abstract of the United States: 2003). We approved
19 new hospitals for participation in the demonstration program. We
determined that each of these new hospitals would begin participating
in the demonstration with its first cost reporting period beginning on
or after April 1, 2011.
Three of these 19 hospitals declined participation prior to the
start of the cost reporting periods for which they would have begun the
demonstration. In addition to the 7 hospitals that were selected in
either 2004 or 2008, the new selection led to a total of 23 hospitals
in the demonstration. During CY 2013, one additional hospital among the
set selected in 2011 withdrew from the demonstration, similarly citing
a relative financial advantage to returning to the customary SCH
payment methodology, which left 22 hospitals participating in the
demonstration.
In addition, section 410A(c)(2) of Public Law 108-173 required
that, ``[i]n conducting the demonstration program under this section,
the Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have paid
if the demonstration program under this section was not implemented.''
This requirement is commonly referred to as ``budget neutrality.''
Generally, when we implement a demonstration program on a budget
neutral basis, the demonstration program is budget neutral in its own
terms; in other words, the aggregate payments to the participating
hospitals do not exceed the amount that would be paid to those

[[Page 28166]]

same hospitals in the absence of the demonstration program. Typically,
this form of budget neutrality is viable when, by changing payments or
aligning incentives to improve overall efficiency, or both, a
demonstration program may reduce the use of some services or eliminate
the need for others, resulting in reduced expenditures for the
demonstration program's participants. These reduced expenditures offset
increased payments elsewhere under the demonstration program, thus
ensuring that the demonstration program as a whole is budget neutral or
yields savings. However, the small scale of this demonstration program,
in conjunction with the payment methodology, makes it extremely
unlikely that this demonstration program could be viable under the
usual form of budget neutrality.
Specifically, cost-based payments to participating small rural
hospitals are likely to increase Medicare outlays without producing any
offsetting reduction in Medicare expenditures elsewhere. Therefore, a
rural community hospital's participation in this demonstration program
is unlikely to yield benefits to the participant if budget neutrality
were to be implemented by reducing other payments for these same
hospitals.
In the past 10 IPPS final regulations, spanning the period for
which the demonstration program has been implemented, we have adjusted
the national inpatient PPS rates by an amount sufficient to account for
the added costs of this demonstration program, thus applying budget
neutrality across the payment system as a whole rather than merely
across the participants in the demonstration program. As we discussed
in the FYs 2005 through 2014 IPPS final rules (69 FR 49183; 70 FR
47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343,
76 FR 51698, 77 FR 53449, and 78 FR 50740, respectively), we believe
that the language of the statutory budget neutrality requirements
permits the agency to implement the budget neutrality provision in this
manner. In light of the statute's budget neutrality requirement, in
this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing to continue
to use the methodology we finalized in FY 2013 to calculate a budget
neutrality adjustment factor to the FY 2015 national IPPS rates.
In general terms, in each of these previous years, we used
available cost reports for the participating hospitals to derive an
estimate of the additional costs attributable for the demonstration.
Prior to FY 2013, we used finalized, or settled, cost reports, as
available, and ``as submitted'' cost reports for hospitals for which
finalized cost reports were not available. Annual market basket
percentage increase amounts provided by the CMS Office of the Actuary
reflecting the growth in the prices of inputs for inpatient hospitals
were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53452), we used ``as submitted'' cost reports (for cost
reporting periods ending in CY 2010) for each hospital participating in
the demonstration in estimating the costs of the demonstration. In
addition, in FY 2013, we incorporated different update factors (the
market basket percentage increase and the applicable percentage
increase, as applicable, to several years of data as opposed to solely
using the market basket percentage increase) for the calculation of the
budget neutrality offset amount. Finally, in each of the previous
years, an annual update factor provided by the CMS Office of the
Actuary reflecting growth in the volume of inpatient operating services
was also applied. For the budget neutrality calculations in the IPPS
final rules for FYs 2005 through 2011, the annual volume adjustment
applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, and
2014, it was 3 percent. For a detailed discussion of our budget
neutrality offset calculations, we refer readers to the IPPS final rule
applicable to the fiscal year involved.
In general, for FYs 2005 through 2009, we based the budget
neutrality offset estimate on the estimated cost of the demonstration
in an earlier given year. For these periods, we derived that estimated
cost by subtracting the estimated amount that would otherwise be paid
without the demonstration in an earlier given year from the estimated
amount for the same year that would be paid under the demonstration
under the reasonable cost-based methodology authorized by section 410A
of Public Law 108-173. (We note that section 410A of Pub. L. 108-173
was later amended by the Affordable Care Act.) The reasonable cost-
based methodology authorized by section 410A of Public Law 108-173, as
amended, is hereafter referred to as the ``reasonable cost
methodology.'' (We ascertained the estimated amount that would be paid
in an earlier given year under the reasonable cost methodology and the
estimated amount that would otherwise be paid without the demonstration
in an earlier given year from ``as submitted'' cost reports that were
submitted by the hospitals prior to the inception of the
demonstration.) We then updated the estimated cost described above to
the current year by multiplying it by the market basket percentage
increases applicable to the years involved and the applicable annual
volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule,
data from finalized cost reports reflecting the participating
hospitals' experience under the demonstration were available.
Specifically, the finalized cost reports for the first 2 years of the
demonstration, that is, cost reports for cost reporting years beginning
in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These
data showed that the actual costs of the demonstration for these years
exceeded the amounts originally estimated in the respective final rules
for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we included in the budget neutrality offset amount an
amount in addition to the estimate of the demonstration costs in that
fiscal year. This additional amount was based on the amount that the
costs of the demonstration for FYs 2005 and 2006 exceeded the budget
neutrality offset amounts finalized in the IPPS rules applicable for
those years.
Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we
have continued to propose a methodology for calculating the budget
neutrality offset amount to account for both the estimated
demonstration costs in the upcoming fiscal year and an amount by which
the actual demonstration costs corresponding to an earlier, given year
(which would be known once we have finalized cost reports for that
year) exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. However, we noted in the FYs
2011, 2012, and 2013 IPPS final rules that, because of a delay
affecting the settlement process for cost reports for IPPS hospitals
occurring on a larger scale than merely for the demonstration, we were
unable to finalize this component of the budget neutrality offset
amount accounting for the amount by which the actual demonstration
costs in a given year exceeded the budget neutrality offset amount
finalized in the corresponding year's IPPS final rule for cost reports
of demonstration hospitals dating to those beginning in FY 2007.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through
53453), we adopted changes to the methodology for calculating the
budget neutrality offset amount in an effort to further improve and
refine it. We noted that the revised methodology varied, in part, from
that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698
through

[[Page 28167]]

51705). Specifically, in adopting refinements to the methodology, our
objective was to simplify the calculation so that it included as few
steps as possible. In addition, we incorporated different update
factors (the market basket percentage increase and the applicable
percentage increase, as applicable, to several years of data as opposed
to solely using the market basket percentage increase) for the
calculation of the budget neutrality offset amount. We stated that we
believed this approach would maximize the precision of our calculation
because it would more closely replicate payments made with and without
the demonstration. We refer readers to the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53449 through 53453) for a detailed discussion of the
methodology we used for FY 2013. We noted that, although we were making
changes to certain aspects of the budget neutrality offset amount
calculation for FY 2013, several core components of the methodology
would remain unchanged. For example, we continued to include in the
budget neutrality offset amount methodology the estimate of the
demonstration costs for the upcoming fiscal year and the amount by
which the actual demonstration costs corresponding to an earlier year
(which would be determined once we have finalized cost reports for that
year) exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. However, finalized cost reports
for the hospitals participating in the demonstration were not available
for FYs 2007, 2008, 2009, and 2010 at the time of development of the FY
2013 IPPS/LTCH PPS final rule. Therefore, we were unable to finalize
this component of the budget neutrality offset calculation. We stated
in the final rule that we expected settled cost reports for all of the
demonstration hospitals that participated in the applicable fiscal year
(FYs 2007, 2008, 2009, and 2010) to be available prior to the FY 2014
IPPS/LTCH PPS proposed rule.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through
50744), we determined the final budget neutrality offset amount to be
applied to the FY 2014 IPPS rates to be $52,589,741. This amount was
comprised of two distinct components: (1) the final resulting
difference between the estimated reasonable cost amount to be paid
under the demonstration to the 22 participating hospitals in FY 2014
for covered inpatient hospital services and the estimated amount that
would otherwise be paid to such hospitals in FY 2014 without the
demonstration (this amount was $46,549,861); and (2) the amount by
which the actual costs of the demonstration for FY 2007, as shown in
the finalized cost reports for the hospitals that participated in the
demonstration during FY 2007, exceeded the budget neutrality offset
amount that was finalized in the FY 2007 IPPS final rule (this amount,
$6,039,880, was derived from finalized cost reports for cost reporting
periods beginning in FY 2007 for the 9 hospitals that participated in
the demonstration during that year).
2. Proposed FY 2015 Budget Neutrality Offset Amount
For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53449 through 53453), we are proposing in this FY 2015 IPPS/LTCH
PPS proposed rule to continue to use the methodology finalized in the
FY 2013 IPPS/LTCH PPS final rule to calculate a budget neutrality
adjustment factor to be applied to the FY 2015 national IPPS payment
rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53451), we revised our methodology in that final rule to further
improve and refine the calculation of the budget neutrality offset
amount and to simplify the methodology so that it includes only a few
steps. Consistent with the methodology finalized in the FY 2013 IPPS/
LTCH PPS final rule, the proposed methodology for calculating the
estimated FY 2015 demonstration cost for the participating hospitals is
as follows:
Step 1: For each of the participating hospitals, we are proposing
to identify the general reasonable cost amount calculated under the
reasonable cost methodology for covered inpatient hospital services (as
indicated on the ``as submitted'' cost report for the hospital's cost
reporting period ending in CY 2012). The general reasonable cost amount
calculated under the reasonable cost methodology is hereafter referred
to as the ``reasonable cost amount.'' As we explained in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to
streamline our methodology for calculating the budget neutrality offset
amount would be to use cost reports with the same status and from the
same time period for all hospitals participating in the demonstration.
Because ``as submitted'' cost reports ending in CY 2012 are the most
recent available cost reports, we believe they would be an accurate
predictor of the costs of the demonstration in FY 2015 because they
give us a recent picture of the participating hospitals' costs.
Because section 410A of Public Law 108-173 stipulates swing-bed
services are to be included among the covered inpatient hospital
services for which the demonstration payment methodology applies, we
are proposing to include the cost of these services, as reported on the
cost reports for the hospitals that provide swing-bed services, within
the general total estimated FY 2012 reasonable cost amount for covered
inpatient hospital services under the demonstration. As indicated
above, we are proposing to use ``as submitted'' cost reports for the
hospital's cost reporting period ending in CY 2012 for this
calculation.
We are proposing to sum the two above-referenced amounts to
calculate the general total estimated FY 2012 reasonable cost amount
for covered inpatient hospital services for all participating
hospitals.
We are proposing to multiply this sum (that is, the general total
estimated FY 2012 reasonable cost amount for covered inpatient hospital
services for all participating hospitals) by the FY 2013, FY 2014, and
FY 2015 IPPS market basket percentage increases, which are formulated
by the CMS Office of the Actuary. In this proposed rule, the current
estimate of the FY 2015 IPPS market basket percentage increase provided
by the CMS Office of the Actuary is specified in section IV.B.1. of the
preamble of this proposed rule. We are proposing to use the final FY
2015 IPPS market basket percentage increase in the final rule. We also
are proposing to then multiply the product of the general total
estimated FY 2012 reasonable cost amount for all participating
hospitals and the market basket percentage increases applicable to the
years involved by a 3-percent annual volume adjustment for FYs 2013
through 2015--the result would be the general total estimated FY 2015
reasonable cost amount for covered inpatient hospital services for all
participating hospitals.
We are proposing to apply the IPPS market basket percentage
increases applicable for FYs 2013 through 2015 to the FY 2012
reasonable cost amount described above to model the estimated FY 2015
reasonable cost amount under the demonstration. We are proposing to use
the IPPS market basket percentage increases because we believe that
these update factors appropriately indicate the trend of increase in
inpatient hospital operating costs under the reasonable cost
methodology for the years involved. The 3-percent annual volume
adjustment was stipulated by the CMS Office of the Actuary and is being
proposed because it is intended to

[[Page 28168]]

accurately reflect the tendency of hospitals' inpatient caseloads to
increase. We acknowledge the possibility that inpatient caseloads for
small hospitals may fluctuate, and are proposing to incorporate into
the estimate of demonstration costs a factor to allow for a potential
increase in inpatient hospital services.
Step 2: For each of the participating hospitals, we are proposing
to identify the general estimated amount that would otherwise be paid
in FY 2012 under applicable Medicare payment methodologies for covered
inpatient hospital services (as indicated on the ``as submitted'' cost
report for cost reporting periods ending in CY 2012) if the
demonstration was not implemented. Similarly, as in Step 1, for the
hospitals that provide swing-bed services, we are proposing to identify
the estimated amount that generally would otherwise be paid for these
services (as indicated on the ``as submitted'' cost report for cost
reporting periods ending in CY 2012) and include it in the total FY
2012 general estimated amount that would otherwise be paid for covered
inpatient hospital services without the demonstration. We are proposing
to sum these two amounts in order to calculate the estimated FY 2012
total payments that generally would otherwise be paid for covered
inpatient hospital services for all participating hospitals without the
demonstration.
We are proposing to multiply the above amount (that is, the
estimated FY 2012 total payments that generally would otherwise be paid
for covered inpatient hospital services for all participating hospitals
without the demonstration) by the FYs 2013 through 2015 IPPS applicable
percentage increases. In this proposed rule, the current estimate of
the FY 2015 applicable percentage increase is specified in section
IV.B. of this preamble. This methodology differs from Step 1, in which
we are proposing to apply the market basket percentage increases to the
sum of the hospitals' general total FY 2012 estimated reasonable cost
amount for covered inpatient hospital services. We believe that the
IPPS applicable percentage increases are appropriate factors to update
the estimated amounts that generally would otherwise be paid without
the demonstration. This is because IPPS payments would constitute the
majority of payments that would otherwise be made without the
demonstration and the applicable percentage increase is the factor used
under the IPPS to update the inpatient hospital payment rates.
Hospitals participating in the demonstration would be participating
under the IPPS payment methodology if they were not in the
demonstration. (We are proposing to use the final FY 2015 applicable
percentage increase in the final rule.) Then we are proposing to
multiply the product of the estimated FY 2012 total payments that
generally would otherwise be made without the demonstration and the
applicable IPPS percentage increases for the years involved by a 3-
percent annual volume adjustment for FYs 2013 through 2015. The result
would be the general total estimated FY 2015 costs that would otherwise
be paid without the demonstration for covered inpatient hospital
services to the participating hospitals.
Step 3: We are proposing to subtract the amount derived in Step 2
(representing the sum of estimated amounts that generally would
otherwise be paid to the participating hospitals for covered inpatient
hospital services for FY 2015 if the demonstration were not
implemented) from the amount derived in Step 1 (representing the sum of
the estimated reasonable cost amount that generally would be paid under
the demonstration to all participating hospitals for covered inpatient
hospital services for FY 2015). We are proposing that the resulting
difference would be one component of the estimated amount for which an
adjustment to the national IPPS rates would be calculated (as further
discussed below).
For this proposed rule, the resulting difference is $53,673,008.
This estimated amount is based on the specific assumptions identified
regarding the data sources used, that is, ``as submitted'' recently
available cost reports. Also, we note that if updated data become
available prior to the FY 2015 IPPS/LTCH PPS final rule, we would use
them to the extent appropriate to estimate the costs of the
demonstration program in FY 2015. Therefore, this estimated budget
neutrality offset amount might change in the final rule, depending on
the availability of updated data.
In addition, similar to previous years, we are proposing to include
in the budget neutrality offset amount the amount by which the actual
demonstration costs corresponding to an earlier given year (which would
be determined once we had finalized cost reports for that year)
exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. For this FY 2015 IPPS/LTCH PPS
proposed rule, we have calculated the amount by which the actual costs
of the demonstration in FY 2008 (that is, the costs of the
demonstration for the 10 hospitals that participated in FY 2008, as
shown in these hospitals' finalized cost reports for the cost report
period beginning in that fiscal year), exceeded the budget neutrality
offset amount that was finalized in the FY 2008 IPPS final rule. We
have calculated this amount to be $10,389,771 for this proposed rule.
However, we are noting that if updated data become available prior to
the FY 2015 IPPS/LTCH PPS final rule, we would use them to the extent
appropriate to determine this amount. Therefore, this amount might
change in the final rule, depending on the availability of updated
data. We also are currently working with the MACs that service the
hospitals participating in the demonstration to obtain finalized cost
reports for FYs 2009, 2010, and 2011. Similar to previous years, we are
proposing that if settled cost reports for all of the demonstration
hospitals that participated in an applicable year (FYs 2009, 2010, or
2011) are available prior to the FY 2015 IPPS/LTCH PPS final rule, we
would include in the budget neutrality offset amount any additional
amounts by which the final settled costs of the demonstration for the
year (FYs 2009, 2010, or 2011) exceed the budget neutrality offset
amount applicable to such year as finalized in the respective year's
IPPS final rule.
Therefore, the total budget neutrality offset amount that we are
proposing to be applied to the FY 2015 IPPS rates is $64,062,779. This
is the sum of two separate components: (1) The difference between the
total estimated FY 2015 reasonable cost amount to be paid under the
demonstration to the 22 participating hospitals for covered inpatient
hospital services and the total estimated amount that would otherwise
be paid to the participating hospitals in FY 2015 without the
demonstration ($53,673,008); and (2) the amount by which the actual
costs of the demonstration for FY 2008 (as shown in the finalized cost
reports for cost reporting periods beginning in FY 2008 for the
hospitals that participated in the demonstration during FY 2008) exceed
the budget neutrality offset amount that was finalized in the FY 2008
IPPS final rule ($10,389,771). We are proposing that the resulting
total ($64,062,779) would be the amount for which an adjustment to the
national IPPS rates would be calculated.

[[Page 28169]]

M. Requirement for Transparency of Hospital Charges Under the
Affordable Care Act

1. Overview
Hospitals determine their charges for items and services provided
to patients. While Medicare does not pay billed charges, hospital
reported charges are used in determining Medicare's national payment
rates (for example, billed charges are adjusted to cost to determine
how much to pay for one type of case relative to another). Although the
Medicare payment amount for a discharge under the IPPS or a service
furnished under the OPPS is not based directly on the hospital's
charges for the individual services provided, we believe that hospital
charges nevertheless remain an important component of our healthcare
system. For example, hospital charges are often billed, in full, to
uninsured patients who cannot benefit from discounts negotiated by
insurance companies. Hospital charges also vary significantly by
hospital, making it challenging for patients to compare the cost of
similar services across hospitals.
In 2013, we released data that demonstrated significant variation
across the country and within communities in what hospitals charge for
a number of common inpatient and outpatient services. These data also
showed that hospital charges for services furnished in both the
inpatient setting and the outpatient setting were, in general,
significantly higher than the amount paid by Medicare under the IPPS or
the OPPS. The data that we released are posted on the Web site at:
https://www/cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/. Our intent
in releasing these data was to enable the public to examine the
relationship between the amounts charged by individual hospitals for
comparable services and Medicare's payment for that inpatient or
outpatient care. We believe that providing charge data comparisons is
introducing both transparency and accountability to hospital pricing,
and we are continuing to pursue opportunities to report on hospital
charging practices.
2. Transparency Requirement Under the Affordable Care Act
The Affordable Care Act contains a provision that is consistent
with our effort to improve the transparency of hospital charges. As a
result of the Affordable Care Act, section 2718(e) of the Public Health
Service Act requires that ``[e]ach hospital operating within the United
States shall for each year establish (and update) and make public (in
accordance with guidelines developed by the Secretary) a list of the
hospital's standard charges for items and services provided by the
hospital, including for diagnosis-related groups established under
section 1886(d)(4) of the Social Security Act.''
In this proposed rule, we are reminding hospitals of their
obligation to comply with the provisions of section 2718(e) of the
Public Health Service Act. Hospitals are responsible for establishing
their charges and are in the best position to determine the exact
manner and method by which to make those charges available to the
public. Therefore, we are providing hospitals with the flexibility to
determine how they make a list of their standard charges public. Our
guidelines for implementing section 2718(e) of the Public Health
Service Act are that hospitals either make public a list of their
standard charges (whether that be the chargemaster itself or in another
form of their choice), or their policies for allowing the public to
view a list of those charges in response to an inquiry. We encourage
hospitals to undertake efforts to engage in consumer friendly
communication of their charges to help patients understand what their
potential financial liability might be for services they obtain at the
hospital, and to enable patients to compare charges for similar
services across hospitals. We expect that hospitals will update the
information at least annually, or more often as appropriate, to reflect
current charges.
We are confident that hospital compliance with this statutory
transparency requirement will greatly improve the public accessibility
of charge information. As hospitals make data publicly available in
compliance with section 2718(e) of the Public Health Service Act, we
also will continue to review and post relevant charge data in a
consumer friendly way, as we previously have done by posting on the CMS
Web site the following hospital and physician charge information: May
and June 2013 hospital charge data releases; 2013 physician data
requests for information; and the April 2014 physician data releases
and data provided on geographic variation in payments and payments per
beneficiary.

N. Medicare Payment for Short Inpatient Hospital Stays

Some members of the hospital community have expressed support for
the general concept of an alternative payment methodology under the
Medicare program for short inpatient hospital stays. We are interested
in public comments on such a payment methodology, specifically how it
might be designed. There are several issues of consideration that would
inform how such a payment methodology would be devised. Below we
outline some specific questions and considerations that we have
identified as critical for developing such a methodology. This list of
questions and considerations is not exhaustive, and we welcome
additional questions, suggestions, and input from stakeholders.
Defining short or low cost inpatient hospital stays:
One issue would be how to define a short inpatient hospital stay
for the purpose of determining the appropriate Medicare payment. For
instance, would a short inpatient hospital stay be one where the
average length of stay for the MS-DRG is short or would it be
atypically short or low cost cases relative to other cases within same
MS-DRG? There are significant differences in mean lengths of stay among
MS-DRGs. (We refer readers to Table 5.--List of Proposed Medicare
Severity Diagnosis-Related Groups (MS-DRGs), Relative Weighting
Factors, and Geometric and Arithmetic Mean Length of Stay for this
proposed rule, which is available via the Internet on the CMS Web
site.) For example, many frequently billed MS-DRGs have historically
had mean lengths of stay of approximately 2 days, such as MS-DRG 313
(Chest Pain). Other MS-DRGs such as MS-DRG 871 (Septicemia or Severe
Sepsis without Mechanical Ventilation 96+ hours with MCC) have had
longer lengths of stay.
If we adopted a policy that paid less for atypically low-cost or
short-stay cases relative to the average case in the same MS-DRG, we
believe such a policy is more likely to affect an MS-DRG like MS-DRG
871 that has a longer average length of stay or higher average cost
associated with the typical patient. Such a policy is less likely to
apply to MS-DRG 313 because the typical case is already low cost or
short stay.
Determining appropriate payment for short inpatient
hospital stays:
Another issue would be how to determine the appropriate payment
once a short stay has been identified. Some have suggested a per diem
based payment amount, perhaps modelled on the existing transfer payment
policy. Again, such a policy is far more likely to affect payment for
an atypically short-stay or low-cost case in an MS-DRG with a longer
average length of stay. For short-stay cases in an MS-DRG where the
average length of stay for the MS-DRG is short, this methodology would

[[Page 28170]]

be unlikely to affect payment as the full IPPS payment would be made in
1 or 2 days.
For these types of short-stay cases, one relevant issue to address
may be that payment for the same case will be very different under the
OPPS and the IPPS depending upon whether the patient has been formally
admitted to the hospital as an inpatient, pursuant to a physician
order. Under what circumstances should the IPPS payment amount be
limited to the OPPS payment amount and under what circumstances might
it be appropriate for the payment amount to be higher? If it were
appropriate for the payment amount to be higher, how would the amount
of the additional payment be determined?
We welcome input on these and other issues related to an
alternative payment methodology under the Medicare program for short
inpatient hospital stays.

O. Suggested Exceptions to the 2-Midnight Benchmark

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through
50954), we discussed modifications and clarifications to CMS'
longstanding policy on how Medicare contractors review inpatient
hospital and CAH admissions for payment purposes. Under that final
rule, we established a 2-midnight benchmark for determining the
appropriateness of an inpatient hospital admission versus treatment on
an outpatient basis. We provided in regulations at Sec. 412.3(e)(1)
that, in addition to services designated as inpatient only, surgical
procedures, diagnostic tests, and other treatments are generally
appropriate for inpatient hospital admission and payment under Medicare
Part A when the physician (1) expects the beneficiary to require a
medically necessary hospital stay that crosses at least 2 midnights and
(2) admits the beneficiary to the hospital based upon that expectation.
The FY 2014 policy responded to both hospital calls for more guidance
about when an inpatient admission and Part A payment are appropriate,
and beneficiaries' concerns about increasingly long stays as
outpatients due to hospital uncertainties about payment.
In the FY 2014 IPPS/LTCH PPS final rule, at Sec. 412.3(e)(2), we
recognized that if an unforeseen circumstance, such as a beneficiary's
death or transfer, results in a shorter beneficiary stay than the
physician's expectation of at least 2 midnights, the patient may be
considered to be appropriately treated on an inpatient basis and
hospital inpatient payment may be made under Medicare Part A. We also
clarified, in both the final rule and subsequent subregulatory
guidance, that the unforeseen circumstances specified at Sec.
412.3(e)(2) are not all-inclusive and could also include additional
circumstances such as unexpected clinical improvement, election of
hospice care, or departure against medical advice.
The FY 2014 IPPS/LTCH PPS final rule also indicated that there are
exceptions to the 2-midnight benchmark. In other words, we expect there
to be cases in which an admitting practitioner expects the
beneficiary's length of stay to last less than 2 midnights and yet
inpatient admission would still be appropriate. For example, we
specified that procedures on the OPPS inpatient only list are always
appropriately inpatient, regardless of the actual time expected at the
hospital, so long as the procedure is medically necessary and performed
pursuant to a physician order and formal admission.
In addition to procedures contained on the OPPS inpatient only
list, we noted in the FY 2014 IPPS/LTCH PPS final rule that there may
be other rare and unusual circumstances in which a hospital stay
expected to last less than 2 midnights would nonetheless be appropriate
for inpatient hospital admission and Part A payment. We indicated that
we would explore other potential exceptions to the generally applicable
benchmark and would detail any such rare and unusual circumstances in
subregulatory guidance. As part of this process, throughout the year,
we have accepted and considered suggestions from stakeholders on this
topic.
In January 2014, we identified medically necessary, newly initiated
mechanical ventilation (excluding anticipated intubations related to
minor surgical procedures or other treatment) as the first rare and
unusual exception to the 2-midnight rule and announced it on the CMS
Web site.
We recognize that there could be additional rare and unusual
circumstances that we have not identified that justify inpatient
admission and Part A payment absent an expectation of care spanning at
least 2 midnights and are inviting further feedback on this issue.
Suggestions can be sent to CMS via written correspondence or emailed to
SuggestedExceptions@cms.hhs.gov with ``Suggested Exceptions to the 2-
Midnight Benchmark'' in the subject line. We will continue to respond
to these suggestions through subregulatory guidance, such as postings
on the CMS Web site or manual instruction.

V. Proposed Changes to the IPPS for Capital-Related Costs

A. Overview

Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient acute hospital services ``in
accordance with a prospective payment system established by the
Secretary.'' Under the statute, the Secretary has broad authority in
establishing and implementing the IPPS for acute care hospital
inpatient capital-related costs. The IPPS for capital-related costs was
initially implemented in the Federal fiscal year (FY) 1992 IPPS final
rule (56 FR 43358), in which we established a 10-year transition period
to change the payment methodology for Medicare hospital inpatient
capital-related costs from a reasonable cost-based methodology to a
prospective methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period
established to phase in the IPPS for hospital inpatient capital-related
costs. For cost reporting periods beginning in FY 2002, capital IPPS
payments are based solely on the Federal rate for almost all acute care
hospitals (other than hospitals receiving certain exception payments
and certain new hospitals). (We refer readers to the FY 2002 IPPS final
rule (66 FR 39910 through 39914) for additional information on the
methodology used to determine capital IPPS payments to hospitals both
during and after the transition period.)
The basic methodology for determining capital prospective payments
using the Federal rate is set forth in Sec. 412.312 of the
regulations. For the purpose of calculating capital payments for each
discharge, the standard Federal rate is adjusted as follows:
(Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment
Factor (GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1
+ Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if
applicable).
In addition, under Sec. 412.312(c), hospitals also may receive
outlier payments under the capital IPPS for extraordinarily high-cost
cases that qualify under the thresholds established for each fiscal
year.

B. Additional Provisions

1. Exception Payments
The regulations at Sec. 412.348 provide for certain exception
payments under the capital IPPS. The regular exception payments
provided under Sec. Sec. 412.348(b)

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through (e) were available only during the 10-year transition period.
For a certain period after the transition period, eligible hospitals
may have received additional payments under the special exceptions
provisions at Sec. 412.348(g). However, FY 2012 was the final year
hospitals could receive special exceptions payments. For additional
details regarding these exceptions policies, we refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51725).
Under Sec. 412.348(f), a hospital may request an additional
payment if the hospital incurs unanticipated capital expenditures in
excess of $5 million due to extraordinary circumstances beyond the
hospital's control. Additional information on the exception payment for
extraordinary circumstances in Sec. 412.348(f) can be found in the FY
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
Under the capital IPPS, Sec. 412.300(b) of the regulations defines
a new hospital as a hospital that has operated (under previous or
current ownership) for less than 2 years and lists examples of
hospitals that are not considered new hospitals. In accordance with
Sec. 412.304(c)(2), under the capital IPPS a new hospital is paid 85
percent of its allowable Medicare inpatient hospital capital-related
costs through its first 2 years of operation, unless the new hospital
elects to receive full prospective payment based on 100 percent of the
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51725) for additional information on payments to new hospitals
under the capital IPPS.
3. Hospitals Located in Puerto Rico
Section 412.374 of the regulations provides for the use of a
blended payment amount for prospective payments for capital-related
costs to hospitals located in Puerto Rico. Accordingly, under the
capital IPPS, we compute a separate payment rate specific to Puerto
Rico hospitals using the same methodology used to compute the national
Federal rate for capital-related costs. In general, hospitals located
in Puerto Rico are paid a blend of the applicable capital IPPS Puerto
Rico rate and the applicable capital IPPS Federal rate. Capital IPPS
payments to hospitals located in Puerto Rico are computed based on a
blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent
of the capital IPPS Federal rate. For additional details on capital
IPPS payments to hospitals located in Puerto Rico, we refer readers to
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).

C. Proposed Annual Update for FY 2015

The proposed annual update to the capital PPS Federal and Puerto
Rico-specific rates, as provided for at Sec. 412.308(c), for FY 2015
is discussed in section III. of the Addendum to this proposed rule.
We note that, in section II.D. of the preamble of this proposed
rule, we present a discussion of the MS-DRG documentation and coding
adjustment, including previously finalized policies and historical
adjustments, as well as the recoupment adjustment to the standardized
amounts under section 1886(d) of the Act that we are proposing for FY
2015 in accordance with the amendments made to section 7(b)(1)(B) of
Public Law 110-90 by section 631 of the ATRA. Because section 631 of
the ATRA requires CMS to make a recoupment adjustment only to the
operating IPPS standardized amount, we are not proposing a similar
adjustment to the national or Puerto Rico capital IPPS rates (or to the
operating IPPS hospital-specific rates or Puerto Rico-specific
standardized amount). This approach is consistent with our historical
approach regarding the application of the recoupment adjustment
authorized by section 7(b)(1)(B) of Public Law 110-90.
In section II.D.7. of the preamble of this proposed rule, we also
note our discussion in the FY 2014 IPPS/LTCH PPS final rule of the
possibility of applying an additional prospective adjustment to account
for the cumulative MS-DRG documentation and coding effect through FY
2010. In that same final rule (78 FR 50515 through 50517 and 50747), we
stated that if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation and coding effect through FY
2010, we believe the most appropriate additional adjustment is -0.55
percent. We did not apply an additional prospective adjustment in FY
2014 for the cumulative MS-DRG documentation and coding effect through
FY 2010, consistent with the approach taken for the operating IPPS
standardized amount (and hospital-specific rates). We continue to
believe that if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation and coding effect through FY
2010, the most appropriate additional adjustment is -0.55 percent.
However, we are not proposing such an adjustment to the capital Federal
rate in FY 2015, consistent with the approach taken for the operating
IPPS standardized amount (and hospital-specific rates) as discussed in
section II.D.7. of the preamble of this proposed rule. We will consider
whether such an adjustment to the capital IPPS Federal rate is
appropriate in future years' rulemaking.

VI. Proposed Changes for Hospitals Excluded from the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY
2015

Certain hospitals excluded from a prospective payment system,
including children's hospitals, 11 cancer hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa) receive payment for
inpatient hospital services they furnish on the basis of reasonable
costs, subject to a rate-of-increase ceiling. A per discharge limit
(the target amount as defined in Sec. 413.40(a) of the regulations) is
set for each hospital based on the hospital's own cost experience in
its base year, and updated annually by a rate-of-increase percentage.
For each cost reporting period, the updated target amount is multiplied
by total Medicare discharges during that period and applies as an
aggregate upper limit (the ceiling as defined in Sec. 413.40(a) of
total inpatient operating costs for a hospital's cost reporting period.
In accordance with Sec. 403.752(a) of the regulations, RNHCIs also are
subject to the rate-of-increase limits established under Sec. 413.40
of the regulations discussed above.
As explained in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50747),
beginning with FY 2006, we have used the percentage increase in the
IPPS operating market basket to update the target amounts for
children's hospitals, cancer hospitals, and RNHCIs. Consistent with
Sec. Sec. 412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we
also have used the percentage increase in the IPPS operating market
basket to update the target amounts for short-term acute care hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa. For the reasons explained in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50747), we are proposing to continue to use the
percentage increase in the IPPS operating market basket to update the
target amounts for children's hospitals, cancer hospitals, RNHCIs, and
short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern

[[Page 28172]]

Mariana Islands, and American Samoa for FY 2015 and subsequent fiscal
years.
In addition, because we have revised and rebased the IPPS operating
market basket to a FY 2010 base year, we are proposing to continue to
use the percentage increase in the FY 2010-based IPPS operating market
basket to update these target amounts for FY 2015 and subsequent fiscal
years. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR
50596 through 50603) for a further discussion of the revision and
rebasing of the IPPS operating market to a FY-2010 base year.)
Accordingly, for FY 2015, the rate-of-increase percentage to be applied
to the target amount for these children's hospitals, cancer hospitals,
RNHCIs, and short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa would
be the FY 2015 percentage increase in the FY 2010-based IPPS operating
market basket.
For this proposed rule, based on IHS Global Insight, Inc.'s 2014
first quarter forecast, we estimated that the FY 2010-based IPPS
operating market basket update for FY 2015 is 2.7 percent (that is, the
estimate of the market basket rate-of-increase). We are proposing that
if more recent data become available for the final rule, we would use
them to calculate the IPPS operating market basket update for FY 2015.

B. Proposed Updates to the Reasonable Compensation Equivalent (RCE)
Limits on Compensation for Physician Services Provided in Providers
(Sec. 415.70)

1. Background
Under section 1848 of the Act and 42 CFR Parts 414 and 415, medical
or surgical services furnished by physicians to individual Medicare
beneficiaries generally are billed and paid under Medicare Part B on a
fee-for-service basis under the Medicare Physician Fee Schedule (MPFS).
As required by section 1887(a)(2)(B) of the Act, the amount of
allowable compensation for services furnished by physicians to
providers that are paid by Medicare on a reasonable cost basis is
subject to reasonable compensation equivalent (RCE) limits. Under these
limits, Medicare recognizes as reasonable, for purposes of payment to
the provider, the lower of the actual cost of the services furnished by
the physician to the provider (that is, any form of compensation to the
physician) or an RCE. The allowable compensation costs for physicians'
services to a provider are described in Sec. 415.55 of the
regulations. Under Sec. 415.60(a) of the regulations, for purposes of
applying the RCE limits, ``physician compensation costs means monetary
payments, fringe benefits, deferred compensation, and any other items
of value (excluding office space and billing and collection services)
that a provider or other organization furnishes a physician in return
for the physician's services'' to the provider.
On March 2, 1983, we published a final rule in the Federal Register
that codified regulations to implement section 1887(a)(2)(B) of the Act
(currently at 42 CFR 415.70) and established the first set of RCE
limits (48 FR 8902). In accordance with Sec. 415.70(a)(2), RCE limits
do not apply to the costs of physician compensation attributable to
furnishing inpatient hospital services for which payment is made under
the IPPS or to the costs of physician compensation attributable to
approved GME programs that are payable under Sec. Sec. 413.75 through
413.83 of the regulations. In addition, under Sec. 415.70(a)(3),
compensation that a physician receives for activities that may not be
paid for under either Medicare Part A or Part B is not considered in
applying these RCE limits. Furthermore, in accordance with Sec.
413.70, RCE limits are not used in determining the reasonable costs
that CAHs incur in compensating physicians for services furnished to
the CAH.
The RCE limits apply equally to all physicians' services to
providers that are payable on a reasonable cost basis under Medicare.
If a physician receives any compensation from one or more providers for
his or her services to the provider (that is, those services that
benefit patients generally), payment to those providers for the costs
of such compensation is subject to the RCE limits. The RCE limits are
not applied to payment for services that are identifiable medical or
surgical services to individual patients and paid under the MPFS, even
if the physician agrees to accept compensation (for example, from a
hospital) for those services. Payments to teaching hospitals that have
elected to be paid for physicians' services to the provider on a
reasonable cost basis in accordance with section 1861(b)(7) of the Act
are subject to the limits (68 FR 45458).
2. Overview of the Current RCE Limits
a. Application of the RCE Limits
Currently, we use the RCE limits to compute Medicare payments when
a physician is compensated by a provider that is subject to the RCE
limits. We also use these limits when the physician is compensated by
any other provider-related organization for physician administrative,
supervisory, and other services to the provider under Medicare. In
applying the RCE limits, we compute the Medicare payments using
information submitted on the cost report, and ensure that each
compensated physician is assigned to the most appropriate specialty
category. The current physician specialty categories for RCE limits are
General/Family Practice, Internal Medicine, Surgery, Pediatrics, OB/
GYN, Radiology, Psychiatry, Anesthesiology, Pathology, and Total. If
there is no specific specialty category (for example, for an emergency
room physician), we use the ``Total'' category, for which the RCE
limits are calculated based on mean annual income data for all
physicians.
If the physician's contractual compensation covers all duties,
activities, and services furnished to the provider and, under a
reassignment, all physicians' services furnished to individual patients
of the provider, and the physician is employed by the provider full
time, we use the RCE limit for the appropriate specialty, adjusted by
the physician's allocation agreement (which reflects the percentage of
total time spent performing services furnished to the provider) to
arrive at the Medicare program's share of the provider's allowable
physician compensation costs (Sec. 415.60). In the absence of an
allocation agreement, we would assume that 100 percent of the
compensation paid to the physician by the provider is related to
physicians' services for which payment is made under the MPFS and that
there are no allowable physician compensation costs to the provider
(Sec. 415.60(f)(2)).
If a physician's compensation from the provider represents payment
only for services that benefit patients generally (that is, the
physician bills for all services furnished to individual patients), we
use the appropriate specialty RCE limit. If a physician is employed by
a provider to furnish services of general benefit to patients on other
than a full-time basis, the RCE limit will be adjusted to reflect the
hours the physician actually worked, as reported on the provider's cost
report, related to a full work year of 2,080 hours.
b. Exceptions to the RCE Limits
Some providers such as small or rural hospitals may be unable to
recruit or maintain an adequate number of physicians at a compensation
level within the prescribed RCE limits. In accordance with section
1887(a)(2)(C) of the Act and Sec. 415.70(e) of the regulations, if a
provider can demonstrate to the MAC its inability to

[[Page 28173]]

recruit or maintain physicians at a compensation level allowable under
the RCE limits (as documented, for example, by unsuccessful advertising
through national medical or health care publications), the MAC may
grant the provider an exception to the RCE limits established under
these rules. Such exceptions would allow the provider to be paid based
on costs for compensation higher than the RCE limit.
c. Methodology for Establishing the RCE Limits
In the March 2, 1983 final rule with comment period (48 FR 8902),
we published the initial RCE limits, along with the methodology used to
calculate those limits, that were applicable to cost reporting periods
beginning during CYs 1982 and 1983. As part of that same rule, we
established regulations that outline our general authority to develop,
publish, and apply RCE limits (currently at Sec. 415.70). Section
415.70(b) of the regulations specifies that we establish the
methodology for determining annual RCE limits, considering, to the
extent possible, average physician incomes by specialty and type of
location, using the best available data.
The methodology for establishing the initial RCE limits was based
on the analysis contained in an internal working paper, ``A Methodology
for Determination of Reasonable FTE Compensation for Hospital-Based
Physicians.'' \43\ (Copies of this working paper are available on the
CMS Web site at: https://www.cms.gov/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.) As outlined in this working paper, our
methodology for establishing the initial reasonable levels of
compensation includes the following five steps (for additional
discussion of this methodology, we refer readers to the March 2, 1983
final rule with comment period (48 FR 8902)):
---------------------------------------------------------------------------

\43\ Cantwell, James R. and Sobaski, William J., A Methodology
for Determination of Reasonable FTE Compensation for Hospital-Based
Physicians, Working Paper No. OR-32, revised December 1982.
---------------------------------------------------------------------------

Step 1: We estimated the national average (mean) income for all
physicians using 1979 physician net incomes from the American Medical
Association (AMA) Periodic Survey of Physicians (PSP), published by the
AMA in its Profile of Medical Practices, 1981.
Step 2: We projected physicians' 1979 base net income levels to the
appropriate future year to account for changes in net income levels
occurring after the period for which we have data using the Consumer
Price Index for All Urban Consumers (CPI-U), and projected the results
using forecasts of the CPI-U for future years.
Step 3: We determined the relationship between average net income
for all physicians (estimated in the first step above) and net income
of certain categories of specialist physicians that are commonly
compensated by providers for services that generally benefit Medicare
beneficiaries resulting in separate specialty adjusters for nine
physician specialties as well as the adjuster for the ``Total''
category.
Step 4: We also adjusted each of these specialty (including the
``Total'') adjusters for differences in costs between types of
geographic locations using Standard Metropolitan Statistical Areas
(SMSAs) as defined by the Office of Management and Budget (OMB).
Step 5: Using the AMA PSP data, we calculated the average hours
practiced per year for each specialty and location adjuster
combination, which we then related to a standard full-time equivalent
(FTE) work year of 2,080 hours. We used these ratios to weight the
specialty-location adjusters from the previous step.
This same methodology was used to update the RCE limits published
in a notice in the Federal Register on May 5, 1997 (62 FR 24483). These
updated RCE limits were effective for cost reporting periods beginning
on or after May 5, 1997.
For RCE limits established prior to January 1, 1998, we used the
CPI-U to update the RCE limits. In a final rule with comment period
published in the Federal Register on October 31, 1997 (62 FR 59075), we
finalized a policy to use the Medicare Economic Index (MEI) to update
the RCE limits (rather than the CPI-U), effective for cost reporting
periods beginning on or after January 1, 1998. We adopted the MEI as
the applicable update factor in order to achieve a measure of
consistency in the methodologies used to determine payments to
physicians for medical and surgical services furnished to individual
patients and reasonable compensation levels for services that are of
general benefit to a provider's patients. However, we did not update
the RCE limits at that time.
In the FY 2004 IPPS final rule published in the Federal Register on
August 1, 2003 (68 FR 45458), we published updated RCE limits that were
effective for cost reporting periods beginning on or after January 1,
2004. We updated the RCE limits using the CPI-U to adjust the data to
1997, and the MEI to adjust the data from 1998 to 2004. In addition, we
continued to adjust the RCE limits to account for differences in salary
levels by location, as well as by specialty. For the location
adjustment, we continued to base the geographical classifications of
the providers on Metropolitan Statistical Areas (MSAs) (the OMB changed
the area name to describe metropolitan areas in the 1980's from SMSAs
to MSAs, but the definition of MSAs differed only slightly from the
previously used SMSAs).
3. Proposed Changes to the RCE Limits
In accordance with Sec. 415.70(b), when establishing the
methodology to determine the RCE limits, we consider, to the extent
possible, the average physician incomes by specialty and type of
location using the best available data. Since the initial RCE limits
were developed, we have adjusted the RCE data to account for specialty
and location (as discussed earlier in this section). In this proposed
rule, we are proposing to use the most recent MEI data to update the
RCE limits and to replace the RCE limits that have been in effect since
January 1, 2004. We believe that doing so will enhance the accuracy of
the RCE limits. In addition, for the reasons discussed below, we are
proposing to eliminate the location adjustment to the RCE data, while
continuing to adjust the RCE limits by specialty. We are not proposing
changes to any of the other existing policies with respect to the
application of and exceptions to the RCE limits.
In establishing the initial and subsequently updated RCE limits, we
included an adjustment to account for differences in salary levels
based on the location of the provider using geographic classifications
based on the MSAs as defined by the OMB. We assigned an appropriate MSA
designation based on the State/county in which the provider is located.
We included a table in each of the previous RCE limit notices and
rules, whereby each MSA designation was grouped into one of three
categories: Metropolitan areas with a population greater than 1
million, metropolitan areas with a population less than 1 million, and
non-metropolitan areas. The MSA designation of the provider is then
used to identify the appropriate RCE limit.
To update the current RCE limits by location under the current
methodology, we would need to use, as in past updates, the MSA
designations that correspond with the update period. However, since
2003, the OMB no longer updates or uses MSAs. We considered continuing
to use the MSA designations, as we have in the past, but we would have
no way to account for

[[Page 28174]]

shifts in populations among MSAs because the OMB no longer updates
geographic classifications based on MSA designations. The OMB regularly
updates the geographic definitions, and the counties included in each
area, to account for population shifts due to migrations, birth, and
death rates but currently the OMB uses Core-Based Statistical Area
(CBSA) designations rather than MSAs. If we were to continue to use the
MSA designation, providers could potentially be underpaid or overpaid
if the population of their MSA changed significantly from 2004.
Therefore, we determined that, because the MSA designations are no
longer updated, it would not be appropriate to continue using the
previous location adjustment methodology. The most recent geographic
delineations used by the OMB are CBSAs, a term used to refer to both
Metropolitan and Micropolitan Statistical Areas. However, CBSA
delineations do not match the MSA definitions that were used to develop
the initial and subsequently updated RCE limits. As noted above, we
have used the AMA PSP data to develop previous and current RCE limits.
The AMA PSP data were collected from 1970 to 1980 and included
physicians' income, hours worked, and MSA-based population information.
The data that have been used to develop and update the RCE limits were
developed using MSAs as the geographic unit. It is not possible to
exactly crosswalk the MSA designations to the CBSA designations in
order to update the RCE limits using the current location adjustment
methodology. Even if it was possible to crosswalk the MSAs to the
CBSAs, it would not be appropriate to use the MSA-based AMA PSP data to
develop CBSA-based RCE limits. There have been significant changes in
the populations of the MSA-based locations contained in the AMA PSP
data that could not be translated into CBSAs. As such, that data would
no longer be valid as the basis to develop RCE limits based on CBSAs
The OMB has cautioned users about using the new CBSA designations.
For instance, in OMB's 2010 ``Standards for Delineating Metropolitan
and Micropolitan Statistical Areas (CBSAs)'' published on June 28, 2010
in the Federal Register (75 FR 37246), OMB states:
``OMB establishes and maintains these areas solely for statistical
purposes. In reviewing and revising these areas, OMB does not take into
account or attempt to anticipate any public or private sector
nonstatistical uses that may be made of the delineations. These areas
are not designed to serve as a general-purpose geographic framework
applicable for nonstatistical activities or for use in program funding
formulas.
``Furthermore, the Metropolitan and Micropolitan Statistical Area
Standards do not produce an urban-rural classification, and confusion
of these concepts can lead to difficulties in program implementation.
Counties included in Metropolitan and Micropolitan Statistical Areas
and many other counties may contain both urban and rural territory and
populations. . . . OMB urges agencies, organizations, and policy makers
to review carefully the goals of nonstatistical programs and policies
to ensure that appropriate geographic entities are used to determine
eligibility for the allocation of Federal funds.'' (Emphasis in
original.)
For CMS to accurately update the location-adjusted RCE limits using
the CBSAs, we believe it would be necessary to use a new data source
for information on physician salaries, specialties, location, and hours
worked; and the data would need to be allocated to different geographic
areas based on CBSAs. The AMA PSP collected data from a large sample of
office-based physicians. We considered using data that are currently
collected and publicly available. We could not find a reliable dataset
that contained all of the necessary data elements needed to update the
location-adjusted RCE limits based on CBSAs. The most reliable data we
could find came from the Bureau of Labor Statistics (BLS) Occupational
Employment Statistics (OES). The BLS OES data are collected annually,
and capture a large and diverse population of physicians and
corresponding CBSA. We believe the BLS OES data are the most current,
reliable source of income data for physicians. Although, the BLS OES is
very reliable and collects data points for physician specialties,
salary, and location, it does not collect detailed information for all
10 specialties; the ``Radiology'' and ``Pathology'' specialties are not
separately captured. As such, we did not believe it was appropriate to
use the BLS OES data to create an updated RCE limit if we would not
have data available for two specialties.
We also weighed the benefit of collecting updated information from
physicians (through use of a new nationwide survey) in order to obtain
the data necessary for application of an appropriate locality
adjustment based on CBSAs against the burden placed on such physicians
in providing such data. In order to have a dataset that could
accurately capture all the necessary information, we would need to
collect data from a large population of physicians, including a
sufficient sample size for each physician specialty in each CBSA. We
weighed the burden that such a nationwide survey would entail for all
physicians, including office-based physicians, to be asked to respond
to an in-depth survey regarding their salary, specialty, location,
hours worked, and other practice information against the benefit of
using updated, CBSA-based information to include a location adjustment
for the providers that are subject to the RCE limits.
When the RCE limits were developed in 1983, other than inpatient
acute care hospitals paid under the IPPS, most provider types were
reimbursed on a reasonable cost basis. Since then, providers such as
skilled nursing facilities (SNFs), long-term care hospitals (LTCHs),
inpatient rehabilitation facilities (IRFs), inpatient psychiatric
facilities (IPFs), and home health agencies (HHAs) that previously were
paid on a reasonable cost basis have transitioned to prospective
payment systems and are no longer subject to the RCE limits. As of FY
2011 (the most recent cost report year for which we have complete
data), our data show that there were only 59 children's hospitals and
cancer hospitals and 46 teaching hospitals (that have elected to be
paid for physicians' services to the provider on a reasonable cost
basis) that are subject to the RCE limits. As such, we believe the
benefit that could be gained by gathering the new data that would be
necessary to maintain a location adjustment for the RCE limits is
outweighed by the burden of conducting such a comprehensive survey of
physicians.
Furthermore, we analyzed how the elimination of the location
adjustment would affect the accuracy and appropriateness of the
proposed RCE limits. To perform this analysis, we needed a reliable
source of physician income data (without a location adjustment) which
could be compared to the RCE limits without a location adjustment. We
determined that the best available source of physician income data is
the mean annual income data for similar RCE physician specialties
collected by the BLS OES. As mentioned above, the BLS OES data are
collected annually and capture a large and diverse population of
physicians. These data are the most current, reliable source of income
data by physician specialties. In addition, when comparing salaries, it
is important to compare salary amounts that reflect the same number of
hours worked per year. Because many physicians do not work

[[Page 28175]]

a 2,080 hour work year, their salary may seem higher or lower due to
the number of hours actually worked. The RCE limits are based on
physicians who worked a 2,080 hour work year. The BLS OES data also are
based on a 2,080 hour work year; therefore, we believe that comparing
the RCE limits to these BLS OES data is appropriate for purposes of our
analysis.
We performed an analysis comparing RCE limits for 2012, calculated
without a location adjustment and solely for purposes of the analysis,
to the most recently published (at the time of the analysis) BLS OES
physician mean annual income data for the same year, to determine
whether RCE limits based on the AMA PSP data, but without a location
adjustment, would continue to reasonably reflect mean annual physician
income data. For 2012, the BLS OES had income information for 8 of the
10 RCE specialties, which include the ``Total'' category; the BLS OES
data did not capture the ``Radiology'' and ``Pathology'' specialties.
We searched for another reliable data source for ``Radiology'' and
``Pathology'' but we could not find one with sufficient data elements
to compare with the RCE limits. We used the MEI to update the RCE
limits for these eight specialties to 2012 without including the
location factor. We then compared these 2012 RCE limits to the 2012 BLS
OES data for these same eight specialties. As shown in the table below,
we found that the RCE limits ranged from 10.41 percent above the BLS
OES mean annual income data to 3.58 percent below the BLS OES data.
Only three of the eight specialties had RCE limits slightly less than
the current BLS OES mean annual wages for their specialty. The
remaining five specialties had RCE limits above the current BLS OES
mean annual wages for the specialties.

Analysis Chart
----------------------------------------------------------------------------------------------------------------
RCE limits BLS OES mean
Specialty updated to 2012 annual Percent
2012* wage difference
----------------------------------------------------------------------------------------------------------------
Total........................................................... $206,300 $184,820 10.41
General/Family Practice......................................... 174,600 180,850 -3.58
Internal Medicine............................................... 192,700 191,520 0.61
Surgery......................................................... 240,300 230,540 4.06
Pediatrics...................................................... 165,500 167,640 -1.29
OB/GYN.......................................................... 231,200 216,760 6.25
Radiology....................................................... 265,200 N/A N/A
Psychiatry...................................................... 176,800 177,520 -0.41
Anesthesiology.................................................. 233,500 232,820 0.29
Pathology....................................................... 253,900 N/A N/A
----------------------------------------------------------------------------------------------------------------
* These limits were calculated using the proposed methodology only for purposes of this impact analysis.

The RCE amounts updated to 2012 and the BLS OES numbers for 2012
varied only slightly, and in most cases, the RCE limit was higher than
the BLS OES mean annual wage. Based on this analysis, we believe that
RCE limits calculated using the AMA PSP data, and our proposed
elimination of the location adjustment for the updated RCE limits,
would result in RCE limits that are a reasonable reflection of mean
annual physician income and would continue to ensure that providers
subject to the RCE limits are paid in a fair and accurate manner.
Because there are a relatively small number of providers currently
affected by the RCE limits and because, as discussed above, we believe
the revised RCE limits without a location adjustment would continue to
ensure appropriate payment to such providers, we believe that
eliminating the location adjustment would have a minimal overall effect
on providers subject to the RCE limits and on the industry as a whole.
For the reasons discussed above, we are proposing to eliminate the
location adjustment under the RCE limit methodology, and to revise
Sec. 415.70(b) of the regulations to remove consideration of the
``type of location'' as part of the methodology used to establish RCE
limits.
Set forth below are the proposed updated RCE limits on the amount
of allowable compensation for services furnished by physicians to
providers for cost reporting periods beginning on or after January 1,
2015. To calculate these proposed RCE limits, we used the same
methodology that was used to calculate the original and previous
updates to the RCE limits, but did not apply an adjustment based on
geographical classification. As noted earlier, this methodology was
derived from the 1982 working paper. We used the mean physician income
by specialty from that working paper to calculate the RCE limits
without adjusting for geographical classification. We then updated
these data by the CPI-U (from 1982 to 1997) and then by the MEI (from
1998 to 2015) to compute the proposed updated RCE limits. The proposed
RCE limits effective for cost reporting periods beginning on or after
January 1, 2015 are shown in the chart below.

Proposed CY 2015 RCE Limits
------------------------------------------------------------------------

------------------------------------------------------------------------
Total...................................................... $212,100
General/Family Practice.................................... 179,500
Internal Medicine.......................................... 198,100
Surgery.................................................... 247,100
Pediatrics................................................. 170,200
OB/GYN..................................................... 237,800
Radiology.................................................. 272,700
Psychiatry................................................. 181,800
Anesthesiology............................................. 240,100
Pathology.................................................. 261,100
------------------------------------------------------------------------

We are inviting public comments on our proposals to update the RCE
limits and to eliminate the location adjustment for the RCE limits for
cost reporting periods beginning on or after January 1, 2015. In
addition, we are inviting public comments on our proposal to revise
Sec. 415.70(b) of the regulations to eliminate consideration of the
type of location as part of the methodology to establish RCE limits for
cost reporting periods beginning on or after January 1, 2015.

C. Critical Access Hospitals (CAHs)

1. Background
Sections 1820 and 1861(mm) of the Act, as amended by section 4201
of the Balanced Budget Act (BBA) of 1997, replaced the Essential Access
Community Hospitals and Rural Primary Care Hospitals (EACH/RPCH)
program with the Medicare Rural Hospital Flexibility Program (MRHFP),

[[Page 28176]]

under which a qualifying facility can be designated as a CAH. CAHs
participating in the MRHFP must meet the conditions for designation by
the State and be certified by the Secretary in accordance with section
1820 of the Act. Further, in accordance with section 1820(e)(3) of the
Act, a CAH must meet other criteria that the Secretary specifies.
The regulations that govern the conditions of participation (CoPs)
for CAHs under the statutory requirements of section 1820 are codified
at 42 CFR Part 485, Subpart F.
2. Proposed Changes Related to Reclassification as Rural for CAHs
Under section 1820(c)(2)(B)(i) of the Act, a facility is eligible
for designation as a CAH only if it is located in a county or
equivalent unit of local government in a rural area (as defined in
section 1886(d)(2)(D) of the Act), or is being treated as being located
in a rural area in accordance with section 1886(d)(8)(E) of the Act.
The regulations implementing this location requirement are located at
Sec. 485.610(b). The regulations governing the process for a facility
located in an urban area to apply for reclassification as a rural
facility under section 1886(d)(8)(E) of the Act are located at Sec.
412.103.
In this proposed rule, we are proposing to implement the most
recently published OMB delineations (we refer readers to section III.B.
of the preamble of this proposed rule for a discussion of the changes
that were announced in OMB Bulletin No. 13-01). As previously stated, a
facility must be located in a rural area in order to be eligible for
designation as a CAH. Therefore, a new OMB delineation that
redesignates an area from rural to urban, affects the status of a
facility that is currently a CAH and had met the CAH location
requirements prior to the new OMB delineation. A facility that is
located in an urban area cannot remain a CAH unless it is reclassified
as rural under Sec. 412.103 of the regulations. In both the FY 2005
IPPS final rule (69 FR 49221 and 69 FR 60252) and the FY 2010 IPPS/LTCH
PPS final rule (74 FR 43940), we amended the regulations at Sec.
412.103(a) and Sec. 485.610(b) to provide for a transition period
during which CAHs that had previously been located in rural areas but,
as a result of new OMB delineations, were now located in urban areas,
could reclassify as rural under Sec. 412.103. Specifically, in both
the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule,
we provided for a 2-year period during which a CAH located in an urban
area as a result of the new OMB delineations could continue
participating without interruption as a CAH, thereby allowing the CAH
sufficient time to reclassify as rural under Sec. 412.103. If the
facility did not reclassify as a rural facility by the end of that 2-
year period, the CAH would not be able to retain its CAH status beyond
that 2-year period. However, under the FY 2005 IPPS final rule and the
FY 2010 IPPS/LTCH PPS final rule, the application of the regulation was
limited to October 1, 2004 through September 30, 2006, and October 1,
2009 through September 30, 2011, respectively. As a result, in the
absence of a new amendment to the regulations each time there are new
OMB delineations, a CAH that becomes located in an urban area as a
result of those OMB delineations would not be given 2 years to
reclassify as rural under Sec. 412.103 of the regulations.
In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43940), we stated
that we would consider whether it would be appropriate to propose, in
future IPPS rulemaking, to revise Sec. 485.610 and Sec. 412.103 to
provide for a transition period any time a CAH that was formerly
located in a rural area is designated as being located in an urban area
as a result of the redesignation of its county from rural to urban.
After further consideration, we believe that it is appropriate to
propose to change the regulations to provide for a transition period
that is not restricted to a timeframe, but rather can be applied any
time a facility that is currently designated as a CAH becomes located
in an urban area as a result of a new OMB delineation.
Therefore, we are proposing that, effective October 1, 2014, a CAH
that was previously located in a rural area but is now located in an
urban area as a result of a new OMB labor market area delineation will
continue to be treated as rural for 2 years from the date the OMB
delineation is implemented. Accordingly, if the OMB delineations
announced in OMB Bulletin No. 13-01 on February 28, 2013 discussed in
section III.B. of the preamble of this proposed rule are implemented in
the FY 2015 IPPS/LTCH PPS final rule, effective October 1, 2014, any
CAH affected by the new OMB delineations in OMB Bulletin No. 13-01
would retain its rural status through September 30, 2016. An affected
CAH would be required to reclassify as a rural facility under Sec.
412.103 within that 2-year period in order to continue participating in
the Medicare program as a CAH after the 2-year transition period ends.
Therefore, taking into consideration the example above, any CAH
affected by a new OMB delineation that is implemented in the FY 2015
IPPS/LTCH PPS final rule would be required to reclassify as rural by
September 30, 2016, in order to retain its CAH status after September
30, 2016.
To implement this proposed change, we are proposing to revise Sec.
412.103 by adding a new paragraph (a)(6), and to revise Sec. 485.610
by making a conforming change to the introductory text of paragraph (b)
and adding a new paragraph (b)(5) to provide for a 2-year transition
period that will apply any time a new OMB delineation causes a facility
that was previously located in a rural area and is designated as a CAH
to be located in an urban area. We believe that this proposal to revise
the regulations to automatically provide for a 2-year transition period
following the implementation of new OMB delineations is more efficient
than providing for a regulatory change limited to a timeframe, and, as
a result, will be more effective in reducing any disruption caused by
new OMB delineations.
3. Proposed Revision of the Requirements for Physician Certification of
CAH Inpatient Services
For inpatient CAH services to be payable under Medicare Part A,
section 1814(a)(8) of the Act requires that a physician certify ``that
the individual may reasonably be expected to be discharged or
transferred to a hospital within 96 hours after admission to the
critical access hospital.'' The regulations implementing this statutory
requirement are located at 42 CFR 424.15.
Prior to FY 2014, this physician certification was required no
later than 1 day before the date on which the claim for payment for the
inpatient CAH service is submitted. In the FY 2014 IPPS/LTCH PPS final
rule, we revised the CAH regulations concerning the timing requirements
for certification of inpatient CAH services. Specifically, we revised
Sec. 424.15(b) to state: ``Certification begins with the order for
inpatient admission. The certification must be completed, signed, and
documented in the medical record prior to discharge'' (78 FR 50970).
This change was effective October 1, 2013.
However, in order to provide CAHs with greater flexibility in
meeting this certification requirement, we are now proposing to amend
the regulations governing the timing of the 96-hour certification
requirement at Sec. 424.15(b) such that physician certification is
required no later than 1 day before the date on which the claim for
payment for the inpatient CAH service is submitted. That is, we are
proposing to remove the requirement that certification of the 96-

[[Page 28177]]

hour requirement must be completed prior to discharge and are proposing
to reinstate the timing requirement that was in place prior to October
1, 2013.
We are proposing to revise Sec. 424.15(b) to remove the phrase
``prior to discharge'' and replace it with ``no later than 1 day before
the date on which the claim for payment for the inpatient CAH service
is submitted''. In addition, we are proposing to make a conforming
amendment to Sec. 424.11(d)(5). Section 424.11(d)(5) states ``[f]or
all inpatient hospital or critical access hospital inpatient services,
including inpatient psychiatric facility services, a delayed
certification may not extend past discharge.'' Because we are proposing
to change the timing requirement for physician certification of CAH
inpatient services at Sec. 424.15(b), such that the certification
could be completed past discharge, we are proposing to revise Sec.
424.11(d)(5) to remove the phrase ``or critical access hospital
inpatient''. We are seeking public comment on these proposed changes to
the regulations governing the requirement for physician certification
of CAH inpatient services.

VII. Proposed Changes to the Long-Term Care Hospital Prospective
Payment System (LTCH PPS) for FY 2015

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) as amended by section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554) provides for payment for both the operating
and capital-related costs of hospital inpatient stays in long-term care
hospitals (LTCHs) under Medicare Part A based on prospectively set
rates. The Medicare prospective payment system (PPS) for LTCHs applies
to hospitals that are described in section 1886(d)(1)(B)(iv) of the
Act, effective for cost reporting periods beginning on or after October
1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ``a
hospital which has an average inpatient length of stay (as determined
by the Secretary) of greater than 25 days.'' Section
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative
definition of LTCHs: specifically, a hospital that first received
payment under section 1886(d) of the Act in 1986 and has an average
inpatient length of stay (LOS) (as determined by the Secretary of
Health and Human Services (the Secretary)) of greater than 20 days and
has 80 percent or more of its annual Medicare inpatient discharges with
a principal diagnosis that reflects a finding of neoplastic disease in
the 12-month cost reporting period ending in FY 1997.
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge'' system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient
resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that
the Secretary shall examine, and may provide for, adjustments to
payments under the LTCH PPS, including adjustments to DRG weights, area
wage adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment.
In the August 30, 2002 Federal Register, we issued a final rule
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR
55954). For the initial implementation of the LTCH PPS (FYs 2003
through FY 2007), the system used information from LTCH patient records
to classify patients into distinct long-term care diagnosis-related
groups (LTC-DRGs) based on clinical characteristics and expected
resource needs. Beginning in FY 2008, we adopted the Medicare severity
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient
classification system used under the LTCH PPS. Payments are calculated
for each MS-LTC-DRG and provisions are made for appropriate payment
adjustments. Payment rates under the LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
(Pub. L. 97-248) for payments for inpatient services provided by a LTCH
with a cost reporting period beginning on or after October 1, 2002.
(The regulations implementing the TEFRA reasonable cost-based payment
provisions are located at 42 CFR Part 413.) With the implementation of
the PPS for acute care hospitals authorized by the Social Security
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the
Act, certain hospitals, including LTCHs, were excluded from the PPS for
acute care hospitals and were paid their reasonable costs for inpatient
services subject to a per discharge limitation or target amount under
the TEFRA system. For each cost reporting period, a hospital-specific
ceiling on payments was determined by multiplying the hospital's
updated target amount by the number of total current year Medicare
discharges. (Generally, in section VII. of the preamble of this
proposed rule, when we refer to discharges, we describe Medicare
discharges.) The August 30, 2002 final rule further details the payment
policy under the TEFRA system (67 FR 55954).
In the August 30, 2002 final rule, we provided for a 5-year
transition period from payments under the TEFRA system to payments
under the LTCH PPS. During this 5-year transition period, a LTCH's
total payment under the PPS was based on an increasing percentage of
the Federal rate with a corresponding decrease in the percentage of the
LTCH PPS payment that is based on reasonable cost concepts, unless a
LTCH made a one-time election to be paid based on 100 percent of the
Federal rate. Beginning with LTCHs' cost reporting periods beginning on
or after October 1, 2006, total LTCH PPS payments are based on 100
percent of the Federal rate.
In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
budget neutrality requirements mandated by section 123 of the BBRA. The
same final rule that established regulations for the LTCH PPS under 42
CFR Part 412, Subpart O, also contained LTCH provisions related to
covered inpatient services, limitation on charges to beneficiaries,
medical review requirements, furnishing of inpatient hospital services
directly or under arrangement, and reporting and recordkeeping
requirements. We refer readers to the August 30, 2002 final rule for a
comprehensive discussion of the research and data that supported the
establishment of the LTCH PPS (67 FR 55954).
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51733 through 51743) for a chronological summary of the main
legislative and regulatory developments affecting the LTCH PPS through
the annual update cycles prior to the FY 2014 rulemaking cycle. In
addition, in this proposed rule, we discuss the provisions of the
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on
December 26, 2013, that affect the LTCH PPS. In section VII.I.2. of the
preamble of this proposed rule, we discuss the provisions of section
1206(a) of Public Law 113-67, which amended section 1886(m) of the Act
by adding paragraph (6) and established, among other things, patient-
level criteria for payments under the LTCH PPS for implementation

[[Page 28178]]

beginning with FY 2016. In section VII.E. of the preamble of this
proposed rule, we discuss the provisions of section 1206(b)(1) of
Public Law 113-67, which provide for the retroactive reinstatement and
extension, for an additional 4 years, of the moratorium on the full
implementation of the 25-percent threshold payment adjustment policy
(except for ``grandfathered'' hospitals-within-hospitals (HwHs), which
are permanently exempt from this policy). In section VII.G. of the
preamble of this proposed rule, we discuss the provisions of section
1206(b)(2) of Public Law 113-67 (as amended by section 112(b) of the
Protecting Access to Medicare Act (Pub. L. 113-93), which, subject to
certain defined exceptions, provide for statutory moratoria on the
establishment of new LTCHs and LTCH satellite facilities and a new
statutory moratorium on the increase in the number of hospital beds in
LTCHs or LTCH satellite facilities for the period beginning April 1,
2014 and ending September 30, 2017. In section IX.C. of the preamble of
this proposed rule, we discuss the provisions of section 1206(c) of
Public Law 113-67, which amended the LTCH Quality Reporting Program
established under section 1886(m)(5) of the Act by requiring the
Secretary to establish a functional status quality measure to evaluate
the in mobility among inpatients requiring ventilator support no later
than October 1, 2015. In section VII.H. of the preamble of this
proposed rule, we discuss the findings of a review of payments to
certain LTCHs (that is, LTCHs classified under subclause (II) of
section 1886(d)(1)(B)(iv) of the Act) that was conducted in accordance
with section 1206(d) of Public Law 113-67, and propose to apply a
payment adjustment under the LTCH PPS to ``subclause (II)'' LTCHs
beginning in FY 2015 that would result in payments to this type of LTCH
resembling payments under the reasonable cost TEFRA payment system
model.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
Under the regulations at Sec. 412.23(e)(1), to qualify to be paid
under the LTCH PPS, a hospital must have a provider agreement with
Medicare. Furthermore, Sec. 412.23(e)(2)(i), which implements section
1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an
average Medicare inpatient length of stay of greater than 25 days to be
paid under the LTCH PPS. Alternatively, Sec. 412.23(e)(2)(ii) states
that, for cost reporting periods beginning on or after August 5, 1997,
a hospital that was first excluded from the PPS in 1986 and can
demonstrate that at least 80 percent of its annual Medicare inpatient
discharges in the 12-month cost reporting period ending in FY 1997 have
a principal diagnosis that reflects a finding of neoplastic disease
must have an average inpatient length of stay for all patients,
including both Medicare and non-Medicare inpatients, of greater than 20
days.
b. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR Part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject
to the rate-of-increase test at section 1814(b) of the Act).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002 final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH PPS (67 FR 55974
through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we
clarified that the discussion of beneficiary liability in the August
30, 2002 final rule was not meant to establish rates or payments for,
or define Medicare-eligible expenses. Under Sec. 412.507, if the
Medicare payment to the LTCH is the full LTC-DRG payment amount,
consistent with other established hospital prospective payment systems,
a LTCH may not bill a Medicare beneficiary for more than the deductible
and coinsurance amounts as specified under Sec. Sec. 409.82, 409.83,
and 409.87 and for items and services specified under Sec. 489.30(a).
However, under the LTCH PPS, Medicare will only pay for days for which
the beneficiary has coverage until the short-stay outlier (SSO)
threshold is exceeded. Therefore, if the Medicare payment was for a SSO
case (Sec. 412.529) that was less than the full LTC-DRG payment amount
because the beneficiary had insufficient remaining Medicare days, the
LTCH could also charge the beneficiary for services delivered on those
uncovered days (Sec. 412.507).
4. Administrative Simplification Compliance Act (ASCA) and Health
Insurance Portability and Accountability Act (HIPAA) Compliance
Claims submitted to Medicare must comply with both the
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105),
and the Health Insurance Portability and Accountability Act of 1996
(HIPAA) (Pub. L. 104-191). Section 3 of the ASCA requires that the
Medicare Program deny payment under Part A or Part B for any expenses
incurred for items or services ``for which a claim is submitted other
than in an electronic form specified by the Secretary.'' Section
1862(h) of the Act (as added by section 3(a) of the ASCA) provides that
the Secretary shall waive such denial in two specific types of cases
and may also waive such denial ``in such unusual cases as the Secretary
finds appropriate'' (68 FR 48805). Section 3 of the ASCA operates in
the context of the HIPAA regulations, which include, among other
provisions, the transactions and code sets standards requirements
codified under 45 CFR Parts 160 and 162 (generally known as the
Transactions Rule). The Transactions Rule requires covered entities,
including covered health care providers, to conduct certain electronic
health care transactions according to the applicable transactions and
code sets standards.
The Department of Health and Human Services has a number of
initiatives designed to encourage and support the adoption of health
information technology and promote nationwide health information
exchange to improve health care. The Office of the National Coordinator
for Health Information Technology (ONC) leads these efforts in
collaboration with other agencies, including CMS and the Office of the
Assistant Secretary for Planning and Evaluation (ASPE). Through a
number of activities, including several open government initiatives,
HHS is promoting the adoption of electronic health record (EHR)
technology certified under the ONC Health Information Technology (HIT)
Certification Program developed to support secure, interoperable,
health information exchange. While certified EHR technology is not yet
available for LTCHs and other types of providers that are not eligible
for the Medicare and Medicaid EHR Incentive Programs, ONC has requested
the HIT Policy Committee (a Federal Advisory Committee) to explore the
expansion of EHR

[[Page 28179]]

certification under the ONC HIT Certification Program, focusing on EHR
certification criteria needed for long-term and postacute care
(including LTCHs) and behavioral health care providers. ONC has issued
a proposed rule concerning a voluntary 2015 Edition of EHR
certification criteria that would more easily accommodate HIT
certification for health care settings where individual or
institutional health care providers are not typically eligible to
qualify for meaningful use incentive payments under Medicare or
Medicaid, such as behavioral health or long-term postacute care
settings. We believe that the use of certified EHRs by LTCHs (and other
types of providers that are ineligible for the Medicare and Medicaid
EHR Incentive Programs) can effectively and efficiently help providers
improve internal care delivery practices, support the exchange of
important information across care partners and during transitions of
care, and could enable the reporting of electronically specified
clinical quality measures (eCQMs) (as described elsewhere in this
rule). More information on the proposed rule concerning a voluntary
2015 Edition of EHR certification criteria, identification of EHR
certification criteria and development of standards applicable to LTCHs
can be found at:
https://www.healthit.gov/policy-researchers-implementers/standards-and-certification-regulations;
https://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoption;
https://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG;
and
https://wiki.siframework.org/Longitudinal+Coordination+of+Care.

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group
(MS-LTC-DRG) Classifications and Relative Weights for FY 2015

1. Background
Section 123 of the BBRA requires that the Secretary implement a PPS
for LTCHs (that is, a per discharge system with a diagnosis-related
group (DRG)-based patient classification system reflecting the
differences in patient resources and costs). Section 307(b)(1) of the
BIPA modified the requirements of section 123 of the BBRA by requiring
that the Secretary examine ``the feasibility and the impact of basing
payment under such a system [the long-term care hospital (LTCH) PPS] on
the use of existing (or refined) hospital DRGs that have been modified
to account for different resource use of LTCH patients, as well as the
use of the most recently available hospital discharge data.''
When the LTCH PPS was implemented for cost reporting periods
beginning on or after October 1, 2002, we adopted the same DRG patient
classification system (that is, the CMS DRGs) that was utilized at that
time under the IPPS. As a component of the LTCH PPS, we refer to this
patient classification system as the ``long-term care diagnosis-related
groups (LTC-DRGs).'' Although the patient classification system used
under both the LTCH PPS and the IPPS are the same, the relative weights
are different. The established relative weight methodology and data
used under the LTCH PPS result in relative weights under the LTCH PPS
that reflect ``the differences in patient resource use . . .'' of LTCH
patients (section 123(a)(1) of the BBRA (Pub. L. 106-113)).
As part of our efforts to better recognize severity of illness
among patients, in the FY 2008 IPPS final rule with comment period (72
FR 47130), the MS-DRGs and the Medicare severity long-term care
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY
2008). For a full description of the development, implementation, and
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through
47175 and 47277 through 47299). (We note that, in that same final rule,
we revised the regulations at Sec. 412.503 to specify that for LTCH
discharges occurring on or after October 1, 2007, when applying the
provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy
descriptions and payment calculations, all references to LTC-DRGs would
be considered a reference to MS-LTC-DRGs. For the remainder of this
section, we present the discussion in terms of the current MS-LTC-DRG
patient classification system unless specifically referring to the
previous LTC-DRG patient classification system that was in effect
before October 1, 2007.)
The MS-DRGs adopted in FY 2008 represent an increase in the number
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG
classifications are updated annually. There are currently 751 MS-DRG
groupings. If we finalize the proposed changes to the MS-DRG groupings
described in section II.G. of this preamble, there would be a total of
753 MS-DRG groupings for FY 2015. Consistent with section 123 of the
BBRA, as amended by section 307(b)(1) of the BIPA, and Sec. 412.515 of
the regulations, we use information derived from LTCH PPS patient
records to classify LTCH discharges into distinct MS-LTC-DRGs based on
clinical characteristics and estimated resource needs. We then assign
an appropriate weight to the MS-LTC-DRGs to account for the difference
in resource use by patients exhibiting the case complexity and multiple
medical problems characteristic of LTCHs. Below we provide a general
summary of our existing methodology for determining the proposed MS-
LTC-DRG relative weights.
In a departure from the IPPS, and as discussed in greater detail
below in section VII.B.3.f. of this preamble, we are proposing to
continue to use proposed low-volume MS-LTC-DRGs (that is, proposed MS-
LTC-DRGs with less than 25 LTCH cases) in determining the proposed MS-
LTC-DRG relative weights because LTCHs do not typically treat the full
range of diagnoses as do acute care hospitals. For purposes of
determining the proposed relative weights for the large number of
proposed low-volume MS-LTC-DRGs, we are proposing to group all of the
low-volume MS-LTC-DRGs into five quintiles based on average charge per
discharge. (A detailed discussion of the initial development and
application of the quintile methodology appears in the August 30, 2002
LTCH PPS final rule (67 FR 55978).) Under our existing methodology, we
are proposing to account for adjustments to payments for short-stay
outlier (SSO) cases (that is, cases where the covered length of stay at
the LTCH is less than or equal to five-sixths of the geometric average
length of stay for the MS-LTC-DRG). Furthermore, we are proposing to
make adjustments to account for nonmonotonically increasing weights,
when necessary. That is, theoretically, cases under the MS-LTC-DRG
system that are more severe require greater expenditure of medical care
resources and will result in higher average charges such that, in the
severity levels within a base MS-LTC-DRG, the proposed relative weights
should increase monotonically with severity from the lowest to highest
severity level. (We discuss nonmonotonicity in greater detail and our
proposed methodology to adjust the proposed MS-LTC-DRG relative weights
to account for nonmonotonically increasing proposed relative weights in
section VII.B.3.g. (Step 6) of this preamble.)

[[Page 28180]]

2. Patient Classifications into MS-LTC-DRGs
a. Background
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted above in
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the MS-DRGs used under the
IPPS.
The MS-DRGs are organized into 25 major diagnostic categories
(MDCs), most of which are based on a particular organ system of the
body; the remainder involve multiple organ systems (such as MDC 22,
Burns). Within most MDCs, cases are then divided into surgical DRGs and
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy
that orders operating room (O.R.) procedures or groups of O.R.
procedures by resource intensity. The GROUPER software program does not
recognize all ICD-9-CM procedure codes as procedures affecting DRG
assignment. That is, procedures that are not surgical (for example,
EKGs), or minor surgical procedures (for example, a biopsy of skin and
subcutaneous tissue (procedure code 86.11)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge and that payment varies
by the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis;
Additional or secondary diagnoses;
Surgical procedures;
Age;
Sex; and
Discharge status of the patient.
Through FY 2010, the number of diagnosis and procedure codes
considered for MS-DRG assignment was limited to nine and six,
respectively. However, for claims submitted on the 5010 format
beginning January 1, 2011, we increased the capacity to process
diagnosis and procedure codes up to 25 diagnoses and 25 procedures.
This includes one principal diagnosis and up to 24 secondary diagnoses
for severity of illness determinations. We refer readers to section
II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for
a complete discussion of this change (75 FR 50127).
Under HIPAA transactions and code sets regulations at 45 CFR Parts
160 and 162, covered entities must comply with the adopted transaction
standards and operating rules specified in Subparts I through S of Part
162. Among other requirements, by January 1, 2012, covered entities
were required to use the ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3--Health Care Claim: Institutional
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care
Claim: Institutional (837) ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X233A1 for the health care claims or equivalent encounter
information transaction (45 CFR 162.1102).
HIPAA requires covered entities to use the applicable medical data
code set requirements when conducting HIPAA transactions (45 CFR
162.1000). Currently, upon the discharge of the patient, the LTCH must
assign appropriate diagnosis and procedure codes from the most current
version of the Internal Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM). For additional information on the
ICD-9-CM coding system, we refer readers to the FY 2008 IPPS final rule
with comment period (72 FR 47241 through 47243 and 47277 through
47281). We also refer readers to the detailed discussion on correct
coding practices in the August 30, 2002 LTCH PPS final rule (67 FR
55981 through 55983). Additional coding instructions and examples are
published in the Coding Clinic for ICD-9-CM, a product of the American
Hospital Association. (We refer readers to section II.G.13. of the
preamble of this proposed rule for additional information on the annual
revisions to the ICD-9-CM codes.)
Providers use the code sets under the ICD-9-CM coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system. We have been discussing the
conversion to the ICD-10 coding system for many years. We refer readers
to section II.G.1. of the preamble of this proposed rule for additional
information on the implementation of the ICD-10 coding system.
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base
DRGs were subdivided according to the presence of specific secondary
diagnoses designated as complications or comorbidities (CCs) into one,
two, or three levels of severity, depending on the impact of the CCs on
resources used for those cases. Specifically, there are sets of MS-DRGs
that are split into 2 or 3 subgroups based on the presence or absence
of a CC or a major complication or comorbidity (MCC). We refer readers
to section II.D. of the FY 2008 IPPS final rule with comment period for
a detailed discussion about the creation of MS-DRGs based on severity
of illness levels (72 FR 47141 through 47175).
Medicare administrative contractors (MACs) enter the clinical and
demographic information submitted by LTCHs into their claims processing
systems and subject this information to a series of automated screening
processes called the Medicare Code Editor (MCE). These screens are
designed to identify cases that require further review before
assignment into a MS-LTC-DRG can be made. During this process, certain
cases are selected for further development (74 FR 43949).
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the
basis of diagnosis and procedure codes and other demographic
information (age, sex, and discharge status). The GROUPER software used
under the LTCH PPS is the same GROUPER software program used under the
IPPS. Following the MS-LTC-DRG assignment, the Medicare contractor
determines the prospective payment amount by using the Medicare PRICER
program, which accounts for hospital-specific adjustments. Under the
LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG
assignments made by the Medicare contractor and to submit additional
information within a specified timeframe as provided in Sec.
412.513(c).
The GROUPER software is used both to classify past cases to measure
relative hospital resource consumption to establish the MS-LTC-DRG
relative weights and to classify current cases for purposes of
determining payment. The records for all Medicare hospital inpatient
discharges are maintained in the MedPAR file. The data in this file are
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during
our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH
PPS (Sec. 412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2015
As specified by our regulations at Sec. 412.517(a), which require
that the MS-LTC-DRG classifications and relative weights be updated
annually, and consistent with our historical practice of using the same
patient classification system under the LTCH PPS as is used under the
IPPS, we are proposing to update the MS-LTC-DRG classifications
effective October 1, 2014, through September 30, 2015 (FY 2015)
consistent with the proposed changes to

[[Page 28181]]

specific MS-DRG classifications presented in section II.G. of this
preamble (that is, proposed GROUPER Version 32.0). Therefore, the
proposed MS-LTC-DRGs for FY 2015 presented in this proposed rule are
the same as the proposed MS-DRGs that are being proposed for use under
the IPPS for FY 2015. In addition, because the proposed MS-LTC-DRGs for
FY 2015 are the same as the proposed MS-DRGs for FY 2015, the other
proposed changes that affect MS-DRG (and by extension MS-LTC-DRG)
assignments under proposed GROUPER Version 32.0 as discussed in section
II.G. of the preamble of this proposed rule, including the proposed
changes to the MCE software and the ICD-9-CM coding system, also are
applicable under the LTCH PPS for FY 2015.
3. Development of the Proposed FY 2015 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative
Weights
One of the primary goals for the implementation of the LTCH PPS is
to pay each LTCH an appropriate amount for the efficient delivery of
medical care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
Medicare patients whose care is more costly (67 FR 55984). To
accomplish these goals, we have annually adjusted the LTCH PPS standard
Federal prospective payment system rate by the applicable relative
weight in determining payment to LTCHs for each case.
The basic methodology used to develop the MS-LTC-DRG relative
weights generally continues to be consistent with the general
methodology established when the LTCH PPS was implemented in the August
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), with the
exception of some modifications of our historical procedures for
assigning relative weights in cases of zero volume and/or
nonmonotonicity resulting from the adoption of the MS-LTC-DRGs. (For
details on the modifications to our historical procedures for assigning
relative weights in cases of zero volume and/or nonmonotonicity, we
refer readers to the FY 2008 IPPS final rule with comment period (72 FR
47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542
through 48550).) Under the LTCH PPS, relative weights for each MS-LTC-
DRG are a primary element used to account for the variations in cost
per discharge and resource utilization among the payment groups (Sec.
412.515). To ensure that Medicare patients classified to each MS-LTC-
DRG have access to an appropriate level of services and to encourage
efficiency, we calculate a relative weight for each MS-LTC-DRG that
represents the resources needed by an average inpatient LTCH case in
that MS-LTC-DRG. For example, cases in a MS-LTC-DRG with a relative
weight of 2 will, on average, cost twice as much to treat as cases in a
MS-LTC-DRG with a relative weight of 1.
b. Proposed Development of the MS-LTC-DRG Relative Weights for FY 2015
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755 through
50760), we presented our policies for the development of the MS-LTC-DRG
relative weights for FY 2014. The basic methodology we used to develop
the FY 2014 MS-LTC-DRG relative weights was the same as the methodology
we used to develop the FY 2013 MS-LTC-DRG relative weights in the FY
2013 IPPS/LTCH PPS final rule and was consistent with the general
methodology established when the LTCH PPS was implemented in the August
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In this FY
2015 IPPS/LTCH PPS proposed rule, we are proposing to continue to apply
our established methodology to develop the FY 2015 MS-LTC-DRG relative
weights for FY 2015, which includes application of established policies
related to the data, the hospital-specific relative value (HSRV)
methodology, the treatment of severity levels in the MS-LTC-DRGs, low-
volume and no-volume MS-LTC-DRGs, adjustment for nonmonotonicity, and
the steps for calculating the MS-LTC-DRG relative weights with a budget
neutrality factor. Below we present the methodology that we are
proposing to continue to use to determine the MS-LTC-DRG relative
weights for FY 2015, which is consistent with the methodology presented
in the FY 2014 IPPS/LTCH PPS final rule.
Beginning with the FY 2008 update, we established a budget
neutrality requirement for the annual update to the MS-LTC-DRG
classifications and relative weights at Sec. 412.517(b) (in
conjunction with Sec. 412.503), such that estimated aggregate LTCH PPS
payments would be unaffected, that is, would be neither greater than
nor less than the estimated aggregate LTCH PPS payments that would have
been made without the classification and relative weight changes (72 FR
26882 through 26884). Consistent with Sec. 412.517(b), we are
proposing to continue to apply our established two-step budget
neutrality methodology, which is based on the current year MS-LTC-DRG
classifications and relative weights. We are proposing to continue to
apply our established two-step budget neutrality methodology such that
the annual update to the MS-LTC-DRG classifications and relative
weights for FY 2015 are based on the FY 2014 MS-LTC-DRG classifications
and relative weights established in Table 11 listed in section VI. of
the Addendum to the FY 2014 IPPS/LTCH PPS final rule (78 FR 51002).
(For additional information on the established two-step budget
neutrality methodology, we refer readers to the FY 2008 IPPS final rule
(72 FR 47295 through 47296).)
c. Data
For the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755), to
calculate the MS-LTC-DRG relative weights for FY 2014, we obtained
total charges from FY 2012 Medicare LTCH bill data from the December
2012 update of the FY 2012 MedPAR file, which were the best available
data at that time, and used the finalized Version 31.0 of the GROUPER
to classify LTCH cases. Consistent with our historical practice, to
calculate the proposed MS-LTC-DRG relative weights for FY 2015 in this
proposed rule, we are proposing to obtain total charges from the FY
2013 Medicare LTCH bill data from the December 2013 update of the FY
2013 MedPAR file, which are the best available data at this time, and
to use Version 32.0 of the GROUPER to classify LTCH cases.
In this FY 2015 IPPS/LTCH PPS proposed rule and consistent with our
historical methodology, we are proposing to exclude the data from LTCHs
that are all-inclusive rate providers and LTCHs that are reimbursed in
accordance with demonstration projects authorized under section 402(a)
of Public Law 90-248 or section 222(a) of Public Law 92-603.
Furthermore, consistent with our historical practice, we are proposing
to exclude Medicare Advantage (Part C) claims, which are now included
in the MedPAR files, in the calculations for the proposed relative
weights under the LTCH PPS that are used to determine payments for
Medicare fee-for-service claims. Specifically, we are proposing not to
use any claims from the MedPAR files that have a GHO Paid indicator
value of ``1,'' which effectively removes Medicare Advantage claims
from the proposed relative weight calculations. Accordingly, in the
development of the proposed FY 2015 MS-LTC-DRG relative weights in this
proposed rule, we excluded the data of 12 all-inclusive rate providers
and one LTCH that is

[[Page 28182]]

paid in accordance with demonstration projects that had claims in the
December 2013 update of the FY 2013 MedPAR file, as well as any
Medicare Advantage claims.
d. Hospital-Specific Relative Value (HSRV) Methodology
By nature, LTCHs often specialize in certain areas, such as
ventilator-dependent patients and treatment of infections and wound
care. Some case types (MS-DRGs) may be treated, to a large extent, in
hospitals that have, from a perspective of charges, relatively high (or
low) charges. This nonrandom distribution of cases with relatively high
(or low) charges in specific MS-LTC-DRGs has the potential to
inappropriately distort the measure of average charges. In this
proposed rule, to account for the fact that cases may not be randomly
distributed across LTCHs, consistent with the methodology we have used
since the implementation of the LTCH PPS, we are proposing to continue
to use a hospital-specific relative value (HSRV) methodology to
calculate the proposed MS-LTC-DRG relative weights for FY 2015. We
believe this method removes this hospital-specific source of bias in
measuring LTCH average charges (67 FR 55985). Specifically, under this
methodology, we reduce the impact of the variation in charges across
providers on any particular proposed MS-LTC-DRG relative weight by
converting each LTCH's charge for a case to a relative value based on
that LTCH's average charge.
Under the HSRV methodology, we standardize charges for each LTCH by
converting its charges for each case to hospital-specific relative
charge values and then adjusting those values for the LTCH's case-mix.
The adjustment for case-mix is needed to rescale the hospital-specific
relative charge values (which, by definition, average 1.0 for each
LTCH). The average relative weight for a LTCH is its case-mix, so it is
reasonable to scale each LTCH's average relative charge value by its
case-mix. In this way, each LTCH's relative charge value is adjusted by
its case-mix to an average that reflects the complexity of the cases it
treats relative to the complexity of the cases treated by all other
LTCHs (the average case-mix of all LTCHs).
In accordance with our established methodology, we are proposing to
continue to standardize charges for each case by first dividing the
adjusted charge for the case (adjusted for SSOs under Sec. 412.529 as
described in section VII.B.3.g. (Step 3) of this preamble) by the
average adjusted charge for all cases at the LTCH in which the case was
treated. SSO cases are cases with a length of stay that is less than or
equal to five-sixths the average length of stay of the MS-LTC-DRG
(Sec. 412.529 and Sec. 412.503). The average adjusted charge reflects
the average intensity of the health care services delivered by a
particular LTCH and the average cost level of that LTCH. The resulting
ratio is multiplied by that LTCH's case-mix index to determine the
standardized charge for the case (67 FR 55989).
Multiplying the resulting ratio by the LTCH's case-mix index
accounts for the fact that the same relative charges are given greater
weight at a LTCH with higher average costs than they would at a LTCH
with low average costs, which is needed to adjust each LTCH's relative
charge value to reflect its case-mix relative to the average case-mix
for all LTCHs. Because we standardize charges in this manner, we count
charges for a Medicare patient at a LTCH with high average charges as
less resource intensive than they would be at a LTCH with low average
charges. For example, a $10,000 charge for a case at a LTCH with an
average adjusted charge of $17,500 reflects a higher level of relative
resource use than a $10,000 charge for a case at a LTCH with the same
case-mix, but an average adjusted charge of $35,000. We believe that
the adjusted charge of an individual case more accurately reflects
actual resource use for an individual LTCH because the variation in
charges due to systematic differences in the markup of charges among
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the Proposed MS-LTC-DRG
Relative Weights
For purposes of determining the proposed MS-LTC-DRG relative
weights, under our historical methodology, there are three different
categories of MS-DRGs based on volume of cases within specific MS-LTC-
DRGs. Proposed MS-LTC-DRGs with at least 25 cases are each assigned a
unique proposed relative weight; proposed low-volume MS-LTC-DRGs (that
is, proposed MS-LTC-DRGs that contain between 1 and 24 cases based on a
given year's claims data) are grouped into quintiles (as described
below) and assigned the proposed relative weight of the quintile.
Proposed no-volume MS-LTC-DRGs (that is, no cases in the given year's
claims data are assigned to those proposed MS-LTC-DRGs) are cross-
walked to other proposed MS-LTC-DRGs based on the clinical similarities
and assigned the proposed relative weight of the cross-walked MS-LTC-
DRG (as described in greater detail below). In this proposed rule, we
are proposing to continue to utilize these same three categories of MS-
LTC-DRGs for purposes of the treatment of severity levels in
determining the proposed MS-LTC-DRG relative weights for FY 2015. (We
provide in-depth discussions of our policy regarding weight-setting for
proposed low-volume MS-LTC-DRGs in section VII.B.3.f. of the preamble
of this proposed rule and for proposed no-volume MS-LTC-DRGs, under
Step 5 in section VII.B.3.g. of the preamble of this proposed rule.)
Furthermore, in determining the proposed FY 2015 MS-LTC-DRG
relative weights, when necessary, we are proposing to make adjustments
to account for nonmonotonicity, as discussed in greater detail below in
Step 6 of section VII.B.3.g. of this preamble. We refer readers to the
discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule for our
rationale for including an adjustment for nonmonotonicity (74 FR 43953
through 43954).
f. Proposed Low-Volume MS-LTC-DRGs
In order to account for proposed MS-LTC-DRGs with low volume (that
is, with fewer than 25 LTCH cases), consistent with our existing
methodology for purposes of determining the proposed FY 2015 MS-LTC-DRG
relative weights, we are proposing to continue to employ the quintile
methodology for proposed low-volume MS-LTC-DRGs, such that we group the
proposed ``low-volume MS-LTC-DRGs'' (that is, proposed MS-LTC-DRGs that
contained between 1 and 24 cases annually) into one of five categories
(quintiles) based on average charges (67 FR 55984 through 55995 and 72
FR 47283 through 47288). In determining the proposed FY 2015 MS-LTC-DRG
relative weights in this proposed rule, in cases where the initial
assignment of a proposed low-volume MS-LTC-DRG to a quintile results in
nonmonotonicity within a base-DRG, in order to ensure appropriate
Medicare payments, consistent with our historical methodology, we are
proposing to make adjustments to the treatment of proposed low-volume
MS-LTC-DRGs to preserve monotonicity, as discussed in detail below in
section VII.B.3.g. (Step 6) of the preamble of this proposed rule.
In this proposed rule, using LTCH cases from the December 2013
update of the FY 2013 MedPAR file (which is currently the best
available data), we identified 297 proposed MS-LTC-DRGs that contained
between 1 and 24 cases. This list of proposed MS-LTC-DRGs was then
divided into one of the 5 low-

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volume quintiles, each containing 59 proposed MS-LTC-DRGs (297/5 = 59
with two proposed MS-LTC-DRGs as the remainder). We are proposing to
assign a proposed low-volume MS-LTC-DRG to a specific low-volume
quintile by sorting the proposed low-volume MS-LTC-DRGs in ascending
order by average charge in accordance with our established methodology.
Based on the data available for this proposed rule, the number of
proposed MS-LTC-DRGs with less than 25 cases is not evenly divisible by
5. Therefore, consistent with our historical approach, we are proposing
to use the average charge of the low-volume quintile to determine which
of the low-volume quintiles contain the additional proposed low-volume
MS-LTC-DRG. Specifically for this proposed rule, after organizing the
proposed MS-LTC-DRGs by ascending order by average charge, we are
proposing to assign the first fifth (1st through 59th) of proposed low-
volume MS-LTC-DRGs (with the lowest average charge) into proposed
Quintile 1. The proposed MS-LTC-DRGs with the highest average charge
cases were assigned into proposed Quintile 5. Because the average
charge of the 119th proposed low-volume MS-LTC-DRG in the sorted list
was closer to the average charge of the 118th proposed low-volume MS-
LTC-DRG (assigned to proposed Quintile 2) than to the average charge of
the 120th proposed low-volume MS-LTC-DRG (assigned to proposed Quintile
2), we are proposing to assign it to proposed Quintile 2 (such that
proposed Quintile 2 contains 60 proposed low-volume MS- LTC-DRGs before
any adjustments for nonmonotonicity, as discussed below). This resulted
in 3 of the 5 proposed low-volume quintiles containing 59 proposed MS-
LTC-DRGs (proposed Quintiles 1, 3, and 4) and two proposed low-volume
quintiles containing 60 proposed MS-LTC-DRGs (Quintiles 2 and 5). Table
13A, which is listed in section VI. of the Addendum to this proposed
rule and is available via the Internet, lists the proposed composition
of the low-volume quintiles for proposed MS-LTC-DRGs for FY 2015.
Accordingly, in order to determine the proposed FY 2015 relative
weights for the proposed MS-LTC-DRGs with low volume, we are proposing
to use the five proposed low-volume quintiles described above. We
determined a proposed relative weight and (geometric) average length of
stay for each of the five proposed low-volume quintiles using the
methodology that we are proposing to apply to the proposed MS-LTC-DRGs
(25 or more cases), as described below in section VII.B.3.g. of the
preamble of this proposed rule. We are proposing to assign the same
proposed relative weight and average length of stay to each of the
proposed low-volume MS-LTC-DRGs that make up an individual proposed
low-volume quintile. We note that, as this system is dynamic, it is
possible that the number and specific type of proposed MS-LTC-DRGs with
a low volume of LTCH cases will vary in the future.
Furthermore, we note that we will continue to monitor the volume
(that is, the number of LTCH cases) in the proposed low-volume
quintiles to ensure that our proposed quintile assignments used in
determining the proposed MS-LTC-DRG relative weights result in
appropriate payment for such cases and do not result in an unintended
financial incentive for LTCHs to inappropriately admit these types of
cases.
g. Steps for Determining the Proposed FY 2015 MS-LTC-DRG Relative
Weights
In this proposed rule, we are proposing to determine the proposed
FY 2015 MS-LTC-DRG relative weights based on our existing methodology.
(For additional information on the original development of this
methodology, and modifications to it since the adoption of the MS-LTC-
DRGs, we refer readers to the August 30, 2002 LTCH PPS final rule (67
FR 55989 through 55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43951 through 43966).) In summary, to determine the
proposed FY 2015 MS-LTC-DRG relative weights, we are proposing to group
LTCH cases to the appropriate proposed MS-LTC-DRG, while taking into
account the proposed low-volume quintile (as described above). After
grouping the cases to the appropriate proposed MS-LTC-DRG (or proposed
low-volume quintile), we are proposing to calculate the FY 2015
relative weights by first removing statistical outliers and cases with
a length of stay of 7 days or less (Steps 1 and 2 below). Next, we are
proposing to adjust the number of cases in each proposed MS-LTC-DRG (or
proposed low-volume quintile) for the effect of SSO cases (Step 3
below). After removing statistical outliers (Step 1 below) and cases
with a length of stay of 7 days or less (Step 2 below), the SSO
adjusted discharges and corresponding charges were then used to
calculate ``relative adjusted weights'' for each proposed MS-LTC-DRG
(or proposed low-volume quintile) using the HSRV method.
Below we discuss in detail the steps for calculating the proposed
FY 2015 MS-LTC-DRG relative weights. We note that, as we discussed in
section VII.B.3.c. of the preamble of this proposed rule, we excluded
the data of all-inclusive rate LTCHs, LTCHs that are paid in accordance
with demonstration projects, and any Medicare Advantage claims in the
December 2013 update of the FY 2013 MedPAR file.
Step 1--Remove statistical outliers.
The first step in the calculation of the proposed FY 2015 MS-LTC-
DRG relative weights is to remove statistical outlier cases. Consistent
with our historical relative weight methodology, we are proposing to
continue to define statistical outliers as cases that are outside of
3.0 standard deviations from the mean of the log distribution of both
charges per case and the charges per day for each proposed MS-LTC-DRG.
These statistical outliers are removed prior to calculating the
proposed relative weights because we believe that they may represent
aberrations in the data that distort the measure of average resource
use. Including those LTCH cases in the calculation of the proposed
relative weights could result in an inaccurate proposed relative weight
that does not truly reflect relative resource use among the proposed
MS-LTC-DRGs. (For additional information on this step of the relative
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 2--Remove cases with a length of stay of 7 days or less.
The proposed MS-LTC-DRG relative weights reflect the average of
resources used on representative cases of a specific type. Generally,
cases with a length of stay of 7 days or less do not belong in a LTCH
because these stays do not fully receive or benefit from treatment that
is typical in a LTCH stay, and full resources are often not used in the
earlier stages of admission to a LTCH. If we were to include stays of 7
days or less in the computation of the proposed FY 2015 MS-LTC-DRG
relative weights, the value of many proposed relative weights would
decrease and, therefore, payments would decrease to a level that may no
longer be appropriate. We do not believe that it would be appropriate
to compromise the integrity of the payment determination for those LTCH
cases that actually benefit from and receive a full course of treatment
at a LTCH by including data from these very short stays. Therefore,
consistent with our historical relative weight methodology, in
determining the proposed FY 2015 MS-LTC-DRG relative weights, we are
proposing to remove LTCH cases with a length of stay of 7 days or less.
(For additional

[[Page 28184]]

information on this step of the relative weight methodology, we refer
readers to 67 FR 55989 and 74 FR 43959.)
Step 3--Adjust charges for the effects of SSOs.
After removing cases with a length of stay of 7 days or less, we
were left with cases that have a length of stay of greater than or
equal to 8 days. As the next step in the calculation of the proposed FY
2015 MS-LTC-DRG relative weights, consistent with our historical
relative weight methodology, we are proposing to adjust each LTCH's
charges per discharge for those remaining cases for the effects of SSOs
(as defined in Sec. 412.529(a) in conjunction with Sec. 412.503).
In this proposed rule, we are proposing to make this adjustment by
counting an SSO case as a fraction of a discharge based on the ratio of
the length of stay of the case to the average length of stay for the
proposed MS-LTC-DRG for non-SSO cases. This has the effect of
proportionately reducing the impact of the lower charges for the SSO
cases in calculating the average charge for the proposed MS-LTC-DRG.
This process produces the same result as if the actual charges per
discharge of an SSO case were adjusted to what they would have been had
the patient's length of stay been equal to the average length of stay
of the MS-LTC-DRG.
Counting SSO cases as full discharges with no adjustment in
determining the proposed FY 2015 MS-LTC-DRG relative weights would
lower the proposed FY 2015 MS-LTC-DRG relative weight for affected
proposed MS-LTC-DRGs because the relatively lower charges of the SSO
cases would bring down the average charge for all cases within a
proposed MS-LTC-DRG. This would result in an ``underpayment'' for non-
SSO cases and an ``overpayment'' for SSO cases. Therefore, we are
proposing to adjust for SSO cases under Sec. 412.529 in this manner
because it results in more appropriate payments for all LTCH cases.
(For additional information on this step of the relative weight
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 4--Calculate the proposed FY 2015 MS-LTC-DRG relative weights
on an iterative basis.
Consistent with our historical relative weight methodology, we are
proposing to calculate the proposed FY 2015 MS-LTC-DRG relative weights
using the HSRV methodology, which is an iterative process. First, for
each LTCH case, we are proposing to calculate a hospital-specific
relative charge value by dividing the SSO adjusted charge per discharge
(see Step 3) of the LTCH case (after removing the statistical outliers
(see Step 1) and LTCH cases with a length of stay of 7 days or less
(see Step 2)) by the average charge per discharge for the LTCH in which
the case occurred. The resulting ratio was then multiplied by the
LTCH's case-mix index to produce an adjusted hospital-specific relative
charge value for the case. An initial case-mix index value of 1.0 was
used for each LTCH.
For each proposed MS-LTC-DRG, we calculated the proposed FY 2015
relative weight by dividing the average of the adjusted hospital-
specific relative charge values (from above) for the proposed MS-LTC-
DRG by the overall average hospital-specific relative charge value
across all cases for all LTCHs. Using these recalculated proposed MS-
LTC-DRG relative weights, each LTCH's average relative weight for all
of its cases (that is, its case-mix) was calculated by dividing the sum
of all the LTCH's proposed MS-LTC-DRG relative weights by its total
number of cases. The LTCHs' hospital-specific relative charge values
(from above) were then multiplied by the hospital-specific case-mix
indexes. The hospital-specific case-mix adjusted relative charge values
were then used to calculate a new set of proposed MS-LTC-DRG relative
weights across all LTCHs. This iterative process was continued until
there was convergence between the relative weights produced at adjacent
steps, for example, when the maximum difference was less than 0.0001.
Step 5--Determine a proposed FY 2015 relative weight for proposed
MS-LTC-DRGs with no LTCH cases.
As we stated above, we determined the proposed FY 2015 relative
weight for each proposed MS-LTC-DRG using total Medicare allowable
total charges reported in the best available LTCH claims data (that is,
the December 2013 update of the FY 2013 MedPAR file for this proposed
rule). Using these data, we identified the proposed MS-LTC-DRGs for
which there were no LTCH cases in the database, such that no patients
who would have been classified to those MS-LTC-DRGs were treated in
LTCHs during FY 2013 and, therefore, no charge data were available for
these proposed MS-LTC-DRGs. Therefore, in the process of determining
the proposed MS-LTC-DRG relative weights, we were unable to calculate
proposed relative weights for the proposed MS-LTC-DRGs with no LTCH
cases using the methodology described in Steps 1 through 4 above.
However, because patients with a number of the diagnoses under these
proposed MS-LTC-DRGs may be treated at LTCHs, consistent with our
historical methodology, we are proposing to assign a proposed relative
weight to each of the proposed no-volume MS-LTC-DRGs based on clinical
similarity and relative costliness (with the exception of proposed
``transplant'' MS-LTC-DRGs and proposed ``error'' MS-LTC-DRGs, as
discussed below). (For additional information on this step of the
relative weight methodology, we refer readers to 67 FR 55991 and 74 FR
43959 through 43960.)
In general, we determined proposed FY 2015 relative weights for the
proposed MS-LTC-DRGs with no LTCH cases in the December 2013 update of
the FY 2013 MedPAR file used in this proposed rule (that is, proposed
``no-volume'' MS-LTC-DRGs) by cross-walking each proposed no-volume MS-
LTC-DRG to another proposed MS-LTC-DRG with a calculated proposed
relative weight (determined in accordance with the methodology
described above). Then, the proposed ``no-volume'' MS-LTC-DRG was
assigned the same proposed relative weight (and average length of stay)
of the proposed MS-LTC-DRG to which it was cross-walked (as described
in greater detail below).
Of the 753 proposed MS-LTC-DRGs for FY 2015, we identified 237
proposed MS-LTC-DRGs for which there are no LTCH cases in the database
(including the 8 proposed ``transplant'' MS-LTC-DRGs and 2 proposed
``error'' MS-LTC-DRGs). As stated above, we are proposing to assign
proposed relative weights for each of the 237 proposed no-volume MS-
LTC-DRGs (with the exception of the 8 proposed ``transplant'' MS-LTC-
DRGs and the 2 proposed ``error'' MS-LTC-DRGs, which are discussed
below) based on clinical similarity and relative costliness to one of
the remaining 516 (753 - 237 = 516) proposed MS-LTC-DRGs for which we
were able to determine proposed relative weights based on FY 2013 LTCH
claims data using the steps described above. (For the remainder of this
discussion, we refer to the proposed ``cross-walked'' MS-LTC-DRGs as
the proposed MS-LTC-DRGs to which we cross-walked one of the 237
proposed ``no volume'' MS-LTC-DRGs, with the exception of the 8
proposed ``transplant'' MS-LTC-DRGs and the 2 proposed ``error'' MS-
LTC-DRGs, for purposes of determining a proposed relative weight.)
Then, we are proposing to assign the proposed no-volume MS-LTC-DRG the
proposed relative weight of the proposed cross-walked MS-LTC-DRG. (As
explained below in Step 6, when necessary, we are proposing to make
adjustments to account for nonmonotonicity.)

[[Page 28185]]

For this proposed rule, we cross-walked the proposed no-volume MS-
LTC-DRG to a proposed MS-LTC-DRG for which there were LTCH cases in the
December 2013 update of the FY 2013 MedPAR file, and to which it was
similar clinically in intensity of use of resources and relative
costliness as determined by criteria such as care provided during the
period of time surrounding surgery, surgical approach (if applicable),
length of time of surgical procedure, postoperative care, and length of
stay. We evaluated the relative costliness in determining the
applicable proposed MS-LTC-DRG to which a proposed no-volume MS-LTC-DRG
was cross-walked in order to assign an appropriate proposed relative
weight for the proposed no-volume MS-LTC-DRGs in FY 2015. (For more
details on our process for evaluating relative costliness, we refer
readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).)
We believe in the rare event that there would be a few LTCH cases
grouped to one of the proposed no-volume MS-LTC-DRGs in FY 2015, the
proposed relative weights assigned based on the proposed cross-walked
MS-LTC-DRGs would result in an appropriate LTCH PPS payment because the
crosswalks, which are based on similar clinical similarity and relative
costliness, generally require equivalent relative resource use.
We then assigned the proposed relative weight of the proposed
cross-walked MS-LTC-DRG as the proposed relative weight for the
proposed no-volume MS-LTC-DRG such that both of these proposed MS-LTC-
DRGs (that is, the proposed no-volume MS-LTC-DRG and the proposed
cross-walked MS-LTC-DRG) have the same proposed relative weight for FY
2015. We note that if the proposed cross-walked MS-LTC-DRG had 25 cases
or more, its proposed relative weight, which was calculated using the
methodology described in Steps 1 through 4 above, was assigned to the
proposed no-volume MS-LTC-DRG as well. Similarly, if the proposed MS-
LTC-DRG to which the proposed no-volume MS-LTC-DRG was cross-walked had
24 or less cases and, therefore, was designated to one of the proposed
low-volume quintiles for purposes of determining the proposed relative
weights, we assigned the proposed relative weight of the applicable
proposed low-volume quintile to the proposed no-volume MS-LTC-DRG such
that both of these proposed MS-LTC-DRGs (that is, the proposed no-
volume MS-LTC-DRG and the proposed cross-walked MS-LTC-DRG) have the
same proposed relative weight for FY 2015. (As we noted above, in the
infrequent case where nonmonotonicity involving a proposed no-volume
MS-LTC-DRG resulted, additional adjustments as described in Step 6 were
required in order to maintain monotonically increasing proposed
relative weights.)
For this proposed rule, a list of the proposed no-volume MS-LTC-
DRGs and the proposed MS-LTC-DRGs to which each was cross-walked (that
is, the proposed cross-walked MS-LTC-DRGs) for FY 2015 is shown in
Table 13B, which is listed in section VI. of the Addendum to this
proposed rule and is available via the Internet.
To illustrate this methodology for determining the proposed
relative weights for the proposed FY 2015 MS-LTC-DRGs with no LTCH
cases, we are providing the following example, which refers to the
proposed no-volume MS-LTC-DRGs crosswalk information for FY 2015
provided in Table 13B.
Example: There were no cases in the FY 2013 MedPAR file used for
this proposed rule for proposed MS-LTC-DRG 61 (Acute Ischemic Stroke
with Use of Thrombolytic Agent with MCC). We determined that proposed
MS-LTC-DRG 70 (Nonspecific Cerebrovascular Disorders with MCC) was
similar clinically and based on resource use to proposed MS-LTC-DRG 61.
Therefore, we assigned the same proposed relative weight of proposed
MS-LTC-DRG 70 of 0.8657 for FY 2015 to proposed MS-LTC-DRG 61 (obtained
from Table 11, which is listed in section VI. of the Addendum to this
proposed rule and is available via the Internet).
Again, we note that, as this system is dynamic, it is entirely
possible that the number of proposed MS-LTC-DRGs with no volume of LTCH
cases based on the system will vary in the future. We used the most
recent available claims data in the MedPAR file to identify proposed
no-volume MS-LTC-DRGs and to determine the proposed relative weights in
this proposed rule.
Furthermore, for FY 2015, consistent with our historical relative
weight methodology, we are proposing to establish a relative weight of
0.0000 for the following proposed transplant MS-LTC-DRGs: Heart
Transplant or Implant of Heart Assist System with MCC (proposed MS-LTC-
DRG 1); Heart Transplant or Implant of Heart Assist System without MCC
(proposed MS-LTC-DRG 2); Liver Transplant with MCC or Intestinal
Transplant (proposed MS-LTC-DRG 5); Liver Transplant without MCC
(proposed MS-LTC-DRG 6); Lung Transplant (proposed MS-LTC-DRG 7);
Simultaneous Pancreas/Kidney Transplant (proposed MS-LTC-DRG 8);
Pancreas Transplant (proposed MS-LTC-DRG 10); and Kidney Transplant
(proposed MS-LTC-DRG 652). This is because Medicare will only cover
these procedures if they are performed at a hospital that has been
certified for the specific procedures by Medicare and presently no LTCH
has been so certified. At the present time, we include these eight
proposed transplant MS-LTC-DRGs in the proposed GROUPER program for
administrative purposes only. Because we use the same proposed GROUPER
program for LTCHs as is used under the IPPS, removing these proposed
MS-LTC-DRGs would be administratively burdensome. (For additional
information regarding our treatment of transplant MS-LTC-DRGs, we refer
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).)
Step 6--Adjust the proposed FY 2015 MS-LTC-DRG relative weights to
account for nonmonotonically increasing relative weights.
As discussed earlier in this section, the MS-DRGs contain base DRGs
that have been subdivided into one, two, or three severity of illness
levels. Where there are three severity levels, the most severe level
has at least one secondary diagnosis code that is referred to as an MCC
(that is, major complication or comorbidity). The next lower severity
level contains cases with at least one secondary diagnosis code that is
a CC (that is, complication or comorbidity). Those cases without an MCC
or a CC are referred to as ``without CC/MCC.'' When data do not support
the creation of three severity levels, the base MS-DRG is subdivided
into either two levels or the base MS-DRG is not subdivided. The two-
level subdivisions could consist of the MS-DRG with CC/MCC and the MS-
DRG without CC/MCC. Alternatively, the other type of two-level
subdivision may consist of the MS-DRG with MCC and the MS-DRG without
MCC.
In those base MS-LTC-DRGs that are split into either two or three
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a
three-level split). That is, theoretically, cases that are more severe
typically require greater expenditure of medical care resources and
will result in higher average charges. Therefore, in the three severity
levels, proposed relative weights should increase by severity, from
lowest to highest. If the proposed relative weights decrease as
severity

[[Page 28186]]

increases (that is, if within a base proposed MS-LTC-DRG, a proposed
MS-LTC-DRG with CC has a higher proposed relative weight than one with
MCC, or the proposed MS-LTC-DRG ``without CC/MCC'' has a higher
proposed relative weight than either of the others), they are
nonmonotonic. We continue to believe that utilizing nonmonotonic
proposed relative weights to adjust Medicare payments would result in
inappropriate payments because the payment for the cases in the higher
severity level in a base proposed MS-LTC-DRG (which are generally
expected to have higher resource use and costs) would be lower than the
payment for cases in a lower severity level within the same base
proposed MS-LTC-DRG (which are generally expected to have lower
resource use and costs). Consequently, in determining the proposed FY
2015 MS-LTC-DRG relative weights in this proposed rule, consistent with
our historical methodology, we are proposing to combine MS-LTC-DRG
severity levels within a base proposed MS-LTC-DRG for the purpose of
computing a proposed relative weight when necessary to ensure that
monotonicity was maintained. For a comprehensive description of our
existing methodology to adjust for nonmonotonicity, we refer readers to
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through
43966). Any adjustments for nonmonotonicity that were made in
determining the proposed FY 2015 MS-LTC-DRG relative weights in this
proposed rule by applying this methodology are denoted in Table 11,
which is listed in section VI. of the Addendum to this proposed rule
and is available via the Internet.
Step 7-- Calculate the proposed FY 2015 budget neutrality factor.
In accordance with the regulations at Sec. 412.517(b) (in
conjunction with Sec. 412.503), the annual update to the MS-LTC-DRG
classifications and relative weights is done in a budget neutral manner
such that estimated aggregate LTCH PPS payments would be unaffected,
that is, would be neither greater than nor less than the estimated
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed
discussion on the establishment of the budget neutrality requirement
for the annual update of the MS-LTC-DRG classifications and relative
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR
26881 and 26882).)
The MS-LTC-DRG classifications and relative weights are updated
annually based on the most recent available LTCH claims data to reflect
changes in relative LTCH resource use (Sec. 412.517(a) in conjunction
with Sec. 412.503). Under the budget neutrality requirement at Sec.
412.517(b), for each annual update, the MS-LTC-DRG relative weights are
uniformly adjusted to ensure that estimated aggregate payments under
the LTCH PPS would not be affected (that is, decreased or increased).
Consistent with that provision, we are proposing to update the MS-LTC-
DRG classifications and relative weights for FY 2015 based on the most
recent available LTCH data, and apply a budget neutrality adjustment in
determining the proposed FY 2015 MS-LTC-DRG relative weights.
To ensure budget neutrality in the update to the MS-LTC-DRG
classifications and relative weights under Sec. 412.517(b), we are
proposing to continue to use our established two-step budget neutrality
methodology. In this proposed rule, in the first step of our proposed
MS-LTC-DRG budget neutrality methodology, for FY 2015, we are proposing
to calculate and apply a normalization factor to the recalibrated
proposed relative weights (the result of Steps 1 through 6 above) to
ensure that estimated payments were not affected by changes in the
composition of case types or the changes to the classification system.
That is, the proposed normalization adjustment is intended to ensure
that the recalibration of the proposed MS-LTC-DRG relative weights
(that is, the process itself) neither increases nor decreases the
average CMI.
To calculate the proposed normalization factor for FY 2015 (the
first step of our proposed budget neutrality methodology), we are
proposing to use the following three steps: (1.a.) we use the most
recent available LTCH claims data (FY 2013) and group them using the
proposed FY 2015 GROUPER (Version 32.0) and the recalibrated proposed
FY 2015 MS-LTC-DRG relative weights (determined in Steps 1 through 6 of
the Steps for Determining the Proposed FY 2015 MS-LTC-DRG Relative
Weights above) to calculate the average CMI; (1.b.) we group the same
LTCH claims data (FY 2013) using the FY 2014 GROUPER (Version 31.0) and
FY 2014 MS-LTC-DRG relative weights and calculated the average CMI; and
(1.c.) we compute the ratio of these average CMIs by dividing the
average CMI for FY 2014 (determined in Step 1.b.) by the average CMI
for FY 2015 (determined in Step 1.a.). In determining the proposed MS-
LTC-DRG relative weights for FY 2015, each recalibrated proposed MS-
LTC-DRG relative weight was multiplied by 1.12619 (determined in Step
1.c.) in the first step of the proposed budget neutrality methodology,
which produced proposed ``normalized relative weights.''
In the second step of our proposed MS-LTC-DRG budget neutrality
methodology, we are proposing to determine a budget neutrality factor
to ensure that estimated aggregate LTCH PPS payments (based on the most
recent available LTCH claims data) after reclassification and
recalibration (that is, the proposed FY 2015 MS-LTC-DRG classifications
and relative weights) are equal to estimated aggregate LTCH PPS
payments before reclassification and recalibration (that is, the FY
2014 MS-LTC-DRG classifications and relative weights). Accordingly,
consistent with our existing methodology, we are proposing to use FY
2013 discharge data to simulate payments and compared estimated
aggregate LTCH PPS payments using the FY 2014 MS-LTC-DRGs and relative
weights to estimate aggregate LTCH PPS payments using the proposed FY
2015 MS-LTC-DRGs and relative weights. Specifically, for this proposed
rule, as discussed previously in section VII.B.3.c. of this preamble,
we are proposing to use LTCH claims data from the December 2013 update
of the FY 2013 MedPAR file, as these are the best available data at
this time.
For this proposed rule, we are proposing to determine the proposed
FY 2015 budget neutrality adjustment factor using the following three
steps: (2.a.) we simulate estimated total LTCH PPS payments using the
proposed normalized relative weights for FY 2015 and proposed GROUPER
Version 32.0 (as described above); (2.b.) we simulate estimated total
LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY
2014 MS-LTC-DRG relative weights in Table 11 of the Addendum to the FY
2014 IPPS/LTCH PPS final rule available on the Internet (78 FR 51002);
and (2.c.) we calculate the ratio of these estimated total LTCH PPS
payments by dividing the estimated total LTCH PPS payments using the FY
2014 GROUPER (Version 31.0) and the FY 2014 MS-LTC-DRG relative weights
(determined in Step 2.b.) by the estimated total LTCH PPS payments
using the proposed FY 2015 GROUPER (Version 32.0) and the proposed
normalized MS-LTC-DRG relative weights for FY 2015 (determined in Step
2.a.). In determining the proposed FY 2015 MS-LTC-DRG relative weights,
each proposed normalized relative weight was multiplied by a proposed
budget neutrality factor of 0.995275 (determined in Step 2.c.) in the
second step of the proposed budget neutrality methodology to determine
the proposed

[[Page 28187]]

budget neutral FY 2015 relative weight for each proposed MS-LTC-DRG.
Accordingly, in determining the proposed FY 2015 MS-LTC-DRG
relative weights in this proposed rule, consistent with our existing
methodology, we are proposing to apply a proposed normalization factor
of 1.12619 and a proposed budget neutrality factor of 0.995275
(computed as described above). Table 11, which is listed in section VI.
of the Addendum to this proposed rule and is available via the
Internet, lists the proposed MS-LTC-DRGs and their respective proposed
relative weights, geometric mean length of stay, five-sixths of the
geometric mean length of stay (used to identify SSO cases under Sec.
412.529(a)), and the ``IPPS Comparable Thresholds'' (used in
determining SSO payments under Sec. 412.529(c)(3)), for FY 2015 (and
reflect both the proposed normalization factor of 1.12619 and the
proposed budget neutrality factor of 0.995275).

C. Proposed LTCH PPS Payment Rates for FY 2015

1. Overview of Development of the LTCH Payment Rates
The basic methodology for determining LTCH PPS Federal prospective
payment rates is set forth at Sec. 412.515 through Sec. 412.536. In
this section, we discuss the factors that we are proposing to use to
update the LTCH PPS standard Federal rate for FY 2015, that is,
effective for LTCH discharges occurring on or after October 1, 2014
through September 30, 2015.
For further details on the development of the FY 2003 standard
Federal rate when the LTCH PPS was initially implemented, we refer
readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through
56037). For subsequent updates to the LTCH PPS standard Federal rate as
implemented under Sec. 412.523(c)(3), we refer readers to the
following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through
34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY
2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS
final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72
FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800
through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021
through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through
50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773);
FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481); and FY
2014 IPPS/LTCH PPS final rule (78 FR 50760 through 50765).
The proposed update to the LTCH PPS standard Federal rate for FY
2015 is presented in section V.A. of the Addendum to this proposed
rule. The components of the proposed annual market basket update to the
LTCH PPS standard Federal rate for FY 2015 are discussed below,
including the reduction to the annual update for LTCHs that fail to
submit quality reporting data for fiscal year FY 2015 as required by
the statute (as discussed below in section VII.C.2.c. of the preamble
of this proposed rule). Furthermore, as discussed below in section
VII.C.3. of the preamble of this proposed rule, for FY 2015, in
addition to the proposed update factor, under the final year of the 3-
year phase-in under the current regulations at Sec. 412.523(d)(3), we
are proposing to make a one-time prospective adjustment to the standard
Federal rate for FY 2015 so that the effect of any significant
difference between the data used in the original computations of budget
neutrality for FY 2003 and more recent data to determine budget
neutrality for FY 2003 is not perpetuated in the prospective payment
rates for future years. In addition, as discussed in section V.A. of
the Addendum of this proposed rule, we are proposing to make an
adjustment to the standard Federal rate to account for the estimated
effect of the changes to the area wage level adjustment for FY 2015 on
estimated aggregate LTCH PPS payments, in accordance with Sec.
412.523(d)(4). (We refer readers to the discussion of the reduction to
the annual update for LTCHs that fail to submit quality reporting data
under section VII.C.2.c. of the preamble of this proposed rule, the
proposed application of the one-time prospective adjustment under the
final year of the 3-year phase-in under section VII.C.3. of this
preamble, and the proposed budget neutrality adjustment for changes in
the area wage levels under section V.A. of the Addendum of this
proposed rule.)
2. Proposed FY 2015 LTCH PPS Annual Market Basket Update
a. Overview
Historically, the Medicare program has used a market basket to
account for price increases in the services furnished by providers. The
market basket used for the LTCH PPS includes both operating and
capital-related costs of LTCHs because the LTCH PPS uses a single
payment rate for both operating and capital-related costs. As discussed
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we
adopted the newly created FY 2009-based LTCH-specific market basket for
use under the LTCH PPS beginning in FY 2013. For additional details on
the historical development of the market basket used under the LTCH
PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53467 through 53468) and this preamble.
Section 3401(c) of the Affordable Care Act provides for certain
adjustments to any annual update to the standard Federal rate and
refers to the timeframes associated with such adjustments as a ``rate
year'' (which are discussed in more detail in section VII.C.2.b. of the
preamble of this proposed rule.) We note that because the annual update
to the LTCH PPS policies, rates, and factors now occurs on October 1,
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY)
under the LTCH PPS beginning October 1, 2010, to conform with the
standard definition of the Federal fiscal year (October 1 through
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through
50397). Although the language of sections 3004(a) 3401(c), 10319, and
1105(b) of the Affordable Care Act refers to years 2010 and thereafter
under the LTCH PPS as ``rate year,'' consistent with our change in the
terminology used under the LTCH PPS from ``rate year'' to ``fiscal
year,'' for purposes of clarity, when discussing the annual update for
the LTCH PPS, including the provisions of the Affordable Care Act, we
use ``fiscal year'' rather than ``rate year'' for 2011 and subsequent
years.
b. Proposed Revision of Certain Market Basket Updates as Required by
the Affordable Care Act
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year through 2019, any annual update to the standard
Federal rate shall be reduced:
For rate year 2010 through 2019, by the ``other
adjustment'' specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the
Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment (which we refer to as ``the multifactor
productivity (MFP) adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate

[[Page 28188]]

year being less than such payment rates for the preceding rate year.
Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment
as equal to the 10-year moving average of changes in annual economy-
wide, private nonfarm business multifactor productivity (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, calendar year, cost reporting period, or other annual
period). Under our methodology, the end of the 10-year moving average
of changes in the MFP coincides with the end of the appropriate FY
update period. In addition, the MFP adjustment that is applied in
determining any annual update to the LTCH PPS standard Federal rate is
the same adjustment that is required to be applied in determining the
applicable percentage increase under the IPPS under section
1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year.
The MFP adjustment is derived using a projection of MFP that is
currently produced by IHS Global Insight, Inc. (For additional details
on the development of the MFP adjustment and its application under the
LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51691 through 51692 and 51770 through 51771).)
For FY 2015, we are proposing to continue to use our methodology
for calculating and applying the proposed MFP adjustment to determine
the annual update to the LTCH PPS standard Federal rate for FY 2015.
(For details on the development of the proposed MFP adjustment,
including our finalized methodology for calculating and applying the
MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51689 through 51692).)
c. Proposed Adjustment to the Annual Update to the LTCH PPS Standard
Federal Rate Under the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
1. Background
In accordance with section 1886(m)(5) of the Act, as added by
section 3004(a) of the Affordable Care Act, the Secretary established
the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As
noted above, although the language of section 3004(a) of the Affordable
Care Act refers to years 2011 and thereafter under the LTCH PPS as
``rate year,'' consistent with our change in the terminology used under
the LTCH PPS from ``rate year'' to ``fiscal year,'' for purposes of
clarity, when discussing the annual update for the LTCH PPS, including
the provisions of the Affordable Care Act, we use ``fiscal year''
rather than ``rate year'' for 2011 and subsequent years.) Under the
LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for
FY 2014 and each subsequent year, in the case of an LTCH that does not
submit quality reporting data to the Secretary in accordance with
section 1886(m)(5)(C) of the Act with respect to such a year, any
annual update to a standard Federal rate for discharges for the
hospital during the year, and after application of section 1886(m)(3)
of the Act, shall be reduced by 2.0 percentage points. Section
1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0
percentage points reduction may result in an annual update that is less
than 0.0 for a year, and may result in LTCH PPS payment rates for a
year being less than such LTCH PPS payment rates for the preceding
year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the
2.0 percentage points reduction is applied in a noncumulative manner,
such that any reduction made under section 1886(m)(5)(A) of the Act
shall apply only with respect to the year involved, and shall not be
taken into account in computing the LTCH PPS payment amount for a
subsequent year. For additional information on the history of the
LTCHQR Program, including the statutory authority and the selected
measures, we refer readers to section IX.C. of the preamble of this
proposed rule.
2. Proposed Reduction to the Annual Update to the LTCH PPS Standard
Federal Rate Under the LTCHQR Program
Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014
and subsequent fiscal years, for LTCHs that do not submit quality
reporting data under the LTCHQR Program with respect to such a fiscal
year, any annual update to a standard Federal rate for discharges for
the LTCH during the fiscal year and after application of the market
basket update adjustments required by section 1886(m)(3) of the Act, is
further reduced by 2.0 percentage points. That is, in establishing an
update to the LTCH PPS standard Federal rate for FY 2014 and subsequent
fiscal years, the full LTCH PPS market basket increase estimate,
subject to an adjustment based on changes in economy-wide productivity
(``the MFP adjustment'') required under section 1886(m)(3)(A)(i) of the
Act and an additional reduction required by sections 1886(m)(3)(A)(ii)
and 1886(m)(4) of the Act, is further reduced by 2.0 percentage points
for LTCHs that fail to submit quality reporting data under the LTCHQR
Program. The reduction in the annual update to the LTCH PPS standard
Federal rate for failure to report quality data under the LTCHQR
Program for FY 2014 and subsequent fiscal years is codified under Sec.
412.523(c)(4) of the regulations.
Specifically, consistent with section 1886(m)(5)(A)(i) of the Act,
under Sec. 412.523(c)(4)(i), for an LTCH that does not submit quality
reporting data in the form and manner and at the time specified by the
Secretary under the LTCHQR Program, the annual update to the standard
Federal rate under Sec. 412.523(c)(3) is further reduced by 2.0
percentage points. In addition, consistent with section
1886(m)(5)(A)(ii) of the Act, Sec. 412.523(c)(4)(ii) specifies that
any reduction of the annual update to the standard Federal rate under
Sec. 412.523(c)(4)(i) will apply only to the fiscal year involved and
will not be taken into account in computing the annual update to the
standard Federal rate for a subsequent fiscal year. Lastly, consistent
with section 1886(m)(5)(B) of the Act, under Sec. 412.523(c)(4)(iii),
the application of any reduction of the annual update to the standard
Federal rate under Sec. 412.523(c)(4)(i) may result in an annual
update that is less than 0.0 percent for a fiscal year, and may result
in payment rates for a fiscal year that would be less than such payment
rates for the preceding rate year.
We discuss the application of the 2.0 percentage point reduction
under Sec. 412.523(c)(4)(i) in our discussion of the proposed annual
market basket update to the LTCH PPS standard Federal rate for FY 2015
below in section VII.C.2.e. of the preamble of this proposed rule.
d. Proposed Market Basket Under the LTCH PPS for FY 2015
Under the authority of section 123 of the BBRA as amended by
section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53468), we adopted a newly created FY 2009-based LTCH-specific
market basket for use under the LTCH PPS beginning in FY 2013. The FY
2009-based LTCH-specific market basket is based solely on the Medicare
cost report data submitted by LTCHs and, therefore, specifically
reflects the cost structures of only LTCHs. For additional details on
the development of the FY 2009-based LTCH-specific market basket, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467
through 53476).
For FY 2015, we are proposing to continue to use the FY 2009-based
LTCH-specific market basket to update

[[Page 28189]]

the LTCH PPS for FY 2015. We continue to believe that the FY 2009-based
LTCH-specific market basket appropriately reflects the cost structure
of LTCHs for the reasons discussed when we adopted the FY 2009-based
LTCH-specific market basket for use under the LTCH PPS in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53467 through 53476).
e. Proposed Annual Market Basket Update for LTCHs for FY 2015
Consistent with our historical practice, we are proposing to
estimate the market basket update and the proposed MFP adjustment based
on IGI's forecast using the most recent available data. Based on IGI's
first quarter 2014 forecast, the proposed FY 2015 full market basket
estimate for the LTCH PPS using the FY 2009-based LTCH-specific market
basket is 2.7 percent. Using our established methodology for
determining the MFP adjustment, the current estimate of the proposed
MFP adjustment for FY 2015 based on IGI's first quarter 2014 forecast
is 0.4 percent, as discussed in section IV.B. of the preamble of this
proposed rule. In addition, consistent with our historical practice of
using the best available data, we are proposing that if more recent
data is available, we would use such data to estimate the market basket
update and the MFP adjustment for FY 2015 in the final rule.
For FY 2015, section 1886(m)(3)(A)(i) of the Act requires that any
annual update to the standard Federal rate be reduced by the
productivity adjustment (``the MFP adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are
proposing to reduce the full FY 2015 market basket update by the
proposed FY 2015 MFP adjustment. To determine the market basket update
for LTCHs for FY 2015, as reduced by the MFP adjustment, consistent
with our established methodology, we are proposing to subtract the
proposed FY 2015 MFP adjustment from the proposed FY 2015 market basket
update. Furthermore, sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of
the Act requires that any annual update to the standard Federal rate
for FY 2015 be reduced by the ``other adjustment'' described in
paragraph (4), which is 0.2 percentage point for FY 2015. Therefore,
following application of the proposed productivity adjustment, we are
proposing to reduce the adjusted market basket update (that is, the
proposed full market basket increase less the proposed MFP adjustment)
by the ``other adjustment'' specified by sections 1886(m)(3)(A)(ii) and
1886(m)(4) of the Act. (For additional details on our established
methodology for adjusting the market basket increase by the MFP and the
``other adjustment'' required by the statute, we refer readers to the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
As discussed previously in section VII.C.2.c. of the preamble of
this proposed rule, for FY 2015, section 1886(m)(5) of the Act requires
that for LTCHs that do not submit quality reporting data under the
LTCHQR Program, any annual update to a standard Federal rate, after
application of the adjustments required by section 1886(m)(3) of the
Act, is further reduced by 2.0 percentage points. Therefore, the
proposed update to the LTCH PPS standard Federal rate for FY 2015 for
LTCHs that fail to submit quality reporting data under the LTCHQR
Program, the full LTCH PPS market basket increase estimate, subject to
an adjustment based on changes in economy-wide productivity (``the MFP
adjustment'') as required under section 1886(m)(3)(A)(i) of the Act and
an additional reduction required by sections 1886(m)(3)(A)(ii) and
1886(m)(4) of the Act, would also be further reduced by 2.0 percentage
points.
In this proposed rule, in accordance with the statute, we are
proposing to reduce the proposed FY 2015 full market basket estimate of
2.7 percent (based on IGI's first quarter 2014 forecast of the FY 2009-
based LTCH-specific market basket) by the proposed FY 2015 MFP
adjustment (that is, the 10-year moving average of MFP for the period
ending FY 2015, as described in section IV.B. of the preamble of this
proposed rule) of 0.4 percentage point (based on IGI's first quarter
2014 forecast). Following application of the proposed productivity
adjustment, the adjusted market basket update of 2.3 percent (2.7
percent minus 0.4 percentage point) would then be reduced by 0.2
percentage point, as required by sections 1886(m)(3)(A)(ii) and
1886(m)(4)(E) of the Act. Therefore, in this proposed rule, under the
authority of section 123 of the BBRA as amended by section 307(b) of
the BIPA, we are proposing to establish an annual market basket update
under the LTCH PPS for FY 2015 of 2.1 percent (that is, the most recent
estimate of the LTCH PPS proposed market basket update at this time of
2.7 percent, less the proposed MFP adjustment of 0.4 percentage point,
and less the 0.2 percentage point required under section 1886(m)(4)(E)
of the Act), provided the LTCH submits quality reporting data in
accordance with section 1886(m)(5) of the Act. Accordingly, we are
proposing to revise Sec. 412.523(c)(3) by adding a new paragraph (xi),
which specifies that the standard Federal rate for FY 2015 would be the
standard Federal rate for the previous LTCH PPS year updated by 2.7
percent, and as further adjusted, as appropriate, as described in Sec.
412.523(d). For LTCHs that fail to submit quality reporting data under
the LTCHQR Program, under proposed Sec. 412.523(c)(3)(xi) in
conjunction with Sec. 412.523(c)(4), we are proposing to further
reduce the annual update to the LTCH PPS standard Federal rate by 2.0
percentage points in accordance with section 1886(m)(5) of the Act.
Accordingly, we are proposing to establish an annual update to the LTCH
PPS standard Federal rate of 0.1 percent (that is, 2.1 percent minus
2.0 percentage points) for FY 2015 for LTCHs that fail to submit
quality reporting data under the LTCHQR Program. As stated above,
consistent with our historical practice of using the best available
data, we are proposing that if more recent data is available, we would
use such data to establish an annual update to the LTCH PPS standard
Federal rate for FY 2015 under Sec. 412.523(c)(3)(xi) in the final
rule. (We note that, we also are proposing to adjust the proposed FY
2015 standard Federal rate by applying a one-time prospective
adjustment under the final year of the 3-year phase-in under Sec.
412.523(d)(3) (discussed in section VII.C.3. of the preamble of this
proposed rule) and by a proposed area wage level budget neutrality
factor in accordance with Sec. 412.523(d)(4) (as discussed in section
V.B.5. of the Addendum of this proposed rule).)
3. Proposed Adjustment for the Final Year of the Phase-In of the One-
Time Prospective Adjustment to the Standard Federal Rate Under Sec.
412.523(d)(3)
We set forth regulations implementing the LTCH PPS, based upon the
broad authority granted to the Secretary, under section 123 of the BBRA
(as amended by section 307(b) of the BIPA). Section 123(a)(1) of the
BBRA required that the system ``maintain budget neutrality'' in the
August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget
neutrality requirement means that estimated aggregate payments under
the LTCH PPS for FY 2003 would be equal to the estimated aggregate
payments that would have been made if the LTCH PPS were not implemented
for FY 2003. The methodology for determining the LTCH PPS standard
Federal rate for FY 2003 that would ``maintain budget neutrality'' is
described in considerable detail in the August 30, 2002 final rule (67
FR 56027 through 56037). Our methodology for

[[Page 28190]]

estimating payments for the purposes of budget neutrality calculations
used the best available data, and necessarily reflected several
assumptions (for example, costs, inflation factors, and intensity of
services provided) in estimating aggregate payments that would have
been made if the LTCH PPS had not been implemented (without accounting
for certain statutory provisions that affect the level of payments to
LTCHs in years prior to the implementation of the LTCH PPS, as required
by the statute).
In the August 30, 2002 final rule, we also stated our intentions to
monitor LTCH PPS payment data to evaluate whether later data varied
significantly from the data available at the time of the original
budget neutrality calculations (for example, data related to inflation
factors, intensity of services provided, or behavioral response to the
implementation of the LTCH PPS). To the extent the later data
significantly differed from the data employed in the original
calculations, the aggregate amount of payments during FY 2003 based on
later data may be higher or lower than the estimates upon which the
budget neutrality calculations were based. Therefore, in that same
final rule, under the broad authority conferred upon the Secretary in
developing the LTCH PPS, including the authority for establishing
appropriate adjustments, under section 123(a)(1) of the BBRA, as
amended by section 307(b) of the BIPA, we provided in Sec.
412.523(d)(3) of the regulations for the possibility of making a one-
time prospective adjustment to the LTCH PPS rates, so that the effect
of any significant difference between actual payments and estimated
payments for the first year of the LTCH PPS would not be perpetuated in
the LTCH PPS rates for future years. We refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53487 through 53488) for a complete
discussion of the history of the development of the one-time
prospective adjustment to the LTCH PPS standard Federal rate at Sec.
412.523(d)(3).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized
our policy to make a one-time prospective adjustment to the standard
Federal rate so that it will be permanently reduced by approximately
3.75 percent to account for the estimated difference between projected
aggregate FY 2003 LTCH PPS payments and the projected aggregate
payments that would have been made in FY 2003 under the TEFRA payment
system if the LTCH PPS had not been implemented. Specifically, using
the methodology we adopted in that same final rule, we determined that
permanently applying a factor of 0.9625 (that is, a permanent reduction
of approximately 3.75 percent) to the standard Federal rate is
necessary to ensure estimated total FY 2003 LTCH PPS payments equal
estimated total FY 2003 TEFRA payments consistent with our stated
policy goal of the one-time prospective adjustment under Sec.
412.523(d)(3) (that is, to ensure that the difference between estimated
total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA
payments is not perpetuated in the LTCH PPS payment rates in future
years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53487 through 53502) for a complete discussion of the evaluation
approach, methodology, and determination of the one-time prospective
adjustment to the LTCH PPS standard Federal rate at Sec.
412.523(d)(3).)
Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53501 through 53502), under Sec. 412.523(d)(3),
we established a policy to phase-in the permanent adjustment of 0.9625
to the standard Federal rate over a 3-year period. To achieve a
permanent adjustment of 0.9625, under the phase-in of this adjustment,
in that same final rule, we explained that we will apply a factor of
0.98734 to the standard Federal rate in each year of the 3-year phase-
in, that is, in FY 2013 (which does not apply to payments for
discharges occurring on or after October 1, 2012, and on or before
December 28, 2012, consistent with current law), FY 2014, and FY 2015.
By applying a permanent factor of 0.98734 to the standard Federal rate
in each year for FYs 2013, 2014, and 2015, we will completely account
for the entire adjustment by having applied a cumulative factor of
0.9625 (calculated as 0.98734 x 0.98734 x 0.98734 = 0.9625) to the
standard Federal rate. Accordingly, under Sec. 412.523(d)(3), we
applied a permanent factor of 0.98734 to the standard Federal rate in
both FY 2013 and FY 2014 under the established 3-year phase-in of the
one-time prospective adjustment.
In this proposed rule, for FY 2015, we are proposing to apply a
permanent one-time prospective adjustment factor of 0.98734 to the
standard Federal rate for FY 2015 under the last year of the 3-year
phase-in of the one-time prospective adjustment, in accordance with the
existing regulations under Sec. 412.523(d)(3).

D. Proposed Revision of LTCH PPS Geographic Classifications

1. Background
As discussed in the August 30, 2002 LTCH PPS final rule, which
implemented the LTCH PPS (67 FR 56015 through 56019), in establishing
an adjustment for area wage levels, the labor-related portion of an
LTCH's standard Federal payment rate is adjusted by using an
appropriate wage index based on the labor market area in which the LTCH
is located. Specifically, the application of the LTCH PPS area wage-
level adjustment, which is codified under existing Sec. 412.525(c) of
the regulations, is based on the location of the LTCH--either in an
``urban'' area or a ``rural'' area. Currently, under the LTCH PPS, as
codified under Sec. 412.503 of the regulations, an ``urban area'' is
defined as a Metropolitan Statistical Area (which includes a
Metropolitan division, where applicable) as defined by the Executive
OMB, and a ``rural area'' is defined as any area outside of an urban
area.
In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), we
revised Sec. 412.525(c) to update the labor market area definitions
used under the LTCH PPS, effective for discharges occurring on or after
July 1, 2005, based on the Executive OMB's Core-Based Statistical Area
(CBSA) designations (``CBSA designations''), which are based on 2000
Census data. We made this revision because we believed that the CBSA
designations (geographic classifications) would ensure that the LTCH
PPS wage index adjustment most appropriately accounts for and reflects
the relative hospital wage levels in the geographic area of the
hospital as compared to the national average hospital wage level. We
noted that these were the same CBSA designations implemented for acute
care hospitals under the IPPS, which were codified under Sec.
412.64(b) of the regulations, beginning in FY 2005. (For a further
discussion of the CBSA-based labor market area designations currently
used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final
rule (70 FR 24182 through 24191).) We have generally updated the LTCH
PPS CBSA designations annually since they were adopted for RY 2006 when
updates from OMB were available (73 FR 26812 through 26814, 74 FR 44023
through 44204, and 75 FR 50444 through 50445).
In OMB Bulletin No. 10-2, issued on December 1, 2009, OMB announced
that the CBSA changes in that bulletin would be the final update prior
to the 2010 Census of Population and Housing. We adopted those changes
under the

[[Page 28191]]

LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444 through
50445), effective October 1, 2010. We continued to use these CBSA
designations for FYs 2012 and 2013 (76 FR 51808 and 77 FR 53710,
respectively). New OMB labor market area delineations (which we refer
to in this section as ``new OMB delineations'') based on 2010 standards
and the 2010 Decennial Census data were announced by OMB on February
28, 2013. OMB issued Bulletin No. 13-01, which announced revisions to
the delineation of Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the uses of the delineation of these labor market areas.
(For a copy of this bulletin, we refer readers to the following Web
site: https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. This bulletin specifically provides the delineations of
all Metropolitan Statistical Areas (MSAs), Metropolitan Divisions,
Micropolitan Statistical Areas, Combined Statistical Areas, and New
England City and Town Areas in the United States and Puerto Rico based
on the standards published in the Federal Register on June 28, 2010 (75
FR 37246 through 37252) and 2010 Census data. (We note that, as
discussed in section III.B. of the preamble of this proposed rule,
consistent with the terminology used in the OMB Bulletin No. 13-01 and
the standards published in the Federal Register on June 28, 2010, when
referencing the new OMB geographic boundaries of Metropolitan
Statistical Areas (MSAs) based on 2010 standards, we are using the term
``new OMB delineations'' rather than the term ``CBSA-based labor market
area definitions'' that we have used in the past to refer to OMB
geographic boundaries of statistical areas (75 FR 37249).)
As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994
through 50995), in order to implement these changes for the LTCH PPS
(as in the case of the IPPS), it is necessary to identify the new OMB
delineations for each county and hospital in the country. While the
revisions OMB published on February 28, 2013, are not as sweeping as
the changes OMB announced in 2003, the February 28, 2013 bulletin does
contain a number of significant changes. For example, under the new OMB
delineations, there are new CBSAs, urban counties that have become
rural, rural counties that have become urban, and existing CBSAs that
have been split apart and moved to other CBSAs. Because the update was
not issued until February 28, 2013, and it was necessary for the
changes made by the update and their ramifications to be extensively
reviewed and verified, we were unable to undertake such a lengthy
process before publication of the FY 2014 rulemaking cycle. That is, by
the time the update was issued, the FY 2014 IPPS/LTCH PPS proposed rule
was in the advanced stages of development, and the proposed FY 2014
LTCH PPS wage indexes based on the CBSA designations that are currently
used under the LTCH PPS had been developed. Therefore, we did not
propose to use the changes to the LTCH PPS CBSA designations for FY
2014 based on the new OMB delineations. Rather, to allow for sufficient
time to assess the new changes and their ramifications, we stated that
we intended to propose the adoption of the new OMB delineations and the
corresponding changes to the wage index based on those delineations
under the LTCH PPS for FY 2015 through notice and comment rulemaking,
consistent with the approach used under the IPPS (78 FR 50994 through
50995). As discussed below, in this proposed rule, under the authority
of section 123 of the BBRA, as amended by section 307(b) of the BIPA,
we are proposing to adopt the new OMB delineations announced in the
February 28, 2013 OMB Bulletin No. 13-01, effective for FY 2015 under
the LTCH PPS, consistent with the approach proposed for the IPPS as
discussed in section III.B. of the preamble of this proposed rule.
2. Proposed Use of the New OMB Labor Market Area Delineations (``New
OMB Delineations'')
Historically, Medicare prospective payment systems have utilized
labor market area definitions developed by the OMB. As discussed above,
the CBSA designations currently used under the LTCH PPS are based on
the most recent market area definitions issued by the OMB. The OMB
reviews its market area definitions/delineations based on data from the
preceding decennial census to reflect more recent population changes.
As discussed above and in section III.B. of the preamble of this
proposed rule, the new OMB delineations are based on the OMB's latest
market area delineations based on the 2010 Decennial Census data.
Because we believe that the OMB's latest labor market area delineations
are the best available data that reflect the local economies and wage
levels of the areas in which hospitals are currently located, we are
proposing to adopt the new OMB delineations based on the 2010 Decennial
Census data under the LTCH PPS, beginning in FY 2015, for the reasons
discussed below (which are consistent with the IPPS proposal discussed
in section III.B. of the preamble of this proposed rule).
When we implemented the wage index adjustment under Sec.
412.525(c) for the LTCH PPS, and updated the LTCH PPS labor market area
definitions based on the CBSA designations beginning in RY 2006, we
explained that the LTCH PPS wage index adjustment was intended to
reflect the relative hospital wage levels in the geographic area of the
hospital as compared to the national average hospital wage level. (We
refer readers to the RY 2003 LTCH PPS final rule (67 FR 56016) and the
RY 2006 LTCH PPS final rule (70 FR 24184).) Because we believe that the
new OMB delineations based on 2010 Decennial Census data reflect the
most recent available geographic classifications (market area
delineations), we are proposing to revise the geographic
classifications used under the LTCH PPS based on these new OMB
delineations to ensure that the LTCH PPS wage index adjustment
continues to most appropriately account for and reflect the relative
hospital wage and wage-related costs in the geographic area of the
hospital as compared to the national average hospital wage and wage-
related costs. Specifically, we are proposing to adopt the new OMB
delineations (as discussed in greater detail below), effective for LTCH
PPS discharges occurring on or after October 1, 2014 (that is,
effective for FY 2015). We note that, because the application of the
LTCH PPS area wage-level adjustment under existing Sec. 412.525(c) is
made on the basis of the location of the LTCH--either in an ``urban''
area or a ``rural'' area as those terms are defined under existing
Sec. 412.503. Under Sec. 412.503, an ``urban area'' is defined as a
Metropolitan Statistical Area as defined by the Executive OMB. A
``rural area'' is defined as any area outside of an urban area.
Therefore, we are not proposing any changes to the existing regulations
under this proposal.
As discussed in section III.B. of this preamble, while CMS and
other stakeholders have explored potential alternatives to the current
CBSA-based labor market system, no consensus has been achieved
regarding how best to implement a replacement system. While we
recognize that MSAs are not designed specifically to define labor
market areas, we believe that they do represent a useful proxy for this
purpose. Consistent with the approach taken for the IPPS, we have used
MSAs to define labor market areas for

[[Page 28192]]

purposes of Medicare wage indices under the LTCH PPS since its
implementation in FY 2003. MSAs also are used to define labor market
areas for purposes of the wage index for many of the other Medicare
payment systems (for example, the IRF PPS, the SNF PPS, the HHA PPS,
the OPPS, and the IPF PPS). (We refer readers to the RY 2006 LTCH PPS
final rule (70 FR 24184).) Therefore, under the authority of section
123 of the BBRA, as amended by section 307(b) of the BIPA, we are
proposing to adopt the new OMB delineations as described in the
February 28, 2013 OMB Bulletin No. 13-01, effective under the LTCH PPS
for FY 2015. In addition, we are proposing to use these new OMB
delineations to calculate area wage indexes in a manner that is
consistent with the CBSA-based methodologies finalized in the RY 2006
LTCH PPS final rule, as refined in subsequent rulemaking. We also are
proposing a wage index transition policy (as discussed in more detail
below) for LTCHs that would experience a negative payment impact due to
the proposed use of the new OMB delineations. This proposal, including
the proposed wage index transition policy, is consistent with the
proposal under the IPPS presented in section III.B. of the preamble of
this proposed rule. The discussion below is focused on issues related
to the proposed use of the new OMB delineations to define labor market
areas for purposes of the wage index adjustment under the LTCH PPS, and
is consistent with what is being proposed for the IPPS.
a. Micropolitan Statistical Areas
When we adopted the CBSA designations under the LTCH PPS in RY
2006, we discussed CMS' consideration of whether to use Micropolitan
Statistical Areas to define the labor market areas for the purpose of
the LTCH PPS wage index. OMB defines a ``Micropolitan Statistical
Area'' as a Consolidated Metropolitan Statistical Area (CMSA)
``associated with at least one urban cluster that has a population of
at least 10,000, but less than 50,000'' (70 FR 24183). We refer to
these areas as ``Micropolitan Areas.'' After conducting an extensive
impact analysis, we determined that the best course of action would be
to treat all hospitals located in ``Micropolitan Areas'' as ``rural,''
and to include these hospitals in the calculation of each State's rural
wage index. Because Micropolitian Areas tend to encompass smaller
population centers and contain fewer hospitals than MSAs, we determined
that if Micropolitan Areas were to be treated as separate labor market
areas, the IPPS wage index would include drastically more single-
provider labor market areas. This larger number of labor market areas
with fewer providers could create instability in year-to-year wage
index values for a large number of hospitals; could reduce the
averaging effect of the wage index, lessening some of the efficiency
incentive inherent in a system based on the average hourly wages for a
large number of hospitals; and could arguably create an inequitable
system when so many hospitals would have wage indexes based solely on
their own wage data while other hospitals' wage indexes would be based
on an average hourly wage across many hospitals. For these reasons, we
adopted a policy to include Micropolitan Areas in the State's rural
wage area, and have continued this policy through the present. (We
refer reader to the RY 2006 LTCH PPS final rule (70 FR 24187).)
Based upon the 2010 Decennial Census data, a number of rural and
urban counties have joined or have become Micropolitan Areas, while
other counties that once were part of a Micropolitan Area under
previous OMB CBSA designations, have become either urban or rural under
the new OMB delineations. Overall, there are fewer Micropolitan Areas
(541) under the new OMB delineations based on 2010 Decennial Census
data than existed under the data from the 2000 Census (581). We believe
that it is appropriate to continue the policy established in the RY
2006 LTCH PPS final rule, and we are proposing to treat Micropolitan
Areas as rural labor market areas under the LTCH PPS. These areas
continue to be defined as having relatively small urban cores
(populations of 10,000-49,999). We do not believe that it would be
appropriate to calculate a separate wage index for areas that typically
may include only a few hospitals for the reasons set forth in the RY
2006 LTCH PPS final rule, as discussed above. Therefore, in conjunction
with our proposal to use the new OMB labor market area delineations,
under the authority of section 123 of the BBRA, as amended by section
307(b) of the BIPA, for FY 2015, we are proposing to continue to treat
Micropolitan Areas as ``rural,'' and to assign the Micropolitan Area
the statewide rural wage index for the State in which the LTCH is
located. We also are proposing that, beginning in FY 2015, the wage
data for any IPPS hospitals located in the Micropolitan Areas would be
included in the calculation of each State's LTCH PPS rural area wage
index. (As discussed in section V.B.2. of the Addendum to this proposed
rule, the LTCH PPS area wage index values are calculated using the wage
data of IPPS hospitals.) We note that this proposal is consistent with
the proposal for the IPPS discussed in section III.B.2.a. of the
preamble of this proposed rule. We refer readers to section VII.D.2.e.
of this preamble for a discussion of our proposals to moderate the
impact of our proposed use of the new OMB delineations under the LTCH
PPS.
b. Urban Counties That Became Rural Under the New OMB Labor Market Area
Delineations
In proposing to use the new OMB delineations, which are based upon
2010 Decennial Census data, for FY 2015, we found that there are a
number of counties (or county equivalents) that are defined as
``urban'' under the previous CBSA designations that are now defined as
``rural'' under the new OMB delineations. As discussed in section
III.B. of this preamble, an analysis of the new OMB delineations shows
that a total of 37 counties (and county equivalents) that were
considered to be part of an ``urban'' CBSA are now considered to be
located in a ``rural'' area, beginning in FY 2015, based on the new OMB
delineations. We refer readers to a table presented in section
III.B.2.b. of the preamble of this proposed rule that lists the 37
urban counties that would be defined as rural if we finalize our
proposal to use the new OMB delineations. Under our proposal to use the
new OMB delineations for the LTCH PPS, we are proposing that LTCHs
located in any of the 37 counties listed in the table under section
III.B.2.b. of the preamble of this proposed rule would be considered
``rural,'' and would receive their respective State's rural area wage
index for FY 2015 under the LTCH PPS. We note that, currently, there
are no LTCHs located in any of the 37 counties listed in the table that
are currently considered to be part of an ``urban'' CBSA and that would
be considered to be located in a ``rural'' area, beginning in FY 2015,
if the proposed adoption of the new OMB delineations is finalized. We
also proposing that, if finalized, the wage data for any IPPS hospitals
located in those 37 counties listed in the table now would be
considered ``rural'' when calculating the respective State's LTCH PPS
rural area wage index beginning in FY 2015. (As discussed in section
V.B.2. of the Addendum to this proposed rule, the LTCH PPS area wage
index values are calculated using the area wage data of IPPS
hospitals.) We note that this proposal is consistent with the proposal
under the IPPS discussed in section

[[Page 28193]]

III.B.2.b. of the preamble of this proposed rule. We refer readers to
section VII.D.2.e. of the preamble of this proposed rule for a
discussion of our proposals to moderate the impact of our proposal to
implement the new OMB delineations under the LTCH PPS.
c. Rural Counties That Became Urban Under the New OMB Labor Market Area
Delineations
In proposing to use the new OMB labor market area delineations
(which are based upon 2010 Decennial Census data) for FY 2015, we found
that there are a number of counties (or county equivalents) that are
defined as ``rural'' under the previous OMB definitions (that is, CBSA
designations) that would be considered ``urban'' if the proposed
adoption of the new OMB delineations is finalized. As discussed in
section III.B.2.c. of the preamble of this proposed rule, an analysis
of the new OMB labor market area delineations shows that a total of 105
counties (and county equivalents) that were previously located in
``rural'' areas now are located in an ``urban'' area under the new OMB
delineations. We refer readers to a table in section III.B.2.c. of the
preamble of this proposed rule that lists the 105 ``rural'' counties
that would be located in an ``urban'' area, if we finalize our proposal
to adopt the new OMB delineations presented in section III.B.2.c. of
the preamble of this proposed rule. There are currently no LTCHs
located in the 105 ``rural'' counties listed in that table.
Under our proposal to adopt the new OMB labor market area
delineations, we are proposing that LTCHs located in any of those 105
counties now would be included in their new respective ``urban'' CBSAs
and would receive the respective ``urban'' CBSA's area wage index. We
also are proposing that, beginning in FY 2015, the wage data for any
IPPS hospitals located within those 105 counties now would be included
in the calculation of the LTCH PPS area wage index for those hospitals'
respective ``urban'' CBSAs. (As discussed in section V.B.2. of the
Addendum to this proposed rule, the LTCH PPS area wage index values are
calculated using the area wage data of IPPS hospitals.) We note that
this proposal is consistent with the proposal for the IPPS discussed in
section III.B.2.c. of the preamble of this proposed rule. We refer
readers to section VII.D.2.e. of the preamble of this proposed rule for
a discussion of our proposals to moderate the impact of our proposal to
implement the new OMB delineations under the LTCH PPS.
d. Urban Counties Moved to a Different Urban CBSA Under the New OMB
Labor Market Area Delineations
In addition to ``rural'' counties that would become ``urban'' and
``urban'' counties that would become ``rural'' under the new OMB
delineations, we found that several urban counties shifted from one
urban CBSA to another urban CBSA. In certain cases, the new OMB
delineations involved a change only in the CBSA name or code, while the
CBSA continued to encompass the same constituent counties. However, in
other cases, under the new OMB delineations, some counties are shifted
between existing urban CBSAs and new urban CBSAs, changing the
constituent makeup of those CBSAs. For example, in some cases, entire
CBSA are subsumed by another CBSA. In other cases, some CBSAs have
counties that are split off as part of a different urban CBSA, or to
form entirely new labor market areas. We refer readers to section
III.B.2.d. of the preamble of this proposed rule for additional
information, including examples, on urban counties that are moved from
one urban CBSA to a different urban CBSA under the new OMB
delineations. LTCHs located in these affected counties that would move
from one urban CBSA to a different urban CBSA under our proposal to
adopt the new OMB delineations would experience both negative and
positive impacts in regard to the LTCH's specific area wage index
values. We refer readers to section VII.D.2.e. of the preamble of this
proposed rule for a discussion of our proposals to moderate the impact
imposed upon hospitals because of our proposal to adopt the new OMB
labor market area delineations under the LTCH PPS.
e. Proposed Transition Period
As indicated above, overall, we believe that our proposal to adopt
the new OMB delineations would result in LTCH PPS wage index values
being more representative of the actual costs of labor in a given area.
However, we also recognize that some LTCHs would experience decreases
in their area wage index values as a result of our proposal. We also
realize that many LTCHs would have higher area wage index values under
our proposal. To mitigate the impact imposed upon hospitals, we have in
the past provided for transition periods when adopting changes that
have significant payment implications, particularly large negative
impacts. While we believe that using the new OMB delineations would
create a more accurate payment adjustment for differences in area wage
levels, we also recognize that adopting such changes may cause some
short-term instability in LTCH PPS payments. Therefore, under the
authority of section 123 of the BBRA, as amended by section 307(b) of
the BIPA, we are proposing a transition policy for LTCHs that would
experience a decrease in their area wage index values due to our
proposal to adopt the new OMB delineations under the LTCH PPS.
Specifically, for FY 2015, we are proposing to compute a blended area
wage index value for any LTCH that would experience a decrease in its
area wage index value solely due to the proposed adoption of the new
OMB delineations beginning in FY 2015. That is, for purposes of
determining an LTCH's area wage index for FY 2015, we are proposing to
compute LTCH PPS wage index values using the proposed area wage data
discussed above and in section V.B.4. of the Addendum to this proposed
rule under both the current (FY 2014) CBSA designations and the
proposed (FY 2015) new OMB delineations based on the 2010 OMB Decennial
Census data. For each LTCH, we are proposing to compare these two
proposed wage indexes. If an LTCH's proposed wage index under the
proposed adoption for FY 2015 of the new OMB delineations is lower than
the LTCH's proposed wage index under the FY 2014 CBSA designations, we
are proposing that, for FY 2015, the LTCH would be paid based on a
blended wage index that would be computed as the sum of 50 percent of
each of the two proposed wage index values described above (referred to
as the proposed 50/50 blended wage index). If an LTCH's proposed wage
index under the proposed adoption for FY 2015 of the new OMB
delineations is higher than the LTCH's proposed wage index under the FY
2014 CBSA designations, we are proposing that, for FY 2015, the LTCH
would be paid based on 100 percent of the proposed wage index under the
proposed FY 2015 new OMB delineations (and would not receive the
proposed 50/50 blended wage index).
Furthermore, we are proposing that the proposed transitional area
wage index policy be used in a budget neutral manner. Under Sec.
412.525(c)(2), any changes to the adjustment for differences in area
wage levels are made in a budget neutral manner such that estimated
aggregate FY 2015 LTCH PPS payments are unaffected; that is, will be
neither greater than nor less than estimated aggregate LTCH PPS
payments without such changes to the area wage-level adjustment. Under
this policy, we determine an area wage-level

[[Page 28194]]

adjustment budget neutrality factor that is applied to the standard
Federal rate (under Sec. 412.523(d)(4)) to ensure that any changes to
the area wage-level adjustments are budget neutral such that any
changes to the wage index values or labor-related share would not
result in any change (increase or decrease) in estimated aggregate LTCH
PPS payments. Because our proposed transition policy for LTCHs that
would experience a decrease in their area wage index values solely as a
result of our finalized policy to adopt the new OMB delineations under
the LTCH PPS would result in an increase in estimated aggregate LTCH
PPS payments without such changes, we are proposing to include the
proposed 50/50 blended wage index in our calculations for the proposed
area wage-level adjustment budget neutrality factor that would be
applied to the proposed standard Federal rate to ensure that any
changes to the area wage-level adjustment are budget neutral.
Specifically, consistent with our established methodology, we are
proposing to use the following methodology to determine a proposed area
wage-level adjustment budget neutrality factor for FY 2015:
Proposed Step 1--We are proposing to simulate estimated
aggregate LTCH PPS payments using the FY 2014 wage index values as
established in Tables 12A and 12B for the FY 2014 IPPS/LTCH PPS final
rule (which is available via the Internet on the CMS Web site) and the
FY 2014 labor-related share of 62.537 percent as established in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50996).
Proposed Step 2--We are proposing to simulate estimated
aggregate LTCH PPS payments using the proposed FY 2015 wage index
values as shown in Tables 12A through 12D for this proposed rule (which
are available via the Internet on the CMS Web site), including the
proposed transitional 50/50 blended wage index values, if applicable
(as discussed in section V.B.4. of the Addendum of this proposed rule),
and the proposed FY 2015 labor-related share of 62.571 percent (as
discussed in section V.B.3. of the Addendum to this proposed rule).
Proposed Step 3--We are proposing to determine the ratio
of these estimated total LTCH PPS payments by dividing the estimated
total LTCH PPS payments using the FY 2014 area wage-level adjustments
(calculated in proposed Step 1) by the estimated total LTCH PPS
payments using the proposed FY 2015 area wage-level adjustments
(calculated in proposed Step 2) to determine the proposed FY 2015 area
wage-level adjustment budget neutrality factor.
Proposed Step 4--We are proposing to then apply the
proposed FY 2015 area wage-level adjustment budget neutrality factor
from proposed Step 3 to the proposed FY 2015 LTCH PPS standard Federal
rate after the application of the proposed FY 2015 annual update as
discussed in section V.A.2. of the Addendum to this proposed rule.
As explained above, we are proposing to apply this factor in
determining the proposed FY 2015 standard Federal rate to ensure that
the proposed updates to the area wage-level adjustment for FY 2015
would be implemented in a budget neutral manner. For this proposed
rule, using the steps in the methodology described above, we determined
a FY 2015 area wage-level adjustment budget neutrality factor of
1.0002034.
We note that this proposed transitional area wage index policy
under our proposal to adopt the new OMB delineations for FY 2015 under
the LTCH PPS is consistent with the proposals under the IPPS presented
in sections III.B.2.e.(5) and (6) of the preamble of this proposed
rule. As noted previously in section VII.D.2.b. of the preamble of this
proposed rule, there are currently no LTCHs located in an ``urban''
county that would become ``rural'' under the proposal to adopt the new
OMB delineations. Therefore, we are not proposing a transitional area
wage index policy that is consistent with the IPPS proposal presented
in section III.B.2.e.(2). of the preamble of this proposed rule for
hospitals that are currently located in an ``urban'' county that would
become ``rural'' under the proposed adoption of the new OMB
delineations. We also note that we are not proposing any transitional
policies under the LTCH PPS that would be consistent with those
presented under the IPPS for hospitals with a reclassification or
redesignation as discussed in section III.B.2.e.(3). of the preamble of
this proposed rule, or for hospitals deemed urban under section
1886(d)(8)(B) of the Act as discussed in section III.B.2.e.(4) of the
preamble of this proposed rule, as those reclassifications,
redesignations, and statutory deems are not applicable to LTCHs.

E. Reinstatement and Extension of Certain Payment Rules for LTCH
Services--The 25-Percent Threshold Payment Adjustment

1. Background
Section 1206(b)(1)(A) of the Pathway for SGR Reform Act of 2013
(Pub. L. 113-67), enacted on December 26, 2013, provides for the
retroactive reinstatement and extension, for an additional 4 years, of
the moratorium on the full implementation of the 25-percent threshold
payment adjustment (hereinafter referred to as ``the 25-percent
policy'') under the LTCH PPS established under section 114(c) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c)
and 10312(a) of the Affordable Care Act. In addition, section
1206(b)(1)(B) of Public Law 113-67 provides for a permanent exemption
from the application of the 25-percent policy for certain grandfathered
co-located LTCHs and LTCH satellite facilities.
Section 1206(b)(1)(C) of Public Law 113-67 also requires that ``. .
. [n]ot later than 1 year before the end of the 9-year period referred
to in section 114(c)(1) of the Medicare, Medicaid, and SCHIP Extension
Act of 2007 (42 U.S.C. 1395ww note), as amended by subparagraph (B) [of
section 1206 of Pub. L. 113-67], the Secretary of Health and Human
Services shall submit to Congress a report on the need for any further
extensions (or modifications of the extensions) of the 25 percent rule
described in sections 412.534 and 412.536 of title 42, Code of Federal
Regulations, particularly taking into account the application of
section 1886(m)(6) of the Social Security Act, as added by subsection
(a)(1) [of section 1206 of Pub. L. 113-67].'' We refer readers to
section VII.I.2. of the preamble of this proposed rule for further
discussion of this report.
The 25-percent policy is a payment adjustment under the LTCH PPS,
originally established in our regulations at 42 CFR 412.534 for LTCHs
and LTCH satellite facilities and their co-located referring hospitals
in the FY 2005 IPPS final rule (69 FR 49191), and at 42 CFR 412.536 for
all other LTCHs and referring hospitals in the RY 2007 LTCH PPS final
rule (72 FR 26870), based on analyses of Medicare discharge data that
indicated that patterns of patient shifting appeared to be occurring
more for provider financial advantage than for patient benefit. In
order to discourage such activity, a payment adjustment was applied for
LTCH discharges of patients who were admitted to the LTCH from the same
referring hospital in excess of an applicable percentage threshold,
which was to transition to a 25-percent threshold after specified
phase-in periods. (For rural and single-urban LTCHs and those with MSA-
dominant referring hospitals, a 50-percent threshold was applied.).
Under this policy, discharges in excess of the threshold are paid at an
``IPPS equivalent'' rate, instead of the much higher LTCH PPS rate. (We
refer readers to detailed discussions of the 25-percent

[[Page 28195]]

policy for LTCH HwHs and LTCH satellite facilities in the FY 2005 IPPS
final rule (69 FR 49191 through 49214) and its application to all other
LTCHs in the RY 2008 LTCH PPS final rule (72 FR 26919 through 26944).)
The results of the different rulemaking schedules in effect when
Sec. Sec. 412.534 and 412.536 were implemented (FY 2005 (October 1,
2004) and RY 2007 (July 1, 2006), respectively) are as follows: for co-
located LTCHs and LTCH satellite facilities governed under Sec.
412.534, the 25-percent policy was effective for cost reporting periods
beginning on or after October 1, 2005 (``October'' LTCHs); for LTCHs
and LTCH satellite facilities governed under Sec. 412.536, the 25-
percent policy was effective for cost reporting periods beginning on or
after July 1, 2007 (``July'' LTCHs). In addition, even though
grandfathered LTCH HwHs and LTCH satellite facilities are governed
under Sec. 412.534(h), they are ``July'' LTCHs because the 25-percent
policy was applied to these facilities in the RY 2008 LTCH PPS final
rule.
Section 114(c) of the MMSEA, as amended by section 4302(a) of the
ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act,
provided for a 5-year moratorium on the full application of the 25-
percent policy that expired for some LTCHs and LTCH satellite
facilities for cost reporting periods beginning on or after October 1,
2012 (``October'' LTCHs) and for other LTCHs and LTCH satellite
facilities for cost reporting periods beginning on or after July 1,
2012 (``July'' LTCHs). (For a detailed description of the moratorium on
the application of the 25-percent policy, we refer readers to the May
22, 2008 Interim Final Rule with Comment Period (73 FR 29699 through
29704) and the August 27, 2009 Interim Final Rule with Comment Period
for the ARRA, which was published in the FY 2010 IPPS final rule and
Changes to the LTCH PPS and Rate Years 2010 and 2009 Rates final rule
(74 FR 43990 through 43992).
The expiration of the statutory moratorium for both ``July'' and
``October'' LTCHs was delayed because CMS established regulatory
extensions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through
53484), as amended by the FY 2013 IPPS/LTCH PPS correcting amendment
(77 FR 63751 through 63753). Specifically, we established a 1-year
extension (that is, for cost reporting periods beginning on or after
October 1, 2012, and before October 1, 2013) on the full application of
the 25-percent policy for ``October'' LTCHs. For those ``July'' LTCHs
that would have been affected by the ``gap'' between the expiration of
the statutory moratorium (for cost reporting periods beginning on or
after July 1, 2012) and our prospective regulatory relief (for cost
reporting periods beginning on or after October 1, 2012), we also
provided for an additional moratorium based on LTCH discharges
occurring on or after October 1, 2012 and ending at the start of the
LTCHs' next cost reporting period. For those ``July'' LTCHs with cost
reporting periods beginning on or after October 1, 2012, the regulatory
extension of the statutory moratorium, described above, effective for
the hospital's first cost reporting period beginning on or after
October 1, 2012, resulted in seamless coverage for that group. However,
for those ``July'' LTCHs with cost reporting periods beginning on or
after July 1, 2012, and before October 1, 2012, that would have
otherwise been subject to the ``gap'' between the expiration of the
statutory moratorium and the effective date of the regulatory
moratoria, we established a second regulatory moratorium effective with
discharges occurring beginning October 1, 2012, through the end of the
LTCH's cost reporting period (that is, the end of the cost reporting
period that began on or after July 1, 2012, and before October 1,
2012). Therefore, by providing for the above described regulatory
extension for ``July'' LTCHs, we eliminated the distinction between
``July'' and ``October'' LTCHs, which resulted in the 25-percent policy
being applied for all cost reporting periods beginning on or after
October 1, 2012, following the expiration of the moratorium. For more
details about these moratoria, we refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53483 through 53484).
Because we did not extend the regulatory moratorium on the 25-
percent policy in the FY 2014 IPPS/LTCH PPS final rule, the full
application of the payment adjustment policy was effective for all
LTCHs (both ``October'' and ``July'' LTCHs) for cost reporting periods
beginning on or after October 1, 2013 (78 FR 50772).
2. Proposed Implementation of Section 1206(b)(1) of Public Law 113-67
As stated earlier, section 1206(b)(1)(A) of Public Law 113-67
provides an additional amendment to section 114(c) of the MMSEA, as
amended by section 4302(a) of the ARRA and sections 3106(c) and
10312(a) of the Affordable Care Act, that extends the ``original''
statutory moratorium on the full implementation of the 25-percent
policy to a total of 9 years from the original effective dates
established by the MMSEA (July 1 or October 1, 2007, as applicable). As
a result, the lapse of the regulatory moratorium on the full
implementation of the 25-percent policy is moot. This ``seamless''
statutory moratorium provides relief until cost reporting periods
beginning on or after July 1, or October 1, 2016, as applicable.
Section 1206(b)(1)(B) provides a permanent exemption from the 25-
percent policy for certain grandfathered co-located LTCHs and LTCH
satellite facilities.
In this proposed rule, based on the statutory changes made by
sections 1206(b)(1)(A) and (b)(1)(B) of Public Law 113-67, we are
proposing to make conforming amendments to the regulations governing
application of the 25-percent policy. Specifically, we are proposing to
revise Sec. Sec. 412.534(c)(1)(i) and (c)(1)(ii), (c)(2), (c)(3),
(d)(1) and (d)(1)(i), (d)(2), (d)(3), (e)(1) and (e)(1)(i), (e)(2),
(e)(3), the introductory text of paragraph (h), (h)(4), and (h)(5) and
to remove paragraph (h)(6); and removing paragraphs (a)(1)(iii) and
(a)(2)(ii), revising (a)(2), and removing paragraph (a)(3) of Sec.
412.536 to reflect the statutory changes.

F. Proposed Changes to the Fixed-Day Thresholds Under the ``Greater
Than 3-Day Interruption of Stay'' Policy Under the LTCH PPS

1. Background
The interrupted stay policy is a payment adjustment that was
included under the LTCH PPS from the inception; that is, for cost
reporting periods beginning on or after October 1, 2002 (FY 2003). In
this discussion, we use the terms ``interrupted stay'' and
``interruption of stay'' interchangeably. An ``interruption of stay''
occurs when during the course of an LTCH hospitalization, a patient is
discharged to an inpatient acute care hospital, an IRF, or a SNF for
treatment or services not available at the LTCH for a specified period
followed by a readmittance to the same LTCH. We refer readers to the RY
2003 LTCH PPS final rule (67 FR 56002). When we established this
policy, we believed that the readmission to the LTCH represented a
continuation of the initial treatment, a stay in which an
``interruption'' occurred, rather than a new admission if the length of
stay at the intervening facility was within a specified number of days.
If an ``interruption of stay'' occurred, payment for both ``halves'' of
the LTCH discharge were then ``bundled,'' and Medicare would make one
payment based on the second date of discharge. Specifically, under this
policy, we established a fixed-day threshold, which applied to the
specified number of days

[[Page 28196]]

a Medicare beneficiary spends as an inpatient at an acute care
hospital, an IRF, or a SNF. In the RY 2003 LTCH PPS final rule, we
explained that we were implementing this policy because we wanted ``. .
.to reduce the incentives inherent in a discharged-based prospective
payment system of ``shifting'' patients between Medicare-covered sites
of care in order to maximize Medicare payments. This policy is
particularly appropriate for LTCHs because, as a group, these hospitals
differ considerably in the range of services offered such that where
some LTCHs may be able to handle certain acute conditions, others will
need to transfer their patients to acute care hospitals.
``For instance, some LTCHs are equipped with operating rooms and
intensive care units and are capable of performing minor surgeries.
However, other LTCHs are unable to provide those services and will need
to transfer the beneficiary to an acute care hospital. We believed that
our policy also provided for a patient . . . ``who no longer requires
hospital-level care, but is not ready to return to the community,'' and
who ``. . . could be transferred to a SNF.'' (We refer readers to the
RY 2003 LTCH PPS final rule (67 FR 56002).)
Therefore, in the regulations under 42 CFR 412.531, we defined two
types of interruptions of stays. Under Sec. 412.531(a)(1), ``[a] 3-day
or less interruption of stay'' means a stay at a LTCH during which a
Medicare inpatient is discharged from the LTCH to an acute care
hospital, IRF, SNF, or the patient's home and readmitted to the same
LTCH within 3 days of the discharge from the LTCH. Whereas under the
``3 day or less interruption of stay policy,'' the fixed-day threshold
period begins with the calendar date of discharge from the LTCH and
ends not later than midnight of the third day, if an LTCH patient's
``interruption'' exceeds this threshold, payment is governed by the
``greater than 3-day interruption of stay'' policy. (We refer readers
to the RY 2005 LTCH PPS final rule (69 FR 25690 through 25700), the RY
2006 LTCH PPS final rule (70 FR 24206), and the RY 2007 LTCH PPS final
rule (71 FR 27872 through 27875) for detailed discussions of the 3-day
or less interruption of stay policy.) We are not proposing to revise
the 3-day or less category of interrupted stays, but we make mention of
the policy for clarity in making a distinction between the 3-day or
less interruption of stay policy and the greater than 3-day
interruption of stay policy that we are proposing to revise.
The ``greater than 3-day interruption of stay policy,'' is defined
under Sec. 412.531(a)(2) as a stay ``. . . during which a Medicare
inpatient is transferred upon discharge to an acute care hospital, an
IRF, or a SNF for treatment or services that are not available in the
long-term care hospital and returns to the same long-term care hospital
within the applicable fixed-day period specified in regulations under
Sec. 412.531(a)(2)(i) through (a)(2)(iii).'' For a discharge to an
acute care hospital, the applicable fixed-day period is between 4 and 9
consecutive days; the counting of the days begins on the calendar day
of discharge from the LTCH and ends on the 9th day when the patient is
readmitted to the LTCH. For a discharge to an IRF, the applicable
fixed-day period is between 4 and 27 consecutive days; the counting of
the days begins on the calendar day of discharge from the LTCH and ends
on the 27th day. For a discharge to a SNF, the applicable fixed-day
period is between 4 and 45 consecutive days; the counting of the days
begins on the calendar day of discharge from the LTCH and ends on the
45th day.
These timeframes reflect our policy of only paying for more than
one discharge if the patient's length of stay exceeds one standard
deviation from the average length of stay. As we stated in the RY 2003
LTCH PPS final rule, this policy was established with the intent of
``balanc[ing] the payment incentives of both the LTCH and the acute
care hospital, IRF, or SNF to which the LTCH patient is discharged
before being readmitted to the LTCH,'' and is intended to ensure ``that
discharges from LTCHs are based on clinical considerations and not
financial incentives'' (67 FR 56002). As we stated at that time, we
believed that a threshold of one standard deviation from the average
length of stay would address the cost-based disincentives inherent in
cases that significantly exceed the average length of stay.
Furthermore, the threshold would ``capture the majority of the
discharges that are similar to the average length of stay for the
respective DRG, combination CMG and comorbidity tier, or for all
Medicare SNF cases.'' Specifically, in establishing this policy, we
calculated the average length of stay plus one standard deviation for
each inpatient setting in which an ``interruption'' could occur in
order to determine a fixed-day threshold. This use of a standard
deviation as the justification for additional payment is consistent
with our use of a standard deviation measure as the measure for paying
additional amounts for new technologies under the acute care hospital
inpatient prospective payment system. Under that system, ``the cost of
a new technology must exceed one standard deviation beyond the mean
standardized charge for all cases in the DRG to which the new
technology is assigned in order to receive additional payments'' (67 FR
56002).
Therefore, if an LTCH readmission occurs within the fixed-day
period both halves of the LTCH discharge are treated as a single
discharge for the purposes of payment under the LTCH PPS. In such
instances, the beneficiary's readmittance to the LTCH is paid for with
a single LTC-DRG payment that covers the initial admission to the LTCH,
and the subsequent readmission. That is, a single Medicare payment is
made for the entire two-part discharge. Payment to the acute care
hospital, the IRF, or the SNF is then made in accordance with the
applicable payment policies for those providers when the interruption
of stay exceeds 3 days. Therefore, we balanced the payment incentives
of both the LTCH and the acute care hospital, IRF, or SNF to which the
LTCH patient might be discharged before being readmitted to the LTCH.
As we discussed in the RY 2003 LTCH PPS final rule (67 FR 56007),
our concerns about patient shifting were significantly increased in the
context of transfers between co-located LTCHS and LTCH satellite
facilities, or for LTCH hospital-within-hospital transfers.
Collectively, we refer to these arrangements as transfers to ``onsite''
providers. In the regulations under Sec. 412.532(b), we define a
facility that is ``co-located or ``on-site'' as ``a hospital, satellite
facility, unit, or SNF that occupies space in a building also used by
another hospital or unit or in one or more buildings on the same
campus, as defined in Sec. 413.65(a)(2) of this subchapter, as
buildings used by another hospital or unit.'' Under this LTCH PPS
policy, if more than 5 percent of the Medicare patients discharged from
an LTCH during a cost reporting period were discharged to an ``onsite''
SNF, IRF, or psychiatric facility, or to an ``onsite'' acute care
hospital, and directly readmitted to the same LTCH, the LTCH would be
paid one MS-LTC-DRG payment to cover both LTCH discharges, regardless
of the length of the interrupted stay. As is the case in regard to the
greater than 3-day interruption of stay policy, payment to an acute
care hospital, an IRF, or a SNF would not be affected under the 5-
percent policy. We refer readers to the RY 2003 LTCH PPS final rule for
a

[[Page 28197]]

detailed description of the 5-percent policy (67 FR 56007 through
56014).
Our concern about patient shifting among ``onsite'' providers did
not originate with the implementation of the LTCH PPS. The LTCH 5-
percent policy under Sec. 412.532 was recodified from an earlier
regulation under Sec. 413.40(a)(3), which applied a payment adjustment
to hospitals paid under the TEFRA payment system, including LTCHs, to
address inappropriate discharges of patients to a host hospital paid
under the inpatient prospective payment system from an excluded
hospital-within-a-hospital (such as a LTCH), that culminated in a
readmission to the hospital-within-a-hospital. (We refer readers to the
RY 1999 LTCH PPS final rule (64 FR 41353) and the RY 2003 LTCH PPS
final rule (67 FR 56007).) In the RY 2003 LTCH PPS final rule, we
adopted this payment adjustment under the LTCH PPS to ``address
inappropriate shifting of patients among these providers without
clinical justification to maximize Medicare payment'' due to
inappropriate incentives to prematurely discharge patients to one of
these other onsite providers once their lengths of stay at the LTCH
exceeded the thresholds established by the short-stay outlier
policies.'' Therefore, we sought to ensure that discharges would not be
based on ``payment considerations rather than on a clinical basis as an
extension of the normal progression of appropriate patient care.''
2. Thresholds Used in Recent Statutory Programs
Two previously implemented Medicare initiatives, the Hospital IQR
Program, established by section 501(b) of the Medicare Prescription
Drug, Improvement, and Modernization Act (MMA) of 2003, and the
Readmission Reduction Program, established by section 3025 of the
Affordable Care Act, include measures that focus, among other things,
on the implied relationships between quality patient care and payment
consequences for the Medicare program resulting from patient
readmissions. The Hospital IQR Program, which we discuss in detail in
section IX.A. of the preamble of this proposed rule, publicly reports,
among other things, inpatient outcome measures, including 30-day
readmissions for specific medical conditions (acute myocardial
infarction, heart failure, pneumonia, total hip/knee arthroplasty,
hospital-wide all-cause unplanned, stroke, and COPD). The Hospital
Readmissions Reduction Program, which we discuss in section IV.H. of
the preamble of this proposed rule, requires CMS to reduce payments to
IPPS hospitals with excess readmissions, effective for discharges
beginning on October 1, 2012. Under that program, we define a
``readmission'' as an admission to a subsection (d) hospital within 30
days of a discharge from the same or another subsection (d) hospital.
As noted in our response to a public comment in the FY 2012 IPPS/LTCH
PPS final rule, the ``timeframe of 30 days from the date of the initial
discharge from the index hospitalization is the timeframe that has been
NQF[National Quality Forum]-endorsed as part of the three readmission
measures. The timeframe of 30 days is considered an acceptable standard
[for quality measurement] in both the research and measurement
communities, as this time period is long enough to capture a
substantial proportion of readmissions attributable to an index
hospitalization . . . and yet it is short enough that outcomes can be
attributed to and influenced by hospital care and the early transition
to the outpatient setting. The use of the 30-day timeframe is also a
clinically meaningful period for hospitals to collaborate with their
communities in an effort to reduce readmissions.'' (We refer readers to
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51669 through 51670).)
In light of the 30-day threshold established for the Hospital IQR
Program and the Hospital Readmissions Reduction Program, we conducted
an evaluation of our greater than 3-day interruption of stay policy. A
review of claims data indicates that interrupted stays at acute care
hospitals constitute the vast majority of the intervening stays under
the interruption of stay policy. When implementing policies under the
Hospital IQR Program and the Hospital Readmissions Reduction Program,
we have, in effect, asserted that a second inpatient episode of care
that occurs within 30 days of an initial (index) hospitalization is
likely linked to the first stay. Under the LTCH PPS, the application of
the payment adjustment specified in the ``greater than 3-day
interruption of stay'' policy is based on the number of days that
elapsed between the initial LTCH discharge and the beneficiary's
readmission to the same LTCH. An interruption of stay that does not
exceed the fixed-day threshold would result in one ``bundled''
discharge-based payment to cover both LTCH discharges. An interruption
of stay that exceeds the fixed-day threshold would currently result in
two separate Medicare payments under the LTCH PPS. However, we believe
that it would be more appropriate to use a 30-day interval as the
fixed-day threshold under the greater than 3-day interruption of stay
policy under the LTCH PPS because that is consistent with the intervals
used in the Hospital Readmissions Reductions Program and the Hospital
Inpatient Quality Reporting Program. As such, we are proposing to
revise the fixed-day thresholds under the greater than 3-day
interruption of stay policy to provide for a 30-day fixed threshold as
an ``acceptable standard'' for determining a linkage between an index
discharge and a readmission from an inpatient facility as specified
under this policy, that is, an IPPS hospital, an IRF, or a SNF.
3. Proposed Changes to the Greater Than 3-Day Interruption of Stay
Policy
We are proposing to adopt a 30-day standard as the fixed-day
threshold under the LTCH PPS ``greater than 3-day interruption of
stay'' policy. To do so, we are proposing to amend our regulations by
revising Sec. Sec. 412.531(a)(2) and (b)(4) and adding new paragraphs
(a)(3) and (b)(5) to reflect this proposed policy change.
Under our proposed policy revision, Medicare payments to LTCHs for
patients discharged on or after October 1, 2014, who are treated in an
acute care hospital, IRF, or SNF and readmitted to the same LTCH within
30 days of the index LTCH discharge, both discharges from the LTCH
would be treated as one episode of care and a single discharge payment
would be made to the LTCH. In addition, because we believe that this
30-day fixed-day threshold policy would address ``onsite'' concerns, we
are proposing to remove Sec. 412.532, that currently governs
discharges from LTCHs to ``onsite'' providers that subsequently readmit
the patient to the same LTCH. If we finalize our proposal to adopt the
30-day fixed-day threshold under the LTCH PPS greater than 3-day
interruption of stay policy, we no longer believe that the regulatory
requirements under Sec. 412.532 are necessary and, therefore, we are
proposing to remove that section in its entirety. Furthermore, a
determination as to whether an LTCH has exceeded its 5-percent
threshold under the LTCH PPS 5-percent policy occurs only upon cost
report settlement, and as such, reflects an ``after the fact'' payment
adjustment rather than an ``up front'' payment adjustment, such as the
payment adjustments that would be applied under our proposed greater
than 3-day interruption of stay policy. As such, we believe that the 5-
percent policy has a limited impact on provider behavior, and we do not
believe that retaining it has significant value to the Medicare
program.

[[Page 28198]]

In summary, we are proposing to revise the regulations under
Sec. Sec. 412.531(a)(2) and (b)(4) and to add new Sec. Sec.
412.531(a)(3) and (b)(5) to reflect this proposed payment policy
revision. In addition, we are proposing to remove Sec. 412.532 in its
entirety and make a conforming change to Sec. 412.525 by removing and
reserving paragraph (d)(3), which references payments under Sec.
412.532.

G. Moratoria on the Establishment of LTCHs and LTCH Satellite
Facilities and on the Increase in the Number of Beds in Existing LTCHs
or LTCH Satellite Facilities

As previously noted, Public Law 113-67 was enacted on December 26,
2013. Section 1206(b)(2) of Public Law 113-67 amended section 114(d) of
the MMSEA of 2007, as previously amended by section 4302 of the
American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111-5)
and sections 3106(b) and 10312(b) of the Affordable Care Act (Pub. L.
111-148). As further amended by section 112(b) of the Protecting Access
to Medicare Act of 2014 (Pub. L. 113-93), section 114(d) of the MMSEA
includes a ``new'' statutory moratoria on the establishment of new
LTCHs and LTCH satellite facilities, and on the increase in the number
of hospital beds in existing LTCHs and LTCH satellite facilities, ``for
the period beginning April 1, 2014 and ending September 30, 2017,''
which mirrors nearly identical provisions of the ``expired'' moratoria
under section 114(d)(1) of the MMSEA, as amended by sections 4302 of
the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act.
These prior, yet nearly identical, provisions of section 114(d)(1) of
the MMSEA, as amended by the ARRA and the Affordable Care Act, expired
on December 28, 2012. For clarity and brevity, we will refer to the
``expired'' moratoria or moratorium to reference those that expired on
December 28, 2012, and the ``new'' moratoria or moratorium to reference
those that began on April 1, 2014, as applicable, throughout this
discussion.
The primary difference between the ``expired'' moratoria and the
``new'' moratoria is that, while the ``expired moratoria'' provided for
specific exceptions to both the moratorium on the establishment of new
LTCHs and LTCH satellite facilities and on increases in the number of
beds in existing LTCHs and LTCH satellite facilities, the ``new''
moratoria only provides exceptions to the moratorium on the
establishment of new LTCHs and LTCH satellite facilities. No exceptions
are provided under the ``new'' moratorium on increases in the number of
hospital beds in existing LTCHs and LTCH satellite facilities. (For a
detailed description of the ``expired'' moratoria provisions (including
the applicable exceptions) that were in effect from December 29, 2007
through December 28, 2012, we refer readers to the May 22, 2008 Interim
Final Rule with Comment Period (73 FR 29705 through 29708).
In light of the expiration date of the ``expired'' moratoria on
December 28, 2012, and the effective date of the ``new'' moratoria on
April 1, 2014, there has been a period of time in which new LTCHs and
LTCH satellite facilities have been allowed to be established, and
during which time there may have been increases in the number of
hospital beds in LTCHs and LTCH satellite facilities. In accordance
with section 114(d)(1) of the MMSEA, as amended by section 112(b) of
Public Law 113-93, for the period beginning April 1, 2014 through
September 30, 2017, CMS will be unable to designate any hospital as an
LTCH, unless one of the exceptions (described below) is met.
Additionally, as of April 1, 2014, in accordance with sections
114(d)(6) and (d)(7) of the MMSEA, as amended by section 112(b) of
Public Law 113-93, an existing LTCH may not increase the number of its
hospital beds. This moratorium will extend through September 30, 2017,
and is not subject to any exceptions.
To qualify for an exception under the ``new'' moratorium to
establish a new LTCH or LTCH satellite facility during the timeframe
between April 1, 2014, and September 30, 2017, a hospital or entity
must meet the following criteria:
The hospital or entity must have begun its qualifying
period for payment as an LTCH under 42 CFR 412.23(e).
The hospital or entity must have a binding written
agreement with an outside, unrelated party for the actual construction,
renovation, lease, or demolition for an LTCH, and must have expended
before April 1, 2014, at least 10 percent of the estimated cost of the
project or, if less, $2,500,000.
The hospital or entity must have obtained an approved
certificate of need in a State where one is required.
While this exception only applies to the ``new'' moratorium on the
establishment of new LTCHs and LTCH satellite facilities under section
114(d)(7) of the MMSEA, as amended by section 112(b) of Public Law 113-
93, the mechanics of the exception are analogous to those established
under the ``expired'' moratorium, which ended in 2012. The ``expired''
moratoria were implemented in a May 22, 2008 Interim Final Rule with
Comment Period (73 FR 29704 through 29707). As discussed in that rule,
some of the terminology in the statutory provision was internally
inconsistent. A strictly literal reading of the statutory language
under section 114(d)(2) of the MMSEA, as amended by section 4302 of the
ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act,
presented practical challenges for implementation in light of the
established LTCH classification criteria under Sec. 412.23(e) of the
regulations. Therefore, we adopted interpretations that we believed
would reasonably reconcile seemingly inconsistent provisions and that
would result in a logical and workable mandate. Specifically, as
drafted, the exception only applies to a hospital or entity when it is
already classified as an ``LTCH.'' Such entities would not need an
exception to the moratorium on becoming an ``LTCH'' because they would
already be an LTCH. As such, we are proposing to interpret this
provision under the new exception as we interpreted the exceptions to
the ``expired'' moratorium. We discuss our interpretations below.
At the outset of this discussion, we want to clarify which
provisions of section 114(d) of the MMSEA, as amended, were subject to
the ``expired'' moratoria, and which are subject to the ``new''
moratoria. Sections 114(d)(2) and (3) of the MMSEA, as amended, only
address exceptions under the ``expired'' moratoria. Section (d)(6) of
the MMSEA, as amended, defines when the exceptions addressed in
sections 114(d)(2) and (3) expired. Section (d)(7) of the MMSEA
addresses the exception under the ``new'' moratorium on the
establishment of new LTCHs and LTCH satellite facilities. There are no
exceptions to the ``new'' moratorium on the increases in the number of
beds in existing LTCHs and LTCH satellite facilities, as noted above.
Section 114(d)(7)(A) of the MMSEA, as amended, mirrors the expired
provisions of section 114(d)(2)(A). Both provisions refer to an LTCH
that began its qualifying period for payment as a ``long-term care
hospital'' on or before a given date. However, a hospital would not be
classified as an LTCH during that qualifying period; the facility or
entity would typically be classified as an IPPS hospital. For a full
discussion of our rationale for interpreting section 114(d)(2)(A) of
the MMSEA to refer to an IPPS hospital meeting the stated requirements,
we refer readers to our May 22, 2008 Interim Final Rule with Comment
Period (73 FR 20704 through 29707) regarding the implementation of the
``expired'' moratorium. We are proposing to apply the same rationale in

[[Page 28199]]

regard to the interpretation of section 114(d)(7)(A), that is, we are
proposing to interpret the provision to refer to an acute care hospital
meeting the stated requirements as the hospital or entity seeks
classification as an LTCH. As we did when interpreting the same
language under the ``expired'' moratorium exception under section
114(d)(2)(A) of the MMSEA, as amended by section 4302 of the ARRA and
sections 3106(b) and 10312(b) of the Affordable Care Act, we note that
the exception under section 114(d)(7)(A) of the MMSEA cannot provide
any relief to LTCH satellite facilities because there is no
``qualifying period'' for the establishment of a LTCH satellite
facility for payment as a LTCH under Sec. 412.23(e). Therefore, an
LTCH satellite facility cannot meet the stated requirements for an
exception under section 114(d)(7)(A) of the MMSEA.
Section 114(d)(7)(B) of the MMSEA specifies the conditions for an
exception to the moratorium on the establishment of new LTCHs and LTCH
satellite facilities having: (1) A binding written agreement with an
outside, unrelated party for the actual construction, renovation,
lease, or demolition for an LTCH; and (2) expended, before the date of
enactment of Public Law 113-93, April 1, 2014, ``at least 10 percent of
the estimated cost of the project (or, if less, $2,500,000).'' As
drafted, this provision is also problematic. In cases in which a
hospital has not yet been built, but there is a binding written
agreement for the actual construction of a hospital that intends to be
classified as an LTCH, the entity hiring those who would complete the
construction would not be classified as an LTCH. Prior to the
designation or classification of a hospital or an entity as an LTCH, a
hospital must first be established and certified and must then complete
the procedures specified under Sec. 412.23(e) in order to qualify as
an LTCH, at which point the hospital would be reclassified as an LTCH.
In accordance with our interpretation of section 114(d)(2)(B) of
the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b)
and 10312(b) of the Affordable Care Act, we are proposing to interpret
the contracting and expenditure provisions under section 114(d)(7)(B)
of the MMSEA, as added by section 112(b) of Public Law 113-93, to apply
to the hospital/entity requesting an exception to the moratorium on the
establishment of new LTCHs and LTCH satellite facilities between April
1, 2014, and September 30, 2017--the entity that would be classified as
an LTCH if it meets the stated requirements. That entity must have a
binding written agreement with an outside unrelated party for the
actual construction, renovation, lease, or demolition for converting
the hospital to an LTCH, and it must have expended at least 10 percent
of the estimated cost of the project (or, if less, $2,500,000) by the
date of enactment of Public Law 113-93--April 1, 2014.
Furthermore, with regard to the first prong, as when we implemented
the ``expired'' moratoria, we continue to believe that the use of the
term ``actual'' in the context of the ``actual construction,
renovation, lease, or demolition'' indicates that the provision focuses
only on the specific actions cited in the statute, and does not include
those actions that are being contemplated or are not yet substantially
underway. Although we are aware that a hospital or some other type of
entity may enter into binding written agreements regarding services and
items (for example, feasibility studies or land purchase) and incur
costs for those services and items prior to actual construction,
renovation, lease or demolition, we believe that those services or
items are not included in what we are permitted to consider under the
statutory language of the exception requirements.
With respect to the second prong, the statute specifies that the
hospital or entity must have ``expended'' at least 10 percent of the
estimated cost of the project (or, if less, $2,500,000) by April 1,
2014. As we did in regard to the interpretation of section 114(d)(2)(B)
of the MMSEA, as amended by section 4302 of the ARRA and section
3106(b) and 10312(b) of the Affordable Care Act, we are proposing to
interpret the phrase ``cost of the project'' to mean the activities
enumerated in the first prong: ``The actual construction, renovation,
lease, or demolition for a long-term care hospital.'' That is, the
statute requires the hospital or entity to have spent the amount
specified in the statute on the actual construction, renovation, lease,
or demolition for the contemplated LTCH. Furthermore, as we did
previously in regard to the interpretation of section 114(d)(2)(B) of
the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b)
and 10312(b) of the Affordable Care Act, because the statute uses the
phrase ``has expended'' (that is, a past tense phrase), we are
proposing to limit funds counting toward the 10 percent or $2,500,000
minimum to those funds that have actually been transferred as payment
for the stated aspects of the project prior to April 1, 2014, as
opposed to merely obligating capital and posting the cost of the
project on its books. We believe that the provision addressed the
concept of ``obligate'' in the first prong of the test where the
statute specifies ``a binding written agreement . . . for the actual
construction, renovation, lease, or demolition of the long-term care
hospital . . .'' and there is no reason to believe that the second
prong of the test, which requires the ``expenditure'' of 10 percent of
the project or, if less, $2,500,000, was intended as a redundancy. The
ability to post the expense on the hospital's or entity's books could
be satisfied by merely having a binding written agreement under the
first prong of section 114(d)(7)(B) of the MMSEA. The fact that a
second requirement is included that involves an expenditure indicates
that an additional threshold must be met.
Finally, section 114(d)(7)(C) of the MMSEA includes an exception to
the moratorium if an LTCH, as of April 1, 2014, has ``obtained an
approved certificate of need in a State where one is required.'' As
discussed above, we are proposing to apply this exception requirement
to the entity that is requesting approval for an exception to the
moratorium on the establishment of new LTCHs and LTCH satellite
facilities between April 1, 2014, and September 30, 2017--the entity
that would be classified as an ``LTCH'' if the stated requirements are
met.
However, with that said, we are clarifying what kind of certificate
of need we are proposing to accept under the provisions of section
114(d)(7) of the MMSEA. We believe that the certificate of need
exception applies to a ``hospital'' or entity that was actively engaged
in developing an LTCH, as evidenced by the fact that either an entity
that wanted to create a LTCH but did not exist as a hospital as of
April 1, 2014, had obtained a certificate of need for a hospital by the
date of enactment, or an existing hospital had obtained a certificate
of need to convert the hospital into a new LTCH by that date. We are
proposing not to apply this exception requirement to a hospital that
was already in existence prior to the date of enactment of Public Law
113-93, and that had previously obtained an approved certificate of
need for a hospital (other than a LTCH) on or before April 1, 2014. We
believe that Congress intended the exception to the moratorium to save
those entities that were already actively engaged in becoming an LTCH.
The fact that a hospital may have had a certificate of need issued to
it years before April 1, 2014, to operate a hospital (other than a
LTCH) is not indicative of such active engagement, and, we believe, is
outside

[[Page 28200]]

of what is contemplated in these LTCH-specific statutory provisions. We
are proposing to only apply this exception requirement where the
certificate of need was specifically for an LTCH. Because the
certificate of need process is controlled at the State level, in
determining whether the hospital or entity has obtained an approved
certificate of need on or before April 1, 2014, we would consult the
applicable State on a case-by-case basis for that determination.
Decisions regarding the application of these moratoria and
exceptions provided within the provisions of section 114(d) of the
MMSEA will be handled on a case-by-case basis by the applicant's MAC
and the CMS Regional Office.
In accordance with these proposals, we also are proposing to revise
our regulations under Sec. 412.23(e)(6) and (e)(7) to include a
description of the ``new'' moratoria, which is in effect from April 1,
2014, through September 30, 2017, on the establishment of new LTCHs and
LTCH satellite facilities (with specific exceptions), and on increasing
the number of beds in existing LTCHs and existing LTCH satellite
facilities.

H. Evaluation and Proposed Treatment of LTCHs Classified Under Section
1886(d)(1)(B)(iv)(II) of the Act

Section 1206(d) of the Pathway for SGR Reform Act (Pub. L. 113-67)
instructs the Secretary to evaluate payments and regulations governing
``hospitals which are classified under subclause (II) of subsection
(d)(1)(B)(iv) . . .'' as part of the annual rulemaking for payment
rates under subsection (d) of section 1886 of the Act for FY 2015 or FY
2016. (We refer to hospitals ``classified under subclause (II) of
subsection (d)(1)(B)(iv) . . .'' as ``subclause (II) LTCHs.'') Based on
the results of this evaluation, the Secretary is authorized to adjust
the payment rates under section 1886(b)(3) of the Act for this type of
hospital (such as by applying a payment adjustment such that the
payments resemble those under a ``TEFRA-payment model''). To implement
such a payment adjustment, the Secretary would have to propose changes
to the existing regulations governing subclause (II) LTCHs.
For this proposed rule, under the requirements of section
1206(d)(1) of Public Law 113-67 to evaluate the payment rates and
regulations governing subclause (II) LTCHs, we have reviewed Medicare
data from the only hospital meeting the statutory definition of a
subclause (II) LTCH. As a result of these analyses, we are proposing to
apply a payment adjustment to subclause (II) LTCHs beginning in FY
2015, which would result in payments for this category of LTCHs that
resemble a payment based upon a TEFRA payment model (that is, a
reasonable cost payment, subject to a ceiling).
Section 4417(b) of the BBA established the meaning of ``subsection
(d) hospitals,'' which are paid under the IPPS, and in doing so,
excluded two categories of hospitals that experience extended average
inpatient length of stays. It also authorized the Secretary to define
how an average inpatient length of stay would be calculated for these
excluded hospitals. These provisions are included under sections
1886(d)(1)(B)(iv)(I) and (d)(1)(B)(iv)(II) of the Act, and the two
categories of hospitals are generally referred to as subclause (I) and
subclause (II) LTCHs.
Subclause (I) LTCHs are required to have an average inpatient
length of stay that is greater than 25 days. Subclause (II) LTCHs are
only required to have an average inpatient length of stay of greater
than 20 days. The subclause (II) LTCH definition further limited the
classification of a subclause (II) LTCH by including the requirement
that the LTCH must have been first excluded from the IPPS in CY 1986,
and treated a Medicare inpatient population in which 80 percent of the
discharges in the 12-month reporting period ending in Federal FY 1997
had a principal diagnosis that reflected a finding of neoplastic
disease. This statutory requirement is implemented under 42 CFR
412.23(e)(2)(ii).
In establishing the category of subclause (II) LTCHs, Congress
essentially authorized special treatment of a hospital that, since
1986, had focused on the provision of palliative care to Medicare
beneficiaries diagnosed with end-stage cancer. In consideration of the
distinction between hospitals qualifying as LTCHs, either as a
subclause (I) LTCH or a subclause (II) LTCH, we established different
standards for counting the average inpatient length of stay values for
these two categories of LTCHs. We calculate the greater than 25-day
average length of stay criteria using only Medicare claims data for
subclause (I) LTCHs. However, for subclause (II) LTCHs, we calculate
the average length of stay based on its entire patient population. We
refer readers to the RY 2003 LTCH PPS final rule (67 FR 55974) for a
full discussion of our rationale for implementing these average length
of stay calculation methodologies.
The theoretical foundations of any PPS are based on a system of
averages, where the costs of some cases may exceed the payment, while
other cases' costs will be less than the payment, creating an adequate
balance in payments. Therefore, it is assumed that a hospital paid
under a PPS would be able to maintain a balance of patients that will
allow the hospital to achieve fiscal stability. With that said, in
developing the LTCH PPS we were aware that a per discharge PPS system
that pays the same amount for every case in a specific MS-LTC-DRG could
encourage hospitals to make decisions based on financial considerations
(such as prematurely discharging patients to reduce the cost of such
cases). As per discharge payments under the LTCH PPS are based on the
extended lengths of stay that characterize LTCHs, at the outset of the
LTCH PPS, we established a short-stay outlier (SSO) policy under which
we apply a payment adjustment for LTCH discharges with lengths of stay
that do not exceed \5/6\ of the geometric average length of stay of the
MS-LTC-DRG. Equally, we were aware that there would be exceptionally
expensive cases that could create financial disincentives to treat such
patients and, therefore, we adopted a high-cost outlier (HCO) policy as
well. However, given the nature of a subclause (II) LTCH's patient
population, it may not be reasonable to expect a balancing of more and
less costly cases, as these LTCHs are generally only treating a subset
of very sick patients. As such, we modified our original SSO payment
policy for subclause (II) LTCHs, and we exempted this category of LTCHs
from additional changes to the SSO policy to account for the extremely
high percentage of cases that our data analysis revealed would have
been subject to our SSO policy if that policy were to be applied to
subclause (II) LTCHs.
In accordance with the requirements of section 1206(d)(1) of Public
Law 113-67, we conducted an evaluation of the payment rates and
regulations governing subclause (II) LTCHs. We analyzed MedPAR claims
data for FY 2010 and estimated Medicare costs incurred by the one LTCH
currently classified as a subclause (II) LTCH, a 225-bed LTCH located
in New York. We also evaluated the same metrics for two comparison
groups of LTCHs, that is, approximately 40 LTCHs located in the same
census region (that is, the Northeast Census Region, which includes
Connecticut, Maine, New Jersey, and Pennsylvania), and approximately 25
LTCHs with the same bed size category (that is, between 150 and 250
beds) in order to assess the distinctions between a subclause (I) LTCH
and a subclause (II) LTCH. For purposes of this analysis, LTCH PPS

[[Page 28201]]

payments were calculated from the payment field in the MedPAR claims
data, and the estimated costs for those claims were calculated using
the covered charges and CCRs in the Provider-Specific File (PSF) that
correlate to the discharge date on each claim. We calculated the
aggregate average margins (ratio of payment to costs) for the subclause
(II) LTCH and for the two sets of comparison groups of LTCHs using the
calculated FY 2010 costs and payments. Our analysis found that, under
current LTCH PPS payment policy, the subclause (II) LTCH has much lower
margins than comparable LTCHs located in the Northeast Census Region or
LTCHs with 150-250 beds. Specifically, the subclause (II) LTCH had a
negative margin for its Medicare patients paid under LTCH PPS in FY
2010, while both the Northeast Census Region LTCHs and LTCHs with 150-
250 beds had positive aggregate margins for its Medicare patients paid
under LTCH PPS for the same period.
In our evaluation of subclause (II) LTCHs under the LTCH PPS, in
accordance with the requirements of section 1206(d) of Public Law 113-
67, we also compared the types of patients treated at subclause (I) and
subclause (II) LTCHs. The top five MS-LTC-DRGs for patients treated at
the subclause (II) LTCH in FY 2010 account for almost one-third of all
of its Medicare discharges. Four of the top five MS-LTC-DRGs for the
subclause (II) LTCH involve a neoplastic disease, and its case-mix
differs significantly from the subclause (I) LTCHs, which had large
proportions of ventilator and respiratory patients. The five most
common MS-LTC-DRGs for the subclause (I) LTCHs were: Respiratory system
diagnosis with ventilator support 96+ hours (MS-LTC-DRG 207); Pulmonary
edema and respiratory failure (MS-LTC-DRG 189); Septicemia or severe
sepsis without ventilator support 96+ hours with MCC (MS-LTC-DRG 870);
Skin ulcers with MCC (MS-LTC-DRG 592); and Respiratory system diagnosis
with ventilator support < 96 hours (MS-LTC-DRG 208). In comparison, for
the subclause (II) LTCH, the five most common MS-LTC-DRGs were:
Respiratory neoplasms with CC (MS-LTC-DRG 181); Digestive malignancy
with CC (MS-LTC-DRG 375); Respiratory neoplasms with MCC (MS-LTC-DRG
180); Organic disturbances & mental retardation (MS-LTC-DRG 884); and
Malignancy, female reproductive system w CC (MS-LTC-DRG 755). These
data highlight significant differences between a subclause (I) LTCH and
a subclause (II) LTCH based on patient-mix and Medicare margins,
notwithstanding the considerations that have been made in structuring
the current LTCH regulations to acknowledge the uniqueness of an LTCH
meeting the statutory definition of a subclause (II) LTCH.
In evaluating ``both the payment rates and regulations governing
hospitals which are classified under subclause (II) . . .,'' as
required by section 1206(d) of Public Law 113-67, we also analyzed the
impacts of upcoming changes to the LTCH PPS under section 1206(a) of
Public Law 113-67. In discussing these analyses, we note that, as
discussed in section VII.I.2. of the preamble of this proposed rule, we
are not proposing any specific policy and payment changes in this
proposed rule to implement the provisions of section 1206(a) of Public
Law 113-67. We intend to establish policies related to the types of
LTCH cases expected to meet the legislative patient-level criteria for
the ``standard LTCH PPS payment'' and cases expected to meet the
criteria for the ``site neutral'' payments under the LTCH PPS in the FY
2016 rulemaking cycle. Although we are not making any proposals in this
proposed rule related to the provisions of section 1206(a) of Public
Law 113-67 at this time, we discuss these provisions in this section
because they relate to our analysis of the LTCH PPS payment rates and
regulations governing subclause (II) LTCHs.
Absent policy proposals for the implementation of section 1206(d)
of Public Law 113-67, the payment changes required by section 1206(a)
of Public Law 113-67 would apply to subclause (II) LTCHs beginning with
discharges occurring in cost reporting periods beginning on or after
October 1, 2015 (that is, FY 2016 and beyond). Due to the changes
required by the provisions of section 1206(a) of Public Law 113-67
(discussed at greater length under section VII.I. of the preamble of
this proposed rule), beginning in FY 2016, only those LTCH discharges
meeting specified patient-level clinical criteria will be paid a
``standard LTCH PPS payment amount.'' Discharges not meeting those
criteria will be paid based on a ``site neutral'' payment amount (the
lesser of the ``IPPS comparable'' amount, as applied under our SSO
policy at Sec. 412.529, or 100 percent of the estimated costs of the
case). The statutory requirements to be paid the ``standard LTCH PPS
payment amount'' are that the LTCH discharge does not have a principal
diagnosis relating to a psychiatric diagnosis or to rehabilitation,
and:
The stay in the LTCH was immediately preceded by a
discharge from an acute care hospital that included at least 3 days in
an intensive care unit (ICU); or
The stay in the LTCH was immediately preceded by a
discharge from an acute care hospital and the patient's LTCH stay is
assigned to an MS-LTC-DRG based on the receipt of ventilator services
of at least 96 hours.
Furthermore, section 1206(a)(1)(C)(ii)(II) of Public Law 113-67
specifies that, effective with cost reporting periods beginning on or
after FY 2020, any LTCH with an ``LTCH discharge payment percentage''
that demonstrates that more than 50 percent of that LTCH's discharges
were paid for based on the ``site neutral'' payment rate will
subsequently be paid for all discharges at the rate ``. . . that would
apply under subsection (d) for the discharge if the hospital were a
subsection (d) hospital.'' We refer readers to section VII.I. of the
preamble of this proposed rule for a further discussion of the
provisions of section 1206(a) of Public Law 113-67.
In light of these forthcoming statutory changes, we evaluated
MedPAR claims data from the only hospital meeting the statutory
definition of a subclause (II) LTCH for FY 2010 to project the impact
of the revisions to the LTCH PPS made by section 1206(a) of Public Law
113-67. Our simulations included analyses of the potential financial
impact of applying the patient-level criteria and ``site neutral''
payment policies to a subclause (II) LTCH, and the financial impact on
payments if that LTCH were to be paid for more than 50 percent of its
discharges at the ``site neutral'' payment rate. In conducting this
analysis in the absence of rules implementing the changes mandated by
section 1206(a) of Public Law 113-67, we assumed that there would be no
changes in LTCH admission patterns in response to the LTCH PPS payment
changes required by section 1206(a) of Public Law 113-67. Furthermore,
we used the FY 2010 claims data for the subclause (II) LTCH and the two
LTCH comparison groups described above in order to compare the
potential effects of the payment changes under the LTCH PPS required by
section 1206(a) of Public Law 113-67 between subclause (I) LTCHs and
subclause (II) LTCHs. We simulated payments for those discharges that
would be expected to meet the legislative patient-level criteria for
the ``standard LTCH PPS payment'' and for discharges that would be
expected to receive ``site neutral'' payments under the LTCH PPS. Our
analysis found that the subclause (II) LTCH would be

[[Page 28202]]

expected to have significantly fewer (approximately 5 times fewer)
discharges that would be expected meet the legislative patient-level
criteria for the ``standard LTCH PPS payment'' than the comparison
groups of subclause (I) LTCHs (that is, Northeast Census Region LTCHs
and LTCHs with 150-250 beds).
Additionally, we analyzed the potential effects of the ``LTCH
discharge payment percentage'' provision under the requirements of
section 1206(a)(1)(C)(ii)(II) of Public Law 113-67, as noted above. We
evaluated FY 2010 claims data from the subclause (II) LTCH to project
the potential impact of this provision. Based on our simulations in
which we projected which FY 2010 LTCH claims would be expected to
receive ``site neutral'' payments under the LTCH PPS (as described
above), and having found a significant number, we project that a
significant negative financial impact would be imposed upon the
subclause (II) LTCH's payments. Without considerable behavioral
changes, the subclause (II) LTCH would be expected to have more than 50
percent of its discharges paid based on a ``site neutral'' payment and,
therefore, would receive a payment adjustment under the provisions of
section 1206(a)(1)(C)(ii)(II) of Public Law 113-67 for all of its
discharges. Furthermore, our analysis revealed that, given the
particular medical profile of their patient population, that the
``subsection (d)'' comparable payment amount under the payment
adjustment required by section 1206(a)(1)(C)(ii)(II) of Public Law 113-
67 would not likely cover the costs for a significant number of their
discharges. Consequently, our analysis shows that the subclause (II)
LTCH is projected to experience a large negative aggregate average
margin for its Medicare discharges under the payment changes required
by section 1206(a) of Public Law 113-67.
Based on our findings under our evaluation of payments to subclause
(II) LTCHs under the LTCH PPS and consistent with the provisions of
section 1206(d) of Public Law 113-67, we evaluated adjustments that
could be applied to ensure appropriate payments under the LTCH PPS for
a subclause (II) LTCH under the LTCH PPS. This analysis included
consideration of a reasonable-cost based model, such as the TEFRA
payment system under which certain PPS-excluded hospitals (such as
children's and cancer hospitals) are currently paid. The TEFRA payment
system, which was established under the provisions of Public Law 97-
248, is implemented under the regulations at 42 CFR 413.40.
In addition to governing the current payment of certain PPS-
excluded hospitals, the TEFRA payment system was also previously used
to pay LTCHs prior to the implementation of the LTCH PPS. As described
in the RY 2003 LTCH PPS final rule (67 FR 55957), the TEFRA payment
system was ``. . . established [to make] payments based on hospital-
specific limits for inpatient operating costs. A ceiling on payments to
such hospitals is determined by calculating the product of a facility's
base year costs (the year on which its target reimbursement limit is
based) per discharge, updated to the current year by a rate-of-increase
percentage, and multiplied by the number of total current year
discharges.'' (A detailed discussion of target amount payment limits
under Public Law 97-248 can be found in the September 1, 1983 final
rule published in the Federal Register (48 FR 39746).)'' Under the
TEFRA payment system, in accordance with section 1886(g) of the Act,
Medicare allowable capital costs are paid on a reasonable cost basis.
To evaluate reasonable cost-based payments under a TEFRA-payment
model for subclause (II) LTCHs, we estimated operating and capital
payments under the TEFRA payment system principles using FY 2010 cost
report data for the one LTCH currently classified as a subclause (II)
LTCH (the 225-bed LTCH located in New York noted previously). As
described above, payments for operating costs under the TEFRA payment
system are based on hospital-specific limits (that is, a ceiling). The
ceiling on payments is determined as the product of a hospital's base
year costs (the year on which its target reimbursement limit is based)
per discharge (``target amount per discharge''), updated to the current
year by a rate-of-increase percentage, and multiplied by the number of
its Medicare discharges for the year. For purposes of this analysis, we
determined the subclause (II) LTCH's TEFRA-based target amount per
discharge by updating its FY 2000 target amount per discharge (prior to
the implementation of the LTCH PPS) using the annual update factors as
established under Sec. 413.40(c)(3). We used the FY 2000 target amount
per discharge in order to calculate a target amount per discharge that
does not include the increased target amounts and caps on the target
amounts provided to LTCHs under section 307(a) of the BIPA.
Specifically, section 307(a) of the BIPA provided a 2-percent increase
to the wage-adjusted 75th percentile cap on the TEFRA target amounts
for existing LTCHs for cost reporting periods beginning in FY 2001, and
a 25-percent increase to the hospital-specific TEFRA target amounts for
LTCHs, subject to the increased 75th percentile cap. These provisions
were promulgated prior to the implementation of the LTCH PPS. However,
as required by section 307(a)(2) of the BIPA, the 2-percent increase to
the 75th percentile cap and the 25-percent increase to the TEFRA target
amounts were not to be taken into account in the development and
implementation of the LTCH PPS. To ensure that these increases would
not be included in the LTCH PPS payments to subclause (II) LTCHs,
consistent with the statutory requirement under section 307(a)(2) of
the BIPA, for purposes of our analysis, we determined the subclause
(II) LTCH's updated target amount by starting with its target amount
from the FY 2000 cost report, the year prior to when these increases
were effective. Then we updated its FY 2000 target amount per discharge
using the annual update factors established under Sec. 413.40. This
approach is consistent with the methodology we used to estimate each
LTCH's FY 2003 payment per discharge for inpatient operating costs
under the TEFRA payment system in determining the one-time prospective
adjustment under Sec. 412.523(d)(3) in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53498). For payments for capital-related costs, we used the
hospital's capital cost data from Worksheets D, Parts I and II, as
reported on their FY 2000 cost report. As described previously,
Medicare allowable capital costs are paid on a reasonable cost basis
under the TEFRA payment system, in accordance with the regulations
underSec. 413.40. This approach is also consistent with the
methodology we used to estimate each LTCH's FY 2003 payment per
discharge for inpatient capital-related costs under the TEFRA payment
system in determining the one-time prospective adjustment at Sec.
412.523(d)(3), in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53499).
Our analysis of the subclause (II) LTCH's projected payments under a
TEFRA-payment model indicated that such payments would reasonably cover
the costs for most of their discharges, and consequently, the subclause
(II) LTCH is not projected to experience a negative aggregate margin
for its Medicare discharges, unlike our projections under both the
current LTCH PPS and the forthcoming payment changes to the LTCH PPS
required by section 1206(a) of Public Law 113-67.

[[Page 28203]]

In the above analyses, we evaluated the current regulations as well
as anticipated payment rates under various statutorily mandated
policies for FY 2016 on a subclause (II) LTCH under the LTCH PPS based
on FY 2010 discharge data, including payments, costs and case-mix. As
discussed above, our evaluation indicates that, given the required
patient-mix for a subclause (II) LTCH, the forthcoming changes to the
LTCH PPS are likely to result in a financial situation that is not
sustainable for the subclause (II) LTCH evaluated above. Furthermore,
our analysis also shows that current LTCH PPS payments for a subclause
(II) LTCH, even with taking into account the considerations that have
been made in structuring current LTCH PPS policies to acknowledge the
uniqueness of a subclause (II) LTCH, may not be sufficient to cover the
costs incurred for the treatment of patients of the particular medical
profile of the subclause (II) patient population prescribed by the
statute. Furthermore, we believe that in establishing subclause (II)
LTCHs, Congress endorsed the support of the unique mission of this
particular category of hospital. In fact, while mandating a significant
revision to the LTCH PPS under section 1206(a) of Public Law 113-67,
under section 1206(d) of the same statute, Congress directed the
Secretary to evaluate the impact of the LTCH PPS on subclause (II)
LTCHs, and, based on those findings, authorized the Secretary to adjust
payment rates and other regulations, as appropriate, for this category
of LTCHs.
Accordingly, in recognition of the subclause (II) LTCH's current
estimated payment-to-cost ratio under the LTCH PPS and further
anticipated losses that would likely otherwise occur under the
forthcoming statutory changes to the LTCH PPS, which would render this
type of specially recognized facility fiscally untenable, we believe
that it is appropriate to exercise the authority under section
1206(d)(2) of Public Law 113-67. Therefore, in this proposed rule, for
cost reporting periods beginning on or after October 1, 2014 (FY 2015
and beyond), we are proposing to apply a payment adjustment to
subclause (II) LTCH payments under the LTCH PPS such that these LTCH
PPS payments would resemble payments made under the reasonable cost-
based TEFRA payment system. We believe that it would be appropriate to
apply this proposed payment adjustment for a subclause (II) LTCH's
first cost reporting period beginning on or after October 1, 2014,
rather than discharges occurring on or after October 1, 2014, because
it is consistent with the annual update of the hospital-specific limits
(ceiling) for inpatient operating costs under the TEFRA payment system
(as described below). We are proposing to implement this proposed
payment adjustment for subclause (II) LTCHs in the regulations by
adding new Sec. 412.526 under 42 CFR Part 412, Subpart O.
Specifically, we are proposing to establish new regulations under
Sec. 412.526 that would provide that, for cost reporting periods
beginning on or after October 1, 2014, payments to a ``subclause (II)''
LTCH that are made under the LTCH PPS and under Subpart O of Part 412,
as adjusted. This adjusted payment amount would generally be equivalent
to an amount determined under the reasonable cost-based reimbursement
rules for both operating and capital-related costs under 42 CFR Part
413. As described above, Medicare payments for inpatient operating
costs under the reasonable-cost based TEFRA payment system are subject
to a hospital-specific ceiling on payments that is determined as the
product of a hospital's base year costs per discharge (``target amount
per discharge''), updated to the current year by a rate-of-increase
percentage, and multiplied by the number of its Medicare discharges for
the year. Medicare allowable inpatient capital-related costs are paid
on a reasonable cost basis, in accordance with section 1886(g) of the
Act.
Under this proposed payment adjustment under new Sec. 412.526 for
inpatient operating costs, the adjusted payment amount would generally
be determined in accordance with the cited provisions of Sec. 413.40.
Accordingly, we are proposing to establish a ``target amount'' for a
subclause (II) LTCH for purposes of calculating a hospital-specific
ceiling on payments for inpatient operating costs under this proposed
payment adjustment. We are proposing to determine such a target amount
based on the subclause (II) LTCH's target amount that was used to
determine its payments for inpatient operating costs under the TEFRA
payment system prior to the implementation of the LTCH PPS, updated by
the TEFRA payment system rate-of-increase percentages under Sec.
413.40(c)(3). Furthermore, in determining a subclause (II) LTCH's
target amount for purposes of this proposed payment adjustment,
consistent with the statute (as explained below), we are proposing not
to include the increases to LTCHs' TEFRA target amounts and caps
provided for by section 307(a) of the BIPA. As discussed previously,
prior to the implementation of the LTCH PPS, section 307(a) of the BIPA
provided a 2-percent increase to the wage-adjusted 75th percentile cap
on the TEFRA target amounts for existing LTCHs for cost reporting
periods beginning in FY 2001 and a 25-percent increase to the hospital-
specific TEFRA target amounts for LTCHs, subject to the increased 75th
percentile cap. Section 307(a)(2) of the BIPA also specifies that the
2-percent increase to the 75th percentile cap and the 25-percent
increase to the TEFRA target amounts were not to be taken into account
in the development and implementation of the LTCH PPS. Therefore,
consistent with the statutory requirement under section 307(a)(2) of
the BIPA, under new Sec. 412.526, we are proposing to determine a
subclause (II) LTCH's updated target amount based on its FY 2000 TEFRA
payment system target amount, the year prior to when the increases
under section 307(a) of the BIPA were effective. Using its FY 2000
TEFRA payment system target amount would ensure that the increases
provided for by section 307(a) of the BIPA would not be included in the
LTCH PPS payments to subclause (II) LTCHs under this proposed LTCH PPS
payment adjustment. This approach for excluding those increases to the
TEFRA payment system target amounts is consistent with the methodology
that was used to develop the one-time prospective adjustment to the
standard Federal rate in which we calculated what amount would have
been paid under the TEFRA payment system had the LTCH PPS not been
implemented (77 FR 53497 through 53500). Therefore, under the proposed
payment adjustment for subclause (II) LTCHs under new Sec. 412.526, we
are proposing to determine a FY 2015 TEFRA-based target amount by
updating the subclause (II) LTCH's FY 2000 TEFRA target amount using
the applicable rate-of-increase percentages for FYs 2001 through 2015
established under Sec. 413.40(c)(3).
In addition to payment for inpatient operating costs, the proposed
adjusted payment amount for subclause (II) LTCHs that would be
equivalent to an amount determined under the reasonable cost-based
reimbursement rules under 42 CFR Part 413 would also include payment
for inpatient capital-related costs. Under the TEFRA payment system, in
accordance with the regulations under 42 CFR Part 413, Medicare
allowable capital costs are paid on a reasonable cost basis, consistent
with section 1886(g) of the Act. Therefore, we are proposing that

[[Page 28204]]

the payment adjustment to subclause (II) LTCHs under new Sec. 412.526
would include reasonable cost-based payments for capital-related costs.
Payments under the LTCH PPS encompass both inpatient operating and
capital-related costs of furnishing covered inpatient LTCH services,
including routine and ancillary costs (67 FR 55983). Accordingly, under
new Sec. 412.526, the proposed adjusted payment amount that would be
equivalent to an amount determined under the reasonable cost-based
reimbursement rules is based only on inpatient operating and capital-
related costs incurred by the subclause (II) LTCH for furnishing
covered inpatient LTCH services, and does not include any other TEFRA
system payment amounts, such as bonus and relief payments, continuous
improvement bonus payments, or adjustments to the rate-of-increase
limits.
In summary, for cost reporting periods beginning on or after
October 1, 2014, we are proposing that payment to a ``subclause (II)''
LTCH be made under the LTCH PPS, as adjusted. The adjusted payment
amount would be equivalent to an amount determined under the reasonable
cost-based reimbursement rules for both operating and capital-related
costs in accordance with the cited portions of Part 413. Under this
proposed payment adjustment, Medicare inpatient operating costs would
be reimbursed on a reasonable cost basis, subject to a ceiling; that
is, an aggregate upper limit on the amount of a hospital's net Medicare
inpatient operating costs that would be recognized for payment
purposes. For each cost reporting period, the ceiling on payments for
Medicare inpatient operating costs would be determined by multiplying
the updated target amount for that period by the number of LTCH PPS
discharges during that period. For cost reporting periods beginning
during FY 2015, the target amount would be equal to the hospital's
target amount determined under Sec. 413.40(c)(4) for its cost
reporting period beginning during FY 2000, updated by the applicable
annual rate-of-increase percentages specified in Sec. 413.40(c)(3) to
the subject period (that is, for FYs 2001 through 2015). For subsequent
cost reporting periods, the target amount would equal the hospital's
target amount for the previous cost reporting period updated by the
applicable annual rate-of-increase percentage specified in Sec.
413.40(c)(3) for the subject cost reporting period. Payment for
Medicare allowable inpatient capital-related costs under this proposed
payment adjustment would be paid on a reasonable cost basis, in
accordance with the cited portions of 42 CFR Part 413. We are proposing
to codify the provisions of this proposed payment adjustment to
subclause (II) LTCHs under new Sec. 412.526 of the regulations. In
addition, we are proposing to make conforming changes to Sec.
412.521(a)(2) to refer to this proposed payment adjustment under new
Sec. 412.526.

I. Description of Statutory Framework for Patient-Level Criteria-Based
Payment Adjustment Under the LTCH PPS Under Public Law 113-67

1. Overview
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through
27676), we presented a description of our research on the development
of patient-level and facility-level criteria for LTCHs and a potential
framework for developing changes to the LTCH PPS. The framework was
based on the preliminary findings of two projects conducted by Kennell
and Associates (Kennell) and its subcontractor, RTI, under the guidance
of CMS' Center for Medicare and Medicaid Innovation (the Innovation
Center). We stated that we believed that the findings from these
projects, in large part, could be used to identify the subpopulation of
Medicare beneficiaries that should form the core group of patients
under the LTCH PPS (that is, a chronically critical ill/medically ill
(CCI/MC) framework for the LTCH PPS). Although this research was not
completed at the time of issuance of the FY 2014 IPPS/LTCH PPS proposed
rule, we solicited feedback from LTCH stakeholders in the FY 2014 IPPS/
LTCH PPS proposed rule on the description of the interim framework, and
indicated that any public comments submitted would be evaluated and
considered by our contractors with the expectation of formulating a
proposal for FY 2015 based on this research (78 FR 27668 through
27676).
Section 1206(a) of Public Law 113-67 amended section 1886(m) of the
Act by adding paragraph (6), which establishes patient-level criteria
for payments under the LTCH PPS for implementation beginning in FY
2016. Therefore, our prior intention to present a proposal for a CCI/MC
framework for the LTCH PPS (as discussed in the FY 2014 IPPS/LTCH PPS
proposed and final rules) in this FY 2015 IPPS/LTCH PPS proposed rule
has been superseded. Accordingly, we are not proposing revisions to the
LTCH PPS based upon the Kennell/RTI framework for FY 2015. Rather, we
intend to propose to implement the requirements established by section
1206(a) of Public Law 113-67 in the FY 2016 LTCH PPS rulemaking cycle.
(We note that the final report on the CCI/MC framework developed by
Kennell/RTI under our research contract is expected to be available
later this year and will be made available to the public through a Web
site.)
In section VII.I.2. of the preamble of this proposed rule, we
summarize the statutory provisions of section 1206(a) of Public Law
113-67, and in section VII.I.3. of the preamble of this proposed rule,
we discuss several significant issues arising from these statutory
changes to the LTCH PPS, on which we are interested in receiving
stakeholder feedback prior to developing our proposals for FY 2016
implementation.
2. Provisions of Section 1206(a) of Public Law 113-67
Section 1206(a) of Public Law 113-67 added a new section
1886(m)(6), which establishes patient-level clinical criteria that must
be met in order for a standard LTCH PPS payment to be made and provides
that patients stays that do not meet those criteria that will be paid
based on an adjusted or ``site neutral'' payment rate. The provisions
of section 1206(a) are effective for LTCH discharges occurring during
cost reporting periods beginning on or after October 1, 2015 (FY 2016).
Specifically, the patient-level clinical criteria that must be met
in order for a standard LTCH PPS payment to be made under section
1886(m)(6) of the Act, as added by section 1206(a) of Public Law 113-
67, are that:
The stay in the LTCH is immediately preceded by a
discharge from an acute care hospital that included at least 3 days in
an intensive care unit (ICU); or the stay in the LTCH is immediately
preceded by a discharge from an acute care hospital and the patient's
LTCH stay was assigned to an MS-LTC-DRG based on the receipt of
ventilator services of at least 96 hours; and
The LTCH discharge does not have a principal diagnosis
relating to a psychiatric diagnosis or to rehabilitation.
Section 1886(m)(6)(A) of the Act, as added by section 1206(a) of
Public Law 113-67, specifies that payments for LTCH discharges that do
not meet the clinical criteria will be made at the applicable ``site
neutral payment rate.'' The statute defines ``site neutral payment
rate'' as the lower of the ``IPPS comparable'' amount or 100 percent of
the ``estimated cost'' of the case. The ``IPPS comparable'' amount,
which the statute specifies is calculated based on

[[Page 28205]]

the methodology applied under the short stay outlier (SSO) policy at 42
CFR 412.529(d)(4), is an amount comparable to the hospital inpatient
prospective payment system per diem capped at an amount comparable to
the full MS-DRG payment rate, including any applicable outlier payments
under Sec. 412.525. We expect to propose calculating the ``cost of the
case,'' as specified in the regulations at Sec. 412.529(d)(2), by
multiplying the applicable hospital-specific CCR by the Medicare
allowable charges for a case, consistent with how we currently estimate
the cost of the case under both the SSO and high-cost outlier policies.
Section 1886(m)(6)(B) of the Act also requires a phase-in of this
payment policy change under the LTCH PPS over 2 years. Therefore, for
LTCH discharges occurring in cost reporting periods during FYs 2016 and
2017 that do not meet the patient level clinical criteria, the total
payment amount for LTCH services will be based on one-half of the
calculated ``site neutral'' payment rate and one-half of the standard
LTCH PPS payment rate. The full payment adjustment based on the
requirements of Public Law 113-67 will begin to effect payments to
LTCHs and LTCH satellite facilities for discharges beginning with
LTCHs' and LTCH satellite facilities' FY 2018 cost reporting period.
Therefore, for cost reporting periods beginning during FY 2018, LTCHs
will be paid the standard LTCH PPS payment amount only for LTCH
discharges that meet the statutory clinical criteria under section
1886(m)(6) of the Act. LTCH discharges that do not meet the clinical
criteria will be paid based on the ``site neutral'' payment rate.
Section 1886(m)(6)(C) of the Act, as added by section 1206(a)(1) of
Public Law 113-67, also includes a limit on payments for all hospital
discharges occurring in cost reporting periods during or after FY 2021
if a hospital fails to meet the applicable LTCH discharge threshold. In
anticipation of this limit on payments, section 1886(m)(6)(C)(i) of the
Act specifies that, for cost reporting periods beginning on or after
October 1, 2015 (FY 2016), the Secretary is required to notify each
LTCH of its ``discharge payment percentage,'' which is defined under
section 1886(m)(6)(C)(iv) of the Act as the percentage resulting from
the ratio of the LTCH's discharges paid based on the standard LTCH PPS
payment amount to the LTCH's total discharges for each cost reporting
period.
Section 1886(m)(6)(C)(ii) of the Act specifies that, for cost
reporting periods during or after FY 2020, the Secretary is required to
provide notice to LTCHs with a ``discharge payment percentage'' that
indicates that the LTCH does not meet the ``at least 50 percent''
threshold. An LTCH that does not meet the required threshold for a cost
reporting period in FY 2020 will be paid for services as if the
hospital were an acute care hospital until such time as that facility
is reinstated under section 1886(m)(6)(C)(iii) of the Act.
Specifically, section 1886(m)(6)(C)(ii) of the Act provides that LTCHs
that are determined to be treating a Medicare population with less than
50 percent of patients for whom a standard LTCH PPS payment is made,
that is, LTCHs for whom 50 percent or more Medicare beneficiary
discharges are paid at the ``site neutral'' payment rate will receive
``. . . the payment amount that would apply under subsection (d) for
all discharges as if the hospital were a subsection (d) hospital.'' In
other words, LTCHs failing to meet the applicable discharge threshold
will be paid an IPPS equivalent payment rate.
Section 1886(m)(6)(C)(iii) of the Act provides that the Secretary
is authorized to establish a ``reinstatement'' process through which an
LTCH that fails to meet the required discharge threshold percentage can
be ``reinstated'' and resume receiving payments under the new payment
policy for LTCH services established by section 1206(a)(1) of Public
Law 113-67, that is, standard LTCH PPS payments or ``site neutral''
payments, as applicable.
Section 1886(m)(6)(D) of the Act, as added by section 1206(a)(1) of
Public Law 113-67, specifies that subsection (d) hospitals in Puerto
Rico are deemed to be included in any reference in section 1886(m) of
the Act to a subsection (d) hospital.
Section 1206(a)(3) of Public Law 113-67 revised the existing policy
for calculating whether an LTCH or LTCH satellite facility meets the
greater than 25-day average length of stay requirement in sections
1886(d)(1)(B)(iv)(I) and 1861(ccc)(2) of the Act, which is implemented
in the regulations at Sec. 412.23(e)(2) and (e)(3). Specifically,
section 1206(a)(3) provides that cases for which Medicare paid the
provider under the ``site neutral'' rate, as well as any paid under a
Medicare Advantage plan (that is, Medicare Part C) shall be excluded
from the calculations of the average length of stay of an LTCH or an
LTCH satellite facility. LTCHs that had not attained their LTCH
designation by December 10, 2013, are exempt from this statutorily
mandated change.
As previously stated, section 1206(a)(1) of Pub. L 113-67 provides
for ``site neutral'' payments to an LTCH for certain specified patient
discharges effective for discharges occurring in cost reporting periods
beginning on or after October 1, 2015. We intend to propose the
specific policy and payment changes that will be necessary to implement
the Public Law 113-67 provisions for cost reporting periods beginning
on or after October 1, 2015, during the FY 2016 rulemaking cycle.
Although we are not proposing the changes mandated by section
1206(a)(1) of Public Law 113-67 in this proposed rule, in light of the
degree of forthcoming changes, in section VII.I.3. we discuss some of
the changes in this proposed rule, and request public feedback to
inform our proposals for FY 2016.
3. Additional LTCH PPS Issues
The LTCH PPS was originally established for cost reporting periods
beginning on or after October 1, 2002, by section 123(a) of the BBRA
(Pub. L. 106-113) and section 307(b) of the BIPA (Pub. L. 106-554). (We
also refer readers to section 1886(m) of the Act, as added by section
114(e) of the MMSEA.) Section 307(b) of the BIPA granted the Secretary
considerable authority in developing the LTCH PPS, specifying that the
Secretary shall ``. . . examine and may provide for appropriate
adjustments to the long-term hospital payment system, including
adjustments to DRG weights, area wage adjustments, geographic
reclassification, outliers, updates, and a disproportionate share
adjustment. . . .''
Accordingly, as we evaluate the revisions to the LTCH PPS required
by section 1206(a)(1) of Public Law 113-67, we believe that the broad
authority permitted by the original statutory mandates continues to
grant us the authority to modify, if appropriate, methodologies for our
payment determinations under the LTCH PPS. (We refer readers to the RY
2003 LTCH PPS final rule (67 FR 55954), which describes the development
and implementation of the LTCH PPS for FY 2003.) Specifically, section
1206(a) of Public Law 113-67 establishes two distinct payment groups
for LTCH discharges under the revised system: discharges meeting
specified patient-level criteria that will be paid under the ``standard
LTCH PPS payment amount'' and all other patient discharges that will be
paid under the ``site neutral'' payment rate and methodology (discussed
above). In setting the payment rates and factors under the LTCH PPS as
required by section 1206(a) of Public Law 113-67 for certain LTCH PPS
payment adjustments, such as the MS-LTC-DRG relative weights and high-
cost outlier payments, we plan

[[Page 28206]]

to evaluate whether it would be appropriate to modify our historical
methodology to account for the establishment of the two distinct
payment methodologies for LTCHs. For example, we intend to examine
whether, beginning in FY 2016, it is still appropriate to include data
for all LTCH PPS cases, including ``site neutral'' payment cases, in
our methodology for setting relative payment weights for MS-LTC-DRGs.
We also intend to explore the need for changes to the LTCH PPS high-
cost outlier payment policies. Given the fact that, for a number of
LTCH patients, payment will be made based on the lower of the ``IPPS
comparable'' per diem payment and the estimated cost of the case, we
will need to decide whether to maintain a single high-cost outlier
``target'' for all LTCH PPS cases (including ``site neutral'' payment
cases) or whether it may be more appropriate to establish separate
high-cost outlier ``targets'' for each of the two payment groups under
the revised LTCH PPS. Our existing methodology for calculating the MS-
LTC-DRG relative weights is discussed during the annual rulemaking
cycle and was, most recently, included in the FY 2014 IPPS/LTCH final
rule (78 FR 50753 through 50760). Our detailed description of our
existing high-cost outlier payment policy, which has remained the same
since being implemented, can be found in the RY 2003 LTCH PPS final
rule (67 FR 56022 through 56027). (We note that our proposed
methodology for calculating the MS-LTC-DRG relative payment weights for
FY 2015 can be found in section VII.B.3. of the preamble of this
proposed rule, and our proposals under the high-cost outlier payment
policy for FY 2015 can be found in section V.D. of the Addendum to this
proposed rule.)
We are interested in receiving feedback from LTCH stakeholders on
our plans to evaluate whether it would be appropriate to modify any of
our historical methodologies as we implement the payment changes to the
LTCH PPS under section 1206(a) of Public Law 113-67. In particular, we
are interested in public feedback on the issues mentioned earlier (that
is, policies relating to establishing the relative payment weights and
high-cost outliers) so that we may evaluate various options in
preparation for developing proposals to implement the statutory changes
beginning in FY 2016.

J. Proposed Technical Change

In this proposed rule, we are proposing to update the legislative
basis for the regulations governing the LTCH PPS under Subpart O of
Part 412. Specifically, we are proposing to add references under new
paragraphs (a)(4), (a)(5), and (a)(6) of Sec. 412.500 of the
regulations to the revisions to the Act made by section 4302(a) of
Public Law 111-5, sections 3106(a) and 10312(a) of Public Law 111-148,
and section 1206 of Public Law 113-67, respectively.

VIII. Appropriate Claims in Provider Cost Reports; Administrative
Appeals by Providers and Judicial Review

In this proposed rule, we are proposing to revise the cost
reporting regulations in 42 CFR Part 413, Subpart B by requiring a
provider to include an appropriate claim for a specific item in its
Medicare cost report in order to receive or potentially qualify for
Medicare payment for the specific item. If the provider's cost report
does not include an appropriate claim for a specific item, payment for
the item will not be included in the notice of program reimbursement
(NPR) issued by the Medicare Administrative Contractor (MAC) (formerly
known as fiscal intermediary and herein referred to as ``contractor'')
or in any decision or order issued by a reviewing entity (as defined in
42 CFR 405.1801(a) of the regulations) in an administrative appeal
filed by the provider. In addition, we are proposing to revise the
appeals regulations in 42 CFR Part 405, Subpart R, by eliminating the
requirement that a provider must include an appropriate claim for a
specific item in its cost report in order to meet the dissatisfaction
requirement for jurisdiction before the Provider Reimbursement Review
Board (Board), and by specifying the procedures for Board review of
whether the provider's cost report meets the proposed substantive
reimbursement requirement of an appropriate cost report claim for a
specific item. We also are proposing technical revisions to other Board
appeal regulations to conform those regulations to the main revisions
(described above) to the cost reporting regulations and the provider
appeal regulations, in addition to proposing similar revisions to the
Part 405, Subpart R regulations for appeals before the contractor
hearing officers. In addition, we are proposing to conform the
terminology in Part 405, Subpart R and all subparts of Part 413 from
``intermediary'' or ``fiscal intermediary'' to ``contractor'' pursuant
to sections 1816, 1874A and 1878 of the Act. All of these proposed
revisions to the cost reporting regulations and the provider appeals
regulations would apply to provider cost reporting periods beginning on
or after the effective date of the final IPPS annual update rule.

A. Background

1. Payments and Cost Reporting Requirements
For cost reporting years beginning before October 1, 1983, all
providers were reimbursed on a reasonable cost basis for Part A
(hospital insurance) covered items and services that were furnished to
Medicare beneficiaries. Reasonable cost is defined at section
1861(v)(1)(A) of the Act and implementing regulations at 42 CFR Part
413. In the Social Security Amendments of 1983 (Pub. L. 98-21),
Congress added section 1886(d) to the Act, which, effective with cost
reporting periods beginning on or after October 1, 1983, changed the
payment method for inpatient hospital services furnished by short-term
acute care hospitals to a prospective payment system (PPS). In
accordance with section 1886(d) of the Act and implementing regulations
at 42 CFR Part 412, a PPS payment is made at a predetermined specific
rate for each hospital discharge (classified according to a list of
diagnosis-related groups (DRGs)), excluding certain costs that are paid
on a reasonable cost basis.
Later statutory amendments expanded the types of providers and
services that are subject to a PPS. The various prospective payment
systems for inpatient hospital services are summarized in Sec. 412.1
of the regulations. Other prospective payment systems for different
types of providers and services are summarized in Sec. Sec. 413.170,
413.300, 413.330, and 419.1 of the regulations. As explained in Sec.
413.1(b) of the regulations, if a service is not subject to a PPS when
it is furnished, the provider is paid on the basis of reasonable cost.
(For ease of reference, we will use the terms ``reimbursement'' and
``payment'' interchangeably unless a particular context calls for the
use of one of these terms instead of the other.)
Before October 1, 2005, payments to providers were ordinarily made
through private organizations known as fiscal intermediaries, under
contracts with the Secretary. After a 6-year transition period (Sec.
421.400(a)), the claims processing and payment functions of the fiscal
intermediaries are now performed by MACs, under contracts with the
Secretary.
For covered items and services paid on a reasonable cost basis, the
contractor pays a provider during its cost reporting period interim
payments that approximate the provider's actual costs. Under a PPS,
providers are generally paid for each patient discharge after a bill is
submitted.

[[Page 28207]]

Sections 1815(a) and 1833(e) of the Act provide that no payments
will be made to a provider unless it has furnished the information,
requested by the Secretary, needed to determine the amount of payments
due the provider under the Medicare program. In general, providers
submit this information through annual cost reports that cover a 12-
month period of time.
All providers participating in the Medicare program are required
under Sec. 413.20(a) to ``maintain sufficient financial records and
statistical data for proper determination of costs.'' Moreover,
providers must use standardized definitions and follow accounting,
statistical, and reporting practices that are widely accepted in the
hospital and related fields. Under the provisions of Sec. Sec.
413.20(b) and 413.24(f), providers are required to submit cost reports
annually, with the reporting period based on the provider's accounting
year. For cost years beginning on or after October 1, 1989, section
1886(f)(1) of the Act and Sec. 413.24(f)(4) of the regulations require
hospitals to submit cost reports in a standardized electronic format,
and the same requirement was later imposed for other types of
providers. In addition, Sec. 412.52 of the regulations requires all
PPS hospitals to meet the recordkeeping and cost reporting requirements
of Sec. Sec. 413.20 and 413.24, which include submitting a cost report
for each 12-month period.
2. Administrative Appeals by Providers and Judicial Review
Upon receipt of a provider's cost report, the contractor reviews or
audits the cost report, makes any necessary adjustments to the
provider's Medicare reimbursement for the cost reporting period, and
finally determines the total amount of payment due the provider. This
year-end reconciliation of Medicare payment for the provider's cost
reporting period constitutes a contractor determination, as defined in
Sec. 405.1801(a). Under Sec. Sec. 405.1801(a)(1), (2) and 405.1803,
the contractor must give the provider written notice of the final
contractor determination for the cost period in a notice of the total
amount of program reimbursement (NPR). The NPR is an appealable
determination, and the contractor determination is final and binding
unless it is revised on appeal or reopening (Sec. 405.1807).
Under section 1878(a) of the Act, a provider that has submitted a
timely cost report may appeal to the Provider Reimbursement Review
Board (the Board) a final determination of program reimbursement made
by a contractor, as well as certain final determinations by the
Secretary involving payment under the IPPS. The Secretary's delegate,
the Administrator of CMS, may review certain Board decisions under
section 1878(f)(1) of the Act and Sec. 405.1875 of the regulations.
The final decision of the Board or the Administrator is subject to
judicial review under section 1878(f)(1) of the Act and Sec. 405.1877
of the regulations. In addition, by regulation, providers are given the
right to appeal to the Board or to contractor hearing officers certain
other determinations. A CMS reviewing official may review some
contractor hearing officer decisions under Sec. 405.1834 of the
regulations, but there is no judicial review of decisions by contractor
hearing officers or a CMS reviewing official.
Under sections 1878(a)(1)(A), (a)(2), and (a)(3) of the Act, and
Sec. 405.1835(a)(1), (a)(2), and (a)(3)(i) of the regulations, a
provider may obtain a Board hearing if: (1) the provider is
``dissatisfied'' with a final determination of the contractor [formerly
intermediary] or the Secretary; (2) the amount in controversy is at
least $10,000; and (3) the provider files a request for a hearing to
the Board within 180 days of notice of the final determination of the
contractor or the Secretary. The same jurisdictional requirements
govern provider appeals to contractor hearing officers under Sec.
405.1811(a)(1), (a)(2), and (a)(3)(i) of the regulations, except that
the amount in controversy requirement is at least $1,000 but less than
$10,000.
However, the statutory requirements for Board jurisdiction are
somewhat different if the provider does not receive a final
determination of the contractor on a timely basis. Under sections
1878(a)(1)(B), (a)(2), and (a)(3) of the Act, a provider may obtain a
Board hearing if: (1) The provider does not receive a final
determination of the contractor on a timely basis, after the provider
filed a cost report that complied with the cost reporting regulations;
(2) the amount in controversy is at least $10,000; and (3) the provider
files a request for a hearing to the Board within 180 days after notice
of the contractor's final determination would have been received if
such contractor determination had been issued on a timely basis.
Moreover, Sec. 405.1835(a)(3)(ii) of the regulations provides that a
contractor determination is not timely if it is not issued, through no
fault of the provider, within 12 months of the contractor's receipt of
the provider's perfected cost report or amended cost report (as
specified in Sec. 413.24(f) of the regulations). The same
jurisdictional requirements govern provider appeals to contractor
hearing officers, based on an untimely contractor determination, under
Sec. 405.1811(a), except that the amount in controversy requirement is
at least $1,000 but less than $10,000.
3. Appropriate Claims in Provider Cost Reports
Under longstanding Medicare policy as set forth in Sec. 413.24 of
the regulations and section 115 of the Provider Reimbursement Manual
(PRM), Part 2 (CMS Pub. 15-2), a provider must make an appropriate cost
report claim for a specific item in order to be reimbursed for the
item, whether through the NPR issued by the contractor or as the result
of an administrative appeal or judicial review. For example, as set
forth in Sec. 413.24, providers receiving payment on the basis of
reimbursable cost are required to provide adequate cost data to the
contractor to support payments made for services furnished to
beneficiaries. In addition, as set forth in section 115 of the PRM,
Part 2, we also require that providers make a specific claim for an
item in its cost report, in order to meet the dissatisfaction
requirement for Board jurisdiction. The Medicare cost report has always
included particular ``lines'' for specific allowable costs such as
interest expense and depreciation. If a provider makes a cost report
claim for a cost that is allowable, and reimbursement is claimed in
accordance with Medicare payment policy, the NPR will include
appropriate reimbursement for the cost. (For ease of reference, we will
use the terms ``specific item'' or ``item'' to refer to a particular
aspect of reasonable cost-based payment or a specific aspect of payment
under a prospective payment system unless a particular context calls
for the use of more specific terms (for example, the term ``allowable
cost'' as used in determining reasonable cost-based payment).)
If the NPR does not include reimbursement for a specific item or if
the provider believes it should have received more reimbursement for
the item, the provider can request a hearing before the Board or the
contractor hearing officers (if the amount in controversy is at least
$1,000 but less than $10,000). However, our longstanding policy is that
an appropriate cost report claim is a jurisdictional requirement for an
appeal to the Board or the contractor hearing officers. As explained
above, section 1878(a)(1)(A) of the Act provides for a hearing before
the Board if the provider has filed a timely cost report with the

[[Page 28208]]

contractor, and the provider is ``dissatisfied'' with a final
determination of the contractor or the Secretary. Our view has been
that, in order for a provider to be dissatisfied with a specific aspect
of the contractor determination, the provider must include an
appropriate cost report claim for the specific item so that the
contractor can respond to the provider's claim in the NPR and thereby
potentially produce a specific reimbursement result about which the
provider is dissatisfied.
Under our policy for Board jurisdiction, we required a provider to
make a specific claim for an item in its cost report, in order to meet
the dissatisfaction requirement for Board jurisdiction. We did not
permit a provider to ``self-disallow'' a specific item, even if the
Medicare contractor had no discretion to award payment for the item.
(In self-disallowing an item, the provider submits a cost report that
complies with Medicare policy for the item and then appeals the item to
the Board; the contractor's NPR then would not include any disallowance
of the item, and therefore the provider would effectively self-disallow
the item.) However, the Supreme Court rejected our longstanding policy
in Bethesda Hospital Association v. Bowen, 485 U.S. 399 (1988). The
Court held that, despite the providers' failure to claim all the
reimbursement they believed should have been made, the plain language
of the dissatisfaction requirement in section 1878(a)(1)(A) of the Act
supported Board jurisdiction because the contractor had no authority to
award reimbursement in excess of a regulation by which it was bound,
and thus it would have been futile for the providers to try to persuade
the contractor otherwise. The Court also stated in dicta, however, that
the dissatisfaction requirement might not be met if providers were to
``bypass a clearly prescribed exhaustion requirement or . . . fail to
request from the intermediary reimbursement for all costs to which they
are entitled under applicable rules'' (Bethesda Hosp., 485 U.S. at 404-
05).
Following the Bethesda decision, we no longer required providers to
make a cost report claim for reimbursement of items for which the
contractor did not have the discretion to award payment due to a
regulation or manual provision but, consistent with the dicta in
Bethesda, we continued to require providers to include cost report
claims for allowable costs. However, our policy, as revised in response
to Bethesda, was also challenged in the courts, and a ``circuit split''
resulted. Compare Little Co. of Mary Hosp. v. Shalala, 165 F.3d 1162
(7th Cir. 1999) (sustaining our interpretation of the statutory
dissatisfaction requirement for Board jurisdiction) with Loma Linda
Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065 (9th Cir. 2007) (rejecting
our interpretation of the dissatisfaction requirement); Maine General
Med. Ctr. v. Shalala, 205 F.3d 493 (1st Cir. 2000) (same).
In response to the Supreme Court's Bethesda decision and the
ensuing circuit split, we then addressed the dissatisfaction
requirement in notice and comment rulemaking. In a 2008 final rule, we
revised Sec. 405.1811(a)(1) and Sec. 405.1835(a)(1) for contractor
and Board hearings, respectively (73 FR 30190, 30195 through 30200,
30244 through 30245, 30249 through 30250 (May 23, 2008)). Under the
revised regulations, in order to preserve its appeal rights, a provider
must either claim an item in its cost report where it is seeking
reimbursement that it believes to be in accordance with Medicare
policy, or self-disallow the item if it is seeking reimbursement that
it believes may not comport with Medicare policy (for example, where
the contractor does not have the discretion to award the reimbursement
sought by the provider). In order to self-disallow an item, the
provider must follow the applicable procedures for filing a cost report
under protest, which are contained currently in section 115 of the PRM,
Part 2.
As explained in the preamble to the 2008 final rule, we believe the
revised dissatisfaction policy set forth in Sec. 405.1835(a)(1) is a
reasonable interpretation of the dissatisfaction requirement for Board
jurisdiction in section 1878(a)(1)(A) of the Act (73 FR 30195 through
30200). The dissatisfaction requirement in Sec. 405.1835(a)(1)
comports with the Supreme Court's statement (discussed above) that the
statutory dissatisfaction requirement might not be met if a provider
bypassed a clearly prescribed exhaustion requirement or failed to ask
the contractor for reimbursement of all costs to which it is entitled
under applicable rules. (Bethesda Hosp., 485 U.S. at 404-05; Little Co.
of Mary, 165 F.3d 1162 (sustaining our interpretation of the statutory
dissatisfaction requirement for Board jurisdiction on the basis of the
forgoing statements by the Supreme Court); Little Co. of Mary Hosp. v.
Shalala, 24 F.3d 984 (7th Cir. 1994) (same).
Upon further reflection, however, we believe that the requirement
that a provider either claim reimbursement for a specific cost, or
expressly self-disallow the cost, in its cost report is more
appropriately treated as a cost reporting requirement under sections
1815(a) and 1833(e) of the Act, as the agency cannot make payments to a
provider without sufficient information on all claims for which the
provider believes it should be paid. Indeed, it is eminently reasonable
for the Secretary to require a provider to make an appropriate cost
report claim for a specific item if the provider wants to be paid for
the item. As we explain in detail in the next section, requiring a cost
report claim for full reimbursement or an express self-disallowance of
the cost enables the contractor to review and audit the claim, make any
adjustments that seem appropriate, and include final payment for the
cost as part of the NPR. Accordingly, we are proposing to revise the
cost reporting regulations in Part 413, Subpart B by adding the
substantive reimbursement requirement that a provider must include an
appropriate claim for an item in its cost report. The failure to
account appropriately for the item in its cost report will foreclose
payment for the item in the NPR issued by the contractor and in any
decision, order, or other action by a reviewing entity (as defined in
Sec. 405.1801(a) of the regulations) in an administrative appeal filed
by the provider.
However, we recognize that the proposed addition to the cost
reporting regulations of the substantive reimbursement requirement of
an appropriate cost report claim for a specific item would be
potentially duplicative of the existing jurisdictional requirement in
the Board appeals regulations of an appropriate cost report claim. In
order to avoid such duplication, we also are proposing to revise the
appeals regulations in Part 405, Subpart R by eliminating the
requirement that a provider must include an appropriate claim for an
item in its cost report in order to meet the dissatisfaction
requirement for Board jurisdiction. Our longstanding requirement of an
appropriate cost report claim would be made a substantive reimbursement
requirement in the cost reporting regulations and the existing Board
jurisdiction requirement of an appropriate cost report claim would be
eliminated. These proposed revisions to the cost reporting regulations
and the provider appeals regulations would apply on a prospective-only
basis, to provider cost reporting periods beginning on or after the
effective date of the final IPPS annual update rule.

[[Page 28209]]

B. Proposed Changes Regarding the Claims Required in Provider Cost
Reports, and for Provider Administrative Appeals

1. Proposed Addition to the Cost Reporting Regulations of the
Substantive Reimbursement Requirement of an Appropriate Cost Report
Claim
a. Specific Provisions of Proposed Paragraph (j) of Sec. 413.24
We are proposing to add a new paragraph (j) to Sec. 413.24 of the
regulations. Proposed paragraph (j)(1) of Sec. 413.24 provides that in
order to receive or potentially qualify for payment for a specific
item, the provider must include in its cost report an appropriate claim
for the specific item. In order to make an appropriate claim for an
item in its cost report, the provider must either claim payment for the
item in its cost report where it is seeking payment that it believes is
consistent with Medicare policy, or self-disallow the item if the
provider is seeking payment that it believes may not comport with
Medicare policy (for example, where the contractor does not have the
authority or discretion to award the payment sought by the provider).
In order to self-disallow a specific item, the provider would have to
follow the applicable procedures for filing a cost report under
protest, which are now contained in section 115 of the PRM, Part 2 and
are included in proposed paragraph (j)(2) of Sec. 413.24.
Specifically, the provider would have to include an estimated payment
amount for each self-disallowed item in the ``protested amount'' line
of the cost report, and attach a worksheet explaining why a self-
disallowance is necessary (instead of claiming payment for the item in
its cost report) and describing how it determined the estimated payment
amount for each self-disallowed item.
Proposed paragraph (j)(3) of Sec. 413.24 specifies the procedures
for determining whether there is an appropriate cost report claim for a
specific item. The default rule is that the question of whether the
provider's cost report includes an appropriate claim for the specific
item must be determined by reference to the cost report that the
provider submits originally to, and is accepted by, the contractor,
unless one of three exceptions applies. The first exception is that if
the provider submits an amended cost report that is accepted by the
contractor, the question of whether there is an appropriate cost report
claim for the specific item must be determined by reference to such
amended cost report, unless one of the two remaining exceptions
applies. The second exception is that if the contractor adjusts the
provider's cost report, as submitted originally by the provider and
accepted by the contractor or as amended by the provider and accepted
by the contractor, whichever is applicable, with respect to the
specific item, the question of whether there is an appropriate cost
report claim for the specific item must be determined by reference to
the provider's cost report, as such cost report is adjusted for the
specific item in the contractor's initial determination (as defined in
Sec. 405.1801(a)), unless the remaining exception applies. The third
exception is that if the contractor reopens either the initial
contractor determination for the provider's cost reporting period
(pursuant to Sec. 405.1885) or a revised contractor determination for
such period (issued pursuant to Sec. 405.1889) and adjusts the
provider's cost report with respect to the specific item, the question
of whether there is an appropriate cost report claim for the specific
item must be determined by reference to the provider's cost report, as
such cost report is adjusted for the specific item in the contractor's
most recent revised contractor determination for such period.
Providers should make every effort to comply with the default rule
set forth in proposed paragraph (j)(3) of Sec. 413.24, even though one
of the exceptions to the default rule might come into play later. In
order to ensure compliance with the substantive requirement of an
appropriate cost report claim for a specific item, the provider should
either claim full payment for, or properly self-disallow, the item in
the cost report that the provider submits originally to the contractor.
However, failure to include an appropriate claim for the specific item
in the provider's original ``as submitted'' cost report does not
necessarily foreclose any further opportunity to meet the requirement
of an appropriate cost report claim for the specific item. Under the
first exception to the default rule under proposed paragraph (j)(3),
the provider could include an appropriate cost report claim for the
specific item in an amended cost report, but the contractor has
discretion whether to accept an amended cost report by the provider.
Under the second and third exceptions to the default rule under
proposed paragraph (j)(3), the requirement of an appropriate cost
report claim could be met through the contractor's adjustment of the
provider's cost report, either in the contractor's initial
determination for the provider's cost reporting period (as defined in
Sec. 405.1801(a)) or, if the initial contractor determination is
reopened, in the contractor's revised determination. However, in
preparing the initial contractor determination for a provider's cost
reporting period, the contractor has discretion whether to adjust the
provider's cost report with respect to the specific item and, if so,
how to adjust the cost report for such item. Similarly, after the
initial contractor determination is issued, the contractor has
discretion whether to reopen the initial contractor determination and,
if the specific item is reopened, whether to adjust the cost report for
such item and how to make any such adjustment.
In order to exemplify the workings of proposed paragraph (j)(3) of
Sec. 413.24, consider a hospital that seeks a Medicare DSH payment
adjustment that, on the provider's view, should be calculated on the
basis of 2,000 Medicaid eligible patient days in the numerator of the
DSH Medicaid fraction (42 CFR 412.106(b)(4)). If the hospital's as
submitted cost report claimed only 1,000 Medicaid eligible patient days
for the numerator of the DSH Medicaid fraction, and the number of
Medicaid eligible patient days was not changed in an amended cost
report by the provider or through adjustments to the cost report by the
contractor, the hospital would have made an appropriate cost report
claim for only 1,000 Medicaid eligible patient days (instead of 2,000
such days). However, if the provider submitted, and the contractor
accepted, an amended cost report that claimed a total of 1,500 Medicaid
eligible patient days, the provider would have made a valid cost report
claim for 1,500 Medicaid eligible patient days (instead of 2,000 such
days). However, if the hospital asked the contractor, during the
contractor's review and settlement of the provider's cost report, to
count 250 more Medicaid eligible patient days, and the contractor
agreed to consider those days in the contractor's initial intermediary
determination, the provider would have made a valid cost report claim
of 1,750 Medicaid eligible patient days (instead of 2,000 such days).
Finally, if the provider next requested, or the contractor initiated on
its own motion, the reopening of the initial contractor determination
on the specific issue of the number of Medicaid eligible patient days
for the DSH Medicaid fraction's numerator, and the contractor did
reopen for that specific issue, the provider would have a valid cost
report claim of 2,000 Medicaid eligible patient days. At that juncture,

[[Page 28210]]

the hospital would have met the requirement of an appropriate cost
report claim for all of the 2,000 Medicaid eligible patient days, which
is the number of such days that the provider believed from the outset
should be used in determining the numerator of the DSH Medicaid
fraction.
We believe proposed paragraph (j)(3) of Sec. 413.24 appropriately
reflects the usual process in which a cost report claim that is first
made in the cost report that is submitted originally to, and accepted
by, the contractor, might be altered through an amended cost report by
the provider (if the amended cost report is accepted by the contractor)
or through adjustments of the provider's cost report claim that are
made in the contractor's initial determination or, in the event of a
reopening, in the contractor's revised determination. This process
enables a provider to ensure compliance with the substantive
requirement of an appropriate cost report claim for a specific item, by
including in the cost report that the provider submits originally to,
and is accepted by, the contractor, either a full claim for payment for
a specific item or a proper self-disallowance of the item. In addition,
this process gives a provider additional opportunities to meet the
requirement of an appropriate cost report claim through an amended cost
report by the provider (if the amended cost report is accepted by the
contractor) and adjustments to the provider's cost report claim that
are included in the contractor's initial contractor determination or,
if there is a reopening, in the revised contractor determination.
Unlike with the provider's original as submitted cost report, however,
the contractor has discretion whether to accept an amended cost report;
whether to include particular cost report claim adjustments in the
initial contractor determination and, if so, how to determine such
adjustments; and whether to reopen a contractor determination and, if
there is a reopening, how to determine any cost report claim
adjustments that may be included in the revised contractor
determination. This ``back and forth'' process between the provider and
the contractor, which is reflected in proposed paragraph (j)(3) of
Sec. 413.24, facilitates appropriate determinations of program payment
and enhances administrative efficiency. Each of the Medicare
contractors has substantial experience in reviewing and auditing cost
reports and in properly determining payment amounts. The back and forth
process between the provider and the contractor eliminates, or
minimizes and sharpens, potential disagreements, which obviates the
need to file some administrative appeals or narrows the issues in many
cases.
In addition, proposed paragraph (j)(4) of Sec. 413.24 provides
that, to the extent a provider fails to claim a specific item
appropriately in its cost report, the final contractor determination
(as defined in Sec. 405.1801(a)) may not include payment for the item.
However, if the contractor determines that the provider made an
appropriate cost report claim for a specific item but the contractor
disagrees with material aspects of the provider's claim for the item,
the contractor must make appropriate adjustments to the provider's cost
report and include payment for the specific item in the final
contractor determination in accordance with the contractor's
adjustments to the cost report and to the extent permitted by program
policy.
Proposed paragraph (j)(5) of Sec. 413.24 provides that if a party
to an administrative appeal questions whether the provider's cost
report included an appropriate claim for the specific item under
appeal, the reviewing entity (as defined in Sec. 405.1801(a)) must
follow the procedures (which we discuss in detail below) that are set
forth in proposed Sec. 405.1873 (if the appeal was filed originally
with the Board), or the procedures in Sec. 405.1832 (if the appeal was
filed initially with the contractor), for review of whether the
substantive reimbursement requirement of an appropriate cost report
claim for the specific item is satisfied. Those regulations require the
reviewing entity to follow the procedures (discussed above) that are
set forth in paragraph (j)(3) of this section for determining whether
the provider's cost report included an appropriate claim for the
specific item under appeal. Also, the reviewing entity may permit
payment for the specific item under appeal solely to the extent
authorized by Sec. 405.1873(f) (if the appeal was filed originally
with the Board) or by Sec. 405.1832(f) (if the appeal was filed
initially with the contractor).
b. Statutory and Policy Bases for Proposed Paragraph (j) of Sec.
413.24
We believe the Medicare statute provides ample authority for the
above-described proposal to add a new paragraph (j) to Sec. 413.24 of
the regulations. This proposal is well within the Secretary's general
rulemaking authority under sections 1102 and 1871 of the Act. Moreover,
proposed Sec. 413.24(j) is an appropriate exercise of the Secretary's
broad authority under sections 1815(a), 1833(e), and 1886(f)(1) of the
Act to require providers to furnish the information needed to determine
the amount of payment due a provider under the Medicare program. As
described above, we have relied on these particular statutory
provisions in adopting regulations that require providers to submit
annual cost reports; specify the requisite contents of cost reports;
and impose various procedural requirements for cost reports (such as
time periods for timely submission of cost reports and certification
requirements for cost reports). Moreover, we have invoked the same
statutory provisions in requiring providers to report other specific
information as a condition for Medicare payment (we refer readers to,
for example, Community Hosp. of Monterey Peninsula v. Thompson, 323
F.3d 782, 790, 795-800 (9th Cir. 2003) (sustaining Medicare's policy
that providers must bill ``crossover bad debts'' to the State Medicaid
agency because 42 U.S.C. 1395g(a) (that is, section 1815(a) of the Act)
``specifically granted the Secretary broad discretion as to what
information to require as a condition of payment to providers under the
Medicare program''). Indeed, as explained above, the Secretary's broad
discretion with respect to cost reporting requirements is also
reflected in the Board appeals provisions of section 1878(a) of the
Act, which makes provider compliance with cost reporting requirements a
prerequisite of Board jurisdiction.
In addition to the plainly sufficient statutory authority for
proposed Sec. 413.24(j), we believe there are sound policy reasons for
requiring a provider to include an appropriate claim for an item in its
cost report by either claiming payment for the item (where the provider
believes such claim would comport with Medicare policy), or by self-
disallowing the item (if the provider is seeking payment that it
believes may not be consistent with Medicare policy). This proposal has
three main parts, each of which we address separately.
First, we believe that if a cost is allowable and the provider does
not disagree with how Medicare determines payment for the cost, the
provider's cost report should include a claim for full payment of the
cost in accordance with the program's payment policy. In such cases, a
cost report claim for full payment of the cost enables the contractor
to review the claim, make any adjustments that seem appropriate, and
include final payment for the cost as part of the NPR. Requiring a cost
report claim for full payment of allowable costs (where the provider

[[Page 28211]]

does not disagree with how Medicare determines payment for the cost)
facilitates the contractor's discharge of some of its principal
responsibilities, which include using the contractor's expertise and
experience to review and audit payment claims, make any necessary
adjustments, and include final payment for the cost in the NPR. Absent
some misstep by the contractor in reviewing such a cost report claim
and determining final payment for the item, there would be no need for
the provider to later request reopening or to file an administrative
appeal regarding the item. Even if the provider disagreed with some
aspect of the contractor's payment determination for the specific item,
any such disagreement would be narrowed and delineated more precisely
because our proposal, to require a full cost report claim for payment
of allowable costs, will give the contractor an opportunity to review
and audit the claim and determine the extent to which (if at all) to
include payment for the claim in the NPR. Therefore, the interests of
administrative finality and efficiency will be advanced if providers
are required to include a cost report claim for full payment of
allowable costs.
Proposed Sec. 413.24(j)'s requirement of a cost report claim for
full payment of allowable cost also comports with the division of
responsibilities between the contractors and the Board and the other
reviewing entities (as defined in Sec. 405.1801(a)). At present, there
are 12 contractors, each of which has a fairly large staff with
substantial experience and expertise in reviewing and auditing cost
reports and determining final payment in accordance with Medicare
policy. By contrast, the Board has only five members and a relatively
small staff. We believe it is a waste of scarce resources and very
inefficient for a provider to first raise a clearly allowable cost in
an appeal to the Board when the contractor could have reviewed and
finally determined payment for such an allowable cost in the NPR, if
the provider had simply made a timely cost report claim for full
payment of the allowable cost. As indicated by the very name of the
Provider Reimbursement Review Board, it is a ``Review Board'' or
administrative appeals tribunal, not the Medicare program's front line
auditors charged with making the initial determination of program
reimbursement for such allowable costs.
Second, there are also sound policy reasons for proposing, under a
new paragraph (j) in Sec. 413.24, that a provider must self-disallow a
specific item if it is seeking payment that it believes may not comport
with Medicare policy (for example, because the provider believes the
contractor does not have the discretion to make the payment sought by
the provider), by following the applicable procedures for filing a cost
report under protest (procedures that, as explained above, are now
contained in section 115 of the PRM, Part 2 and would be set forth in
proposed paragraph (j)(2) of Sec. 413.24). When a provider self-
disallows an item by accounting for it appropriately in the ``protested
amount'' line of the cost report (instead of claiming payment for the
item), the contractor has an opportunity to correct any misconceptions
that the provider may have had about the item. For example, the
contractor could determine, contrary to the provider's apparent
understanding in self-disallowing a specific item, that the item in
question is actually an allowable cost that is reimbursable in
accordance with program policy. Another example: the contractor might
determine, despite the provider's understanding of Medicare policy and
its concomitant self-disallowance, that program policy has changed and
the item is now an allowable cost or a new payment policy now applies
that permits the payment methodology used by the provider in support of
its self-disallowance of the item (for example, 75 FR 50042; 50275
through 50286 (August 16, 2010) (discussing CMS Ruling 1498-R, which
revised Medicare disproportionate share hospital (DSH) payment policy
in response to adverse judicial precedent, and made such revisions
applicable to open cost reports and certain pending administrative
appeals). In such cases, the contractor's deep expertise and experience
and its resources can be brought to bear in reviewing self-disallowed
items, making any necessary corrections, and finally allowing payment
for corrected items in the NPR. Indeed, these kinds of contractor
actions comport with section 1874A(a)(4) of the Act and Sec. 413.20(b)
of the regulations, which require the contractors to furnish providers
with consultative services, education, training, information and
instructions, and technical assistance regarding the interpretation and
application of payment principles and other program policies; be
available to address provider questions and problems on a daily basis;
and facilitate communication between the agency and providers.
Accordingly, we believe our proposed addition of a self-disallowance
requirement to the cost reporting regulations will facilitate
exhaustion of administrative remedies through the contractor's review
and final settlement of the provider's cost report, and when the
contractor corrects errors in a provider's self-disallowance, the
erstwhile need to appeal to the Board or request reopening could be
obviated (we refer readers to Little Co. of Mary Hosp. v. Shalala, 165
F.3d 1162, 1165 (7th Cir. 1999) (the Secretary's requirement of an
appropriate cost report claim for an item ensures that the contractor
will have the ``first shot'' at determining any reimbursement for the
item, before any appeal to the Board need be filed).
By requiring the self-disallowance of items that providers believe
may not comport with Medicare policy, proposed Sec. 413.24(j) would
also contribute importantly to other aspects of program administration.
For example, this proposal would facilitate provider compliance with
the existing requirements in Sec. 413.24(f) that each provider submit
a complete, accurate, and timely cost report, and that the provider's
administrator or chief financial officer certify that the submitted
cost report is complete and accurate. Our proposed self-disallowance
requirement would also enhance CMS' ability to accurately estimate the
program's potential liabilities (for example, for purposes of the
agency's preparation of required financial statements). Similarly, this
proposal would improve the contractors' ability to establish audit and
other workload priorities. The proposed addition of a self-disallowance
requirement (for items that providers believe may not comport with
Medicare policy) to the cost reporting regulations would also enable us
to better monitor Medicare policy and potentially adjust our policies
in response to a pattern of provider self-disallowances of a given
item. Indeed, the importance of requiring complete and accurate cost
report information is highlighted by the fact that we use cost report
data for a wide variety of purposes such as setting and refining
prospective payment rates; establishing hospital market basket weights;
calculating Medicare and total facility margins; determining payment
for graduate medical education (GME) and indirect medical education
(IME); creating projections for the President's annual budget and for
the annual Medicare Trustees Report; for various research projects; and
for responding to requests from the public, the Congress, the Executive
Office of Management and Budget (EOMB), and other parts of the
Administration.
Third, we believe there also are sound reasons for our proposal
that, under a new Sec. 413.24(j), if a provider fails to account
appropriately for an item in its cost report (by making a full claim
for

[[Page 28212]]

payment for the item or self-disallowing the item if the provider
believes a payment claim would not comport with Medicare policy), the
NPR issued by the contractor may not include payment for the item and
payment also may not be permitted in any decision, order, or other
action by a reviewing entity (as defined in Sec. 405.1801(a)) in an
administrative appeal filed by the provider. Under existing Sec. Sec.
405.1835(a)(1) and 405.1840(b)(3), the consequence of not making an
appropriate cost report claim for an item is that the Board would not
have jurisdiction over the provider's appeal of the item. (Similarly,
under Sec. Sec. 405.1811(a)(1) and 405.1814(b)(3), the contractor
hearing officers would lack jurisdiction for an item if the provider
did not make an appropriate cost report claim for the item.) As
explained below, however, we are proposing to eliminate the
jurisdictional requirement of an appropriate cost report claim in
existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) for Board appeals
(and the corresponding jurisdictional requirement in Sec. Sec.
405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer
appeals), because we believe it is a requirement more appropriately
placed in the cost reporting regulations. Given that our longstanding
policy of requiring an appropriate cost report claim for an item would
be added to the cost reporting regulations, in proposed paragraph (j)
of Sec. 413.24, this provision is a natural place to spell out the
consequences of not abiding by this cost reporting requirement. In this
regard, we note that the proposed addition of a new paragraph (j) to
Sec. 413.24 is like the existing paragraph (e) in Sec. 413.20, which
provides for the suspension of Medicare payments if a provider fails to
maintain the records necessary for proper determination of Medicare
reimbursement. Similarly, if a provider fails to include an appropriate
claim for an item in its cost report, the NPR issued by the contractor
will not include payment for the item and payment also will not be
permitted in any decision, order, or other action by a reviewing entity
(as defined in Sec. 405.1801(a)) in an administrative appeal filed by
the provider.
2. Proposed Revisions to the Provider Reimbursement Appeal Regulations
a. Elimination of the Jurisdictional Requirement of an Appropriate Cost
Report Claim
In this proposed rule, we are proposing to eliminate the
requirement in existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of
the regulations that a provider must include an appropriate claim for
an item in its cost report in order to meet the dissatisfaction
requirement for Board jurisdiction. We believe there is a sound basis
in law and policy for this proposal. Our proposal to eliminate an
appropriate cost report claim as a requirement for Board jurisdiction
is well within the Secretary's general rulemaking authority under
sections 1102 and 1871 of the Act. Moreover, this specific proposal is
a reasonable interpretation of the ``dissatisfied'' provision in
section 1878(a)(1)(A) of the Act. In our view, this statutory provision
is ambiguous and the interpretation in the existing appeal regulations,
which requires providers to make appropriate cost report claims in
order to meet the dissatisfaction prerequisite of Board jurisdiction
with respect to a specific item, is a permissible interpretation of the
statute. As described above, however, providers have challenged our
interpretation of the statutory dissatisfaction provision in litigation
spanning more than 30 years, and in public comments on current
Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of the regulations which
were adopted in the FY 2008 IPPS final rule (73 FR 30195 through 30200;
CMS' response to public comments on the current Board appeals
regulations that are based on our interpretation of the statutory
dissatisfaction provision). Providers have maintained throughout this
litigation and in the referenced public comments that the statutory
dissatisfaction provision does not support our policy of requiring an
appropriate cost report claim as a prerequisite of Board jurisdiction.
We continue to disagree with this view of the statute, and still
believe that the existing Board appeals regulations are based on a
permissible interpretation of the statutory dissatisfaction provision.
As explained above, existing Sec. 405.1835(a)(1) comports with the
Supreme Court's statement that the statutory dissatisfaction
requirement might not be met if a provider bypassed a clearly
prescribed exhaustion requirement or failed to ask the contractor for
payment of all costs to which it is entitled under applicable rules
(Bethesda Hosp., 485 U.S. at 404-05). Furthermore, the U.S. Court of
Appeals for the Seventh Circuit has twice sustained our interpretation
of the statutory dissatisfaction provision, on the basis of the
forgoing statements by the Supreme Court (Little Co. of Mary, 165 F.3d
1162; Little Co. of Mary, 24 F.3d 984). Nonetheless, we believe our
proposal, to eliminate Sec. 405.1835(a)(1)'s jurisdictional
requirement of an appropriate cost report claim certainly does not
conflict with the ``dissatisfied'' provision in section 1878(a)(1)(A)
of the Act.
This particular proposal is supported by section 1878(a)(1)(B) of
the Act, which authorizes certain Board appeals if the provider does
not receive a final contractor determination on a timely basis.
(Section 405.1835(a)(3)(ii) of the regulations specifies the time
period and other conditions for Board appeals where the provider does
not receive a final contractor determination on a timely basis.)
Section 1878(a)(1)(B) of the Act does not include an express
dissatisfaction provision. Thus, our proposal, to eliminate existing
Sec. 405.1835(a)(1)'s dissatisfaction jurisdictional requirement of an
appropriate cost report claim, would result in Board appeals
regulations that more closely track the express terms of section
1878(a)(1)(B) of the Act.
In addition to the sufficient statutory authority for our proposed
elimination of an appropriate cost report claim as a requirement for
Board jurisdiction, there are sound policy reasons for this proposal.
As explained above, we believe that, by requiring appropriate cost
report claims in proposed Sec. 413.24(j), complete and accurate
determinations of provider reimbursement will be facilitated as will
the many other important aspects of program administration. Thus,
because we would require an appropriate cost report claim in proposed
Sec. 413.24(j), it is reasonable to eliminate the Board jurisdiction
requirement in existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of
an appropriate cost report claim. We note that once this amendment to
the Board appeals regulations becomes effective, this proposal will
facilitate an orderly end to any litigation regarding the Board
jurisdiction requirement of an appropriate cost report claim.
As explained above, our proposed revisions to the cost reporting
regulations and the provider appeals regulations would apply on a
prospective-only basis, to provider cost reporting periods beginning on
or after the effective date of the final IPPS annual update rule. Until
these proposed regulations take effect, however, the requirement of an
appropriate cost report claim in Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3) of the regulations will continue to be a requirement for
Board jurisdiction. Thus, until these proposed regulations become
effective, the Board and the Administrator of CMS will continue to
determine Board jurisdiction by

[[Page 28213]]

reference to the appropriate cost report claim requirements of
Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3), along with other
applicable jurisdictional provisions of section 1878 of the Act and
Sec. Sec. 405.1835 and 405.1840 of the regulations. We believe that,
because it is essential to require appropriate cost report claims for
the various reasons that we discussed above, it is necessary and proper
to continue to require an appropriate cost report claim as a
prerequisite of Board jurisdiction under Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3) until the proposed addition to the cost reporting
regulations, of the substantive reimbursement requirement of an
appropriate cost report claim, takes effect.
b. Proposed Addition of Sec. 405.1873 Regarding Board Review of
Compliance with Cost Report Claim Requirements in Proposed Sec.
413.24(j)
We are proposing to add a new Sec. 405.1873 to the Board appeal
regulations, which will address how the Board should proceed when any
party to an appeal questions whether a provider made an appropriate
cost report claim (as required by proposed Sec. 413.24(j)) for a
specific item under appeal. We believe this new regulation is necessary
to forestall potential confusion about how the substantive
reimbursement requirement in proposed Sec. 413.24(j) of an appropriate
cost report claim for a specific item will pertain to Board appeals of
the same item.
Under paragraph (b)(1) of proposed new Sec. 405.1873, the Board
will consider timely submitted factual evidence and legal argument on,
and then prepare written specific findings of fact and conclusions of
law regarding, the question of whether the provider's cost report
complied with proposed Sec. 413.24(j). The Board will give these
written specific factual findings and legal conclusions to each party
to the appeal, and they must be included in the record of
administrative proceedings for the appeal. Paragraph (b)(2) of proposed
Sec. 405.1873 provides that, upon giving the parties to the appeal the
Board's written factual findings and legal conclusions on the question
of whether the provider's cost report included an appropriate cost
claim for the specific item under appeal, the Board then must proceed
to issue one of four types of overall decisions with respect to such
item. As discussed below, paragraph (d) of proposed Sec. 405.1873
provides that, if the Board issues either of two types of overall Board
decisions regarding the specific item under appeal (that is, a hearing
decision or an expedited judicial review (EJR) decision where EJR is
granted), the Board's written specific factual findings and legal
conclusions (reached under proposed Sec. 405.1873(b)) about whether
there was an appropriate cost report claim for the item, must be
included in such overall Board decision regarding the specific item,
along with the other matters that are already required for a Board
hearing decision or a Board EJR decision where EJR is granted. However,
under paragraph (e) of proposed Sec. 405.1873, if the Board issues
either of two other types of overall Board decisions regarding the
specific item under appeal (that is, a jurisdictional dismissal
decision or an EJR decision where EJR is denied), the Board's written
specific factual findings and legal conclusions (pursuant to proposed
Sec. 405.1873(b)) must not be included in the overall Board decision
regarding the specific item. In any event, the Board's factual findings
and legal conclusions about whether there was an appropriate cost
report claim for the item must be included in the record of
administrative proceedings for the appeal in accordance with Sec.
405.1865 of the regulations.
We believe that, in order to ensure full and appropriate
implementation of both the addition of the substantive reimbursement
requirement of an appropriate cost report claim (in proposed Sec.
413.24(j)) and the elimination of the Board jurisdiction requirement of
an appropriate cost report claim (in existing Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3)), it is necessary to foreclose certain types of
Board decisions, orders, and other actions. Accordingly, in order to
give full force and effect to our proposed elimination of the Board
jurisdiction requirement of an appropriate cost report claim, paragraph
(c)(1) of new Sec. 405.1873 would prohibit a denial of jurisdiction, a
declination to exercise jurisdiction, the imposition of a sanction, and
various other actions by the Board, if any such jurisdictional
decision, order, sanction, or other specified action is based on (in
whole or in part) the Board's determination that the provider's cost
report did not meet proposed Sec. 413.24(j)'s substantive
reimbursement requirement of an appropriate cost report claim for the
specific item.
In some cases, the Board jurisdiction requirement of an appropriate
cost report claim has been addressed in different but related terms.
For example, Board jurisdiction has been denied based on the absence,
in the final contractor determination or Secretary determination under
appeal, of an adjustment, revision, correction, or other change to the
specific item under appeal. Another example: Board jurisdiction has
also been denied due to the lack of a particular determination by the
contractor or the Secretary regarding the specific item under appeal,
in the final contractor determination or Secretary determination under
appeal. We believe that, in order to give full force and effect to the
proposed elimination of the Board jurisdiction requirement of an
appropriate cost report claim, it is also necessary to address related
terms such as the absence of specific adjustments and the lack of
particular determinations regarding the specific item under appeal.
Accordingly, paragraph (c)(2) of proposed new Sec. 405.1873 would
prohibit a denial of jurisdiction, a declination to exercise
jurisdiction, the imposition of a sanction, and various other actions
by the Board, if any such jurisdictional decision, sanction, or other
specified action is based on (in whole or in part) the absence, in the
final contractor determination or Secretary determination under appeal,
of an adjustment, revision, correction, or other change to the specific
item under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item in the final
contractor determination or Secretary determination under appeal.
However, paragraph (c)(2)(i)(A) of proposed new Sec. 405.1873 would
provide for an important exception: if the provider's appeal of the
specific item is based on the reopening of such item (pursuant to Sec.
405.1885 of the regulations) where the specific item is not revised,
adjusted, corrected, or otherwise changed in a revised final contractor
determination or Secretary determination, the Board must deny
jurisdiction over the specific item under appeal (as prescribed in
Sec. Sec. 405.1887(d) and 405.1889(b) of the regulations). The
reopening regulations are an exercise of the Secretary's general
rulemaking authority under sections 1102 and 1872 of the Act, and this
exception (in proposed Sec. 405.1873(c)(2)(i)(A)) is necessary to
ensure consistency with the above-referenced reopening regulations, our
longstanding ``issue specific'' interpretation of the reopening
regulations, and the interests of administrative finality and
efficiency (we refer readers, for example, to HCA Health Servs. of
Okla. v. Shalala, 27 F.3d 614 (D.C. Cir. 1994) (the reopening
regulations are based on the Secretary's general rulemaking authority,
and the issue specific interpretation of the reopening rules is
reasonable and supportive of administrative finality).

[[Page 28214]]

Under paragraph (d) of proposed Sec. 405.1873, there are two types
of Board decisions that must include any specific findings of fact and
conclusions of law by the Board (reached under paragraph (b) of
proposed Sec. 405.1873), on the question of whether the provider's
cost report included an appropriate claim for the specific item under
appeal. First, paragraph (d)(1) of proposed Sec. 405.1873 provides
that, if the Board issues a hearing decision on the specific item under
appeal (pursuant to Sec. 405.1871 of the regulations), the Board's
specific findings of fact and conclusions of law about whether there
was an appropriate cost report claim for the specific item, must be
included in such a hearing decision along with the other matters
prescribed in existing Sec. 405.1871(a). A Board hearing decision
addresses whether the provider has established that it should receive
relief on the matter at issue (as specified in Sec. 405.1871(a)(3)).
Under proposed Sec. 413.24(j), the requirement of an appropriate cost
report claim is a substantive prerequisite of any payment for the
specific item, which applies in addition to other payment requirements
for the particular item (for example, the specific requirements for
payment of interest expense under Sec. 413.153 of the regulations). We
believe that, because a Board hearing decision addresses whether the
provider has established that it meets the substantive requirements for
payment of the item under appeal whereas an appropriate cost report
claim is a substantive prerequisite of any payment for the specific
item (under proposed Sec. 413.24(j)), any factual findings and legal
conclusions about whether there was an appropriate cost report claim
should be included in any hearing decision that might be issued by the
Board regarding the specific item. In addition, we note that if the
Board elects to issue a hearing decision that also includes factual
findings and legal conclusions about whether the other payment
requirements for the specific item were satisfied (in addition to the
Board's findings and conclusions about whether there was an appropriate
cost report claim for the item), such a hearing decision (addressing
all the substantive reimbursement requirements for the specific item)
will safeguard against piecemeal proceedings before the Board and
potentially before the Administrator of CMS and a Federal court.
However, paragraph (d)(1)(ii) of proposed Sec. 405.1873 provides that,
if the Board determines that the provider's cost report did not include
an appropriate claim for the specific item under appeal, the Board has
discretion whether or not to address in its hearing decision whether
the other substantive reimbursement requirements for the specific item
are also satisfied.
Second, paragraph (d)(2) of proposed Sec. 405.1873 provides that,
if the Board issues an expedited judicial review (EJR) decision where
EJR is granted regarding the specific item under appeal (pursuant to
Sec. 405.1842(f)(1) of the regulations), any specific findings of fact
and conclusions of law by the Board (reached under paragraph (b) of
proposed Sec. 405.1873) about whether there was an appropriate cost
report claim for the specific item, must be included in such an EJR
decision. Section 1878(f)(1) of the Act and Sec. 405.1842 of the
regulations authorize EJR if the requirements for Board jurisdiction
over a specific item are satisfied, and the Board determines that it
lacks the authority to decide a legal question that is relevant to the
specific item under appeal. The Administrator of CMS may review the
Board's determination as to whether there is Board jurisdiction over
the specific item, but the Administrator may not review the Board's
determination as to whether it has the authority to decide a relevant
legal question. We believe that paragraph (d)(2) of proposed Sec.
405.1873 will also safeguard against piecemeal proceedings before the
Board, the Administrator of CMS, and a Federal court. By requiring a
Board EJR decision that grants EJR to include any factual findings and
legal conclusions (reached under proposed Sec. 405.1873(b)) about
whether there was an appropriate cost report claim for the specific
item under appeal, along with the Board's determinations that the two
requirements for EJR were satisfied (that is, a finding of Board
jurisdiction plus the Board's determination that it lacks the authority
to decide a legal question relevant to the specific item under appeal),
piecemeal proceedings would be minimized or eliminated because the
Board EJR decision will encompass both the question of whether there
was an appropriate cost report claim for the specific item and the
relevant legal question for which EJR was granted (and for which the
Board determined that it has no authority to decide such legal
question). Piecemeal proceedings before the Administrator of CMS would
also be minimized or eliminated because, under proposed Sec.
405.1875(a)(2)(v) (which we discuss separately below), if the
Administrator reviews and issues an EJR decision on the question of
whether there is Board jurisdiction over the specific item under
appeal, the Administrator will also review, and any decision will
address, the Board's specific findings of fact and conclusions of law
about whether there was an appropriate cost report claim for the
specific item. In turn, our proposal to require an EJR decision that
grants EJR to include any specific factual findings and legal
conclusions under proposed Sec. 405.1873(b) would ensure that when a
Federal court exercises its EJR authority under section 1878(f)(1) of
the Act and Sec. 405.1842 of the regulations by reviewing a relevant
legal question (for which the Board determined it has no decisional
authority), the court's review can also potentially encompass the final
specific findings of fact and conclusions of law by the Board or the
Administrator, as applicable, about whether there was an appropriate
cost report claim for the specific item. If it is determined, in a
final EJR decision that grants EJR, that there was an appropriate cost
report claim for the specific item under appeal, the court may have no
occasion to review the final specific findings of fact and conclusions
of law on the question of whether there was an appropriate cost report
claim for the specific item. However, if it is instead determined, in a
final EJR decision that grants EJR, that the provider's cost report did
not include an appropriate claim for the specific item under appeal,
the court can potentially review in one proceeding the final specific
findings of fact and conclusions of law about whether there was an
appropriate cost report claim for the specific item, along with the
relevant legal question for which EJR was granted (and for which the
Board determined that it has no authority to decide such legal
question).
However, paragraph (e) of proposed new Sec. 405.1873 would provide
that there are two other types of Board decisions that must not include
any specific findings of fact and conclusions of law by the Board
(reached under proposed Sec. 405.1873(b)), on the question of whether
the provider's cost report included an appropriate claim for the
specific item under appeal. On the one hand, paragraph (e)(1) of
proposed new Sec. 405.1873 would provide that if the Board issues a
jurisdictional dismissal decision on the specific item under appeal
(pursuant to Sec. 405.1840(c)), the Board's specific findings of fact
and conclusions of law about whether there was an appropriate cost
report claim for the specific item must not be included in such a
jurisdictional dismissal decision. When the Board issues a
jurisdictional dismissal decision on a specific item under appeal, the
Board's

[[Page 28215]]

denial of jurisdiction obviates any need to address the question of
whether the substantive reimbursement requirements that are specific to
the particular item (for example, the specific requirements for payment
for certain depreciation under Sec. 413.134) are satisfied. Because
the requirement of an appropriate cost report claim for each specific
item is also a substantive prerequisite of any payment for the specific
item (as prescribed in proposed Sec. 413.24(j)), a denial of
jurisdiction over the specific item also obviates any need to address
the substantive reimbursement requirement of an appropriate cost report
claim in the Board's jurisdictional dismissal decision.
Similarly, under paragraph (e)(2) of proposed new Sec. 405.1873,
if the Board issues an EJR decision where EJR is denied on the specific
item under appeal (pursuant to Sec. 405.1842(f)(2)), the Board's
specific findings of fact and conclusions of law (reached under
paragraph (b) of proposed new Sec. 405.1873) about whether there was
an appropriate cost report claim for the specific item, must not be
included in such an EJR decision. If EJR is denied solely because the
Board determines that it does have the authority to decide the legal
question relevant to the specific item under appeal, the Board would
conduct further proceedings and issue another decision (as specified in
Sec. 405.1842(h)(2)(i)). If such further decision is a hearing
decision, under proposed Sec. 405.1873(d)(1), the Board's factual
findings and legal conclusions (under proposed Sec. 405.1873(b)) about
whether there was an appropriate cost report claim must be included in
the Board's hearing decision; if the Board elects to also include in
the hearing decision its factual findings and legal conclusions about
whether the other reimbursement requirements for the specific item are
satisfied, piecemeal proceedings before the Board and potentially
before the Administrator of CMS and a Federal court would be minimized
or eliminated. However, if EJR is denied because the Board lacked
jurisdiction over the specific item under appeal, the Board's factual
findings and legal conclusions about whether there was an appropriate
cost report claim must not be included in such an EJR decision; as
explained above regarding Board jurisdictional dismissal decisions, the
denial of Board jurisdiction in such an EJR decision obviates the need
to address the substantive reimbursement requirement of an appropriate
cost report claim, just as there is no need to consider other payment
requirements for the particular item under appeal.
Paragraph (f) of proposed new Sec. 405.1873 addresses the various
effects of the Board's factual findings and legal conclusions (reached
under paragraph (b) of proposed Sec. 405.1873) regarding whether there
was an appropriate cost report claim in the two types of Board
decisions where such factual findings and legal conclusions must be
included: Board hearing decisions, and Board EJR decisions where EJR is
granted. An appropriate cost report claim for a specific item is a
necessary, but not sufficient, condition for Medicare payment for the
specific item. This is because the requirement of an appropriate cost
report claim for each specific item is a substantive prerequisite of
any payment for the specific item (as prescribed in proposed Sec.
413.24(j)), but all other payment requirements (for example, the
particular requirements for payment for certain bad debts under Sec.
413.89) also must be satisfied. Accordingly, under paragraph (f)(1) of
proposed new Sec. 405.1873, if the Board determines, as part of a
final hearing decision, that the provider's cost report included an
appropriate claim for the specific item under appeal (as prescribed in
Sec. 413.24(j)), payment for the specific item is made in accordance
with Medicare policy, but only if the Board further determines in such
hearing decision that all the other substantive reimbursement
requirements for the specific item are also satisfied. Conversely, if
the Board determines, in a final hearing decision, that the cost report
lacked an appropriate claim for the specific item under appeal, payment
for the specific item is not made, regardless of whether the Board
further determines in such hearing decision that the other substantive
reimbursement requirements for the specific item are satisfied.
Similarly, paragraph (f)(2) of proposed new Sec. 405.1873 provides
that, if the Board or the Administrator of CMS (as applicable)
determines, as part of a final EJR decision where EJR is granted, the
provider's cost report included an appropriate claim for the specific
item under appeal (as prescribed in Sec. 413.24(j)), payment for the
specific item is made in accordance with Medicare policy, but only to
the extent permitted by the final decision of a Federal court pursuant
to the EJR provisions of section 1878(f)(1) of the Act (see also
Sec. Sec. 405.1842 and 405.1877) regarding the legal question that is
relevant to the specific item (but for which the Board determined it
has no decisional authority). By contrast, if the Board or the
Administrator of CMS (as applicable) determines, in a final EJR
decision where EJR is granted, that the cost report lacked an
appropriate claim for the specific item under appeal, payment for the
specific item is not made unless: (i) The specific factual findings and
legal conclusions by the Board or the Administrator of CMS, as
applicable, about whether there was an appropriate cost report claim
for the specific item are reversed or modified by the final decision of
a Federal court (pursuant to section 1878(f)(1) of the Act and Sec.
405.1877 of the regulations)); and (ii) only to the extent permitted by
the final decision of a Federal court pursuant to the EJR provisions of
section 1878(f)(1) of the Act (see also Sec. Sec. 405.1842 and
405.1877 of the regulations) regarding the legal question that is
relevant to the specific item (but for which the Board determined it
has no decisional authority).
c. Related Proposed Revisions to Sec. 405.1875 Regarding Administrator
Review
We are proposing two revisions to Sec. 405.1875 of the
regulations, which provides for review by the Administrator of CMS of
certain Board decisions, orders, and other actions. We believe these
revisions will facilitate the full and appropriate implementation of
our proposals (discussed above) to add the substantive reimbursement
requirement of an appropriate cost report claim (in proposed Sec.
413.24(j)), eliminate the Board jurisdiction requirement of an
appropriate cost report claim (in existing Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3)), and to add specific procedures for Board review of
questions about compliance with the substantive reimbursement
requirement of an appropriate cost report claim (in proposed new Sec.
405.1873).
First, under existing Sec. 405.1875(a)(2) of the regulations, the
Administrator may review a Board hearing decision, a Board dismissal
decision, the Board's jurisdictional determination in an EJR decision
(but not the Board's determination, in an EJR decision, of whether it
has the authority to decide a relevant legal question), and any other
Board decision or action deemed to be final by the Administrator. We
are proposing to add a new paragraph (a)(2)(v) to Sec. 405.1875, which
would provide that if the Administrator reviews a Board hearing
decision, or the jurisdictional component of a Board EJR decision where
EJR is granted, regarding a specific item, the Administrator's review
of such a hearing decision or such an EJR decision, as applicable, will

[[Page 28216]]

include, and any decision issued by the Administrator under Sec.
405.1875(e) of the regulations will address, the Board's specific
findings of fact and conclusions of law in such hearing decision or EJR
decision (as prescribed in proposed Sec. 405.1873(b) and (d)) on the
question of whether the provider's cost report included an appropriate
claim for the specific item under appeal (as prescribed in Sec.
413.24(j)). We believe this proposed revision to Sec. 405.1875(a)(2)
is an important additional safeguard against piecemeal administrative
appeal proceedings and potentially before a Federal court. As explained
above with respect to proposed Sec. 405.1873(d)(1), if the Board
elects to issue a hearing decision that also includes factual findings
and legal conclusions about whether the other payment requirements for
the specific item were satisfied (in addition to the Board's findings
and conclusions about whether there was an appropriate cost report
claim for the item), all of the payment requirements for the specific
item will be presented in one Board hearing decision for purposes of
any review by the Administrator under proposed Sec. 405.1875(a)(2)(v)
and a Federal court. Moreover, for the specific reasons set forth above
regarding proposed Sec. 405.1873(d)(2), our proposal to require that
the Board's factual findings and legal conclusions about whether there
was an appropriate cost report claim for the item be included in an EJR
decision where EJR is granted will also minimize or eliminate piecemeal
proceedings before the Board and, given the proposed addition of Sec.
405.1875(a)(2)(v), before the Administrator of CMS and a Federal court.
Second, existing Sec. 405.1875(a) requires the Board to promptly
send copies of hearing decisions and EJR decisions to the Office of the
Attorney Advisor. Although the Board often (perhaps typically) sends
copies of dismissal decisions to the Office of the Attorney Advisor,
the Board is not required to so. We are proposing to amend the last
sentence of paragraph (a) of Sec. 405.1875 by requiring the Board to
promptly send copies of dismissal decisions to the Office of the
Attorney Advisor. This revision will facilitate the Administrator's
exercise of her discretion under Sec. 405.1875(a)(2)(ii) as to whether
to review specific Board dismissal decisions. Also, given our proposals
to eliminate the Board jurisdiction requirement of an appropriate cost
report claim (in existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3))
and to add procedures for Board review of compliance with the
substantive reimbursement requirement of an appropriate cost report
claim (in proposed Sec. 405.1873)), our further proposal to require
the Board to promptly send copies of dismissal decisions to the Office
of the Attorney Advisor will enhance the Administrator's ability to
ensure full and appropriate implementation of our proposed revisions to
the Board appeal regulations.

C. Proposed Conforming Changes to the Board Appeal Regulations and
Corresponding Revisions to the Contractor Hearing Regulations

We are proposing technical revisions to several other Board appeal
regulations. We believe these other technical revisions are necessary
and appropriate to maintain consistency with our principal proposals
(discussed above) to add the substantive reimbursement requirement of
an appropriate cost report claim (in proposed Sec. 413.24(j));
eliminate the Board jurisdiction requirement of an appropriate cost
report claim (in existing Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3)); and add procedures for Board review of compliance with
the substantive reimbursement requirement of an appropriate cost report
claim (in proposed Sec. 405.1873)). Finally, we are proposing similar
revisions to the existing regulations for appeals to the contractor
hearing officers. Specifically, we are proposing to eliminate an
appropriate cost report claim as a jurisdictional requirement for
contractor hearing officer appeals (in existing Sec. Sec.
405.1811(a)(1) and 405.1814(b)(3)); add a new Sec. 405.1832 that (like
new Sec. 405.1873 for Board appeals) will detail the procedures for
contractor hearing officer review of compliance with the substantive
reimbursement requirement of an appropriate cost report claim (as
prescribed in proposed Sec. 413.24(j)). These proposed revisions to
the existing regulations for appeals to the contractor hearing officers
comport with our usual practice of adopting similar regulations for
both Board appeals and for contractor hearing officer appeals unless
there is a sufficient reason to do otherwise.
1. Technical Corrections and Conforming Changes to Sec. Sec. 405.1801
and 405.1803
We are proposing to revise the definition of ``intermediary
determination'' in Sec. 405.1801(a) to clarify that the determination
is final as set forth in 1878(a) of the Act and to reflect the
conforming technical correction to ``contractor determination''. We are
proposing to revise Sec. 405.1801(b) to more appropriately refer to
Sec. 413.24 generally (following the proposed addition of paragraph
(j) to Sec. 413.24). We are proposing to revise Sec. 405.1803 to
refer to the final contractor (instead of intermediary) determination
as set forth in Sec. 405.1801 and to appropriately cross-reference the
proposed newly revised Sec. 405.1835(a).
2. Technical Corrections and Conforming Changes to Sec. Sec. 405.1811,
405.1813, and 405.1814
As we are proposing to eliminate the jurisdictional requirement of
an appropriate cost report claim in existing Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3) for Board appeals, we are similarly proposing to
eliminate the corresponding jurisdictional requirement in Sec. Sec.
405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer
appeals. Specifically, we are proposing to eliminate an appropriate
cost report claim as a jurisdictional requirement for contractor
hearing officer appeals. In addition, we are proposing to revise Sec.
405.1813 to add an appropriate cross-reference to Sec. 405.1811,
pursuant to the proposed technical correction in Sec. 405.1811. We are
proposing technical corrections to Sec. Sec. 405.1836 and 405.1837 in
conformance with the proposed revision to Sec. 405.1835(a)(1) to
eliminate the reference to the jurisdictional requirement of an
appropriate cost report claim.
3. Proposed New Sec. 405.1832
We are proposing to add new Sec. 405.1832 which will detail the
procedures for contractor hearing officer review of compliance with the
substantive reimbursement requirement of an appropriate cost report
claim (as prescribed in proposed Sec. 413.24(j)) in appeals first
filed with contractor hearing officers.
4. Proposed Revisions to Sec. 405.1834
We are proposing to amend Sec. 405.1834, which provides for review
of contractor hearing officer decisions by the CMS reviewing official,
by adding a new paragraph (b)(2)(iii). Under proposed Sec.
405.1834(b)(2)(iii), the CMS reviewing official will review, and
address in any decision, the specific factual findings and legal
conclusions of contractor hearing officers regarding compliance with
the substantive requirement of an appropriate cost report claim (as
prescribed in proposed Sec. 413.24(j)), as part of the CMS reviewing
official's review of a contractor hearing decision.

[[Page 28217]]

5. Technical Corrections and Conforming Changes to Sec. Sec. 405.1836,
405.1837, and 405.1839
We are proposing technical and conforming changes to Sec. Sec.
405.1836, 405.1837, and 405.1839 to comport and maintain consistency
with the principal proposed regulation changes discussed above.
6. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts
of 42 CFR part 413
We are proposing to conform the terminology in 42 CFR part 405
Subpart R and all subparts of 42 CFR part 413 by replacing the term
``intermediary'' and its various deviations to ``contractor'', and its
various deviations, pursuant to sections 1816, 1874A, and 1878 of the
Act.

IX. Proposed Quality Data Reporting Requirements for Specific Providers
and Suppliers

We seek to promote higher quality and more efficient health care
for Medicare beneficiaries. This effort is supported by the adoption of
widely agreed-upon quality measures. We have worked with relevant
stakeholders to define quality measures for most settings and to
measure various aspects of care for most Medicare beneficiaries. These
measures assess structural aspects of care, clinical processes, patient
experiences with care, and, increasingly, outcomes.
We have implemented quality reporting programs for multiple care
settings, including:
Hospital inpatient services under the Hospital Inpatient
Quality Reporting (IQR) Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program);
Hospital outpatient services under the Hospital Outpatient
Quality Reporting (OQR) Program (formerly referred to as the Hospital
Outpatient Quality Data Reporting Program (HOP QDRP));
Care furnished by physicians and other eligible
professionals under the Physician Quality Reporting System (PQRS,
formerly referred to as the Physician Quality Reporting Program
Initiative (PQRI));
Inpatient rehabilitation facilities under the Inpatient
Rehabilitation Facility Quality Reporting Program (IRF QRP);
Long-term care hospitals under the Long-Term Care Hospital
Quality Reporting (LTCHQR) Program;
PPS-exempt cancer hospitals under the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program;
Ambulatory surgical centers under the Ambulatory Surgical
Center Quality Reporting (ASCQR) Program;
Inpatient psychiatric facilities under the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program;
Home health agencies under the home health quality
reporting program (HH QRP); and,
Hospice facilities under the Hospice Quality Reporting
Program.
We have also implemented the End-Stage Renal Disease Quality
Incentive Program and Hospital Value-Based Purchasing Program
(described further below) that link payment to performance.
In implementing the Hospital IQR Program and other quality
reporting programs, we have focused on measures that have high impact
and support CMS and HHS priorities for improved quality and efficiency
of care for Medicare beneficiaries. Our goal for the future is to align
the clinical quality measure requirements of the Hospital IQR Program
with various other Medicare and Medicaid programs, including those
authorized by the Health Information Technology for Economic and
Clinical Health (HITECH) Act, so that the reporting burden on providers
will be reduced. As appropriate, we will consider the adoption of
clinical quality measures with electronic specifications so that the
electronic collection of performance information is part of care
delivery. Establishing such a system will require interoperability
between EHRs and CMS data collection systems, additional
infrastructural development on the part of hospitals and CMS, and
adoption of standards for capturing, formatting, and transmitting the
data elements that make up the measures. However, once these activities
are accomplished, adoption of many measures that rely on data obtained
directly from EHRs will enable us to expand the Hospital IQR Program
measure set with less cost and reporting burden to hospitals. We
believe that in the near future, collection and reporting of data
elements for many measures through EHRs will greatly simplify and
streamline reporting for various CMS quality reporting programs, and
that hospitals will be able to switch primarily to EHR-based data
reporting for many measures that are currently manually chart-
abstracted and submitted to CMS for the Hospital IQR Program.
We also have implemented a Hospital Value-Based Purchasing (VBP)
Program under section 1886(o) of the Act. In 2011, we issued the
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547).
We most recently adopted additional policies for the Hospital VBP
Program in section XIV. of the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75120 through 75121). We are proposing additional
policies for this program in section IV.I. of the preamble of this
proposed rule. Under the Hospital VBP Program, hospitals will receive
value-based incentive payments based on their quality performance with
respect to performance standards for a performance period for the
fiscal year involved. The measures under the Hospital VBP Program must
be selected from the measures (other than readmission measures)
specified under the Hospital IQR Program as required by section
1886(o)(2)(A) of the Act.
In selecting measures for the Hospital IQR Program, we are mindful
of the conceptual framework we have described for the Hospital VBP
Program. The Hospital IQR Program is linked with the Hospital VBP
Program because many of the measures and the reporting infrastructure
for the programs overlap. We view the Hospital VBP Program as the next
step in promoting higher quality care for Medicare beneficiaries by
transforming Medicare from a passive payer of claims into an active
purchaser of quality healthcare for its beneficiaries. Value-based
purchasing is an important step to revamping how care and services are
paid for, moving increasingly toward rewarding better value, outcomes,
and innovations instead of merely volume.
We also view the Hospital-Acquired Condition (HAC) payment
adjustment program authorized by section 1886(p) of the Act, as added
by section 3008 of the Affordable Care Act, and the Hospital VBP
Program, as related but separate efforts to reduce HACs. The Hospital
VBP Program is an incentive program that awards payments to hospitals
based on quality performance on a wide variety of measures, while the
HAC Reduction Program creates a payment adjustment resulting in payment
reductions for the lowest performing hospitals based on their rates of
HACs. Proposed policies for the Hospital VBP Program are included in
section IV.I. of the preamble of this proposed rule. Proposed policies
for the HAC Reduction Program are included in section IV.J. of the
preamble of this proposed rule.
Although we intend to monitor the various interactions of programs
authorized by the Affordable Care Act and their overall impact on
providers and suppliers, we also view programs that could potentially
affect a hospital's Medicaid payment as separate from

[[Page 28218]]

programs that could potentially affect a hospital's Medicare payment.
In the preamble of this proposed rule, we are proposing changes to
the following Medicare quality reporting systems:
In section IX.A., the Hospital IQR Program.
In section IX.B., the PCHQR Program.
In section IX.C., the LTCHQR Program.
In addition, in section IX.D. of the preamble of this proposed
rule, we are proposing changes to the Medicare EHR Incentive Program.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50180 through 50181) for detailed discussions of the history of
the Hospital IQR Program, including the statutory history, and to the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50789 through 50807) for the
measures we have adopted for the Hospital IQR measure set through the
FY 2016 payment determination and subsequent years.
b. Maintenance of Technical Specifications for Quality Measures
The technical specifications for the Hospital IQR Program measures,
or links to Web sites hosting technical specifications, are contained
in the CMS/The Joint Commission (TJC) Specifications Manual for
National Hospital Quality Measures (specifications manual). This
Specifications Manual is posted on the QualityNet Web site at https://www.qualitynet.org/. We generally update the Specifications Manual on a
semiannual basis and include in the updates detailed instructions and
calculation algorithms for hospitals to use when collecting and
submitting data on required measures. These semiannual updates are
accompanied by notifications to users, providing sufficient time
between the change and the effective date in order to allow users to
incorporate changes and updates to the specifications into data
collection systems.
The technical specifications for the HCAHPS patient experience of
care survey are contained in the current HCAHPS Quality Assurance
Guidelines manual, which is available at the HCAHPS On-Line Web site,
https://www.hcahpsonline.org. We maintain the HCAHPS technical
specifications by updating the HCAHPS Quality Assurance Guidelines
manual annually, and include detailed instructions on survey
implementation, data collection, data submission and other relevant
topics. As necessary, HCAHPS Bulletins are issued to provide notice of
changes and updates to technical specifications in HCAHPS data
collection systems.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are endorsed by the National Quality Forum
(NQF). As part of its regular maintenance process for endorsed
performance measures, the NQF requires measure stewards to submit
annual measure maintenance updates and undergo maintenance of
endorsement review every 3 years. In the measure maintenance process,
the measure steward (owner/developer) is responsible for updating and
maintaining the currency and relevance of the measure and will confirm
existing or minor specification changes with NQF on an annual basis.
NQF solicits information from measure stewards for annual reviews, and
it reviews measures for continued endorsement in a specific 3-year
cycle.
The NQF regularly maintains its endorsed measures through annual
and triennial reviews, which may result in the NQF making updates to
the measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates made by the
NQF into the measure specifications we have adopted for the Hospital
IQR Program so that these measures remain up-to-date. We also recognize
that some changes the NQF might make to its endorsed measures are
substantive in nature and might not be appropriate for adoption using a
subregulatory process.
Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504
through 53505), we finalized a policy under which we use a
subregulatory process to make nonsubstantive updates to measures used
for the Hospital IQR Program. With respect to what constitutes
substantive versus nonsubstantive changes, we expect to make this
determination on a case-by-case basis. Examples of nonsubstantive
changes to measures might include updated diagnosis or procedure codes,
medication updates for categories of medications, broadening of age
ranges, and exclusions for a measure (such as the addition of a hospice
exclusion to the 30-day mortality measures). We believe that
nonsubstantive changes may include updates to NQF-endorsed measures
based upon changes to guidelines upon which the measures are based.
We will continue to use rulemaking to adopt substantive updates
made to measures we have adopted for the Hospital IQR Program. Examples
of changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure, or when a standard of performance assessed by a measure
becomes more stringent (for example: Changes in acceptable timing of
medication, procedure/process, or test administration). Another example
of a substantive change would be where the NQF has extended its
endorsement of a previously endorsed measure to a new setting, such as
extending a measure from the inpatient setting to hospice. These
policies regarding what is considered substantive versus nonsubstantive
would apply to all measures in the Hospital IQR Program. We also note
that the NQF process incorporates an opportunity for public comment and
engagement in the measure maintenance process.
We believe this policy adequately balances our need to incorporate
updates to Hospital IQR Program measures in the most expeditious manner
possible while preserving the public's ability to comment on updates
that so fundamentally change an endorsed measure that it is no longer
the same measure that we originally adopted.
c. Public Display of Quality Measures
Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section
3001(a)(2) of the Affordable Care Act, requires that the Secretary
establish procedures for making information regarding measures
submitted available to the public after ensuring that a hospital has
the opportunity to review its data before they are made public. In this
proposed rule, we are not proposing to change our current policy of
reporting data from the Hospital IQR Program as soon as it is feasible
on CMS Web sites such as the Hospital Compare Web site (https://www.medicare.gov/hospitalcompare) and/or the interactive https://data.medicare.gov Web site, after a preview period.
The Hospital Compare Web site is an interactive Web tool that
assists beneficiaries by providing information on hospital quality of
care to those who need to select a hospital. For more information on
measures reported to Hospital Compare, please see https://www.medicare.gov/hospitalcompare. Other information not reported to
Hospital Compare may be made

[[Page 28219]]

available on other CMS Web sites such as https://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50777 through 50778)
we responded to public comments on what additional quality measures and
information featured on Hospital Compare may be highly relevant to
patients and other consumers of health care, and how we may better
display this information on the Hospital Compare Web site.
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital IQR
Program
As discussed further below, we generally retain measures from the
previous year's Hospital IQR Program measure set for subsequent years'
measure sets except when we specifically propose to remove or replace
them. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50185), the criteria that we consider when determining whether to
remove Hospital IQR Program measures are the following: (1) Measure
performance among hospitals is so high and unvarying that meaningful
distinctions and improvements in performance can no longer be made
(``topped out'' measures); (2) availability of alternative measures
with a stronger relationship to patient outcomes; (3) a measure does
not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or the availability of a measure that is more proximal in
time to desired patient outcomes for the particular topic; (6) the
availability of a measure that is more strongly associated with desired
patient outcomes for the particular topic; and (7) collection or public
reporting of a measure leads to negative unintended consequences other
than patient harm. We also take into account the views of the Measure
Applications Partnership (MAP) when determining when a measure should
be removed, and we strive to eliminate redundancy of similar measures
(77 FR 53505 through 53506).
In this proposed rule, we are proposing to change the criteria for
determining when a measure is ``topped-out.'' A measure is ``topped-
out'' when measure performance among hospitals is so high and unvarying
that meaningful distinctions and improvements in performance can no
longer be made (``topped out'' measures) (77 FR 53505 through 53506).
We do not believe that measuring hospital performance on ``topped-out''
measures provides meaningful information on the quality of care
provided by hospitals. We further believe that quality measures, once
``topped out,'' represent care standards that have been widely adopted
by hospitals. We believe such measures should be considered for removal
from the Hospital IQR Program because their associated reporting burden
may outweigh the value of the quality information they provide.
In order to determine ``topped out'' status, we are proposing to
apply the following two criteria, the first of which was previously
adopted by the HVBP Program in the Hospital Inpatient VBP Program final
rule (76 FR 26496 through 26497), to Hospital IQR measures. The second
criterion is a modified version of what was previously adopted by the
Hospital VBP Program in the above mentioned final rule, with the change
from the ``less than'' operator (<) to the ``less than or equal to''
operator (<=):
Statistically indistinguishable performance at the 75th
and 90th percentiles; and
Truncated coefficient of variation <= 0.10.
The coefficient of variation (CV) is a common statistic that
expresses the standard deviation as a percentage of the sample mean in
a way that is independent of the units of observation. Applied to this
analysis, a large CV would indicate a broad distribution of individual
hospital scores, with large and presumably meaningful differences
between hospitals in relative performance. A small CV would indicate
that the distribution of individual hospital scores is clustered
tightly around the mean value, suggesting that it is not useful to draw
distinctions among individual hospitals' measure performance. By
adopting ``less than or equal to'' in our ``topped out'' test, we are
clarifying the interpretation of the CV when a tie at 0.1 occurs due to
rounding. We believe that the proposed criteria distinguish measures
with significant variation in performance among hospitals.
In the Hospital VBP Program context, we used a modified version of
the CV, namely a truncated CV, for each measure, in which the 5 percent
of hospitals with the lowest scores, and the 5 percent of hospitals
with highest scores were first truncated (set aside) before calculating
the CV. This was done to avoid undue effects of the highest and lowest
outlier hospitals, which if included, would tend to greatly widen the
dispersion of the distribution and make the measure appear to be more
reliable or discerning.
We welcome public comments on this proposal.
b. Proposed Removal of Hospital IQR Program Measures for the FY 2017
Payment Determination and Subsequent Years
As we continue moving towards including more clinical outcomes
measures as opposed to process-of-care measures in the Hospital IQR
Program measure set, we have considered removing additional measures
using our previously-adopted removal criteria. We are proposing to
remove five measures from the Hospital IQR Program for the FY 2017
payment determination and subsequent years, which begins in the CY 2015
reporting period: (1) AMI-1 Aspirin at arrival (NQF 0132); (2)
AMI-3 ACEI/ARB for left ventricular systolic dysfunction (NQF
0137); (3) AMI-5 Beta-blocker prescribed at discharge (NQF
0160); (4) SCIP INF-6 Appropriate Hair Removal; and (5)
Participation in a systematic database for cardiac surgery (NQF
0113).
We are proposing to remove the first four process measures because
they were previously determined to be ``topped out'' and suspended (77
FR 53509). We are proposing to remove the fifth measure because the MAP
recommended the measure's removal in its MAP Pre-Rulemaking Report:
2014 Recommendations on Measures for More than 20 Federal Programs,
which is available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. The MAP report states that
the measure's NQF endorsement has been placed on reserve status because
the measure is ``topped-out.'' The purpose of reserve status is to
retain endorsement of reliable and valid quality performance measures
that have overall high levels of performance with little variability so
that performance could be monitored in the future if necessary to
ensure that performance does not decline. This status would apply only
to highly credible, reliable, and valid measures that have high levels
of performance due to quality improvement actions (often facilitated or
motivated through public reporting and other accountability programs).
More information about NQF reserve status is available at: https://www.qualityforum.org/docs/Reserve_Endorsement_Status.aspx.
By removing these measures, we would alleviate the maintenance
costs and administrative burden to hospitals

[[Page 28220]]

associated with retaining them. Should we determine that hospital
adherence to these practices has unacceptably declined, we would
propose to resume data collection in future rulemaking. In addition, we
would comply with any requirements imposed by the Paperwork Reduction
Act before re-proposing these measures.
We also analyzed the remainder of the Hospital IQR measure set for
other potential ``topped out'' measures using the previously adopted
criteria. The analysis was based on the most recent two quarters of
clinical process of care data available in the CMS Clinical Data
Warehouse for IPPS eligible hospitals, which covers a measurement
period from 01/01/2013 to 06/30/2013 (Q1 2013-Q2 2013). Based on this
analysis and using the previously adopted criteria, we believe that an
additional 15 chart-abstracted measures are ``topped out,'' and we are
proposing to remove them from the measure set for the FY 2017 payment
determination and subsequent years. However, we are proposing to retain
the electronic clinical quality measure version of 10 of these chart-
abstracted measures for Hospital IQR Program reporting as discussed
further in section IX.A.7.f. of the preamble of this proposed rule. We
believe that retaining ``topped out'' measures under certain
circumstances enables us to continue monitoring the clinical topic
covered by the measure to ensure that hospitals continue to maintain
high levels of performance. Further, we believe the additional
reporting burden associated with retaining these measures is mitigated
by retaining electronic versions of those measures, which are more
easily reported by hospitals. These 10 measures are denoted in the
chart below by an asterisk.

``Topped Out'' Chart-Abstracted Measures Proposed for Removal for the FY
2017 Payment Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
AMI-1: Aspirin at Arrival (previously suspended).
AMI-3: ACEI or ARB for left ventricular systolic dysfunction--
Acute Myocardial Infarction (AMI) Patients (previously suspended) (NQF
0137).
AMI-5: Beta-Blocker Prescribed at Discharge for AMI (previously
suspended) (NQF 0160).
AMI-8a: Primary PCI received within 90 minutes of hospital
arrival * (NQF 0163).
HF-2: Evaluation of left ventricular systolic function (NQF
0135).
PN-6: Initial antibiotic selection for community-acquired
pneumonia (CAP) in immunocompetent patients* (NQF 0147).
SCIP-Inf-1: Prophylactic antibiotic received within one hour
prior to surgical incision* (NQF 0527).
SCIP-Inf-2: Prophylactic antibiotic selection for surgical
patients* (NQF 0528).
SCIP-Inf-3: Prophylactic antibiotics discontinued within 24
hours after surgery end time (48 hours for cardiac surgery) (NQF 0529).
SCIP-Inf-4: Cardiac surgery patients with controlled
postoperative blood glucose (NQF 0300).
SCIP-Inf-6: Surgery patients with appropriate hair removal
(previously suspended) (NQF 0301).
SCIP-Inf-9: Urinary catheter removed on Postoperative Day 1
(POD1) or Postoperative Day 2 (POD2) with day of surgery being day
zero.* (NQF 0453).
SCIP-Card-2: Surgery patients on beta blocker therapy prior to
arrival who received a beta blocker during the perioperative period
(NQF 0284).
SCIP-VTE-2: Surgery Patients Who Received Appropriate Venous
Thromboembolism (VTE) Prophylaxis Within 24 Hours Prior to Surgery to
24 Hours After Surgery (NQF 0218).
STK-2: Discharged on antithrombotic therapy * (NQF 0435).
STK-3: Anticoagulation therapy for atrial fibrillation/flutter*
(NQF 0436).
STK-5: Antithrombotic therapy by the end of hospital day two*
(NQF 0438).
STK-10: Assessed for rehabilitation* (NQF 0441).
VTE-4: Patients receiving un-fractionated Heparin with doses/
labs monitored by protocol*.
Participation in a systematic database for cardiac surgery (NQF
0113).
------------------------------------------------------------------------
* Proposed to be retained as an electronic clinical quality measure.

We welcome public comments on our proposal to remove these
measures.
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53512 through 53513), for our finalized measure retention policy. When
we adopt measures for the Hospital IQR Program beginning with a
particular payment determination, these measures are automatically
adopted for all subsequent payment determinations unless we propose to
remove, suspend, or replace the measures.
We are not proposing any changes to our policy for retaining
previously adopted measures for subsequent payment determinations.
4. Additional Considerations in Expanding and Updating Quality Measures
Under the Hospital IQR Program
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53510 through 53512) for a discussion of the considerations we use to
expand and update quality measures under the Hospital IQR Program. We
are not proposing any changes to the considerations in expanding or
updating quality measures.
5. Previously Adopted Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
For currently adopted and future condition-specific, claims-based
measures, beginning with the FY 2017 payment determination and
subsequent years, we would like to propose to use 3 years of data to
calculate measures unless otherwise specified. In other words, this
reporting period would apply to all future calculations of condition
specific measures already adopted in the Hospital IQR Program and any
condition-specific measures that may be subsequently adopted in future
years. The currently adopted, applicable measures are:

Hospital 30-day, all-cause, risk-standardized mortality rate
(RSMR) following acute myocardial infarction (AMI) hospitalization for
patients 18 and older (NQF 0230)
Hospital 30-day, all-cause, risk-standardized mortality rate
(RSMR) following heart failure (HF) hospitalization for patients 18 and
older (NQF 0229)
Hospital 30-day, all-cause, risk-standardized mortality rate
(RSMR) following pneumonia hospitalization (NQF 0468)
Stroke 30-day mortality rate
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
(RSMR)

[[Page 28221]]

following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization
(NQF 1893)
30-day all-cause, Acute Myocardial Infarction (AMI) 30-day
risk standardized readmission rate (RSMR) following Acute Myocardial
Infarction (AMI) hospitalization (NQF 0505)
30-day all-cause, risk standardized readmission rate (RSMR)
following Heart Failure (HF) hospitalization (NQF 0330)
30-day all-cause, risk standardized readmission rate (RSMR)
following Pneumonia (PN) hospitalization (NQF 0506)
30-day risk standardized readmission rate (RSMR) following
Total Hip/Total Knee Arthroplasty (NQF 1551)
30-day risk standardized readmission rate (RSMR) following
Stroke hospitalization
30-day risk standardized readmission rate (RSMR) following
COPD hospitalization (NQF 1891)
Hip/Knee Complication: Hospital-level Risk-Standardized
Complication Rate (RSCR) following Elective Primary Total Hip
Arthroplasty (NQF 1550)

We welcome public comments on our proposal to use 3 years of data
to calculate current and future condition-specific, claims-based
measures.
The Influenza Vaccination Coverage Among Healthcare Personnel (HCP)
(NQF 0431) was finalized for the Hospital IQR program in the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51633) and the Hospital
Outpatient Quality Reporting (HOQR) in the CY 2014 OPPS/ASC final rule
(78 FR 75099). We received public comments regarding the burden of
separately collecting and reporting HCP influenza vaccination statuses
for both the inpatient and outpatient settings. In response to these
concerns, we clarified that beginning with the 2014-2015 influenza
season (CY 2014 reporting period and FY 2016 payment determination),
facilities should collect and report a single vaccination count for
each healthcare facility by CMS Certification Number (CCN), instead of
separately by inpatient or outpatient setting, in order to reduce
burden. We announced this clarification regarding how to designate HCP
for this measure in an Operational Guidance document which can be found
on our on our Web page at: https://origin.glb.cdc.gov/nhsn/PDFs/HCP/Operational-Guidance-ACH-HCP-Flu.pdf. Using the CCN will allow
healthcare facilities with multiple care settings to simplify data
collection and submit a single count applicable across the inpatient
and outpatient settings. We will then publicly report the percentage of
HCP who received an influenza vaccination per CCN. This single count
per CCN will inform the public of the percentage of vaccinated HCP at a
particular healthcare facility, which would still provide meaningful
data and help to improve the quality of care. Specific details on data
submission for this measure can be found at: https://www.cdc.gov/nhsn/acute-care-hospital/hcp-vaccination/ and at https://www.cdc.gov/nhsn/acute-care-hospital/.
The following table shows measures currently adopted for the
Hospital IQR Program, including suspended measures.

------------------------------------------------------------------------
Hospital IQR program measures
previously adopted for the FY 2016
Topic payment determination and subsequent
years
------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) Measures
------------------------------------------------------------------------
AMI-1: Aspirin at Arrival
(previously suspended).
AMI-3: ACEI or ARB for left
ventricular systolic dysfunction--
Acute Myocardial Infarction (AMI)
Patients (previously suspended)
(NQF 0137).
AMI-5: Beta-Blocker
Prescribed at Discharge for AMI
(previously suspended) (NQF 0160).
AMI-7a Fibrinolytic therapy
received within 30 minutes of
hospital arrival (NQF 0164).
AMI-8a: Primary PCI
received within 90 minutes of
hospital arrival (NQF 0163) *.
------------------------------------------------------------------------
Heart Failure (HF) Measure
------------------------------------------------------------------------
HF-2 Evaluation of left
ventricular systolic function (NQF
0135) *.
------------------------------------------------------------------------
Stroke (STK) Measure Set
------------------------------------------------------------------------
STK-1 Venous
thromboembolism (VTE) prophylaxis
(NQF 0434).
STK-2 Discharged on
antithrombotic therapy (NQF 0435) *.
STK-3 Anticoagulation
therapy for atrial fibrillation/
flutter (NQF 0436) *.
STK-4 Thrombolytic therapy
(NQF 0437).
STK-5 Antithrombotic
therapy by the end of hospital day
two (NQF 0438).
STK-6 Discharged on statin
medication (NQF 0439).
STK-8 Stroke education.
STK-10 Assessed for
rehabilitation (NQF 0441).
------------------------------------------------------------------------
Venous Thromboembolism (VTE) Measure Set
------------------------------------------------------------------------
VTE-1 Venous
thromboembolism prophylaxis (NQF
0371).
VTE-2 Intensive care unit
venous thromboembolism prophylaxis
(NQF 0372).
VTE-3 Venous
thromboembolism patients with
anticoagulation overlap therapy
(NQF 0373).
VTE-4 Patients receiving un-
fractionated Heparin with doses/
labs monitored by protocol.
VTE-5 VTE discharge
instructions.
VTE-6 Incidence of
potentially preventable VTE.
------------------------------------------------------------------------
Pneumonia (PN) Measure
------------------------------------------------------------------------
PN-6 Initial antibiotic
selection for community-acquired
pneumonia (CAP) in immunocompetent
patients (NQF 0147).
------------------------------------------------------------------------
Surgical Care Improvement Project (SCIP) Measures
------------------------------------------------------------------------
SCIP INF-1 Prophylactic
antibiotic received within one hour
prior to surgical incision (NQF
0527) *.
SCIP INF-2 Prophylactic
antibiotic selection for surgical
patients (NQF 0528).

[[Page 28222]]

SCIP INF-3 Prophylactic
antibiotics discontinued within 24
hours after surgery end time (48
hours for cardiac surgery) (NQF
0529).
SCIP INF-4 Cardiac surgery
patients with controlled
postoperative blood glucose (NQF
0300).
SCIP INF-9 Urinary catheter
removed on Postoperative Day 1
(POD1) or Postoperative Day 2
(POD2) with day of surgery being
day zero (NQF 0453).
SCIP Card-2 Surgery
patients on beta blocker therapy
prior to arrival who received a
beta blocker during the
perioperative period (NQF 0284).
SCIP-VTE[dash]2 Surgery
Patients Who Received Appropriate
Venous Thromboembolism (VTE)
Prophylaxis Within 24 Hours Prior
to Surgery to 24 Hours After
Surgery (NQF 0218).
------------------------------------------------------------------------
Mortality Measures
------------------------------------------------------------------------
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following acute myocardial
infarction (AMI) hospitalization
for patients 18 and older (NQF
0230).
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following heart failure (HF)
hospitalization for patients 18 and
older (NQF 0229).
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following pneumonia
hospitalization (NQF 0468).
Stroke 30-day mortality
rate.
Hospital 30-Day, All-Cause,
Risk-Standardized Mortality Rate
(RSMR) following Chronic
Obstructive Pulmonary Disease
(COPD) Hospitalization (NQF 1893).
------------------------------------------------------------------------
Patient Experience of Care Measure
------------------------------------------------------------------------
HCAHPS survey (NQF 0166) (expanded to include two
new ``About You'' items and the 3-
item Care Transition Measure) (NQF
0228).
------------------------------------------------------------------------
Readmission Measures
------------------------------------------------------------------------
Hospital 30-day all-cause
risk-standardized readmission rate
(RSRR) following acute myocardial
infarction (AMI) hospitalization
(NQF 0505).
Hospital 30-day, all-cause,
risk-standardized readmission rate
(RSRR) following heart failure
hospitalization (NQF 0330).
Hospital 30-day, all-cause,
risk-standardized readmission rate
(RSRR) following pneumonia
hospitalization (NQF 0506).
Hospital-level 30-day, all-
cause risk-standardized readmission
rate (RSRR) following elective
primary total hip arthroplasty
(THA) and/or total knee
arthroplasty (TKA) (NQF 1551).
Hospital-Wide All-Cause
Unplanned Readmission (HWR) (NQF
1789).
30-day risk standardized
readmission rate (RSMR) following
Stroke hospitalization.
Hospital 30-Day, All-Cause,
Risk-Standardized Readmission Rate
(RSRR) following Chronic
Obstructive Pulmonary Disease
(COPD) Hospitalization (NQF 1891).
------------------------------------------------------------------------
AHRQ Patient Safety Indicators (PSIs) Composite Measure
------------------------------------------------------------------------
PSI-90 Patient safety for
selected indicators (composite)
(NQF 0531).
------------------------------------------------------------------------
AHRQ PSI and Nursing Sensitive Care Measure
------------------------------------------------------------------------
PSI-4 Death among surgical
inpatients with serious treatable
complications (NQF 0351).
------------------------------------------------------------------------
Structural Measures
------------------------------------------------------------------------
Participation in a
Systematic Database for Cardiac
Surgery (NQF 0113).
Participation in a
Systematic Clinical Database
Registry for Nursing Sensitive
Care.
Participation in a
Systematic Clinical Database
Registry for General Surgery.
Safe Surgery Checklist Use.
------------------------------------------------------------------------
Healthcare-Associated Infections (HAI) Measures
------------------------------------------------------------------------
National Healthcare Safety
Network (NHSN) Central line-
associated Bloodstream Infection
(CLABSI) Outcome Measure (NQF
0139).
American College of
Surgeons--Centers for Disease
Control and Prevention (ACS-CDC)
Harmonized Procedure Specific
Surgical Site Infection (SSI)
Outcome Measure (NQF 0753).
--SSI following Colon Surgery.
--SSI following Abdominal
Hysterectomy.
National Healthcare Safety
Network (NHSN) Catheter-associated
Urinary Tract Infection (CAUTI)
Outcome Measure (NQF 0138).
National Healthcare Safety
Network (NHSN) Facility-wide
Inpatient Hospital-onset
Methicillin-resistant
Staphylococcus aureus (MRSA)
Bacteremia Outcome Measure (NQF
1716).
National Healthcare Safety
Network (NHSN) Facility-wide
Inpatient Hospital-onset
Clostridium difficile Infection
(CDI) Outcome Measure (NQF 1717).
Influenza vaccination
coverage among healthcare personnel
(HCP) (NQF 0431).
------------------------------------------------------------------------
Surgical Complications Measures
------------------------------------------------------------------------

[[Page 28223]]

Hospital-level risk-
standardized complication rate
(RSCR) following elective primary
total hip arthroplasty (THA) and/or
total knee arthroplasty (TKA) (NQF
1550).
------------------------------------------------------------------------
Emergency Department (ED) Throughput Measures
------------------------------------------------------------------------
ED-1 Median time from ED
arrival to ED departure for
admitted ED patients (NQF 0495).
ED-2 Admit Decision Time to
ED Departure Time for Admitted
Patients (NQF 0497).
------------------------------------------------------------------------
Prevention: Global Immunization (IMM) Measures
------------------------------------------------------------------------
IMM-1 Pneumococcal
Immunization (previously suspended)
(NQF 1653).
IMM-2 Influenza
Immunization (NQF 1659).
------------------------------------------------------------------------
Cost Efficiency Measures
------------------------------------------------------------------------
Payment-Standardized
Medicare Spending Per Beneficiary
(MSPB) (NQF 2158).
AMI Payment per Episode of
Care.
------------------------------------------------------------------------
Perinatal Care (PC) Measure
------------------------------------------------------------------------
PC-01 Elective delivery
(NQF 0469)
------------------------------------------------------------------------
* Measures proposed for removal for the FY 2016 payment determination
and subsequent years.

6. Proposed Refinements to Existing Measures in the Hospital IQR
Program
We are proposing to incorporate refinements for several measures
that were previously adopted in the Hospital IQR Program. These
refinements have either arisen out of the NQF endorsement maintenance
process, or during our internal efforts to harmonize measure
approaches. The measure refinements include the following: (1) Refining
the planned readmission algorithm for all seven readmission measures
included in the Hospital IQR Program; (2) modifying the hip/knee
readmission and complication measure cohorts to exclude index
admissions with a secondary fracture diagnosis; and (3) modifying the
hip/knee complication measure to not count as complications coded as
``present on admission'' (POA) during the index admission.
a. Proposed Refinement of Planned Readmission Algorithm for 30-Day
Readmission Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787)
we adopted the CMS Planned Readmission Algorithm Version 2.1 (the
Algorithm) for the Hospital IQR Program. In the same final rule (78 FR
50785 through 50787, 50790 through 50792, and 50794 through 50798), we
also finalized the use of the CMS Planned Readmission Algorithm Version
2.1 in the AMI, HF, PN, THA/TKA, HWR, and COPD measures. This algorithm
identifies readmissions that are planned and occur within 30 days of
discharge from the hospital. A complete description of the Algorithm,
which includes lists of planned diagnoses and procedures, is available
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html in the
``Planned Readmission'' folder. NQF has endorsed the use of the
Algorithm for these measures.
In that final rule (78 FR 50652), in response to comments, we
agreed to continually review the Algorithm and make updates as needed.
Since its development, we have identified and made improvements. As a
result, we are now proposing to use an updated, revised version, the
CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN,
THA/TKA, HWR, COPD, and Stroke readmission measures for the FY 2015
payment determination and subsequent years. As discussed further below,
we are also proposing to use Version 3.0 of this algorithm for the CABG
readmission measure that we are proposing to include in the Hospital
IQR Program starting in FY 2017, proposed in section IX.A.7.a. of the
preamble of this proposed rule.
Version 3.0 incorporates improvements made based on a validation
study of the algorithm. Researchers reviewed 634 patients' charts at 7
hospitals, classified readmission as planned or unplanned based on the
chart review, and compared the results to the claims-based algorithm's
classification of the readmissions. The findings suggested the
algorithm was working well but could be improved.
Specifically, the study suggested the need to make small changes to
the tables of procedures and conditions used in the algorithm to
classify readmission as planned or unplanned. The algorithm uses the
Agency for Healthcare Research and Quality's (AHRQ's) Clinical
Classification Software (CCS) to group thousands of procedure and
diagnosis codes into fewer categories of related procedures or
diagnoses. The algorithm then uses four tables of procedures and
diagnoses categories and a flow diagram to classify tables as planned
or unplanned. Additional information on this software is available at:
https://www.hcup-us.ahrq.gov/toolssoftware/ccs/ccs.jsp. For all
measures, the first table identifies procedures that, if present in a
readmission, classify the readmission as planned. The second table
identifies primary discharge diagnoses that always classify
readmissions as planned. Because almost all planned admissions are for
procedures or surgeries, a third table identifies procedures for which
patients are typically admitted; if any of these procedures is coded in
the readmission, we classify a readmission as planned as long as that
readmission does not have an acute (unplanned) primary discharge
diagnosis. The fourth table lists the acute (unplanned) primary
discharge diagnoses that disqualify readmissions that include one or
more of the potentially planned procedure in the third table as
planned. These tables are structured the same across all measures but
the specific procedure and conditions they contain vary slightly for
certain measures based on clinical considerations for each cohort. The
current tables for each measure can be found in the measure methodology
reports at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.

[[Page 28224]]

Version 3.0 modifies two of these tables by removing or adding
procedures or conditions to improve the accuracy of the algorithm.
First, the validation study revealed that the algorithm could be
improved by removing two procedure CCS categories from the third table,
the potentially planned procedure table: CCS 211--Therapeutic Radiation
and CCS 224--Cancer Chemotherapy. Typically, patients do not require
admission for scheduled Therapeutic Radiation treatments (CCS 211). The
study found that readmissions that were classified as planned because
they included Therapeutic Radiation were largely unplanned.
The algorithm was also more accurate when CCS 224--Cancer
Chemotherapy was removed from the potentially planned procedure table.
The second table of the algorithm classifies all readmissions with a
principal diagnosis of Maintenance Chemotherapy as planned. Most
patients who receive cancer chemotherapy have both a code for Cancer
Chemotherapy (CCS 224) and a principal discharge diagnosis of
Maintenance Chemotherapy (CCS 45). In the validation study, the
readmissions for patients who received Cancer Chemotherapy (CCS 224)
but who did not have a principal diagnosis of Maintenance Chemotherapy
were largely unplanned, therefore removing CCS 224 from the potentially
planned procedure table improved the algorithm's accuracy. Therefore,
Version 3.0 removes CCS 211 and CCS 224 from the list of potentially
planned procedures to improve the accuracy of algorithm.
As noted above, the algorithm uses a table of acute principal
discharge diagnoses to help identify unplanned readmissions.
Readmissions that have a principal diagnosis listed in the table are
classified as unplanned, regardless of whether they include a procedure
in the potentially planned procedure table. The validation study
identified one diagnosis CCS that should be added to the table of acute
diagnoses to more accurately identify truly unplanned admissions as
unplanned: Hypertension with Complications (CCS 99). Hypertension with
complications is a diagnosis that is rarely associated with planned
readmissions.
In addition, the validation study identified a subset of ICD-9
diagnosis codes within two CCS diagnosis categories that should be
added to the acute diagnosis table to improve the algorithm. CCS 149,
Pancreatic Disorders, includes the code for acute pancreatitis;
clinically there is no situation in which a patient with this acute
condition would be admitted for a planned procedure. Therefore, Version
3.0 adds the ICD-9 code for acute pancreatitis, 577.0, to the acute
primary diagnosis table to better identify unplanned readmissions.
Finally, CCS 149, Biliary Tract Disease, is a mix of acute and non-
acute diagnoses. Adding the subset of ICD-9 codes within this CCS group
that are for acute diagnoses to the list of acute conditions improves
the accuracy of the algorithm for these acute conditions while still
ensuring that readmissions for planned procedures, like
cholecystectomies, are counted accurately as planned. For more detailed
information on how the algorithm is structured and the use of tables to
identify planned procedures and diagnoses, we refer readers to CMS's
Planned Readmission Algorithm Version 2.1: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. As noted above, readers
can find the specific Version 3.0 tables for each measure in the
measure updates and specifications reports at the above link.
We invite public comment on our proposal to use the CMS Planned
Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/TKA, HWR,
COPD, and Stroke readmission measures for the FY 2015 payment
determination and subsequent years.
b. Proposed Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures
In this proposed rule, for the FY 2015 payment determination and
subsequent years, we are proposing to refine: (1) The measure outcome
and cohort for the Elective Primary THA/TKA All-Cause 30-Day Risk-
Standardized Complication Measure (NQF 1550); and (2) the
measure cohort for the Elective Primary THA/TKA All-Cause Unplanned 30-
Day Risk-Standardized Readmission Measure (NQF 1551).
As part of measure implementation, CMS conducted a dry run for both
the THA/TKA readmission and complication measures in September/October
of 2012. More information on the dry run is available at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889945763&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DDryRun_HWR-HK_SummRept_122112.pdf&blobcol=urldata&blobtable=MungoBlobs.
During the dry run, several commenters suggested CMS evaluate the
use of Present on Admission (POA) codes for both the hip/knee
readmission and complication measures. We agreed with the suggestion
and have been monitoring POA data collection and testing its readiness
for use in claims-based measures. We also noted our intent to evaluate
the use of POA codes in Hospital IQR Program measures, such as the
stroke mortality rate measure, in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50801). We have since tested the use of the POA codes and
propose to incorporate POA codes into the hip/knee complication measure
for FY 2015 payment determination and subsequent years in order to
prevent identifying a condition as a complication of care if it was
present during admission.
In addition, currently, the THA/TKA Readmission Measure (NQF
1551) adopted for the Hospital IQR Program is intended to only
include patients who have an elective THA or TKA. Currently, this
measure excludes patients who have a principal discharge diagnosis of
femur, hip, or pelvic fracture on their index admission since hip
replacement for hip fracture is not an elective procedure. However,
after hospitals reviewed their hospital-specific THA/TKA Readmission
Measure data during the national dry-run, CMS learned that hospitals
code hip fractures that occur during the same admission as a THA as not
only a principal diagnosis, but also alternatively, a secondary
diagnosis, instead of just a principal diagnosis as currently specified
by the measure. According to feedback received from hospitals
participating in the dry-run, the measure methodology failed to
identify, and, appropriately exclude, a small number of patients (that
is, 0.42 percent of patients in 2009-2010 data) with a hip fracture
that had non-elective total hip arthroplasty as captured by these
secondary diagnoses.
Therefore, to ensure that all such non-elective hip fracture
patients are excluded from the measure, we are proposing to refine the
measure to exclude patients with hip fractures coded as either a
principal or secondary diagnosis during the index admission beginning
with the FY 2015 payment determination and subsequent years. We believe
this refinement is responsive to comments from hospitals (78 FR 50709)
and will allow us to accurately exclude patients who were initially
admitted for a hip fracture and who then subsequently underwent total
hip

[[Page 28225]]

arthroplasty, making their procedure non-elective.
We invite public comment on these proposed refinements.
c. Anticipated Effect of Proposed Refinements to Existing Measures
Based on our analyses of discharges between July 2009 and June
2012, our proposal to use the Planned Readmission Algorithm Version 3.0
would have the following effects on measures had these changes been
applied for the FY 2014 payment determination as an example. We are
sharing this information to provide the public with a sense of the
extent to which these refinements to the measures will change the
measure scores. As the results show, while the refinements improve the
accuracy of the measures, the changes in actual scores are very slight.
The proposed 30-day readmission rate (excluding the planned
readmissions) would increase by 0.1 percentage points for AMI; 0.2
percentage points for HF; 0.1 percentage points for PN; 0.1 percentage
points for COPD; 0.0 percentage points for hip/knee; 0.1 percentage
points for HWR; and 0.0 percentage points for stroke.
The new national measure (unplanned) rate for each condition would
have been 18.4 percent for AMI; 23.2 percent for HF; 17.7 percent for
PN; 21.1 percent for COPD; 5.4 percent for hip/knee; 16.1 percent for
HWR; and 13.8 percent for stroke.
The number of readmissions considered planned (and, therefore, not
counted as a readmission) would decrease by 334 for AMI; 1,375 for HF;
981 for PN, 574 for COPD; 309 for hip/knee; 7,417 for HWR; and 242 for
stroke.

[[Page 28226]]

Comparison of Planned Readmission Algorithms V 2.1 and 3.0 for AMI/HF/PN/COPD/HK/HWR/Stroke Readmission Measures (Based on 2009-2012 Discharges)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMI HF PN COPD Hip/Knee HWR Stroke
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Discharges............................................ 513,331 513,331 1,262,826 1,262,826 1,089,758 1,089,758 989,381 989,381 879,641 879,641 6,918,467 6,918,467 502,376 502,376
Number of Unplanned Readmissions................................ 94,453 93,940 292,976 290,450 192,887 191,797 208,759 207,770 47,236 47,236 1,112,885 1,105,378 69,323 69,081
Readmission Rate................................................ 18.4% 18.3% 23.2% 23.0% 17.7% 17.6% 21.1% 21.0% 5.4% 5.4% 16.1% 16.0% 13.8% 13.8%
Number of Planned Readmissions.................................. 11,947 12,281 16,230 17,605 6,545 7,526 6,447 7,021 2,326 2,635 85,673 93,180 5,750 5,992
Planned Readmission Rate........................................ 2.3% 2.4% 1.3% 1.4% 0.6% 0.7% 0.7% 0.7% 0.3% 0.3% 1.2% 1.3% 1.1% 1.2%
% of Readmissions that are Planned.............................. 11.2% 11.6% 5.3% 5.7% 3.3% 3.8% 3.0% 3.3% 4.7% 5.3% 7.1% 7.8% 7.7% 8.0%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 28227]]

7. Proposed Additional Hospital IQR Program Measures for the FY 2017
Payment Determination and Subsequent Years
For purposes of the Hospital IQR Program, section
1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by
the Secretary must have been endorsed by the entity with a contract
under section 1890(a) of the Act. However, the statutory requirements
under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception
that, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
We are proposing to add a total of eleven measures to measure set
for the FY 2017 payment determination and subsequent years. The first
nine new measures are: (1) Hospital 30-day, all-cause, unplanned, risk-
standardized readmission rate (RSRR) following coronary artery bypass
graft (CABG) surgery (claims-based); (2) Hospital 30-day, all-cause,
risk-standardized mortality rate (RSMR) following coronary artery
bypass graft (CABG) surgery (claims-based); (3) Hospital-level, risk-
standardized 30-day episode-of-care payment measure for pneumonia
(claims-based); (4) Hospital-level, risk-standardized 30-day episode-
of-care payment measure for heart failure (claims-based); (5) Severe
Sepsis and Septic Shock: Management Bundle (NQF 0500) (chart-
abstracted); (6) EHDI-1a Hearing Screening Prior to Hospital Discharge
(NQF 1354) (electronic health record-based); (7) PC-05
Exclusive Breast Milk Feeding and the subset measure PC-05a Exclusive
Breast Milk Feeding Considering Mother's Choice (NQF 0480)
(electronic health record-based); (8) CAC-3 Home Management Plan of
Care (HMPC) Document Given to Patient/Caregiver (electronic health
record-based); and, (9) Healthy Term Newborn (NQF 0716)
(electronic health record-based).
In addition, to align the Hospital IQR Program with the Medicare
EHR Incentive Program for Eligible Hospitals and Critical Access
Hospitals and allow hospitals as many measure options as possible that
overlap both programs, we are proposing to readopt two measures
previously removed from the Hospital IQR Program as voluntary
electronic clinical quality measures: (10) AMI-2 Aspirin Prescribed at
Discharge for AMI (NQF 0142) (electronic clinical quality
measure); and (11) AMI-10 Statin Prescribed at Discharge (NQF
0639) (electronic clinical quality measure). These two
measures are part of the Stage 2 Medicare EHR Incentive Program measure
set for eligible hospitals and CAHs.
The four proposed claims-based measures (1-4, above) were included
on a publicly available document entitled ``List of Measures Under
Consideration for December 1, 2013'' in compliance with section
1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP
2014 Recommendations on Measures for More Than 20 Federal Programs
final report, available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
The proposed chart-abstracted measure (5 above) Severe Sepsis and
Septic Shock: Management Bundle (NQF 0500) was included in the
MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under
Consideration by HHS final report, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
The proposed measures 6-9 above were included on a publicly
available document entitled ``List of Measures Under Consideration for
December 1, 2012'' in compliance with section 1890A(a)(2) of the Act,
and they were reviewed by the MAP in its MAP Pre-Rulemaking Report:
2013 Recommendations on Measures Under Consideration by HHS final
report, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
Measures 10 and 11 were included on a publicly available document
entitled ``Measures Under Consideration for Calendar Year 2012'' in
compliance with section 1890A(a)(2) of the Act, and they were reviewed
by the MAP in its Pre-Rulemaking Report: Input on Measures Under
Consideration by HHS for 2012 Rulemaking available at https://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report__Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx.
a. Proposed Hospital 30-day, All-cause, Unplanned, Risk-Standardized
Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG)
Surgery
(1) Background
CABG is a priority area for outcomes measure development, because
it is a common procedure associated with considerable morbidity,
mortality, and health care spending. In 2007, there were 114,028
hospitalizations for CABG surgery and 137,721 hospitalizations for
combined surgeries for CABG and valve procedures (``CABG plus valve''
surgeries) in the U.S.\44\
---------------------------------------------------------------------------

\44\ Drye E, Krumholz H, Vellanky S, Wang Y. Probing New
Conditions and Procedures for New Measure Development: Yale New
Haven Health Systems Corporation; Center for Outcomes Research and
Evaluation.; 2009:1-7.
---------------------------------------------------------------------------

Readmission rates following CABG surgery are high and vary across
hospitals. For example, in 2009 Medicare fee-for-service (FFS) data,
the median hospital-level risk-standardized readmission rate after CABG
was 17.2 percent and ranged from 13.9 percent to 22.1 percent.\45\ This
is consistent with published data as the average 30-day all-cause,
hospital-level readmission rate in New York state was 16.5 percent and
ranged from 8.3 percent to 21.1 percent among all patients who
underwent CABG surgery between January 1, 2005 and November 30,
2007.\46\ Among patients readmitted within 30 days, 87.3 percent of
readmissions were for reasons related to CABG surgery, with a 30-day
rate of readmissions due to complications of CABG surgery of 14.4
percent. Patients readmitted within 30 days also experienced a 2.8
percent in-hospital mortality rate during their readmission(s), three-
fold higher than the 30-day mortality rate for patients without
readmissions.\47\ Hence, addressing the causes of readmission will
improve outcomes for patients.
---------------------------------------------------------------------------

\45\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
\46\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
\47\ Ibid.
---------------------------------------------------------------------------

Readmissions after CABG also impose significant health care costs.
In 2007, the Medicare Payment Advisory Committee (MedPAC) published a
report to Congress in which it identified the seven conditions
associated with the most costly potentially preventable

[[Page 28228]]

readmissions in the U.S.\48\ Among these seven, CABG ranked as having
the highest potentially preventable readmission rate within 15 days
following discharge (13.5 percent) and the second highest average
Medicare payment per readmission ($8,136).\49\ The annual cost to
Medicare for potentially preventable CABG readmissions was estimated at
$151 million.
---------------------------------------------------------------------------

\48\ Medicare Payment Advisory Committee. Report to the
Congress: Promoting Greater Efficiency in Medicare, 2007.
\49\ Ibid.
---------------------------------------------------------------------------

High readmission rates and wide variation in these rates suggest
that there is room for improvement. Reducing readmissions after CABG
surgery has been identified as a target for quality measurement. An
all-cause readmission measure for patients who undergo CABG surgery
will provide hospitals with an incentive to reduce readmissions through
prevention and/or early recognition and treatment of postoperative
complications, and improved coordination of peri-operative care and
discharge planning.
The specifics of the measure methodology are included in the
measure methodology report we have posted on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer readers to the
report for further details on the risk-adjustment statistical model.
We are proposing to include this non-NQF-endorsed measure in the
Hospital IQR Program under the exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section
IX.A.7. of the preamble of this proposed rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by the NQF. We also are not aware of
any other 30-day, all-cause, unplanned, risk-standardized readmission
rate (RSRR) following coronary artery bypass graft (CABG) surgery
measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. The measure has been reviewed by the MAP and was
conditionally supported pending NQF endorsement as detailed in its Pre-
Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. This measure was submitted to NQF on February 5, 2014 and
is currently under review.
(2) Overview of Measure
The CABG readmission measure assesses hospitals' 30-day, all-cause
risk-standardized rate of unplanned readmission following admission for
a CABG procedure. In general, the measure uses the same approach to
risk adjustment and hierarchical logistic modeling (HLM) methodology
that is specified for CMS's other readmission measures previously
adopted for this program. Information on how the measure employs HLM
can be found in the 2012 CABG Readmission Measure Methodology Report
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
The proposed measure is claims-based. It uses Medicare
administrative data from hospitalizations for Medicare FFS
beneficiaries hospitalized for a CABG procedure.
(4) Outcome
The outcome for this measure is 30-day, all-cause readmission,
defined as an unplanned subsequent inpatient admission to any
applicable acute care facility for any cause within 30 days of the date
of discharge from the index hospitalization. This outcome period is
consistent with other NQF-endorsed publicly reported readmission
measures (AMI, HF, PN, COPD, HWR and, THA/TKA).
The measure assesses all-cause unplanned readmissions (excluding
planned readmissions) rather than readmissions for CABG only for
several reasons. First, from the patient perspective, a readmission for
any reason is likely to be an undesirable outcome of care, even though
not all readmissions are preventable. Second, limiting the measure to
CABG-related readmissions may limit the effort focus too narrowly
rather than encouraging broader initiatives aimed at improving the
overall care within the hospital and transitions from the hospital
setting. Moreover, it is often hard to exclude quality issues and
accountability based on the documented cause of readmission. For
example, a patient who underwent a CABG surgery and develops a
hospital-acquired infection may ultimately be readmitted for sepsis. It
would be inappropriate to consider such a readmission to be unrelated
to the care the patient received for their CABG surgery. Finally, while
the measure does not presume that each readmission is preventable,
interventions generally have shown reductions in all types of
readmissions.^{50 51}
---------------------------------------------------------------------------

\50\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\51\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------

The measure does not count planned readmissions as readmissions.
Planned readmissions would be identified in claims data using the CMS
Planned Readmission Algorithm Version 3.0 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. Version 2.1 of the algorithm was finalized for use in the
current Hospital IQR Program readmission measures in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50785 through 50787, 50790 through 50792 and
50794 through 50798). However, we are proposing to update the algorithm
to version 3.0, and details on the updates to this algorithm can be
found in section IX.A.6.a. of the preamble of this proposed rule. The
proposed CABG readmission measure uses the planned readmission
algorithm tailored for CABG patients. We adapted the algorithm for this
group of patients with input from CABG surgeons and other experts,
narrowing the types of readmissions considered planned since planned
readmissions following CABG are less common and less varied than among
patients discharged from the hospital following a medical admission.
More detailed information on how the CABG measure incorporates the
Planned Readmission Algorithm Version 3.0 can be found on the CMS Web
site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Once at the Web site go to the Coronary Artery Bypass Graft (CABG)
Readmission zip file. Open the file labeled, ``Version10--Readmission--
CABG--Measure--Methodology--Report--3 19 2014'' and refer to Section
2.3.3. For the CABG measure, unplanned readmissions that fall within
the 30-day post-discharge timeframe from the index admission would not
be counted as readmissions for the index admission if they were
preceded by a planned readmission.
(5) Cohort
The cohort includes patients aged 65 years and older who received a
qualifying CABG procedure at an acute care facility. Patients are
eligible for

[[Page 28229]]

inclusion if they had a qualifying CABG procedure and continuous
enrollment in Medicare FFS one year prior to the first day of the index
hospital stay and through 30 days post-discharge. The index stay is the
stay that triggers the 30-day measurement period.
In order to include a clinically-coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and non-cardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures, that is, CABG procedures performed without concomitant
high-risk cardiac and non-cardiac procedures.\52\ Limiting the measure
cohort to ``isolated'' CABG patients is consistent with published
reports of CABG outcomes; \9\ therefore, the measure cohort considers
only patients undergoing isolated CABG as eligible for inclusion in the
measure. We defined isolated CABG patients as those undergoing CABG
procedures without concomitant valve or other major cardiac, vascular
or thoracic procedures. In addition, our clinical experts, consultants,
and Technical Expert Panel (TEP) members agreed that an isolated CABG
cohort is a clinically coherent cohort for quality measurement. For
detailed information on the cohort definition, we refer readers to the
2012 CABG Readmission Measure Methodology Report on the CMS Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\52\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients who are 65 years
of age or older at the time of index admission and for whom there was a
complete 12 months of Medicare FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients who are discharged against
medical advice (excluded because providers do not have the opportunity
to deliver full care and prepare the patient for discharge); (2)
admissions for patients who die during the initial hospitalization
(these patients are not eligible for readmission); (3) admissions for
patients with subsequent qualifying CABG procedures during the
measurement period (a repeat CABG procedure during the measurement
period very likely represents a complication of the original CABG
procedure and is a clinically more complex and higher risk surgery,
therefore we select the first CABG admission for inclusion in the
measure and exclude subsequent CABG admissions from the cohort); and
(4) admissions for patients without at least 30 days post-discharge
enrollment in Medicare FFS (excluded because the 30-day readmission
outcome cannot be assessed in this group).
(7) Risk-Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for readmission relative to patients cared for by
other hospitals. The measure uses claims data to identify patient
clinical conditions and comorbidities to adjust patient risk for
readmission across hospitals, but does not adjust for potential
complications of care. The model does not adjust for socioeconomic
status or race because risk adjusting for these characteristics would
hold hospitals with a large proportion of minority or low socioeconomic
status patients to a different standard of care than other hospitals.
One goal of this measure is to illuminate quality differences that such
risk adjustment would obscure.
(8) Calculating the Risk-Standardized Readmission Ratio (RSRR)
The measure is calculated using hierarchical logistic modeling
(HLM). This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The HLM is an appropriate
statistical approach to measuring quality based on patient outcomes
when the patients are clustered within hospitals (and therefore the
patients' outcomes are not statistically independent) and the number of
eligible patients for the measure varies from hospital to hospital. As
noted above, the measure methodology defines hospital case mix based on
the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the CABG hospitalization, as well as those present in the claims for
care at admission. The methodology, however, specifically does not
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
The RSRR is calculated as the ratio of the number of predicted
readmissions to the number of expected readmissions and then the ratio
is multiplied by the national unadjusted readmission rate. The ratio is
greater than one for hospitals that have more readmissions that would
be expected for an average hospital with similar cases and less than
one if the hospital has fewer readmissions than would be expected for
an average hospital with similar cases. This approach is analogous to a
ratio of ``observed'' or ``crude'' rate to an ``expected'' or risk-
adjusted rate used in other similar types of statistical analyses.
The RSRR is a point estimate--the best estimate of a hospital's
readmission rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://cms.gov/Medicare/QualityInitiativesPatientAssessmentInstruments/HospitalQualityInits/Measure-Methodology.html.
We invite public comment on this proposal.
b. Proposed Hospital 30-Day, All-Cause, Risk-Standardized Mortality
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery \53\
---------------------------------------------------------------------------

\53\ Krumholz H. CABG Mortality Measure Methodology Report
Section 1, Subtask 3.1, Deliverable 49a: Yale New Haven
Systems Corporation; Center for Outcomes Research and Evaluation;
2012.
---------------------------------------------------------------------------

(1) Background
CABG is a priority area for outcomes measure development because it
is a common procedure associated with considerable morbidity,
mortality, and health care spending. In 2007, there were 114,028
hospitalizations for CABG surgery and 137,721 hospitalizations for
combined surgeries for CABG and valve procedures (``CABG plus valve''
surgeries) among Medicare FFS patients in the U.S.\54\
---------------------------------------------------------------------------

\54\ Drye E, Krumholz H, Vellanky S, Wang Y. Probing New
Conditions and Procedures for New Measure Development: Yale New
Haven Systems Corporation; Center for Outcomes Research and
Evaluation; 2009:7.
---------------------------------------------------------------------------

CABG surgeries are costly procedures that account for the majority
of major cardiac surgeries performed nationally. In FY 2009, isolated
CABG surgeries accounted for almost half (47.6 percent) of all cardiac
surgery hospital

[[Page 28230]]

admissions in Massachusetts.\55\ This provides an example of the
frequency in which a CABG Is performed for a patient admitted for
cardiac surgery. In 2008, the average Medicare payment was $30,546 for
CABG without valve and $47,669 for CABG plus valve surgeries.\56\
---------------------------------------------------------------------------

\55\ Massachusetts Data Analysis Center. Adult Coronary Artery
Bypass Graft Surgery in the Commonwealth of Massachusetts: Hospital
and Surgeons Risk-Standardized 30-Day Mortality Rates. In: Health
MDoP, ed. Boston; 2009:77.
\56\ Pennsylvania Health Care Cost Containment Council. Cardiac
Surgery in Pennsylvania 2008-2009. Harrisburg; 2011:60.
---------------------------------------------------------------------------

Mortality rates following CABG surgery are not insignificant and
vary across hospitals. For example, in 2009 Medicare FFS data indicated
that the median hospital-level, risk-standardized mortality rate after
CABG was 3.0 percent and ranged from 1.5 percent to 7.9 percent.\57\
Even within a single state, the observed in-hospital, 30-day all-cause,
hospital-level mortality rate was 1.81 percent and ranged from 0.0
percent to 5.6 percent among patients who were discharged after CABG
surgery (without any other major heart surgery earlier in the hospital
stay) in New York in 2008. The risk-adjusted mortality rate ranged from
0.0 percent to 8.2 percent.\58\
---------------------------------------------------------------------------

\57\ Ibid.
\58\ New York State Department of Health. Adult Cardiac Surgery
in New York State 2006-2008; 2010:54.
---------------------------------------------------------------------------

Variation in these rates suggests that there is room for
improvement. An all-cause mortality measure for patients who undergo
CABG surgery will provide hospitals with an incentive to reduce
mortality through improved coordination of perioperative care and
discharge planning. This is further supported by the success of
registry-based mortality measures in reducing CABG mortality rates. For
example, California reports that CABG mortality in that state has
steadily declined from 2.9 percent in 2003, the first year of mandatory
reporting of their state registry measure, to 2.2 percent in 2008.\59\
---------------------------------------------------------------------------

\59\ California CABG Outcomes Reporting Program. The California
Report on Coronary Artery Bypass Graft Surgery: 2007-2008 Hospital
and Surgeon Data. 2011:119.
---------------------------------------------------------------------------

The specifics of the measure methodology are included in the
measure methodology report we have posted on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer readers to the
report for further details on the risk-adjustment statistical model.
We are proposing to include this non-NQF-endorsed measure in the
Hospital IQR Program under the exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section
IX.A.7. of the preamble of this proposed rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by the NQF, and we were unable to
identify any measures that assess hospital 30-day, all-cause, risk-
standardized mortality rate (RSMR) following coronary artery bypass
graft (CABG) surgery. We also are not aware of any other 30-day, all-
cause, RSMR measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. The measure has been reviewed by the MAP and was
conditionally supported pending NQF endorsement as detailed in its Pre-
Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. This measure was submitted to NQF on March 17, 2014 and
is currently under review.
(2) Overview of Measure
The CABG mortality measure assesses hospitals' 30-day, all-cause
risk-standardized rate of mortality following admission for a CABG
procedure. In general, the measure uses the same approach to risk
adjustment and hierarchical logistic modeling (HLM) methodology that is
specified for CMS's other mortality measures previously adopted for
this program. Information on how the measure employs HLM can be found
in the 2012 CABG Mortality Measure Methodology Report (available at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
The proposed measure is claims-based. It uses Medicare
administrative data from hospitalizations for Medicare FFS
beneficiaries hospitalized for a CABG procedure.
(4) Outcome
The outcome for this measure is 30-day, all-cause mortality,
defined as death for any cause within 30 days of the date of the index
procedure date. We use a standard period of assessment so that the
outcome for each patient is measured consistently. Without a standard
period, variation in length of stay would have an undue influence on
mortality rates, and institutions would have an incentive to adopt
strategies to shift deaths out of the hospital without improving
quality. The measure differs from the timeframe used in the other 30-
day mortality measures in the Hospital IQR Program by starting the
outcome window from the procedure date rather than the admission date.
Data from 2009 Medicare FFS patients demonstrates that 25 percent of
CABG procedures occurred more than 3 days after the admission date.
Therefore, dating the measurement period from admission would
potentially underestimate the period of risk for a substantial number
of hospitals.
We chose 30-day mortality because it is an outcome that can be
strongly influenced by hospital care and the early transition to the
outpatient setting. Clinical experts concur that a 30-day timeframe is
clinically sensible for measuring outcomes following CABG surgery.
The measure assesses all-cause mortality rather than CABG-specific
mortality for several reasons. First, limiting the measure to CABG-
related mortalities may limit the focus of efforts to improve care to a
narrow set of approaches as opposed to encouraging broader initiatives
aimed at improving the overall in-hospital care. Second, cause of death
may be unreliably recorded and it is often not possible to exclude
quality issues and accountability based on the documented cause of
mortality. Finally, from a patient perspective, death due to any cause
is the outcome that matters.
(5) Cohort
The cohort includes patients aged 65 years and older who received a
qualifying CABG procedure at an acute care facility. Patients are
eligible for inclusion if they had a qualifying CABG procedure and
continuous enrollment in Medicare FFS one year prior to the first day
of the index hospital stay and through 30 days post-procedure.
In order to include a clinically-coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and non-cardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures, that is, CABG procedures performed without concomitant
high-risk cardiac and non-cardiac procedures.\60\ Limiting

[[Page 28231]]

the measure cohort to ``isolated'' CABG patients is consistent with
published reports of CABG outcomes; \61\ therefore, the measure cohort
considers only patients undergoing isolated CABG as eligible for
inclusion in the measure. We defined isolated CABG patients as those
undergoing CABG procedures without concomitant valve or other major
cardiac, vascular or thoracic procedures. In addition, our clinical
experts, consultants, and Technical Expert Panel (TEP) members agreed
that an isolated CABG cohort is a clinically coherent cohort for
quality measurement. For detailed information on the cohort definition,
we refer readers to the 2012 CABG Mortality Measure Methodology Report
on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\60\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
\61\ Ibid.
---------------------------------------------------------------------------

(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients who are 65 years
of age or older at the time of index admission and for whom there was a
complete 12 months of Medicare FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients who leave hospital against
medical advice excluded because providers do not have the opportunity
to deliver full care and prepare the patient for discharge); and (2)
admissions for patients with subsequent qualifying CABG procedures
during the measurement period (a repeat CABG procedure during the
measurement period very likely represents a complication of the
original CABG procedure and is a clinically more complex and higher
risk surgery, therefore we select the first CABG admission for
inclusion in the measure and exclude subsequent CABG admissions from
the cohort).
(7) Risk-Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for death relative to patients cared for by other
hospitals. The measure uses claims data to identify patient clinical
conditions and comorbidities to adjust patient risk for readmission
across hospitals, but does not adjust for potential complications of
care. Consistent with NQF guidelines, the model does not adjust for
socioeconomic status or race because risk adjusting for these
characteristics would hold hospitals with a large proportion of
minority or low socioeconomic status patients to a different standard
of care than other hospitals. One goal of this measure is to illuminate
quality differences that such risk adjustment would obscure.
(8) Calculating the Risk-Standardized Mortality Ratio (RSMR)
The measure is calculated using hierarchical logistic modeling
(HLM). This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The HLM is an appropriate
statistical approach to measuring quality based on patient outcomes
when the patients are clustered within hospitals (and therefore the
patients' outcomes are not statistically independent) and the number of
eligible patients for the measure varies from hospital to hospital. As
noted above, the measure methodology defines hospital case mix based on
the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the CABG hospitalization, as well as those present in the claims for
care at admission. The methodology, however, specifically does not
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
The RSMR is calculated as the ratio of the number of predicted
deaths to the number of expected deaths and then the ratio is
multiplied by the national unadjusted mortality rate. The ratio is
greater than one for hospitals that have more deaths than would be
expected for an average hospital with similar cases and less than one
if the hospital has fewer deaths than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or risk-adjusted rate
used in other similar types of statistical analyses.
The RSMR is a point estimate--the best estimate of a hospital's
mortality rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We invite public comment on this proposal.
c. Proposed Hospital-Level, Risk-Standardized 30-Day Episode-of-Care
Payment Measure for Pneumonia
(1) Background
Providing high-value care is an essential part of our mission to
provide better health care for individuals, better health for
populations, and lower costs for health care. In order to incentivize
innovation that promotes high-quality care at high value it is critical
to examine measures of payment and patient outcomes concurrently. There
is evidence of variation in payments at hospitals for pneumonia
patients; mean 30-day risk-standardized payment among Medicare FFS
patients aged 65 or older hospitalized for pneumonia in 2008-2009 was
$13,237, and ranged from $8,281 to $27,975 across 4,155 hospitals.
However, high or low payments to hospitals are difficult to interpret
in isolation. Some high payment hospitals may have better clinical
outcomes when compared with low payment hospitals while other high
payment hospitals may not have better outcomes. For this reason, the
value of hospital care is more clearly assessed when pairing hospital
payments with hospital quality. Therefore, we are proposing to include
this non-NQF-endorsed measure in the Hospital IQR Program under the
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as
previously discussed in section IX.A.7. of the preamble of this
proposed rule. Although the proposed measure is not currently NQF-
endorsed, we considered available measures that have been endorsed or
adopted by the NQF, and we were unable to identify any measures that
assess hospital risk- standardized payment associated with a 30-day
episode-of-care for pneumonia. We also are not aware of any other 30-
day episode-of-care pneumonia measures that have been endorsed or
adopted by a consensus organization, and found no other feasible and
practical measures on this topic. The MAP supports this measure but
reiterated the need for this measure to be submitted for NQF-
endorsement: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. This measure was submitted to the
NQF for endorsement on April 18, 2014.
We believe it is important to adopt this measure as pneumonia is
one of the leading causes of hospitalization for

[[Page 28232]]

Americans 65 and over, and pneumonia patients incur roughly $10 billion
in aggregate health care costs.\62\ Furthermore, because 30-day all-
cause mortality and readmission measures for pneumonia are already
publicly reported, pneumonia serves as a model condition for assessing
relative value for an episode of care that begins with an acute
hospitalization because including this measure in the Hospital IQR
Program and publicly reporting it on Hospital Compare will allow
stakeholders to assess information about a hospital's quality and cost
of care for pneumonia. The measure reflects differences in the
management of care for patients with pneumonia both during
hospitalization and immediately post-discharge. By focusing on one
specific condition, value assessments may provide actionable feedback
to hospitals and incentivize targeted improvements in care.
---------------------------------------------------------------------------

\62\ Lindenauer PK, Lagu T, Shieh M, Pekow PS, Rothberg MB.
Association of diagnostic coding with trends in hospitalizations and
mortality of patients with pneumonia, 2003-2009. JAMA: The Journal
of the American Medical Association. 2012;307(13):1405-1413.
---------------------------------------------------------------------------

(2) Overview of Measure and Rationale for Examining Payments for a 30-
Day Episode-of-Care
The pneumonia payment measure assesses hospital risk-standardized
payment associated with a 30-day episode-of-care for pneumonia for any
hospital participating in the Hospital IQR Program. The measure
includes Medicare FFS patients aged 65 or older admitted for pneumonia
and calculates payments for these patients over a 30-day episode-of-
care beginning with the index admission. In general, the measure uses
the same approach to risk-adjustment as our 30-day outcome measures
previously adopted for the Hospital IQR Program. We refer readers to
our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
When examining variation in payments, consideration of the episode-
of-care triggered by admission is meaningful for several reasons.
First, hospitalizations represent a brief period of illness that
requires ongoing management post-discharge and decisions made at the
admitting hospital affect payments for care in the immediate post-
discharge period. Second, attributing payments for a continuous
episode-of-care to admitting hospitals may reveal practice variations
in the full care of the illness that can result in increased payments.
Third, a 30-day preset window provides a standard observation period by
which to compare all hospitals. Lastly, the pneumonia payment measure
is intended to be paired with our 30-day pneumonia mortality and
readmission measures and capture payments for Medicare patients across
care settings, services, and supplies, except for Medicare Part D (that
is, inpatient, outpatient, skilled nursing facility, home health,
hospice, physician/clinical laboratory/ambulance services, supplier
Part B items, and durable medical equipment, prosthetics/orthotics, and
supplies).
We have posted the measure methodology report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer
readers to the report for further details on the risk adjustment
statistical model as well as the model results.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations and payments for
Medicare FFS beneficiaries hospitalized with pneumonia.
(4) Outcome
The primary outcome of the pneumonia payment measure is the
hospital-level risk-standardized payment for a pneumonia episode-of-
care. The measure captures payments for Medicare patients across all
care settings, services, and supplies, except Part D. By risk-
standardizing the payment measure, we are able to adjust for case-mix
at any given hospital and compare a specific hospital's pneumonia
payment to other hospitals with the same case-mix. The analytic time
frame for the pneumonia payment measure begins with the index admission
for pneumonia and ends 30 days post-admission.
In order to isolate payment variation that reflects practice
patterns rather than CMS payment adjustments, the pneumonia payment
measure excludes policy and geography payment adjustments unrelated to
clinical care decisions. We achieve this by ``stripping'' or
``standardizing'' payments for each care setting. Stripping refers to
removing geographic differences and policy adjustments in payment rates
for individual services from the total payment for that service.
Standardizing refers to averaging payments across geographic areas for
those services where geographic differences in payment cannot be
stripped. Stripping and standardizing the payment amounts allows for a
fair comparison across hospitals based solely on payments for decisions
related to clinical care of pneumonia.
(5) Cohort
We created the pneumonia payment measure cohort to be aligned with
the publicly reported pneumonia mortality measure cohort. Consistent
with these measures, the pneumonia payment measure includes
hospitalizations with a principal hospital discharge diagnosis of
pneumonia using the International Classification of Diseases, Ninth
revision, Clinical Modification (ICD-9-CM). These measures will use
data from July 2010-Jun 2013 which does not yet include the period for
which ICD-10 codes are mandatory. ICD-10 will officially be implemented
on October 1, 2015. A full list of ICD-9-CM codes included in the final
cohort can be found in Appendix B of the technical report on our Web
site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
The measure includes only those hospitalizations from short-stay acute
care hospitals in the index cohort and restricts the cohort to patients
enrolled in FFS Medicare Parts A and B (with no Medicare Advantage
coverage).
(6) Inclusion and Exclusion Criteria
The pneumonia payment measure includes hospitalizations for
patients 65 years or older at the time of index admission and for whom
there was a complete 12 months of FFS enrollment to allow for adequate
risk adjustment. An index admission/hospitalization is the initial
pneumonia admission that triggers the 30-day episode-of-care for this
payment calculation. The measure excludes the following admissions from
the measure cohort: (1) Admissions for patients with fewer than 30 days
of post-admission enrollment in Medicare because this is necessary in
order to identify the outcome (payments) in the sample over the
analytic period; (2) admissions for patients having a principal
diagnosis of pneumonia during the index hospitalization who were
transferred from another acute care facility are excluded, because the
hospital where the patient was initially admitted made the critical
acute care decisions (including the decision to transfer and where to
transfer); (3) admissions for pneumonia patients who were discharged on
the same or next day as the index admission and did not die or get
transferred are excluded, because it is unlikely these patients

[[Page 28233]]

suffered a clinically significant pneumonia; (4) admissions for
patients enrolled in the Medicare Hospice program any time in the 12
months prior to the index hospitalization, including the first date of
the index admission are excluded, because it is likely that these
patients are continuing to seek comfort care and their goal may not be
survival; (5) admissions for patients who are discharged alive and
against medical advice are excluded because providers did not have the
opportunity to deliver full care and prepare the patient for discharge;
(6) admissions for patients transferred to or from federal or Veterans
Administration hospitals are excluded, because we do not have claims
data for these hospitals; thus, including these patients would
systematically underestimate payments; and (7) admissions without a DRG
or DRG weight for the index hospitalization are excluded, because we
cannot calculate a payment for these patients' index admission using
the IPPS; this would underestimate payments for the entire episode-of-
care. There are two portions of the DRG system that determine how much
a provider is reimbursed. The first is the DRG itself which indicates
the reason a patient was admitted. The second is the DRG weight which
determines the severity of the admission. Without either of these, we
were unable to calculate the payment for the index admission.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how
payments are affected by patient comorbidities relative to patients
cared for by other hospitals. Consistent with NQF guidelines, the model
does not adjust for socioeconomic status or race, because risk-
adjusting for these characteristics would hold hospitals with a large
proportion of minority or low socioeconomic status patients to a
different standard of care than other hospitals. One goal of this
measure is to illuminate quality differences that such risk-adjustment
would obscure.
(8) Calculating the Risk-Standardized Payment (RSP)
The measure is calculated using a hierarchical generalized linear
model with a log link and a Poisson error distribution. This is a
widely accepted statistical method that enables fair evaluation of
relative hospital performance by taking into account patient risk
factors as well as the number of patients that a hospital treats. This
statistical model accounts for the structure of the data (patients
clustered within hospitals) and calculates: (1) How much variation in
hospital payment overall is accounted for by patients' individual risk
factors (such as age and other medical conditions); and (2) how much
variation is accounted for by hospital-specific performance. This
approach appropriately models a positive, continuous, right-skewed
outcome like payment and also accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The hierarchical
generalized linear model is an appropriate statistical approach to
measuring quality based on patient outcomes when the patients are
clustered within hospitals and sample sizes vary across hospitals.
Clustered patients are within the same hospital, and the quality of
care of the hospital affects all patients, so the outcomes for each
hospital's patients are not fully independent (that is, completely
unrelated) as is assumed by many statistical models. As noted above,
the measure methodology defines hospital case mix based on the clinical
diagnoses provided in the hospital claims for their patients' inpatient
and outpatient visits for the 12 months prior to the pneumonia
hospitalization, as well as those present in the claims for care at
admission. This methodology specifically does not, however, account for
diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
The RSP is calculated as the ratio of predicted payments to
expected payments and then the ratio is multiplied by the national
unadjusted average payment for an episode of care. The ratio is greater
than one for hospitals that have higher payments than would be expected
for an average hospital with similar cases and less than one if the
hospital has lower payments than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted''
rate used in other similar types of statistical analyses.
The RSP is a point estimate--the best estimate of a hospital's
payment based on the hospital's case mix. To calculate the measure for
the Hospital IQR Program, we computed an interval estimate, which is
similar to the concept of a confidence interval, to characterize the
level of uncertainty around the point estimate, we use the point
estimate and interval estimate to determine hospital performance (for
example, higher than expected, as expected, or lower than expected).
The interval estimate indicates that the true value of the payment
ratio lies between the lower limit and the upper limit of the interval.
For more detailed information on the calculation methodology, we refer
readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
This measure is meant to be paired with our 30-day pneumonia
mortality and/or readmission measure in order for us to gain a better
understanding of the value of care for a hospital's patients and the
nation as a whole.
We invite public comment on this proposal.
d. Proposed Hospital-Level, Risk-Standardized 30-day Episode-of-Care
Payment Measure for Heart Failure
(1) Background
There is evidence of variation in payments at hospitals for heart
failure patients; mean 30-day risk-standardized payment among Medicare
FFS patients aged 65 or older hospitalized for heart failure in 2008-
2009 was $13,922, and ranged from $9,630 to $20,646 across 3,714
hospitals. However, high or low payments to hospitals are difficult to
interpret in isolation. Some high payment hospitals may have better
clinical outcomes when compared with low payment hospitals while other
high payment hospitals may not have better outcomes. For this reason,
the value of hospital care is more clearly assessed when pairing
hospital payments with hospital quality. Therefore, we are proposing to
include this non-NQF-endorsed measure: hospital risk-standardized
payment associated with a 30-day episode-of-care for heart failure in
the Hospital IQR Program under the exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section
IX.A.7. of the preamble of this proposed rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by the NQF, and we were unable to
identify any measures that assess hospital risk- standardized payment
associated with a 30-day episode-of-care for heart failure. We also are
not aware of any other 30-day episode-of-care heart failure measures
that have been endorsed or adopted by a consensus organization, and
found no other feasible and practical measures on this topic. The MAP
supports this measure but reiterated the need for this measure to be
submitted for NQF-endorsement:

[[Page 28234]]

https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The HF measure was submitted to NQF and is
currently under review as part of the cost and resource use project.
We believe it is important to adopt this measure as heart failure
is one of the leading causes of hospitalization for Americans 65 and
over and costs roughly $34 billion annually.^{63 64}
Furthermore, because 30-day all-cause mortality and readmission
measures for heart failure are already publicly reported, heart failure
serves as a model condition for assessing relative value for an episode
of care that begins with an acute hospitalization. Including this
measure in the Hospital IQR Program and publicly reporting it on
Hospital Compare will allow stakeholders to assess information about a
hospital's quality and cost of care for heart failure. The measure
reflects differences in the management of care for patients with heart
failure both during hospitalization and immediately post-discharge. By
focusing on one specific condition, value assessments may provide
actionable feedback to hospitals and incentivize targeted improvements
in care.
---------------------------------------------------------------------------

\63\ Russo CA, Elixhauser, A. Hospitalizations in the Elderly
Population, 2003. Agency for Healthcare Research and Quality. 2006.
\64\ Heidenriech PA, Trogdon JG, Khavjou OA, Butler J, Dracup K,
Ezekowitz MD, et al. Forecasting the future of cardiovascular
disease in the United States: a policy statement from the American
Heart Association. Circulation. 2011;123(8):933-44.
---------------------------------------------------------------------------

(2) Overview of Measure and Rationale for Examining Payments for a 30-
Day Episode-of-Care
The heart failure payment measure assesses hospital risk-
standardized payment associated with a 30-day episode-of-care for heart
failure for any hospital participating in the Hospital IQR Program. The
measure includes Medicare FFS patients aged 65 or older admitted for
heart failure and calculates payments for these patients over a 30-day
episode-of-care beginning with the index admission. In general, the
measure uses the same approach to risk-adjustment as our 30-day outcome
measures previously adopted for the Hospital IQR Program. We refer
readers to the measure methodology report on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
When examining variation in payments, consideration of the episode-
of-care triggered by admission is meaningful for several reasons.
First, hospitalizations represent brief periods of illness that require
ongoing management post-discharge; and decisions made at the admitting
hospital affect payments for care in the immediate post-discharge
period. Second, attributing payments for a continuous episode-of-care
to admitting hospitals may reveal practice variations in the full care
of the illness that can result in increased payments. Third, a 30-day
preset window provides a standard observation period by which to
compare all hospitals. The term preset window means that every
admission will be tracked 30 days post admission in order to apply a
standardized measurement window. In order to compare payments across
providers it is important that the comparison window is identical for
each admission at each hospital. Lastly, the heart failure payment
measure is intended to be paired with our 30-day heart failure
mortality and readmission measures and capture payments for Medicare
patients across all care settings, services, and supplies, except for
Medicare Part D (that is, inpatient, outpatient, skilled nursing
facility, home health, hospice, physician/clinical laboratory/ambulance
services, supplier Part B items, and durable medical equipment,
prosthetics/orthotics, and supplies).
We have posted the measure methodology report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer
readers to the report for further details on the risk adjustment
statistical model as well as the model results.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations and payments for
Medicare FFS beneficiaries hospitalized with heart failure.
(4) Outcome
The primary outcome of the heart failure payment measure is the
hospital-level risk-standardized payment for a heart failure episode-
of-care. The measure captures payments for Medicare patients across all
care settings, services, and supplies, except Part D. By risk-
standardizing the payment measure, we are able to adjust for case-mix
at any given hospital and compare a specific hospital's heart failure
payment to other hospitals with the same case-mix. The analytic time
frame for the heart failure payment measure begins with the index
admission for heart failure and ends 30 days post-admission. The index
admission is any admission included in the measure calculation that
begins the 30-day AMI episode of care.
In order to isolate payment variation that reflects practice
patterns rather than CMS payment adjustments, the heart failure payment
measure excludes policy and geography payment adjustments unrelated to
clinical care decisions. We achieve this by ``stripping'' or
``standardizing'' payments for each care setting. These concepts were
also discussed previously in the proposed hospital-level, risk-
standardized 30-day episode-of-care payment measure for pneumonia
measure in section IX.A.7.c.(4) of the preamble of this proposed rule.
(5) Cohort
We created the heart failure payment measure cohort to be aligned
with the publicly reported heart failure mortality measure cohort.
Consistent with these measures, the heart failure payment measure
includes hospitalizations with a principal hospital discharge diagnosis
of heart failure using ICD-9-CM codes included in the final cohort can
be found in Appendix B of the technical report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The measure
will be using data from July 2010-Jun 2013 which does not yet include
the period where ICD-10 codes are mandatory. ICD-10-CM/PCS will
officially be implemented on October 1, 2015; therefore, the measure
will not include ICD-10 data for another three reporting periods. An
index admission/hospitalization is the initial heart failure admission
that triggers the 30-day episode-of-care for this payment calculation.
The measure includes only those hospitalizations from short-stay acute
care hospitals in the index cohort and restricts the cohort to patients
enrolled in FFS Medicare Parts A and B (with no Medicare Advantage
coverage). These hospitalizations are the admissions which were
included in the measure after applying all inclusion/exclusion
criteria.
(6) Inclusion and Exclusion Criteria
The heart failure payment measure includes hospitalizations for
patients 65 years or older at the time of index admission and for whom
there was a complete 12 months of FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients with fewer than 30 days of
post-admission enrollment in

[[Page 28235]]

Medicare because this is necessary in order to identify the outcome
(payments) in the sample over the analytic period; (2) admissions for
patients having a principal diagnosis of heart failure during the index
hospitalization who were transferred from another acute care facility
are excluded, because the hospital where the patient was initially
admitted made the critical acute care decisions (including the decision
to transfer and where to transfer); (3) admissions for heart failure
patients who were discharged on the same or next day as the index
admission and did not die or get transferred are excluded, because it
is unlikely these patients suffered a clinically significant heart
failure; (4) admissions for patients enrolled in the Medicare Hospice
program any time in the 12 months prior to the index hospitalization,
including the first date of the index admission are excluded, because
it is likely that these patients are continuing to seek comfort care
and their goal may not be survival; (5) admissions for patients who are
discharged alive and against medical advice are excluded because
providers did not have the opportunity to deliver full care and prepare
the patient for discharge; (6) admissions for patients transferred to
or from federal or Veterans Administration hospitals are excluded,
because we do not have claims data for these hospitals; thus, including
these patients would systematically underestimate payments; (7)
admissions without a DRG or DRG weight for the index hospitalization
are excluded, because we cannot calculate a payment for these patients'
index admission using the IPPS; this would underestimate payments for
the entire episode-of-care; and (8) admissions for patients who receive
a heart transplant or LVAD during the index admissions or episode of
care because these patients are clinically distinct, generally very
high payment cases, and not representative of the typical heart failure
patient that this measure aims to capture.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how
payments are affected by patient comorbidities relative to patients
cared for by other hospitals. The model does not adjust for
socioeconomic status or race, because risk-adjusting for these
characteristics would hold hospitals with a large proportion of
minority or low socioeconomic status patients to a different standard
of care than other hospitals. One goal of this measure is to illuminate
quality differences that such risk-adjustment would obscure.
(8) Calculating the Risk-Standardized Payment (RSP)
The measure is calculated using hierarchical generalized linear
statistical models with a log link and a Gamma error distribution. This
approach appropriately models a positive, continuous, right-skewed
outcome like payment and also accounts for the types of patients a
hospital treats (that is, hospital case-mix), the number of patients it
treats, and the quality of care it provides. The hierarchical
generalized linear model is an appropriate statistical approach to
measuring quality based on patient outcomes when the patients are
clustered within hospitals (and therefore the patients' outcomes are
not statistically independent) and sample sizes vary across hospitals.
As noted above, the measure methodology defines hospital case mix based
on the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the heart failure hospitalization, as well as those present in the
claims for care at admission. This methodology specifically does not,
however, account for diagnoses present in the index admission that may
indicate complications rather than patient comorbidities.
The RSP is calculated as the ratio of predicted payments to
expected payments and then the ratio is multiplied by the national
unadjusted average payment for an episode of care. The ratio is greater
than one for hospitals that have higher payments than would be expected
for an average hospital with similar cases and less than one if the
hospital has lower payments than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted''
rate used in other similar types of statistical analyses.
The RSP is a point estimate--the best estimate of a hospital's
payment based on the hospital's case mix. For displaying the measure
for the Hospital IQR Program, we computed an interval estimate, which
is similar to the concept of a confidence interval, to characterize the
level of uncertainty around the point estimate, we use the point
estimate and interval estimate to determine hospital performance (for
example, higher than expected, as expected, or lower than expected).
For more detailed information on the calculation methodology, we refer
readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
This measure is meant to be paired with our 30-day heart failure
mortality and/or readmission measure in order for us to gain a better
understanding of the value of care for a hospital's patients and the
nation as a whole.
We invite public comment on this proposal.
e. Proposed Severe Sepsis and Septic Shock: Management Bundle Measure
(NQF 0500)
(1) Background
Sepsis, severe sepsis, and septic shock can arise from a simple
infection, such as pneumonia or urinary tract infection. Although it
can affect anyone at any age, it is more common in infants, the
elderly, and patients with chronic health conditions such as diabetes
and immunosuppressive disorders seen in transplant patients.
Information for this measure comes from the NQF Measure Information-
Composite for the severe sepsis and septic shock: management bundle
(NQF 0500).\65\ More information on this issue is available
from the Surviving Sepsis Campaign: International Guidelines for
Management of Severe Sepsis and Septic Shock: 2012.\66\ Sepsis is
associated with mortality rates of over 16 to 49 percent, which is more
than 8 times higher than the rate for inpatient stays for other
hospital admissions. Findings from the National Hospital Discharge
Survey indicate that the number of hospital stays for septicemia more
than doubled between the years of 2000 and 2008, and patients with this
condition were more severely ill than patients hospitalized for other
conditions. Severe sepsis and septic shock are frequent causes of re-
hospitalizations, especially during the first year after the initial
hospitalization.
---------------------------------------------------------------------------

\65\ National Quality Forum (NQF). Measure Information-
Composite. 500 Severe Sepsis and Septic Shock: Management
Bundle. Updated 2014 Jan 2. NQF: Washington, DC https://www.qualityforum.org/Home.aspx.
\66\ Dellinger RP, Levy MM, Rhodes A, Annane D, et al. Surviving
Sepsis Campaign: international guidelines for management of severe
sepsis and septic shock: 2012. Crit Care Med. 2013 Feb; 41(2):580-
637.
---------------------------------------------------------------------------

Based on national discharge data reported by the Agency for
Healthcare Research and Quality (AHRQ), sepsis was the sixth most
common principal reason for hospitalization in the United States in
2009, accounting for 836,000 hospital stays. There were an additional
829,500 stays with a secondary diagnosis of sepsis for a total of
1,665,400 inpatient stays and 258,000

[[Page 28236]]

deaths. From 1993 to 2009, sepsis-related hospital stays increased by
153 percent, with an average annual increase of 6 percent. Medicare was
the predominant payer for sepsis-related hospital stays, covering 58.1
percent of patients. Sepsis cases and sepsis-related deaths are
expected to continue to increase with the aging of the population.
In a landmark study by Rivers et al.,\67\ it has been shown that an
absolute and relative reduction in mortality from sepsis can be reduced
16 percent and 30 percent, respectively, when aggressive care is
provided within 6 hours of hospital arrival. Furthermore, a recent
study of the 2008 Healthcare Cost and Utilization Project (HCUP)
Nationwide Inpatient Sample \68\ determined that patients admitted
through the Emergency Department had a 17 percent lower likelihood of
dying from sepsis than when directly admitted.
---------------------------------------------------------------------------

\67\ Rivers E, Nguyen B, Havstad S et al. Early goal-directed
therapy in the treatment of severe sepsis and septic shock. N Engl J
Med. 2001; 345: 1368-77.
\68\ HCUP Nationwide Inpatient Sample (NIS). Healthcare Cost and
Utilization Project (HCUP). 2007-2009. Agency for Healthcare
Research and Quality, Rockville, MD. https://www.hcup-us.ahrq.gov/nisoverview.jsp.
---------------------------------------------------------------------------

The severe sepsis and septic shock: management bundle measure (NQF
0500) is NQF endorsed and is conditionally supported by the
MAP in its Pre-Rulemaking Report: 2013 Recommendations on Measures
Under Consideration by HHS, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted the
measure addresses an NQS priority not adequately addressed in the
program measure set, but conditionally supported this measure stating,
``Not ready for implementation; measure concept is promising but
requires modification or further development.'' In addition, ``MAP
noted the need for continued development of electronic specifications
for NQF 0500 Severe Sepsis and Septic Shock: Management
Bundle. We are recommending this measure because we believe severe
sepsis and septic shock are important conditions to monitor. While some
workgroup members challenged the feasibility and evidence behind this
measure, MAP deferred to the recent endorsement review of this measure
and conditionally supported it for the Meaningful Use Program. Public
comment from Edwards Lifesciences supports MAP's conclusion.''
(2) Overview of Measure
The purpose of the proposed severe sepsis and septic shock:
management bundle measure is to support the efficient, effective, and
timely delivery of high quality sepsis care in support of the Institute
of Medicine's (IOM) aims for quality improvement. This is consistent
with the Department of Health and Human Service National Quality
Strategy's priorities directed at one of the leading causes of
mortality. By providing timely, patient-centered care, and making
sepsis care more affordable through early intervention, reduced
resource use and complication rates can result. The severe sepsis and
septic shock early management bundle provides a standard operating
procedure for the early risk stratification and management of a patient
with severe infection. Through applying this standard operating
procedure, a clinically and statistically significant decrease in organ
failure, mortality, and the utilization of health care resources has
been demonstrated for over 10 years. Additional information about this
measure is available on the NQF's Web site at https://www.qualityforum.org/QPS/0500.
(3) Data Sources
The proposed measure is chart-abstracted data of patients
presenting with septic shock who received treatment detailed in the
Calculations section below.
(4) Outcome
The outcome criteria for this measure consists of: measure lactate;
blood cultures; timely antibiotics; fluid resuscitation; lactate
clearance; vasopressors, central venous pressure (CVP), central venous
oxygen saturation (ScvO2); and overall bundle compliance. These are
discussed in more detail below:
Measure Lactate
Measurement of lactate levels is specifically associated with
improved outcomes in sepsis, and an elevated lactate value identifies
patients at higher risk for poor outcomes. Up to 10 percent of in-
hospital cardiac arrest in the United States per year is secondary to
sepsis (pneumonia). These patients are often misdiagnosed and sent to
the medical floors only to suffer acute hemodynamic deterioration.
These outcomes could be potentially avoided with lactate measurement
upon admission providing risk stratification triggering alternative
dispositions.
Levy et al. (2010) conducted an international, multisite
``Surviving Sepsis Campaign'' (SSC) initiative (Levy et al. SSC
initiative) to determine the rate of change at which the sites reached
the SSC guideline targets. In the first quarter of this initiative,
only 61.0 percent of patients had lactate values measured consistent
with guidelines. In addition, prior studies have shown that care
prompted by measurement of lactate levels in sepsis patients reduced
resource utilization and cost. This leads to lower likelihood of
hospital-acquired conditions. This performance measure has been
previously used as a core component of multicenter and national quality
improvement initiatives. Formalizing it as a national performance
measure will provide direct targets for intervention that are closely
linked with improvements in mortality and cost.
Blood Cultures
In the first quarter of the Levy et al. SSC initiative, only 64.5
percent of patients had blood cultures collected prior to antibiotic
administration. Collecting blood cultures prior to antibiotic
administration is specifically associated with improved outcomes in
sepsis, and pathogens identified by blood cultures allow for customized
therapy. As a result, blood cultures continue as a recommendation of
the current Surviving Sepsis Guidelines.
By obtaining blood cultures, antibiotic regimens can be customized
to treat the specific infecting organism. This will result in less
unnecessary exposure to antibiotics, reducing complications associated
with antibiotic use, including drug reactions, allergies and adverse
events, the development of drug-resistant organisms, and the occurrence
of Clostridium difficile colitis. The performance measure for
collecting blood cultures for suspected sepsis has been previously used
and continues as a core component of the SSC guidelines.
Timely Antibiotics
Kumar et al.\69\ found the median time to appropriate antibiotics
was 6 hours after shock. In the first quarter of the Levy et al.\70\
SSC initiative, only 60.4 percent of patients received timely
antibiotics. Multiple studies, for example, have demonstrated that
delays in administration of appropriate antibiotics in patients with
sepsis and other severe infections are associated with longer lengths
of stay, higher costs,

[[Page 28237]]

and higher mortality. In septic shock, the Kumar et al. study
demonstrated that every hour in delay of appropriate antibiotics was
associated with a 7.6 percent higher mortality. The timely
administration of broad-spectrum antibiotics was associated with
significantly higher risk adjusted survival. Based on a preponderance
of data, the current recommendations in the international guidelines
for the management of severe sepsis and septic shock includes the
administration of broad-spectrum antibiotic therapy within 1 hour of
diagnosis of septic shock and severe sepsis.
---------------------------------------------------------------------------

\69\ Kumar A, Roberts D, Wood K, Light B, et al. Duration of
Hypotension before Initiation of Effective Antimicrobial Therapy is
the Critical Determinant of Survival in Human Septic Shock. Crit
Care Med. 2006;34 (6):1589-96.
\70\ Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign.
The Surviving Sepsis Campaign: results of an international guideline
based performance improvement program targeting severe sepsis. Crit
Care Med. 2010 Feb;38(2):367-74.
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Fluid Resuscitation
A common finding in patients with septic shock, manifested by low
blood pressure and/or other signs of organ hypoperfusion, such as
elevated serum lactate levels, is intravascular volume depletion. The
degree of the intravascular volume deficit in sepsis varies, yet nearly
all patients require initial volume resuscitation and many patients
require continuing fluid resuscitation over the first 24 hours.
Early fluid resuscitation is associated with improved outcomes for
patients with acute lung injury due to septic shock. International
guidelines recommend that patients with suspected hypovolemia be
initially treated with at least 30 mL/kg of crystalloid (for example,
Ringer's solution) to determine clinical response. In the first quarter
of the Levy et al.\71\ SSC initiative, only 59.8 percent of patients
received fluid resuscitation consistent with guidelines. Timely fluid
resuscitation avoids an error of omission in which indicated therapy is
delayed or omitted. By improving outcomes, length of stay is reduced.
This leads to lower likelihood of hospital-acquired conditions. This
performance measure has been previously used as a core component and
continues as a core component of the SSC guidelines. Formalizing it as
a national performance measure will provide direct targets for
intervention that are closely linked with improvements in mortality and
cost.
---------------------------------------------------------------------------

\71\ Ibid.
---------------------------------------------------------------------------

Lactate Clearance
Elevated lactate levels prompt the consideration of specific care
practices toward hemodynamic optimization guided by either central
venous oxygen saturation or lactate clearance. International guidelines
recommend that patients with sepsis and continued elevated lactate
values have additional therapies until lactate levels are normalized.
However, normal lactate levels can be seen in septic shock, especially
in children.
Vasopressors, Central Venous Pressure (CVP), and Central
Venous Oxygen Saturation (ScvO2)
Performance gaps in individual bundle elements can range from 79
percent (Confidence Interval (CI) (69-89 percent) for vasopressors, to
27 percent (CI 18-36 percent) for Central Venous Pressure (CVP)
measurement, and as low as 15 percent (CI 7-23 percent) for Central
Venous Oxygen Saturation (ScvO2) in some community emergency
departments. These numbers increase (50-75 percent) in larger hospital
settings. CVP has been shown to have a significant association with
mortality \72\ and multiple studies and meta-analysis have shown a
significant association with reaching an ScvO2 of 70 percent and
improved mortality.
---------------------------------------------------------------------------

\72\ Varpula M, Tallgren M, Saukkonen K, Voipio-Pulkki LM,
Pettila V. Hemodynamic variables related to outcome in septic shock.
Intensive Care Med. Jun 23 2005;31:1066-1071.
---------------------------------------------------------------------------

Overall Bundle Compliance
Multiple initiatives promoting bundles of care for severe sepsis
and septic shock were associated with improved guideline compliance and
lower hospital mortality. Even with compliance rates of less than 30
percent, absolute reductions in mortality of 4-6 percent have been
noted. Coba et al.\73\ found that when all bundle elements were
completed within 18 hours and compared with patients who did not have
bundle completion, the mortality difference was 10.2 percent. Thus,
there is a direct association between bundle compliance and improved
mortality. Additionally, a continuous quality improvement (CQI)
initiative, can improve compliance rates. CQI is a quality management
process that encourages continually assessing performance and whether
improvements can be made.\74\ Multiple studies have shown that
standardized order sets, enhanced bedside monitor display, telemedicine
and comprehensive CQI feedback is feasible, modifies clinician behavior
and is associated with decreased hospital mortality.
---------------------------------------------------------------------------

\73\ Coba V, Whitmill M, Mooney R, et al. Resuscitation Bundle
Compliance in Severe Sepsis and Septic Shock: Improves Survival, Is
Better Late than Never. J Intensive Care Med. Jan 10 2011.
\74\ Edwards PJ, et al. Maximizing your investment in EHR:
Utilizing EHRs to inform continuous quality improvement. JHIM
2008;22(1):32-7.
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(5) Cohort
This measure will focus on patients aged 18 years and older who
present with symptoms of severe sepsis or septic shock. These patients
will be eligible for the 3 hour (severe sepsis) and/or 6 hour (septic
shock) early management measures.
(6) Inclusion and Exclusion Criteria
Numerator Statement: the numerator is: Patients from the
denominator who received all the following: Step 1, Step 2, and Step 3
within 3 hours of time of presentation, and if septic shock is present
(as either defined as hypotension or lactate >=4 mmol/L), who also
received Step 4, Step 5, Step 6, and Step 7 within 6 hours of time of
presentation. The steps are described in detail below.

Step 1: Measure lactate level
Step 2: Obtain blood cultures prior to antibiotics
Step 3: Administer broad spectrum antibiotics
Step 4: Administer 30 ml/kg crystalloid for hypotension or lactate >= 4
mmol/L
Step 5: Apply vasopressors (for hypotension that does not respond to
initial fluid resuscitation to maintain a mean arterial pressure >= 65)
Step 6: In the event of persistent arterial hypotension despite volume
resuscitation (septic shock) or initial lactate >= 4 mmol/L (36 mg/dl),
measure central venous pressure and central venous oxygen saturation
Step 7: Re-measure lactate if initial lactate is elevated

Denominator: The denominator is the number of patients presenting
with severe sepsis or septic shock. The following patients presenting
with severe sepsis or septic shock will be excluded from the
denominator:
Patients with advanced directives for comfort care;
Patients with clinical conditions that preclude total
measure completion;
Patients for whom a central line is clinically
contraindicated;
Patients for whom a central line was attempted but could
not be successfully inserted;
A patient or a surrogate decision maker declines or is
unwilling to consent to such therapies or central line placement; and
Patients who are transferred to an acute care facility
from another acute care facility.
(7) Calculations
In calculating this measure, the denominator is the number of
patients presenting with severe sepsis or septic shock. The numerator
in this measure is patients from the denominator who had their lactate
levels measured, had blood cultures obtained prior to receiving

[[Page 28238]]

antibiotics, and who received broad spectrum antibiotics within 3 hours
of presentation. If septic shock is present, the patients also must
receive 30 ml/kg crystalloid for hypotension or lactate >=4 mmol/L,
apply vasopressors (for hypotension that does not respond to initial
fluid resuscitation to maintain a mean arterial pressure >= 65), in the
event of persistent arterial hypotension despite volume resuscitation
(septic shock) or initial lactate >=4 mmol/L (36mg/dl) measure central
venous pressure and central venous oxygen saturation, and the patient's
lactate level must be re-measured if the initial lactate level is
elevated.
We invite public comment on this proposal.
f. Electronic Health Record-Based Voluntary Measures
(1) Overview of New Electronic Health Record-Based Voluntary Measures
We are proposing four new voluntary electronic health record-based
measures to be submitted as electronically specified measures: (1)
Hearing Screening Prior to Hospital Discharge (NQF 1354); (2)
PC-05 Exclusive Breast Milk Feeding and the Subset Measure PC-05a
Exclusive Breast Milk Feeding Considering Mother's Choice (Collectively
Referred to as NQF 0480); (3) Home Management Plan of Care
(HMPC) Document Given to Patient/Caregiver (measure de-endorsed
therefore not appropriate to associate with an NQF ); (4) and
Healthy Term Newborn (NQF 0716). The four proposed electronic
health record-based measures were included on a publicly available
document entitled ``List of Measures Under Consideration for December
1, 2012'' in compliance with section 1890A(a)(2) of the Act, and they
were reviewed by the MAP in its MAP Pre Rulemaking Report: 2013
Recommendations on Measures Under Consideration by HHS. The final MAP
report is available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. We considered the input and
recommendations provided by the MAP in selecting measures to propose
for the Hospital IQR Program.
The specifications for the electronic clinical quality measures for
eligible hospitals are found at: https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html.
(2) Proposed Voluntary Electronically Specified Measure: Hearing
Screening Prior to Hospital Discharge (NQF 1354)
The Hearing Screening Prior to Hospital Discharge (NQF
1354) measure assesses the proportion of all live births born
at a hospital that have been screened for hearing loss before hospital
discharge. The Joint Committee on Infant Hearing encourages early
screening and intervention in infants with hearing loss to maximize
linguistic competence and literacy development in children with hearing
loss or who are hard of hearing. Early intervention improves
developmental and social outcomes for children. The States and CDC have
collected this measure as a population-based measure for more than 10
years.
This measure is NQF-endorsed and was supported by the MAP in their
Pre Rulemaking Report: 2013 Recommendations on Measures Under
Consideration by HHS, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted that
the measure addresses a high-impact condition not adequately addressed
in the program measure set.
The numerator is all live births during the measurement period born
at a facility and screened for hearing loss prior to discharge, or
screened but still not discharged, or not screened due to medical
reasons or a medical exclusion.
The denominator includes all live births during the measurement
period born at a facility and discharged without being screened, or
screened prior to discharge, or screened but still not discharged.
The measure excludes any patient deceased prior to discharge and
has not received hearing screening.
(3) Proposed Voluntary Measure: PC-05 Exclusive Breast Milk Feeding and
the Subset Measure PC-05a Exclusive Breast Milk Feeding Considering
Mother's Choice (Collectively Referred to as NQF 0480)
Exclusive breast milk feeding for the first 6 months of neonatal
life has long been the expressed goal of World Health Organization
(WHO), HHS, American Academy of Pediatrics (AAP) and American College
of Obstetricians and Gynecologists (ACOG).
The PC-05 Exclusive Breast Milk Feeding measure and the subset
measure PC-05a Exclusive Breast Milk Feeding Considering Mother's
Choice (NQF 0480) is endorsed by the NQF and supported by the
MAP in its Pre Rulemaking Report: 2013 Recommendations on Measures
Under Consideration by HHS, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted that
the measure addresses a high-impact condition not adequately addressed
in the program measure set.
This measure assesses the number of newborns exclusively fed breast
milk during the newborn's entire hospitalization; and the subset
measure only includes those newborns whose mothers chose to exclusively
feed breast milk.
The numerator is the same for both the measure and subset measure--
newborns that were fed breast milk only since birth. However, the
denominators differ. For PC-05, the denominator is defined as single
term liveborn newborns discharged alive from the hospital with ICD-9-CM
Principal Diagnosis Code for single liveborn newborn. The denominator
for the subset measure, PC-05a, is defined as single term newborns
discharged alive from the hospital excluding those whose mothers chose
not to breast feed with ICD-9-CM Principal Diagnosis Code for single
liveborn newborn. The ICD-9-CM Principal Diagnosis Codes for single
liveborn newborns are found in Appendix A, Table 11.20.1: Single Live
Newborn in the Specifications Manual for Joint Commission National
Quality Measures available at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
Excluded populations:
Admitted to the Neonatal Intensive Care Unit (NICU) at
this hospital during the hospitalization.
ICD-9-CM Other Diagnosis Codes for galactosemia as defined
in Appendix A, Table 11.21 in the Specifications Manual for Joint
Commission National Quality Measures found at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
ICD-9-CM Principal Procedure Code or ICD-9-CM Other
Procedure Codes for parenteral infusion as defined in Appendix A, Table
11.22 in the Specifications Manual for Joint Commission National
Quality Measures found at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
Experienced death.
Length of Stay >120 days.
Enrolled in clinical trials.
Patients transferred to another hospital.
ICD-9-CM Other Diagnosis Codes for premature newborns as
defined in Appendix A, Table 11.23 in the Specifications Manual for
Joint Commission National Quality Measures found at: https://
manual.joint

[[Page 28239]]

commission.org/releases/TJC2013A/AppendixATJC.html.
Documented Reason for Not Exclusively Feeding Breast Milk.
The maternal reasons for not exclusively breastfeeding are limited
to the following situations:
HIV infection;
Human t-lymphotrophic virus type I or II;
Substance abuse and/or alcohol abuse;
Active, untreated tuberculosis;
Taking certain medications, that is, prescribed cancer
chemotherapy, radioactive isotopes, antimetabolites, antiretroviral
medications and other medications where the risk of morbidity outweighs
the benefits of breast milk feeding;
Undergoing radiation therapy;
Active, untreated varicella;
Active herpes simplex virus with breast lesions; and
Admission to Intensive Care Unit (ICU) post-partum.
We invite public comments on this proposal.
(4) Proposed Voluntary Measure CAC-3: Home Management Plan of Care
(HMPC) Document Given to Patient/Caregiver
Asthma is the most common chronic disease in children and a major
cause of morbidity and health care costs nationally. For children,
asthma is one of the most frequent reasons for admission to hospitals.
There were approximately 157,000 admissions for childhood asthma in the
United States in 2009. Under-treatment and/or inappropriate treatment
of asthma are recognized as major contributors to asthma morbidity and
mortality. Guidelines developed by the National Asthma Education and
Prevention Program (NAEPP) of the National Heart, Lung and Blood
Institute (NHLBI), as well as by the American Academy of Pediatrics
(AAP) for the diagnosis and management of asthma in children, recommend
establishing a plan for maintaining control of asthma and for
establishing plans for managing exacerbations.
The CAC-3: Home Management Plan of Care (HMPC) Document Given to
Patient/Caregiver measure is no longer endorsed by the NQF and was not
supported by the MAP in its Pre-Rulemaking Report: 2013 Recommendations
on Measures Under Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738, because the measure no
longer meets the NQF endorsement criteria. However, based on the
prevalence of asthma among children, as well as the risks associated
with under-treatment or over-treatment described above, we believe the
measure is appropriate for voluntary collection. Because asthma is a
serious, and potentially life-threatening disease, we believe that it
is important to allow hospitals to voluntarily report this data, which
may help inform our policy.
This measure assesses the proportion of pediatric asthma patients
(aged 2-17 years) discharged from an inpatient hospital stay with a
HMPC document in place. The numerator is the number of pediatric asthma
inpatients with documentation that they or their caregivers were given
a written HMPC document that addresses: (1) arrangements for follow-up
care, (2) environmental control and control of other triggers, (3)
method and timing of rescue actions, (4) use of controllers, and (5)
use of relievers.
The denominator is the number of pediatric asthma inpatients (age 2
years through 17 years) discharged with a principal diagnosis of
asthma.
The measure excludes: (1) Patients with an age less than 2 years or
18 years or greater; (2) patients who have a length of stay greater
than 120 days; and (3) patients enrolled in clinical trials.
We invite public comments on this proposal.
(5) Proposed Voluntary Measure: Healthy Term Newborn (NQF
0716)
This measure assesses the optimal outcome of pregnancy and
childbirth, specifically a healthy term newborn. It evaluates the
impact of any changes in the management or intervention on the positive
outcome for the newborn.
The measure is NQF endorsed. The MAP recommended removal of this
measure in its Pre Rulemaking Report: 2013 Recommendations on Measures
under Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738, because the
measure required modification or further development. However, the MAP
strongly supported the measure concept for inclusion once technical
issues were resolved. Given its endorsement by NQF, as well as the
MAP's strong support for the measure concept, we believe the measure is
appropriate for voluntary reporting.
The result of the measure calculation is the percentage of term
singleton live births (excluding those with diagnoses originating in
the fetal period) that do not have significant complications during
birth or the nursery care.\75\
---------------------------------------------------------------------------

\75\ National Quality Forum. National Voluntary Consensus
Standards for Patient Outcomes 2009. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=67546.
---------------------------------------------------------------------------

The numerator of this measure is the absence of conditions or
procedures reflecting morbidity that happened during birth and nursery
care to an otherwise normal infant.
The denominator is composed of singleton, term (>=37 weeks),
inborn, live births in their birth admission. The denominator further
has eliminated fetal conditions likely to be present before labor.
Maternal and obstetrical conditions (for example, hypertension, prior
cesarean, malpresentation) are not excluded unless there is evidence of
fetal effect prior to labor (for example, Intrauterine Growth
Restriction (IUGR)/Small for Gestational Age (SGA)).
This measure excludes: (1) Multiple gestations; (2) preterm,
congenital anomalies; and, (3) fetuses affected by selected maternal
conditions.
We invite public comments on this proposal.
g. Proposed Readoption of Measures as Voluntarily Reported Electronic
Clinical Quality Measures
In order to align with the EHR Incentive Program for eligible
hospitals (EHs) and critical access hospitals (CAHs), we are proposing
to re-adopt two measures previously removed from the Hospital IQR
Program; (a) AMI-2 Aspirin Prescribed at Discharge for AMI (acute
myocardial infarction) (NQF 0142) (electronic clinical quality
measure); and (b) AMI-10 Statin Prescribed at Discharge (NQF
0639) (electronic clinical quality measure). We are proposing
to add these measures to the list of voluntarily reported electronic
clinical quality measures as described in section IX.A.7.f. of the
preamble of this proposed rule. We believe we should continue aligning
the Hospital IQR Program and the EHR Incentive Program in order to
minimize reporting burden and continue the transition to reporting of
electronic clinical quality measures, and we believe voluntary adoption
of these measures will further that aim. Further, allowing hospitals
the option to electronically report topped-out measures will provide
hospitals with an opportunity to test the accuracy of their electronic
health record reporting systems.
We welcome public comments on this proposal.
(1) Proposed Readoption of AMI-2 Aspirin Prescribed at Discharge (NQF
0142)
The AMI-2 Aspirin Prescribed at Discharge (NQF 0142)
assesses the

[[Page 28240]]

percentage of acute myocardial infarction (AMI) patients who are
prescribed aspirin at hospital discharge.
The measure is NQF endorsed, but has been placed in reserve status,
as the performance on this measure is topped out. The MAP recommended
the measure should be suspended and phased out in its Pre-Rulemaking
Report: 2013 Recommendations on Measures under Consideration by HHS
available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. However, as stated above,
we intend to continue aligning the Hospital IQR Program and EHR
Incentive Program, and we believe collecting this measure on a
voluntary basis enables us to continue collecting quality data on this
topic while working to minimize reporting burden on participating
hospitals. Further, allowing hospitals the option to electronically
report topped-out measures will provide hospitals with an opportunity
to test the accuracy of their electronic health record reporting
systems.
The numerator includes AMI patients in the denominator who are
prescribed aspirin at hospital discharge. The denominator includes
patients with the following ICD-9-CM principal diagnosis codes of AMI:
410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40,
410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81,
410.90, and 410.91.
The following patients are excluded from this measure:
Patients less than 18 years of age;
Patients who have a length of stay greater than 120 days;
Patients enrolled in clinical trials;
Patients who were discharged to another hospital;
Patients who expired;
Patients who left the hospital against medical advice;
Patients who were discharged to home for hospice care;
Patients who were discharged to a health care facility for
hospice care;
Patients with comfort measures only documented; and
Patients with a documented reason for no aspirin at
discharge.
We invite public comments on this proposal.
(2) Proposed Readoption of AMI-10 AMI-Statin Prescribed at Discharge
(NQF 0639)
AMI-10 AMI-Statin Prescribed at Discharge (NQF 0639)
assesses the percent of acute myocardial infarction (AMI) patients who
are prescribed a statin at hospital discharge.
The measure is NQF endorsed. The MAP recommended phased removal in
its Pre-Rulemaking Report: 2013 Recommendations on Measures under
Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738 because the
performance on this measure is likely topped out. However, as stated
above, we intend to continue aligning the Hospital IQR Program and EHR
Incentive Program, and we believe collecting this measure on a
voluntary basis enables us to continue collecting quality data on this
topic while working to minimize reporting burden on participating
hospitals. Further, allowing hospitals the option to electronically
report topped-out measures will provide hospitals with an opportunity
to test the accuracy of their electronic health record reporting
systems.
The numerator includes AMI patients in the denominator who are
prescribed a statin medication at hospital discharge. The denominator
includes patients with the following ICD-9-CM principal diagnosis codes
of AMI: 410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31,
410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80,
410.81, 410.90, and 410.91.
The following patients are excluded from this measure:
Patients less than 18 years of age;
Patients who have a length of stay greater than 120 days;
Patients with comfort measures only documented;
Patients enrolled in clinical trials;
Patients who were discharged to another hospital;
Patients who left the hospital against medical advice;
Patients who expired;
Patients who were discharged to their home for hospice
care;
Patients who were discharged to a health care facility for
hospice care;
Patients with low-density lipoprotein less than 100 mg/dL
within the first 24 hours after hospital arrival or 30 days prior to
hospital arrival and not discharged on a statin; and
Patients with a reason for not prescribing statin
medication at discharge.
We invite public comments on this proposal.
In summary, for FY 2017 payment determination and subsequent years,
we are proposing to: (1) Adopt 11 total measures--9 new measures (4 of
which are voluntary electronic clinical quality measures) and 2
previously removed measures re-adopted as voluntary electronic clinical
quality measures, and (2) remove 10 measures (4 of which were
previously suspended). If finalized, this would give a total of 62
measures (46 required and 16 voluntary electronic clinical quality
measures) in the Hospital IQR Program measure set.
Set out below is a table showing both the previously adopted and
the proposed quality measures for the FY 2017 payment determination and
subsequent years. Please note that this table does not include
suspended measures or measures proposed for removal.

------------------------------------------------------------------------
Previously adopted hospital IQR
program measures and measures
Topic proposed in this proposed rule for
the FY 2017 payment determination
and subsequent years
------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) AMI-2 Aspirin Prescribed at
Measures. Discharge for AMI */[ballot]/
[dagger] (NQF 0142).
AMI-7a Fibrinolytic therapy
received within 30 minutes of
hospital arrival [ballot] (NQF
0164).
AMI-8a Primary PCI received
within 90 minutes of hospital
arrival [ballot]/[dagger] (NQF
0163).
AMI-10 Statin Prescribed at
Discharge */[ballot]/[dagger] (NQF
0639).
Stroke Measure (STK) Set.......... STK-1 Venous
thromboembolism (VTE) prophylaxis
(NQF 0434).
STK-2 Discharged on
antithrombotic therapy [ballot]/
[dagger] (NQF 0435).
STK-3 Anticoagulation
therapy for atrial fibrillation/
flutter [ballot]/[dagger] (NQF
0436).
STK-4 Thrombolytic therapy
[ballot] (NQF 0437).
STK-5 Antithrombotic
therapy by the end of hospital day
two [ballot]/[dagger] (NQF 0438).
STK-6 Discharged on statin
medication [ballot] (NQF 0439).
STK-8 Stroke education
[ballot].
STK-10 Assessed for
rehabilitation [ballot]/[dagger]
(NQF 0441).
Venous Thromboembolism (VTE) VTE-1 Venous
Measure Set. thromboembolism prophylaxis
[ballot] (NQF 0371).
VTE-2 Intensive care unit
venous thromboembolism prophylaxis
[ballot] (NQF 0372).
VTE-3 Venous
thromboembolism patients with
anticoagulation overlap therapy
[ballot] (NQF 0373).

[[Page 28241]]

VTE-4 Patients receiving un-
fractionated Heparin with doses/
labs monitored by protocol [ballot]/
[dagger].
VTE-5 VTE discharge
instructions [ballot].
VTE-6 Incidence of
potentially preventable VTE
[ballot] (NQF 0376).
Sepsis Measure.................... Severe sepsis and septic
shock: management bundle * (NQF
0500).
Pneumonia (PN) Measure............ PN-6 Initial Antibiotic
Selection for community-acquired
pneumonia (CAP) in Immunocompetent
Patients [ballot]/[dagger] (NQF
0147).
Surgical Care Improvement Project SCIP INF-1 Prophylactic
(SCIP) Measures. antibiotic received within one hour
prior to surgical incision [ballot]/
[dagger] (NQF 0527).
SCIP INF-2 Prophylactic
antibiotic selection for surgical
patients [ballot]/[dagger] (NQF
0528).
SCIP INF-9 Urinary catheter
removed on Postoperative Day 1
(POD1) or Postoperative Day 2
(POD2) with day of surgery being
day zero [ballot]/[dagger] (NQF
0453).
Mortality Measures................ Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following acute myocardial
infarction (AMI) hospitalization
for patients 18 and older (NQF
0230).
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following heart failure (HF)
hospitalization for patients 18 and
older (NQF 0229).
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following pneumonia
hospitalization (NQF 0468).
Stroke 30-day mortality
rate.
Hospital 30-Day, All-Cause,
Risk-Standardized Mortality Rate
(RSMR) following Chronic
Obstructive Pulmonary Disease
(COPD) Hospitalization (NQF 1893).
Hospital 30-day, all-cause,
risk-standardized mortality rate
(RSMR) following coronary artery
bypass graft (CABG) surgery (NQF
1893).*
Patient Experience of Care Measure HCAHPS survey (NQF 0166) (expanded to include two
new ``About You'' items and the 3-
item Care Transition Measure) (NQF
0228).
Readmission Measures.............. Hospital 30-day all-cause
risk-standardized readmission rate
(RSRR) following acute myocardial
infarction (AMI) hospitalization
(NQF 0505).
Hospital 30-day, all-cause,
risk-standardized readmission rate
(RSRR) following heart failure
hospitalization (NQF 0330).
Hospital 30-day, all-cause,
risk-standardized readmission rate
(RSRR) following pneumonia
hospitalization (NQF 0506).
Hospital-level 30-day, all-
cause risk-standardized readmission
rate (RSRR) following elective
primary total hip arthroplasty
(THA) and/or total knee
arthroplasty (TKA) (NQF 1551).
Hospital-Wide All-Cause
Unplanned Readmission (HWR) (NQF
1789).
Stroke 30-day Risk
Standardized Readmission.
Hospital 30-Day, All-Cause,
Risk-Standardized Readmission Rate
(RSRR) following Chronic
Obstructive Pulmonary Disease
(COPD) Hospitalization (NQF 1891).
Hospital 30-day, all-cause,
unplanned, risk-standardized
readmission rate (RSRR) following
coronary artery bypass graft (CABG)
surgery.*
AHRQ Patient Safety Indicators PSI-90 Patient safety for
(PSIs) Composite Measure. selected indicators (composite)
(NQF 0531).
AHRQ PSI and Nursing Sensitive PSI-4 Death among surgical
Care. inpatients with serious treatable
complications (NQF 0351).
Structural Measures............... Participation in a
Systematic Clinical Database
Registry for Nursing Sensitive Care
(NQF 0113).
Participation in a
Systematic Clinical Database
Registry for General Surgery (NQF
0493).
Safe Surgery Checklist Use.
Healthcare-Associated Infections National Healthcare Safety
(HAI) Measures. Network (NHSN) Central line-
associated Bloodstream Infection
(CLABSI) Outcome Measure (NQF
0139).
American College of
Surgeons--Centers for Disease
Control and Prevention (ACS-CDC)
Harmonized Procedure Specific
Surgical Site Infection (SSI)
Outcome Measure (NQF 0753).
--SSI following Colon Surgery.
--SSI following Abdominal
Hysterectomy.
National Healthcare Safety
Network (NHSN) Catheter-associated
Urinary Tract Infection (CAUTI)
Outcome Measure (NQF 0138).
National Healthcare Safety
Network (NHSN) Facility-wide
Inpatient Hospital-onset
Methicillin-resistant
Staphylococcus aureus (MRSA)
Bacteremia Outcome Measure (NQF
1716).
National Healthcare Safety
Network (NHSN) Facility-wide
Inpatient Hospital-onset
Clostridium difficile Infection
(CDI) Outcome Measure (NQF 1717).
Influenza vaccination
coverage among healthcare personnel
(HCP) (NQF 0431).
Surgical Complications............ Hospital-level risk-
standardized complication rate
(RSCR) following elective primary
total hip arthroplasty (THA) and/or
total knee arthroplasty (TKA) (NQF
1550).
Emergency Department (ED) ED-1 Median time from ED
Throughput Measures. arrival to ED departure for
admitted ED patients (NQF 0495). [ballot]
ED-2 Admit Decision Time to
ED Departure Time for Admitted
Patients (NQF 0497).
[ballot]
Prevention: Global Immunization Influenza Immunization (NQF
(IMM) Measure. 1659).
Cost Efficiency................... Payment-Standardized
Medicare Spending Per Beneficiary
(MSPB) (NQF 2158).
AMI Payment per Episode of
Care.
Hospital-level, risk-
standardized 30-day episode-of-care
payment measure for heart failure.*
Hospital-level, risk-
standardized 30-day episode-of-care
payment measure for pneumonia.*

[[Page 28242]]

Perinatal Care (PC)............... PC-01 Elective delivery
[ballot] (NQF 0469).
PC-05 Exclusive Breast Milk
Feeding and the subset measure PC-
05a Exclusive Breast Milk Feeding
Considering Mother's Choice (NQF
0480). */[ballot]/[dagger]
Children's Asthma Care-3
Home Management Plan of Care (HMPC)
document given to patient/
caregiver. */[ballot]/[dagger]
Healthy Term Newborn (NQF
0716). */[ballot]/[dagger]
Hearing Screening Prior to
Hospital Discharge (NQF 1354). */[ballot]/[dagger]
------------------------------------------------------------------------
* New or expanded measures for FY 2017 payment determination and
subsequent years.
[ballot] Electronic clinical quality measure.
[dagger] Voluntary measure.

Previously Adopted Voluntary Electronic Clinical Quality Measures and Proposed Voluntary Electronic Clinical
Quality Measures for the FY 2017 Payment Determination and Associated NQF Domains
----------------------------------------------------------------------------------------------------------------
Domain as assigned in Stage 2 final rule
Short name Measure name NQF \76\
----------------------------------------------------------------------------------------------------------------
ED-1.................... Emergency Department 0495 Patient and Family Engagement.
Throughput--Median time
from ED arrival to ED
departure for admitted
ED patients.
ED-2.................... Emergency Department 0497 Patient and Family Engagement.
Throughput--admitted
patients--Admit
decision time to ED
departure time for
admitted patients.
STK-2................... Discharged on 0435 Clinical Process/Effectiveness.
antithrombotic therapy.
STK-3................... Anticoagulation therapy 0436 Clinical Process/Effectiveness.
for atrial fibrillation/
flutter.
STK-4................... Thrombolytic Therapy.... 0437 Clinical Process/Effectiveness.
STK-5................... Antithrombotic therapy 0438 Clinical Process/Effectiveness.
by end of hospital day
two.
STK-6................... Discharged on Statin 0439 Clinical Process/Effectiveness.
Medication.
STK-8................... Stroke education........ N/A Patient and Family Engagement.
STK-10.................. Assessed for 0441 Care Coordination.
rehabilitation.
VTE-1................... Venous thromboembolism 0371 Patient Safety.
prophylaxis.
VTE-2................... Intensive care unit 0372 Patient Safety.
venous thromboembolism
prophylaxis.
VTE-3................... Venous thromboembolism 0373 Clinical Process/Effectiveness.
patients with
anticoagulation overlap
therapy.
VTE-4................... Patients receiving un- N/A Clinical Process/Effectiveness.
fractionated Heparin
with doses/labs
monitored by protocol.
VTE-5................... VTE discharge N/A Patient and Family Engagement.
instructions.
VTE-6................... Incidence of potentially 0376 Patient Safety.
preventable VTE.
PC-01................... Elective Delivery....... 0469 Clinical Process/Effectiveness.
PC-05................... Exclusive Breast Milk 0480 Clinical Process/Effectiveness.
Feeding and the subset
measure PC-05a
Exclusive Breast Milk
Feeding Considering
Mother[acute]s Choice.*
EHDI-1a................. Hearing screening prior 1354 Clinical Process/Effectiveness.
to hospital discharge *.
Healthy Term Newborn *.. 0716 Patient Safety.
CAC-3................... Home Management Plan of N/A Patient and Family Engagement.
Care (HMPC) Document
Given to Patient/
Caregiver.
AMI-2................... Aspirin Prescribed at 0142 Clinical Process/Effectiveness.
Discharge for AMI *.
AMI-7a.................. Fibrinolytic Therapy 0164 Clinical Process/Effectiveness.
Received Within 30
minutes of Hospital
Arrival.
AMI-8a.................. Primary PCI Received 0163 Clinical Process/Effectiveness.
Within 90 Minutes of
Hospital Arrival.
AMI-10.................. Statin Prescribed at 0639 Clinical Process/Effectiveness.
Discharge *.
PN-6.................... Initial Antibiotic 0147 Efficient Use of Healthcare Resources.
Selection for Community-
Acquired Pneumonia
(CAP) in
Immunocompetent
Patients.
SCIP-Inf-1a............. Prophylactic Antibiotic 0527 Patient Safety.
Received within one
Hour Prior to Surgical
Incision.
SCIP-Inf-2a............. Prophylactic Antibiotic 0528 Efficient Use of Healthcare Resources.
Selection for Surgical
Patients.
SCIP-Inf-9.............. Urinary catheter removed 0453 Patient Safety.
on Postoperative Day 1
(POD1) or Postoperative
Day 2 (POD2) with day
of surgery being day
zero.
----------------------------------------------------------------------------------------------------------------
* Measure proposed for adoption or readoption in Hospital IQR Program.

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

\76\ Medicare EHR Incentive Program Stage 2 final rule (77 FR
54083 through 54087).
---------------------------------------------------------------------------

h. Electronic Clinical Quality Measures
(1) Data Submission Requirements for Quality Measures That May Be
Voluntarily Electronically Reported for the FY 2017 Payment
Determination
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data that is currently manually chart-
abstracted and submitted to CMS for the Hospital IQR Program. As we
noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we
recognize the need to align and harmonize measures across CMS quality
reporting programs to minimize the reporting burden imposed on
hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77
FR 54083 through 54087), we finalized a total of 29 clinical quality
measures from which hospitals must select at least 16 measures covering
three National Quality Strategy (NQS) domains to report beginning in FY
2014. We anticipate that, as health information technology evolves and
infrastructure is

[[Page 28243]]

expanded, we will have the capacity to accept electronic reporting of
many of the chart-abstracted measures that are currently part of the
Hospital IQR Program.
In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the
exception of STK-1), VTE, ED, and PC measure sets, we allowed hospitals
to either: (1) electronically report at least one quarter of CY 2014
(Q1, Q2, or Q3) quality measure data for each measure in one or more of
those four measure sets; or (2) continue reporting all measures in
those four measure sets using chart-abstracted data for all four
quarters of CY 2014 (78 FR 50818).
For the FY 2017 payment determination, we are proposing to expand
this policy, such that providers may select to voluntarily report any
16 of the 28 Hospital IQR Program electronic clinical quality measures
that align with the Medicare EHR Incentive Program as long as those 16
measures span three different NQS domains. The 28 measures are listed
in the table below. Only 28 of the 29 measures adopted in the Medicare
EHR Incentive Program are applicable for the Hospital IQR Program,
because the measure ED-3 Median time from ED arrival to ED departure
for discharged ED patients (NQF 0496) is an outpatient setting
measure. We expect eligible hospitals to select measures that best
apply to their patient mix.
For the FY 2017 payment determination, we also are proposing to
expand the reporting requirement of electronic clinical quality
measures to require a full year's data collection and submission
instead of a minimum of one quarter. In addition, for the FY 2017
payment determination, we are proposing to require data submission
within approximately 60 days after the end of a calendar year quarter.
We have listed the proposed submission deadlines in the table below. We
also refer readers to section IX.D.2. of the preamble of this proposed
rule for a description of the electronic clinical quality measures data
reporting periods and proposed submission deadlines.

CY 2015/FY 2017 Electronic Clinical Quality Measures Data Reporting Periods and Proposed Submission Deadlines
----------------------------------------------------------------------------------------------------------------
Reporting period
CY 2015 quarter (2015) Proposed submission deadline (2015)
----------------------------------------------------------------------------------------------------------------
1.............................. January 1-March 31.... May 30.
2.............................. April 1-June 30....... Aug 30.
3.............................. July 1-September 30... Nov 30.
4.............................. October 1-December 31. Feb 28.
----------------------------------------------------------------------------------------------------------------

As an incentive for hospitals to voluntarily submit electronically-
specified clinical quality measures, we are proposing that for the FY
2017 payment determination, hospitals successfully submitting
electronic clinical quality measures according to our procedures will
not have to validate those electronic clinical quality measures by
submitting chart-abstracted data to validate the accuracy of the
measure data submitted electronically.
By proposing these changes, we would further align the Hospital IQR
Program and the Medicare EHR Incentive Program and promote greater
electronic clinical quality measure data reporting for hospitals. In
addition, we believe that these changes would ease hospitals'
administrative burden, as they will be able to report the same clinical
quality measures once to partially satisfy both the Hospital IQR and
Medicare EHR Incentive Programs' requirements.
(2) Public Reporting of Electronic Clinical Quality Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through
50818), we adopted a policy under which we would only publicly report
electronic clinical quality measure data under the Hospital IQR Program
if we determined that the data are accurate enough to be reported.
However, we noted that the majority of public commenters had opposed
our proposal to withhold the electronically reported data from
publication on Hospital Compare, and instead urged us to publicly
display it (78 FR 50815). Therefore, for electronic clinical quality
measure data submitted for the FY 2016 payment determination, we will
publically report the data as previously finalized. However, for the FY
2017 payment determination, we now propose to provide hospitals that
voluntarily report one year of electronic clinical quality measure data
(as proposed above) an option to have their data reported on Hospital
Compare with a preview period prior to public reporting. We also
propose to add a footnote next to that publically reported data
indicating that it is a result of electronically-specified measures.
We welcome public comments on these proposals.
8. Possible New Quality Measures and Measure Topics for Future Years
a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018
Payment Determination
We anticipate that, as EHR technology changes and improves,
hospitals will electronically report all clinical process-of-care and
HAI measures, which are currently part of the Hospital IQR Program or
which have been proposed for adoption into the Program. As stated
above, we intend for the future direction of electronic quality measure
reporting to significantly reduce administrative burden on hospitals
under the Hospital IQR Program. We will continue to work with measure
stewards and developers to develop new measure concepts, and conduct
pilot, reliability, and validity testing. We believe that this
voluntary reporting option will provide hospitals and CMS with the
ability to test systems in CY 2015 for future quality program proposals
that, if finalized, will make electronic reporting a requirement
instead of voluntary. We believe this will simplify measure collection
and submission for the Hospital IQR Program, and will reduce the burden
on hospitals to report chart-abstracted measures.
We intend to propose to require reporting of electronic clinical
quality measures for the Hospital IQR Program beginning for the CY 2016
reporting period or FY 2018 payment determination. We considered
proposing to require hospitals to electronically report some Hospital
IQR Program quality measures in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27695). After considering public comments, we made electronic
reporting voluntary in CY 2014 in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50813 through 50814). However, after two years, we believe that
hospitals

[[Page 28244]]

are more prepared and should be required to report Hospital IQR Program
measures as electronic clinical quality measures beginning in CY 2016.
We intend to propose this policy in future rulemaking, but request
comments on this intention here.
b. Possible Future Electronic Clinical Quality Measures
We intend to continue to support the following measure domains in
the Hospital IQR Program measure set: effective clinical care (for
example, the AMI, PN, STK, and VTE measures), communication and care
coordination (for example, the readmission measures), patient safety
(for example, the HAI measures), person and caregiver-centered
experience (for example, the HCAHPS measure), community/population
health (for example, the global immunization measure), and efficiency
and cost reduction (for example, the Medicare Spending per Beneficiary
measure). This approach will enhance better patient care while aligning
the Hospital IQR Program with our other established quality reporting
and pay-for-performance programs, such as the Hospital VBP Program.
Based on the above approach, we intend to propose to adopt the
following electronic clinical quality measures with data collection
beginning with October 1, 2016 discharges (or, as described further
above, January 1, 2017, if the proposal to align reporting under the
Hospital IQR Program and Medicare EHR Incentive Program is finalized)
to coincide with EHR Incentive Program Stage 3 collection:
Hepatitis B Vaccine Coverage Among All Live Newborn Infants
Prior to Hospital or Birthing Facility Discharge NQF 0475
The Hepatitis B Vaccine Coverage Among All Live Newborn Infants
Prior to Hospital or Birthing Facility Discharge NQF 0475
measure is NQF-endorsed, supported by the MAP and conditionally
supported by the MAP as an electronic clinical quality measure for the
EHR Incentive Program by the MAP in its 2014 Recommendations on
Measures for More Than 20 Federal Programs final report available at:
https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. However, the MAP recommends a review of the
electronic specifications of this measure through the NQF endorsement
process.
This measure requires each hospital/birthing facility to measure
its administration of a dose of hepatitis B vaccine to all infants born
in their hospital/birthing facility prior to discharge for a specific
time period (for example, one calendar year). Hospitals are required to
assess infants whose parents refused vaccination for exclusion from the
coverage estimate.
PC-02 Cesarean Section NQF 0471
The PC-02 Cesarean Section NQF 0471 is NQF-endorsed and
supported by the MAP in its 2014 Recommendations on Measures for More
Than 20 Federal Programs final report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. The MAP noted that there is an important public
education piece to the reporting of PC-02 and recommended that CMS work
with others to ensure consumers understand what the results mean and
why the measure is important.
This measure assesses the number of nulliparous women with a term,
singleton baby in a vertex position delivered by cesarean section.
Adverse Drug Events--Hyperglycemia
Adverse Drug Events--Hyperglycemia is conditionally supported by
the MAP in its 2014 Recommendations on Measures for More Than 20
Federal Programs final report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Use of this measure would address a very common
condition. The MAP expressed concerns over the feasibility of using
this measure in the Hospital IQR Program as it has been tested using
electronic data and stated that the NQF endorsement process should
resolve this issue.
This measure assesses the average percentage of hyperglycemic
hospital days for individuals with a diagnosis of diabetes mellitus,
anti-diabetic drugs (except metformin) administered, or at least one
elevated glucose level during the hospital stay. The measure's
numerator is the sum of the percentage of hospital days in
hyperglycemia for all admissions in the denominator. The measure's
denominator is the total number of admissions with a diagnosis of
diabetes mellitus, at least one administration of insulin or any oral
anti-diabetic medication except metformin, or at least one elevated
blood glucose value (>200 mg/dL [11.1 mmol/L]) at any time during the
entire hospital stay.
Exclusions include: (1) Admissions with a diagnosis of diabetic
ketoacidosis (DKA) or hyperglycemic hyperosmolar syndrome (HHS); (2)
admissions without any hospital days included in the analysis; (3)
admissions with lengths of stay greater than 120 days.
Adverse Drug Events--Hypoglycemia
Adverse Drug Events--Hypoglycemia is conditionally supported by the
MAP in its 2014 Recommendations on Measures for More Than 20 Federal
Programs final report, which is available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Use of this measure would address a common condition
that is very dangerous to patients. The MAP expressed concerns over the
feasibility of using this measure in the Hospital IQR Program as it has
been tested using electronic data and that the NQF endorsement process
should resolve this issue.
This measure assesses the rate of hypoglycemic events following the
administration of an anti-diabetic agent. The measure's numerator is
the total number of hypoglycemic events (<40 mg/dL) that were preceded
by administration of a short/rapid-acting insulin within 12 hours or an
anti-diabetic agent other than a short/rapid-acting insulin within 24
hours, were not followed by another glucose value greater than 80 mg/dL
within 5 minutes, and were at least 20 hours apart. The measure's
denominator is total number of hospital days with at least one anti-
diabetic agent administered. Exclusions include admissions with length
of stay greater than 120 days.
We request comments on these possible future measures.
9. Form, Manner, and Timing of Quality Data Submission
a. Background
Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the
applicable percentage increase for FY 2007 and each subsequent fiscal
year shall be reduced by 2.0 percentage points (or beginning with FY
2015, by one-quarter of such applicable percentage increase (determined
without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the
Act)) for any subsection (d) hospital that does not submit, to the
Secretary in accordance with this clause and in a

[[Page 28245]]

form and manner, and at a time, specified by the Secretary, data
required to be submitted on measures selected under this clause with
respect to such a fiscal year. We note that, in accordance with this
section, the FY 2015 payment determination begins the first year that
the Hospital IQR Program will reduce the applicable percentage increase
by one-quarter of such applicable percentage increase. In order to
participate in the Hospital IQR Program, hospitals must meet specific
procedural requirements.
Hospitals choosing to participate in the Hospital IQR Program must
also meet specific data collection, submission, and validation
requirements. For each Hospital IQR Program year, we require that
hospitals submit data on each measure in accordance with the measure's
specifications for a particular period of time. The data submission
requirements, Specifications Manual, and submission deadlines are
posted on the QualityNet Web site at: https://www.QualityNet.org/.
Hospitals submit quality data through the secure portion of the
QualityNet Web site. This Web site meets or exceeds all current Health
Insurance Portability and Accountability Act requirements for security
of protected health information.
In order to participate in the Hospital IQR Program, hospitals must
meet specific procedural requirements. Hospitals choosing to
participate in the Hospital IQR Program must also meet specific data
collection, submission, and validation requirements.
b. Procedural Requirements for the FY 2017 Payment Determination and
Subsequent Years
The Hospital IQR Program procedural requirements are codified in
regulation at 42 CFR 412.140. We refer readers to the codified
regulations for participation requirements, as further explained by the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811).
c. Data Submission Requirements for Chart-Abstracted Measures
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811)
for details on the Hospital IQR Program data submission requirements
for chart-abstracted measures.
We are not proposing any changes to data submission requirements
for chart-abstracted measures at this time.
d. Alignment of the EHR Incentive Program Reporting and Submission
Timelines for Clinical Quality Measures With Hospital IQR Program
Reporting and Submission Timelines
The Hospital IQR Program and the EHR Incentive Program have
different reporting and submission periods for clinical quality
measures, with hospitals reporting data to the Hospital IQR Program
based on calendar year deadlines while the EHR Incentive Program is
based on fiscal year deadlines. In addition, the Hospital IQR Program
generally requires quarterly reporting and submission of data for
chart-abstracted measures while the EHR Incentive Program requires
annual submission of clinical process of care measure data.
As a result of the different and incongruent Hospital IQR and
Medicare EHR Incentive Programs' schedules, hospitals reporting and
submitting measure data to both programs would have to do so multiple
times in a calendar year. This discrepancy may create confusion and
additional burden for hospitals attempting to report data to both
programs. To alleviate this possible confusion and reduce provider
burden, beginning with the CY 2015 reporting period/FY 2017 payment
determination, we are proposing to incrementally align the data
reporting and submission periods for clinical quality measures for the
Medicare EHR Incentive Program and the Hospital IQR Program on a
calendar year basis.
This proposed change also would also move us closer to meeting our
commitment to align quality measurement and reporting among our
programs, as we described in the Electronic Health Record Incentive
Program -Stage 2 final rule (77 FR 54049 through 54051), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53502 and 53534), and the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50811 through 50819 and 78 FR 50903 through
50904).
In order to ease the transition and prevent the delay of Medicare
EHR Incentive Program payments, we are proposing to incrementally shift
the Medicare EHR Incentive Program reporting and submission periods for
clinical quality measures to align with that of the Hospital IQR
Program. We refer readers to section IX.E.2. of the preamble of this
proposed rule for a detailed discussion of this proposal in the EHR
Incentive Program. Specifically, for the CYs 2015 and 2016, we are
proposing in the EHR Incentive Program to require CY reporting, but
only for the first three calendar quarters (that is, January through
September). This proposal will allow us to align data reporting and
submission periods without shifting the EHR incentive payments.
We note that for the Hospital IQR Program, for the FY 2017 payment
determination, we are proposing to change the November 30th submission
deadline to require data submission within approximately 60 days of the
close of a quarter. We refer readers to section IX.A.7.h.(1) of the
preamble of this proposed rule where this proposal is made. We are also
proposing this change in the Medicare EHR Incentive Program in order to
align the two programs. We refer readers to section IX.D.2. of the
preamble of this proposed rule where this proposal is made. In summary,
we are proposing to align the reporting and submission periods of the
Medicare EHR Incentive Program clinical quality measures with that of
the Hospital IQR Program for CYs 2015 and 2016.

Proposed Reporting Timeline to Align the EHR Incentive Program With Proposed Hospital IQR Program Submission
Periods
----------------------------------------------------------------------------------------------------------------
EHR incentive Hospital IQR program
CY program reporting reporting Submission period **
requirements* requirements
----------------------------------------------------------------------------------------------------------------
2015 Reporting Period............ Q1......... January 1--March 31, January 1--March 31, Data must be
2015. 2015. submitted by May
31, 2015.
Q2......... April 1--June 30, April 1--June 30, Data must be
2015. 2015. submitted by August
31, 2015.
Q3......... July 1--September July 1--September Data must be
30, 2015. 30, 2015. submitted by
November 30, 2015.

[[Page 28246]]

Q4......... N/A for EHR October 1--December For Hospital IQR
Incentive Program. 31, 2015. Program, Data must
be submitted by
February 28, 2016.
2016 Reporting Period............ Q1......... January 1--March 31, January 1--March 31, Data must be
2016. 2016. submitted by May
31, 2016.
Q2......... April 1--June 30, April 1--June 30, Data must be
2016. 2016. submitted by August
31, 2016.
Q3......... July 1--September July 1--September Data must be
30, 2016. 30, 2016. submitted by
November 30, 2016.
Q4......... N/A for EHR October 1--December For Hospital IQR
Incentive Program. 31, 2016. Program, Data must
be submitted by
February 28, 2017.
----------------------------------------------------------------------------------------------------------------
* Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM
data only.
** Proposed EHR Incentive Program and Hospital IQR submission period would allow data submission on an ongoing
basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the quarter.

The Medicare EHR Incentive Program also clarifies case threshold
denominator and reporting zero denominators are included in the
Medicare EHR Incentive Program at sections IX.D.5. and IX.D.6. of the
preamble of this proposed rule.
We invite public comments on these proposals.
e. Sampling and Case Thresholds for the FY 2017 Payment Determination
and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (75 FR
50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50819) for details on our sampling and case
thresholds for the FY 2016 payment determination and subsequent years.
We are not proposing any changes to sampling or case thresholds.
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through
53538), the FY 2014 IPPS/LTCH PPS final rule and (78 FR 50819 through
50820) for details on HCAHPS requirements.
We are not proposing any changes to HCAHPS requirements at this
time.
Hospitals and HCAHPS survey vendors should, however, regularly
check the official HCAHPS Web site at https://www.hcahpsonline.org for
new information and program updates regarding the HCAHPS Survey, its
administration, oversight and data adjustments.
g. Data Submission Requirements for Structural Measures for the FY 2017
Payment Determination and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51643 through 51644), and the FY 2013 IPPS/LTCH PPS final rule (77 FR
53538 through 53539) for details on the data submission requirements
for structural measures.
We are not proposing any changes to data submission requirements
for structural measures at this time.
h. Data Submission and Reporting Requirements for Healthcare-Associated
Infection (HAI) Measures Reported via NHSN
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51631 through 51633; 51644 through 51645), the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53539), and the FY 2014 IPPS/LTCH PPS final rule (78
FR 50820 through 50822) for details on the data submission and
reporting requirements for healthcare-associated infection (HAI)
measures reported via the CDC's National Healthcare Support Network
(NHSN) Web site. The data submission deadlines are posted on the
QualityNet Web site at: https://www.QualityNet.org org/.
We are not proposing any changes to data submission and reporting
requirements for healthcare-associated infection measures reported via
the NHSN.
10. Submission and Access of HAI Measures Data Through the CDC's
NHSN Web site
As finalized in the FY 2014 Hospital IPPS/LTCH PPS final rule (78
FR 50805 through 50807), the Hospital IQR Program requires hospitals to
report data via the CDC's NHSN Web site for the following HAI measures:
(1) CLABSI (NQF 0139); (2) CAUTI (NQF 0138); (3) SSI
following colon surgery; (4) SSI following abdominal hysterectomy; (5)
laboratory-identified MRSA bacteremia infection (NQF 1716);
(6) laboratory-identified Clostridium difficile infection (NQF
1717); and, (7) healthcare personnel vaccination (NQF
0413). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644
through 51645), we adopted the data submission and reporting standard
procedures that have been set forth by CDC for NHSN participation in
general and for submission of specific HAI measures to NHSN.
For the FY 2016 payment determination and subsequent years, for the
Hospital IQR program, we are clarifying our data reporting and
submission requirements for the above stated HAI measures. By adopting
the data reporting and submission procedures set forth by the CDC, we
intended that hospitals report, through the existing NHSN process, any
and all data elements at the patient-level that are designated as
``required'' on NHSN forms (such as, the ``primary bloodstream
infection'' or ``annual facility survey'' forms). Some examples of
these ``required'' patient-level data elements include: patient
identifier, date of birth, and gender; detailed event data, such as
specific symptoms identified to meet case definitions and laboratory
results; and risk factor data used to calculate the hospital-level
measures. Hospitals may find a comprehensive list of required forms and
data elements on the NHSN Web site (https://www.cdc.gov/nhsn/acute-care-hospital/).

[[Page 28247]]

We further wish to clarify that the NHSN required data collected by
the CDC will be shared with CMS for Hospital IQR Program and Hospital
VBP Program administration, monitoring and evaluation activities,
including validation, appeals review, program impact evaluation, and
development of quality measure specifications. CMS routinely uses
submitted quality measure data for these types of program
administration, monitoring and evaluation activities.
In addition, we are proposing that we will also receive access from
the CDC to voluntarily submitted name and race identifying information
with respect to Hospital IQR Program required measures. These data will
also be used for Hospital IQR Program and Hospital VBP Program
administration, monitoring and evaluation activities, including
validation, appeals review, program impact evaluation, and development
of quality measure specifications. More specifically, for Hospital IQR
Program validation, we propose to use these data to ensure accurate
matching between patient charts submitted for HAI validation that
cannot be matched to NHSN using Medicare beneficiary identification
numbers. We also propose to use these data as appropriate for program
evaluation.
We invite public comment on this proposal.
11. Proposed Modifications to the Existing Processes for Validation of
Chart-Abstracted Hospital IQR Program Data
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through
53553), we finalized the processes and procedures for validation of
chart-abstracted measures in the Hospital IQR Program for the FY 2015
payment determination and subsequent years; this rule also contained a
comprehensive summary of all procedures finalized in previous years and
still in effect. Several modifications to these processes were
finalized for the FY 2016 and FY 2017 payment determinations in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50835). For the FY
2017 payment determination and subsequent years, we are proposing
additional modifications to these processes. Proposed changes fall into
the following categories: (a) Eligibility criteria for hospitals
selected for validation; (b) number of charts to be submitted per
hospital for validation; (c) combining scores for HAI and clinical
process-of-care measures; (d) processes to submit medical records for
chart-abstracted measures; and (e) plans to validate electronic
clinical quality measure data.
a. Eligibility Criteria for Hospitals Selected for Validation
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50833 through
50834), for the FY 2016 payment determination and subsequent years, we
finalized our process to draw a random sample of 400 hospitals and an
additional sample of up to 200 hospitals meeting specific targeting
criteria for purposes of validation. For the FY 2017 payment
determination and subsequent years, we are proposing one minor change
to this process. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227),
we defined hospitals eligible for validation as the subset of
subsection (d) hospitals that successfully submitted ``at least one
case for the third calendar quarter of the year two years prior to the
year to which validation applies.''
For the FY 2017 payment determination and subsequent years, we are
proposing to change the definition of validation-eligible hospitals to
be the subset of subsection (d) hospitals that successfully submitted
at least one case to the Hospital IQR Clinical Data Warehouse during
the quarter containing the most recently available data. The quarter
containing the most recently available data will be defined based on
when the random sample is drawn. For example, for the FY 2017 payment
determination, we intend to draw this sample in November or December of
2014. The second quarter (Q2) of 2014 ends in June 2014, but hospitals
participating in the Hospital IQR Program may submit quality data from
this quarter until November 15, 2014 (see www.qualitynet.org for
submission deadlines). If CMS draws its sample early in November 2014,
before all the second quarter hospital data are submitted and processed
by the Clinical Data Warehouse, the ``quarter containing the most
recently available data'' will be first quarter (Q1) of 2014. On the
other hand, if CMS draws its sample late November or early December
2014 after the second quarter 2014 hospital data are processed, the
second quarter of 2014 will contain the most recently available data.
We are proposing this change because, in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50822 through 50825), for the FY 2017 annual payment
determination and subsequent years, we changed the timing of quarters
for validation of HAI measures, as illustrated in the three graphs (78
FR 50824). To align with this change for HAI measures and to give
hospitals more time to complete HAI validation template requirements
once selected, we intend to draw the validation sample several months
sooner than we have historically drawn it. Historically, we drew the
sample early in each calendar year. This proposal provides us with
greater flexibility for when we can sample hospital data and allows CMS
to use the most recent data available to select hospitals.
We invite public comment on this proposal.
b. Number of Charts To Be Submitted per Hospital for Validation
(1) Background
In the sections that follow, we are proposing to: (1) Change the
number of charts hospitals must submit for validation; (2) change the
measure-specific sample sizes for HAI validation; and (3) change the
topic areas and sample design for clinical process-of-care measures. We
are proposing these changes because Section 1886(o) of the Act requires
the Hospital VBP Program to use a subset of Hospital IQR Program
measures and there is a declining number of measures and chart-
abstracted measure topic areas available to the Hospital VBP Program.
Our proposals also will direct more resources to measures and topic
areas that also overlap with the Hospital VBP Program. Finally, our
proposals will ensure that all chart-abstracted measure topic areas
containing required measures within the Hospital IQR Program are
included in validation. A more detailed rationale accompanies each
proposal.
As described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539
through 53553), the Hospital IQR Program validates chart-abstracted
data submitted to two different systems: clinical process-of-care data
submitted to the Hospital IQR Program Clinical Data Warehouse and HAI
data submitted to the NHSN. Different validation approaches are used
for the data submitted to each of the systems. The process for
selecting and validating HAI data was first introduced in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51646 through 51648) and has evolved
annually in each successive IPPS/LTCH PPS rule. In contrast, validation
of the clinical process of care measures, which involves separate
samples for each topic area, has not substantively changed since it was
first finalized for the FY 2012 payment determination in the FY 2010
IPPS/LTCH PPS final rule (74 FR 43884 through 43889).

[[Page 28248]]

(2) Proposed Number of Charts to be Submitted for Validation
(A) Total Number of Charts Required for Validation
Our current policy requires hospitals to submit 96 charts for
validation (60 charts for clinical process-of-care measures and 36
charts for HAIs) (78 FR 50825 through 50834). For the FY 2017 payment
determination and subsequent years, we are proposing to require
hospitals selected for Hospital IQR Program validation to submit 18
patient charts per quarter for a total of 72 charts per year. A sample
size of 72 charts is statistically estimated to be the number of charts
needed to determine whether an individual hospital clearly passed
validation and to assess hospital performance across both types of
measures (HAIs and clinical process-of-care) combined. As finalized in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53551), hospitals may fall
into three validation categories: (1) Hospitals pass validation with a
lower bound of the confidence interval greater than or equal to 75
percent; (2) hospitals fail validation with an upper bound for a
hospital's confidence interval lower than 75 percent; and (3) hospitals
neither pass nor fail validation with a 90 percent confidence interval
that includes values above and below 75 percent. Hospitals in the third
category that neither pass nor fail validation receive their annual
payment update, but may be randomly sampled for inclusion in the
targeted validation in the following year.
We estimate that a sample of 72 charts will be sufficient to
estimate a reliability of 75 percent +/- 10 percent with 90 percent
confidence, assuming a design effect no greater than 1.4. Historical
data suggests that most hospitals in the Hospital IQR Program pass
validation and validated data have a high level of accuracy. For
example, for the FY 2013 payment determination, approximately 95
percent of hospitals validated had data reliability of 85 percent or
higher. With a sample of 72 charts and an expected mean data
reliability well above 85 percent, we should be able to identify most
hospitals that pass validation. Of the remaining hospitals, we will use
the same conservative approach to identify hospitals failing validation
that we have used since the inception of the Hospital IQR Program.
(B) Number of Charts Required for HAI and Clinical Process-of-Care
Measures
As finalized in the FY 2014 IPPS/LTCH PPS final rule for the FY
2017 payment determination and future years, we require hospitals to
submit 9 charts for HAI measures per quarter (78 FR 50831) and for the
FY 2016 payment determination and future years, we require hospitals to
submit 15 charts for clinical process-of-care measures per quarter for
validation (78 FR 50830). For the FY 2017 payment determination and
subsequent years, we are proposing that of the 18 charts proposed to be
submitted per quarter (above), 10 charts would be submitted to validate
HAI measures and 8 charts would be submitted to validate clinical
process-of-care measures. This would equal 72 charts per year with a
mix of 40 HAI and 32 clinical process-of-care measure charts. We are
proposing to require more HAI charts than clinical process-of-care
measure charts because HAI measures now, as proposed, have a greater
impact on the Hospital VBP and the Hospital-Acquired Condition (HAC)
Reduction Programs. Considering only the relative importance of HAIs
and clinical process-of-care charts to the Hospital VBP Program, which
is about 4 times as great, CMS might choose a ratio larger than 10 HAI
charts for every 8 clinical process-of-care charts. However, we
estimate that CMS spends about 4 times as much money per chart to
validate HAIs than clinical process-of-care measures. Moreover, the
clinical process of care measures are still a critical part of the
Hospital IQR Program. Therefore, CMS proposed this mix of 40 HAI and 32
clinical process of care charts per year because we believe it to be
optimal after considering both the relative importance of the two types
of charts to the Hospital IQR Program and related payment incentive
programs and the relative cost of validation for the two types of
charts.
We invite public comment on these proposals.
(3) HAI Validation: Measures and Measure-Specific Sample Sizes
In the FY 2014 IPPS/LTCH final rule (78 FR 50828 through 50832) for
the FY 2016 payment determination and subsequent years, we finalized
the HAI measures to be included in validation, the processes for
completing validation, and the specific sample sizes for each. To
validate HAI data, hospitals must use Validation Templates to provide
supplemental data to CMS. These supplemental data provide CMS with a
set of candidate infections for each HAI. As finalized previously,
hospitals sampled for validation will be randomly assigned to provide
two Validation Templates, either: (1) CLABSI and CAUTI, or 2) MRSA and
CDI. Consequently, up to 300 hospitals will provide data on each of
these 4 measures. We also previously finalized a decision to validate a
smaller number of patient charts for SSI from twice as many hospitals
because of the smaller number of candidate SSIs expected per hospital
per quarter. We are not proposing to change the process for validating
individual measures.
However, above in this section, we are proposing to increase the
total HAI sample size by 1 chart per quarter for a total of 4 more
charts per year. As explained below in this section, HAI measures have
greater relative scoring weights in the Hospital VBP and HAC Reduction
Programs than clinical process-of-care measures. Therefore, in order to
align the Hospital IQR Program with the Hospital VBP and HAC Reduction
Programs, we are proposing to increase measure-specific sample size
targets to support this 1 chart per quarter increase in the Hospital
IQR Program for the FY 2017 payment determination and subsequent years.
Specifically, the total number of charts for CLABSI, CAUTI, MRSA, and
CDI would increase by 1 from 15 to 16; and the total number of charts
for SSI would increase by 2 from 6 to 8. The previously finalized and
proposed specific sample-size charts are detailed in the tables below.

Previously Finalized Number of Charts Required for HAI Validation for the FY 2017 Payment Determination and
Subsequent Years
----------------------------------------------------------------------------------------------------------------
Number of
HAI Number of hospitals Number of Charts/quarter/ charts per
quarters hospital hospital
----------------------------------------------------------------------------------------------------------------
Previously Finalized:
Central line associated bloodstream Up to 300.............. 4 * 3.75 15
infections (CLABSI).
Catheter-associated urinary tract Up to 300.............. 4 * 3.75 15
infections (CAUTI).
MRSA............................... Up to 300.............. 4 * 3.75 15

[[Page 28249]]

CDI................................ Up to 300.............. 4 * 3.75 15
SSI................................ Up to 600.............. 4 * 1.5 6
----------------------------------------------------------------------------------------------------------------
* As previously finalized, within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI,
CAUTI, and SSI, and 3, 3, and 1 respectively for MRSA, CDI, and SSI. As finalized, 2 additional charts per
quarter per hospital were to be randomized to meet the fractional case targets on average.

Proposed Number of Charts To Be Submitted for HAI Validation for the FY 2017 Payment Determination and
Subsequent Years
----------------------------------------------------------------------------------------------------------------
Number of
HAI Number of hospitals Number of Charts/quarter/ charts per
quarters hospital hospital
----------------------------------------------------------------------------------------------------------------
Proposed:
Central line associated bloodstream Up to 300.............. 4 4 16
infections (CLABSI).
Catheter-associated urinary tract Up to 300.............. 4 4 16
infections (CAUTI).
MRSA............................... Up to 300.............. 4 4 16
CDI................................ Up to 300.............. 4 4 16
SSI................................ Up to 600.............. 4 2 8
----------------------------------------------------------------------------------------------------------------

We invite public comment on this proposal.
(4) Clinical Process of Care Measures: Topic Areas and Sample Design
As discussed above in this section, we are proposing to sample 8
total patient charts for clinical process-of-care measures per quarter
per hospital included in validation for the Hospital IQR Program for
the FY 2017 payment determination and subsequent years. Those 8 charts
are discussed in greater detail below.
As shown in the table below, two other Hospital IQR Program
clinical process-of-care topic areas overlap with measures proposed for
inclusion in the FY 2017 Hospital VBP Program. Regardless, we are not
proposing to target those topic areas for the following reasons. One of
these measures, PC-01, Elective delivery prior to 39 completed weeks of
gestation, is reported in aggregate. We cannot use the same mechanism
to validate PC-01 as we use for measures reported at the patient level,
but we hope to include it in our validation program in the future
should reporting PC-01 as an electronic clinical quality measure
becomes a requirement. The second measure is AMI-7a. AMI-7a describes a
process of care only performed in small rural hospitals. Of the
approximately 3,300 hospitals participating in the Hospital IQR Program
for the FY 2015 payment determination, only 113 submitted cases for
this measure in the first two quarters of CY 2013. Therefore, targeting
hospitals that report the AMI-7a measure would unduly single out small
rural hospitals that disproportionately report relatively high AMI-7a
measure denominator counts for validation, and would be inequitable.

Number of Chart-Abstracted Clinical Process-of-Care Measures per Topic Area Proposed To Be Reported in the
Hospital IQR Program in the CY 2014 and CY 2015 Data Collection Periods *
----------------------------------------------------------------------------------------------------------------
Number of Number of
required required
measures measures Proposed to include in the
Topic area reported in CY proposed for CY Hospital VBP program for FY
2014 for FY 2016 2015 for FY 2017 2017
hospital IQR hospital IQR
program program
----------------------------------------------------------------------------------------------------------------
Acute Myocardial Infarction (AMI)........... 2 1 Yes.
Heart Failure (HF).......................... 1 0 No.
Pneumonia (PN).............................. 1 0 No.
Surgical Care Improvement Project (SCIP).... 7 0 No.
Venous thromboembolism (VTE)................ 6 5 No.
Stroke (STK)................................ 8 4 No.
Emergency department throughput (ED)........ 2 2 No.
Prevention--global immunization (IMM)....... 1 1 Yes.
Sepsis...................................... 0 1 No.
Perinatal Care (PC) **...................... 1 1 Yes.
----------------------------------------------------------------------------------------------------------------
* Data validated for the FY 2017 payment determination are Quarter 3, CY 2014, Quarter 4, CY 2014 Quarter 1, CY
2015 and Quarter 2, CY 2015 (78 FR 50824).
** Not reported at the patient level and not proposed for inclusion in validation.

For the FY 2017 payment determination and subsequent years, we are
proposing that the remaining 5 of the 8 clinical process-of-care charts
be drawn from a systematic random sample of charts across all topic
areas

[[Page 28250]]

containing required measures other aside from those in the immunization
and perinatal care topic areas. Across all hospitals included in
validation, we believe this approach will ensure adequate numbers of
patient charts are sampled for each topic area. Under this proposal,
the pool of clinical process-of-care topic areas sampled for validation
will include: STK, VTE, ED, and sepsis, as well as all other IQR
required topic areas such as AMI. We received many comments in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50807 through 50810; 78 FR 50825)
regarding the importance of validating VTE, STK, and ED measures not
included in validation for the FY 2016 payment determination. With this
proposal, STK, VTE, ED, and sepsis measures would be included in the
pool of clinical process-of-care measures for validation. The
systematic random sample of topic areas from this pool would ensure
that charts are sampled proportionate to the number of charts submitted
for each topic. Thus, a sample of 20 charts per year would not be
limited to only one topic area by random occurrence. In addition,
across all hospitals included in validation, we believe this approach
will ensure adequate numbers of patient charts are sampled for each
topic area.\77\
---------------------------------------------------------------------------

\77\ We used data submitted to the Clinical Data Warehouse for
the Hospital IQR Program from quarters 1 and 2 of 2013 to estimate
that at least 400 cases per topic area would be validated per year
(across all hospitals).
---------------------------------------------------------------------------

This proposal simultaneously simplifies the sampling plan for
clinical process-of-care measures and gives us the flexibility of
introducing or removing new topic areas into validation each year
without having to redesign and propose a new sampling strategy. Using a
random sample ensures that new topic areas are not excluded from the
validation sample and we can more easily adjust as the topic areas
change over the years. If this proposal is finalized, every time a new
required topic area is added to the Hospital IQR Program, it will
automatically be added to validation, and every time a topic is removed
from the Hospital IQR Program, it will automatically be excluded from
validation.
We invite public comment on these proposals.
(5) Immunization Measure Validation
We are proposing for the Hospital IQR Program for the FY 2017
payment determination and subsequent years, that 3 of the 8 total
patient charts each quarter be targeted from the Immunization topic
area. Currently, this topic area only includes the Immunization for
Influenza (NQF 1659) measure, which overlaps with the Hospital
VBP Program. We want to ensure that every hospital included in
validation is validated for this topic area because of the overlap.
c. Combining Scores for HAI and Clinical Process of Care Topic Areas
We refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR
43885) for the process of scoring clinical process-of-care measures,
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50832 through 50833) for
the process of scoring HAI measures, and FY 2014 IPPS/LTCH PPS final
rule (78 FR 50833) for the process to be used to compute the confidence
interval. We are not proposing any changes to those established
policies.
However, for the FY 2017 payment determination and subsequent
years, we are proposing to modify our approach to weighting the scores
for each of the HAI, IMM and ``other topic areas'' with two proposals.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226) and the FY
2013 IPPS/LTCH PPS final rule (77 FR 53548 through 53553), we
established a process to combine the HAI and clinical process-of-care
measure scores by weighting them proportionate to the number of
measures included in validation. For example, in section IX.A.11.b.4.
of the preamble of this proposed rule, our proposal to validate all
clinical process of care measures required by the Hospital IQR Program
for the FY 2017 payment determination would yield 14 clinical process-
of-care measures in validation in CY 2015 and only 5 HAI measures in
validation. Using the previously finalized weights, the clinical
process of care measures score would contribute 14/19 and the HAI score
would contribute only 5/19 to the combined score. This weighting does
not reflect either the relative importance of HAIs to clinical process
of care measures in the Hospital VBP Program nor the resources proposed
to devote to their validation.
In sections IV.I. and IV.J. of the preamble of this proposed rule
(the Hospital VBP Program and the HAC Reduction Program, respectively),
we are proposing to weight the patient safety domain (of which the HAI
measures are part) more heavily in the Hospital VBP Program (20 percent
for the patient safety domain versus 5 percent for the clinical process
of care measures) and to use the HAI measures for the HAC Reduction
Program. In this section, we are proposing to weight the HAI measures
more heavily than the clinical process of care scores to align with
these proposals in sections IV.I and IV.J. For the FY 2017 payment
determination and subsequent years, we are proposing to weight the HAI
score 66.7 percent (or 2/3) of the total score and the clinical
process-of-care measures to weight 33.3 percent (or 1/3) of the total
score. Further justification is provided after the second proposal.
In addition, we are proposing to weight the IMM measures more
heavily than other chart-abstracted clinical process-of-care measures
validated in the Hospital IQR Program to align with the Hospital VBP
Program. We are changing the process currently established to calculate
the clinical process-of-care score, which is based on application of
the formulas for the variance of a stratified single-stage cluster
sample with unequal cluster sizes and the variance of a proportion in a
stratified random sample (see reference to Cochran's ``Sampling
Techniques'' at 75 FR 50226 and 78 FR 53550). We have previously
applied this formula without consideration for the relative importance
of different measures. When so applied, each topic area is weighted
proportionate to the amount of data submitted to the warehouse for that
topic area.
However, we are proposing to modify the formulas as previously
applied to weight the IMM topic area more heavily because of the
overlap with the Hospital VBP Program. For the FY 2017 payment
determination and subsequent years, we are proposing to weight the
``IMM'' clinical topic area as 66.7 percent (2/3) and all other topic
areas combined 33.3 percent (1/3) of the clinical process-of-care
score. The weights reflect our policy preference to place greater
relative weight on Hospital VBP Program included measures to better
ensure accurate scores and payment. Emphasizing chart-abstracted
clinical process of care measures validated in the Hospital IQR Program
to align with the Hospital VBP Program will address the need to
validate Hospital IQR Program data not currently included in Hospital
VBP Program for public reporting and validation feedback to hospitals.
The table below shows the effect of the two proposals combined (the
first to weight the HAI score more heavily than the clinical process-
of-care score and the second to weight IMM data more heavily than other
clinical process-of-care topic areas). The HAI topic area will count 3
times as much as the IMM

[[Page 28251]]

topic area and 6 times as much as all other topic areas combined.

Proposed Weighting To Combine Scores Across Chart-Abstracted Topic Areas
Included in Validation for the FY 2017 Payment Determination and
Subsequent Years
------------------------------------------------------------------------
Topic area Weight (percent)
------------------------------------------------------------------------
Health care associated infection (HAI).............. 66.7
Immunization (IMM).................................. 22.2
Other (AMI, ED, sepsis, STK, VTE)................... 11.1
-------------------
Total........................................... 100
------------------------------------------------------------------------

Previously, the clinical process of care measures accounted for 20
percent of the Hospital VBP Program score, whereas the HAI measures
were a subset of the outcome measures weighted 30 percent (FR 53605
through 53606). The proposed relative weights for the HAI (66 percent)
and IMM (22 percent) topic areas better reflect the strong emphasis we
are proposing for the HAI measures.
These proposals will require adjustments to the formulas applied to
compute the confidence intervals. As we have done in the past, we
intend to post the specific formulas used to compute the confidence
interval on the QualityNet Web site at least one year prior to final
computation (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129). These formulas will continue to account appropriately for the
manner in which patient charts were sampled and data were abstracted.
We invite public comment on these proposals.
d. Processes To Submit Patient Medical Records for Chart-abstracted
Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50834 through
50835), we finalized a process for the FY 2016 payment determination
and subsequent years that allows hospitals to submit patient charts for
validation via: (1) Paper patient medical records; or (2) secure
transmission of electronic versions of patient information. The process
previously finalized restricts electronic submission of patient
information to digital images of patient medical records submitted
using encrypted CD-ROMs, DVDs, or flash drives.
We are proposing for the FY 2017 payment determination and
subsequent years to expand the options for secure transmission of
electronic versions of patient medical records. Specifically, we are
proposing to allow hospitals to submit digital images (PDFs) of patient
charts using a Secure File Transfer Portal on the QualityNet Web site.
This portal would allow hospitals to transfer files through either a
Web-based portal or directly from a client application using a secure
file transfer protocol. The system provides a mechanism for securely
exchanging documents containing sensitive information such as Protected
Health Information (PHI) or Personally Identifiable Information (PII).
Detailed instructions on how to use this system are available in the
Secure File Transfer 1.0 User Manual available on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228773343598. After July 2014, hospitals can submit all Hospital IQR Program
validation data using this portal. This proposal responds to many
commenters from the FY 2014 IPPS/LTCH PPS rulemaking that were
concerned that encrypted CD-ROMs were cumbersome and requested viable
alternatives. We believe that the burden associated with using this
portal will be similar to or less than that involved with submitting
patient medical records via portable electronic media (that is,
encrypted CD-ROMS, DVDs, or flash drives). Therefore, we intend to
reimburse hospitals according to the rate established for submitting
patient medical records via portable electronic media (78 FR 50956).
We invite public comment on this proposal.
e. Plans To Validate Electronic Clinical Quality Measure Data
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through
50810), we finalized a voluntary process allowing hospitals to
partially meet Hospital IQR Program requirements for the FY 2014
payment determination by submitting electronic clinical quality measure
data via certified electronic health record technology. Many commenters
expressed concern that we did not have an adequate methodology to
validate these data.
To respond to these concerns as well as to ensure that Hospital IQR
Program data are accurate and reliable, we conducted an environmental
scan, including review of prior public comments to CMS proposed rules
and requests for information, review of the technical and academic
literatures, numerous listening sessions, and interviews with nine
hospitals. From these activities, we identified three key categories of
threats to data accuracy: (1) The design of the EHR product, including
both the manufacturer-provided EHR product and the hospital's
customizations of that EHR product to support the hospital's specific
workflows and processes, (2) hospital and provider documentation
practice, and (3) EHR and electronic clinical quality measure standards
and specifications. We understand the potential threats to validity in
each of these categories. To respond to these concerns, we are
currently conducting a small scale test of a remote real-time
validation strategy for electronic clinical quality measures in
approximately 9 hospitals.
We are not proposing any requirements for validation of electronic
clinical quality measures for the FY 2017 payment determination.
However, we intend to conduct a larger scale pilot test of validation
activities in FY 2015. The pilot test will engage up to 100 volunteer
hospitals in a highly interactive test abstraction of their EHR systems
using a secure remote access, real-time abstraction technology that
meets the HIPAA Privacy and Security Rules' requirements. Hospitals
that volunteer to participate must meet the EHR Incentive Program Stage
2 criteria (77 FR 53968 through54162) and be able to produce QRDA
Category 1 Revision 2 extracted data (individual patient data) for at
least 6 of the 16 measures in the STK, VTE, ED, and PC topic areas. The
Office of the National Coordinator for Health Information Technology
(ONC) adopted QRDA as the standard to support both QRDA Category I

[[Page 28252]]

(individual patient) and QRDA Category III (aggregate) data submission
approaches for meaningful use Stage 2 in the Health Information
Technology: Standards, Implementation Specifications, and Certification
Criteria for Electronic Health Record Technology, 2014 Edition;
Revisions to the Permanent Certification Program for Health Information
Technology rule (77 FR 54163 through 54292). Interested hospitals will
be invited to attend a 30-minute pre-briefing session where they will
be provided with detailed instructions about the process and a
demonstration explaining how to install needed software and have any
concerns about security or systems requirements addressed. The software
to be installed, Bomgar, is approved by CMS and meets our security
requirements allowing CDAC to remotely view isolated records in real-
time under hospital supervision, comparing all abstracted data with
QRDA Category 1 file data and summarizing the results after the real-
time session.
We implemented Bomgar software, a commercial product, in a CMS data
center to allow for the review of medical records securely over the
Internet. The product will allow the CDAC staff and Hospital medical
record staff to easily set up remote support sessions for reviewing
Hospital IQR Program-related EHR records under hospital supervision.
The software was tested and passed our strict security standards. The
electronic sessions do not require changes to a hospital's firewall or
network because both the CDAC computer and the hospital computer
connect to the product through secure outbound connections. The product
will log and record every session and all session data will be safe-
guarded by federal government approved encryption.
While CDAC has limited, remote viewing access, hospitals will be
asked to:
Generate separate lists of patients eligible for measures
in each of the four topic areas (STK, VTE, ED, and PC);
Generate QRDA Category 1 files extracted automatically
from an EHR for all applicable measures for up to 3 records within each
of the 4 topic areas (for a total of 12 records) as selected by CDAC;
and
Show selected records, such as laboratory records, and
patient medical history, navigating through the EHR system as directed
by CDAC.
During this remote real-time session, CDAC will:
Follow the specifications for the electronic measure to
abstract relevant information related to each data element from up to
10 different sources, for example, medication administration records,
laboratory reports, and patient history, (including structured and
unstructured fields) within each patient medical record.
After concluding the real-time session with a hospital, CDAC will:
Compare all abstracted data with QRDA Category 1 file
data; and
Summarize results identifying patterns of concern.
Based on these results, CMS and our contractors will:
Work with measure stewards to refine measure
specifications based on conflicting findings;
Share conflicting findings with individual hospitals to
support improvement;
Publicize de-identified patterns of conflicting findings
that allow vendors to develop automated checks;
Determine reliability (agreement) between QRDA Category 1
extracted and abstracted data; and
Produce descriptive statistics to estimate sample size
requirements for future validation.
To address the burden associated with this test, we intend to
reimburse hospitals for the burden associated with their participation.
Details about reimbursement are included in section XIII.B.6. of the
preamble of this proposed rule. We will post on QualityNet a detailed
draft of the operational procedures that volunteer hospitals will be
expected to follow during the public comment period. We developed this
process to attempt to meet all of our goals for validity, as further
explained in the table below.

Electronic Clinical Quality Measure Validation Strategy Summary for the
Hospital IQR Program
------------------------------------------------------------------------

-------------------------------------------------------------------------
Desired Attributes of Validation Strategy
------------------------------------------------------------------------
Assesses accuracy including reliability and population
representativeness.
Employs a standardized process conducted by an objective
third party.
Minimizes burden to hospitals.
Minimizes costs to CMS by being performed at a central
location.
Leverages the dynamic qualities of an EHR, including query
functions.
May ultimately integrate with validation of other IQR
measures.
------------------------------------------------------------------------
Goals of Test
------------------------------------------------------------------------
Assess the accuracy and completeness of electronic clinical
quality measure data.
Assess Hospital IQR Program readiness for electronic
clinical quality measure reporting requirements.
Identify the needs for and implement updates to measure
specifications and standards.
Plan future validation requirements, including detailed
operational instructions and sample size.
------------------------------------------------------------------------
Planned Process Overview
------------------------------------------------------------------------
Hospitals will:
Allow CMS' Clinical Data Abstraction Contractor (CDAC) to
remotely view records in real-time.
Generate separate lists of patients eligible for measures
to be validated.
Generate QRDA Category 1 extract files for all applicable
measures for up to 12 records selected by CDAC.
Show selected records, navigating through the EHR system as
directed by CDAC.
CDAC will:
Abstract data following the specifications for the
electronic measure and relevant information related to each data
element from up to 10 different sources (including structured and
unstructured fields) within each medical record.
Compare all abstracted data with QRDA Category 1 file data.
Assess and refine operational processes.
CMS and its contractors will:
Determine reliability (agreement) between extracted and
abstracted measures.
Work with measure stewards to refine measure specifications
based on conflicting findings.
Share conflicting findings with individual hospitals to
support improvement.

[[Page 28253]]

Publicize de-identified common patterns of conflicting
findings that allow vendors to develop automated checks.
Produce descriptive statistics to estimate sample size
requirements for future validation.
Reimburse hospitals for burden associated with
participation in test.
------------------------------------------------------------------------

We invite public comment on this voluntary pilot test for
validation.
We also considered other validation approaches including one that
supplements the current procedures and compares quality data manually
abstracted by the hospitals with QRDA Category 1 extracts from their
EHRs. Although we are making no specific proposals related to these
alternatives at this time, we invite comments on whether we should
develop or identify existing computerized applications to assist
hospitals in self-validation and on the specific functionalities that
may be useful for self-validation. For example, as part of the
validation process, should CMS develop or identify an existing
application that would use natural language processing, to identify
potential threats to validity that human abstractors might then review
more closely. An example of such an application might be one that
searches the unstructured fields for contraindications to VTE
prophylaxis, even if such contraindications were not noted in a
structured field within an EHR. We also invite comments any other types
of applications that would be useful for self-validation.
12. Data Accuracy and Completeness Acknowledgement Requirements for the
FY 2017 Payment Determination and Subsequent Years
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53554) for information for details on DACA requirements for the FY 2017
payment determination and subsequent years.
We are not proposing any changes to DACA form requirements at this
time.
13. Public Display Requirements for the FY 2017 Payment Determination
and Subsequent Years
We refer readers to the FY 2008 IPPS final rule (72 FR 47360), the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77
FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for
details on public display requirements for the FY 2017 payment
determination and subsequent years.
The Hospital IQR Program quality measures are typically reported on
the Hospital Compare Web site at: https://www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites
such as https://www.cms.gov and/or https://data.medicare.gov.
We are not proposing any changes to public display requirements at
this time.
14. Reconsideration and Appeal Procedures for the FY 2017 Payment
Determination and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH final rule (76 FR 51650
through 51651), the FY 2014 IPPS/LTCH final rule (78 FR 50836), and at
42 CFR Sec. 412.140(e) for details on reconsideration and appeal
procedures for the FY 2017 payment determination and subsequent years.
We are not proposing any changes to the reconsideration and appeals
procedures at this time.
15. Hospital IQR Program Extraordinary Circumstances Extensions or
Exemptions
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836
through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital
IQR Program extraordinary circumstances extensions or waivers. We are
not proposing any substantive changes to these policies or the
processes. However, in the future, we will refer to the process as the
Extraordinary Circumstances Extensions or Exemptions process. We are
currently in the process of revising the Extraordinary Circumstances/
Disaster Extension or Waiver Request form, previously approved under
OMB control number 0938-1171.
In addition, we are proposing to make a conforming change from the
phrase ``extension or waiver'' to the phrase ``extension or exemption''
in 42 CFR 412.140(c)(2). Section 412.140(c)(2) currently states,
``Exception. Upon request by a hospital, CMS may grant an extension or
waiver of one or more data submission deadlines in the event of
extraordinary circumstances beyond the control of the hospital.
Specific requirements for submission of a request for an extension or
waiver are available on QualityNet.org.'' We are proposing to revise
this language to state, ``Exception. Upon request by a hospital, CMS
may grant an extension or exemption of one or more data submission
deadlines in the event of extraordinary circumstances beyond the
control of the hospital. Specific requirements for submission of a
request for an extension or exemption are available on
QualityNet.org.''

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

1. Statutory Authority
Section 3005 of the Affordable Care Act added new sections
1866(a)(1)(W) and (k) to the Act. Section 1866(k) establishes a quality
reporting program for hospitals described in section 1886(d)(1)(B)(v)
of the Act (referred to as a ``PPS-Exempt Cancer Hospital'' or
``PCH''). Section 1866(k)(1) of the Act states that, for FY 2014 and
each subsequent fiscal year, a PCH must submit data to the Secretary in
accordance with section 1866(k)(2) of the Act with respect to such a
fiscal year. Section 1866(k)(2) of the Act provides that, for FY 2014
and each subsequent fiscal year, each hospital described in section
1886(d)(1)(B)(v) of the Act must submit data to the Secretary on
quality measures specified under section 1866(k)(3) of the Act in a
form and manner, and at a time, specified by the Secretary.
Section 1866(k)(3)(A) of the Act requires that any measure
specified by the Secretary must have been endorsed by the entity with a
contract under section 1890(a) of the Act, unless an exception under
section 1866(k)(3)(B) of the Act applies. The National Quality Forum
(NQF) currently holds this contract. The NQF is a voluntary, consensus-
based, standard-setting organization with a diverse representation of
consumer, purchaser, provider, academic, clinical, and other health
care stakeholder organizations. The NQF was established to standardize
healthcare quality measurement and reporting through its consensus
development processes. We have generally adopted NQF-endorsed measures
in our reporting programs.
However, section 1866(k)(3)(B) of the Act provides an exception.
Specifically, it provides that, in the case of a specified area or
medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the entity with
a contract under section

[[Page 28254]]

1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
Under section 1866(k)(3)(C) of the Act, the Secretary was required
to publish the measure selection for PCHs no later than October 1,
2012, with respect to FY 2014.
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making public the data submitted by PCHs under the PPS-
Exempt Cancer Hospital Quality Reporting (PCHQR) Program. Such
procedures must ensure that a PCH has the opportunity to review the
data that are to be made public with respect to the PCH prior to such
data being made public. The Secretary must report quality measures of
process, structure, outcome, patients' perspective on care, efficiency,
and costs of care that relate to services furnished by PCHs on the CMS
Web site.
2. Covered Entities
Section 1886(d)(1)(B)(v) of the Act excludes particular cancer
hospitals from payment under the IPPS. This proposed rule covers only
those PPS-excluded cancer hospitals meeting eligibility criteria
specified in 42 CFR 412.23(f).
3. Previously Finalized PCHQR Program Quality Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through
53561), we finalized five quality measures for the FY 2014 program and
subsequent years. Specifically, we finalized two of the CDC NHSN-based
HAI quality measures (outcome measures): (1) CLABSI; and (2) CAUTI. We
also finalized three cancer-specific process of care measures: (1)
Adjuvant chemotherapy is considered or administered within 4 months
(120 days) of surgery to patients under the age of 80 with the American
Joint Committee on Cancer (AJCC) III (lymph node positive) colon
cancer; (2) Combination chemotherapy is considered or administered
within 4 months (120 days) of diagnosis for women under 70 with AJCC
T1c, or Stage II or III hormone receptor negative breast cancer; and
(3) Adjuvant hormonal therapy. We also discussed the collection
requirements and submission timeframes for these measures in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53566).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through
50840), we finalized one new quality measure for the FY 2015 program
and subsequent years. Specifically, we finalized the CDC's NHSN HAI
measure of Surgical Site Infection (SSI). We did not remove or replace
any of the previously finalized measures from the PCHQR Program for the
FY 2015 program and subsequent years.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50840 through
50846), we finalized 12 new quality measures for the FY 2016 program
and subsequent years. Specifically, we finalized six new SCIP measures,
five new clinical process/oncology care measures and the HCAHPS Survey
for reporting beginning with the FY 2016 program and subsequent years.
We did not remove or replace any of the previously finalized measures
from the PCHQR Program for the FY 2016 program and subsequent years. We
also discussed the collection requirements and submission timeframes
for these measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850
through 50853).
We are not proposing to remove or replace any of the previously
finalized measures from the PCHQR Program for the FY 2017 program and
subsequent years.
4. Proposed Update to the Clinical Process/Oncology Care Measures
Beginning With the FY 2016 Program
Beginning with the FY 2016 program, we are proposing to update the
specifications for each of the five clinical process/oncology care
measures so that for each measure, PCHs must report all-patient data.
We believe that the delivery of high quality care in the PCH setting is
critically important and that collecting data on all patients will
enable us to ensure that high quality care is delivered to Medicare
beneficiaries in this setting. In addition, all-patient data increases
transparency in the health care system, aligns with State and federal
initiatives,\78\ and improves research efforts. Our proposal to require
PCHs to collect all-patient data provides us with the data to inform
the public with the most robust and accurate reflection of the quality
of care and patient outcomes in the PCH setting. In addition, this
proposal will align the specifications of the clinical process/oncology
care measures with those of the SCIP PCHQR measures, for which all-
patient data are required for submission.
---------------------------------------------------------------------------

\78\ All-Payer Claims Database (APCD) Fact Sheet; available at:
https://www.apcdcouncil.org/issue-briefs-and-fact-sheets.
---------------------------------------------------------------------------

We welcome public comments on this proposal for the clinical
process/oncology care measures for the FY 2016 program and subsequent
years.
5. Proposed New Quality Measure Beginning With the FY 2017 Program
a. Considerations in the Selection of Quality Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556) and in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50838), we indicated
that we have taken a number of principles into consideration when
developing and selecting measures for the PCHQR Program, and that many
of these principles are modeled on those we use for measure development
and selection under the Hospital IQR Program:
Public reporting should rely on a mix of standards,
outcomes, process of care measures, and patient experience of care
measures, including measures of care transitions and changes in patient
functional status.
The measure set should evolve so that it includes a
focused core set of measures appropriate to cancer hospitals that
reflects the level of care and the most important areas of service
furnished by those hospitals. The measures should address gaps in the
quality of cancer care.
We also consider input solicited from the public through
rulemaking and public listening sessions.
We consider suggestions and input from a PCH Technical
Expert Panel (TEP), convened by a CMS measure development contractor,
which rated potential PCH quality measures for importance, scientific
soundness, usability, and feasibility. The TEP membership includes
health care providers specializing in the treatment of cancer, cancer
researchers, consumer and patient advocates, disparities experts, and
representatives from payer organizations.
Like the Hospital IQR Program, the PCHQR Program supports the
National Quality Strategy (NQS), national priorities, HHS Strategic
Plans and Initiatives, the CMS Quality Strategy, and strives for burden
reduction whenever possible. The PCHQR Program also takes into
consideration the recommendations of the Measure Applications
Partnership (MAP). The MAP is a multi-stakeholder body convened by the
NQF for the purpose of providing input to HHS on the selection of
measures.
b. Proposed New Quality Measure Beginning With the FY 2017 Program
We are proposing to adopt one new clinical effectiveness measure
for the FY 2017 program and subsequent years:

[[Page 28255]]

External Beam Radiotherapy for Bone Metastases (NQF 1822). The
proposed clinical effectiveness measure was included on a publicly
available document entitled ``List of Measures under Consideration for
December 1, 2013,'' a list of quality and efficiency measures being
considered for use in various Medicare programs. The proposed measure
was submitted to the MAP Hospital Workgroup for review. The MAP
supported the inclusion of this measure in the PCHQR Program. The MAP's
conclusions can be found in the ``MAP Pre-Rulemaking Report: 2014
Recommendations on Measures Under Consideration by HHS,'' which is
available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. We considered the MAP's input
and recommendations for this proposed measure for the PCHQR Program,
and specifically, we note that the proposed measure addresses the MAP
priority of palliative care for cancer patients. In addition, the
proposed measure addresses the NQS domain of effective clinical care.
We believe that this NQF-endorsed measure developed by the American
Society for Radiation Oncology (ASTRO) meets the requirement under
section 1866(k)(3)(A) of the Act that measures specified for the PCHQR
generally be endorsed by the entity with a contract under section
1890(a) of the Act (currently the NQF). This measure assesses the
percentage of patients (both Medicare and non-Medicare) with painful
bone metastases and no history of previous radiation who receive EBRT
with an acceptable dosing schedule. The measure numerator includes all
patients with painful bone metastases, and no previous radiation to the
same site, who receive EBRT with any of the following recommended
fractionation schemes: 30Gy/10fxns, 24Gy/6fxns, 20Gy/5fxns, or 8Gy/
1fxn. The measure denominator includes all patients with painful bones
metastases and no previous radiation to the same site, who receive
EBRT. The following patients are excluded from the denominator:
Patients who have had previous radiation to the same site; patients
with femoral axis cortical involvement greater than 3 cm in length;
patients who have undergone a surgical stabilization procedure; and
patients with spinal cord compression, cauda equina compression, or
radicular pain. For the reasons explained more fully below, we believe
that this measure will reduce the rate of EBRT services overuse,
support our commitment to promoting patient safety, and support the NQS
domains.
Bone metastases are a common manifestation of malignancy. Some
cancer types have a bone metastasis prevalence as high as 70 to 95
percent.\79\ EBRT can provide significant pain relief in 50 to 80
percent of patients with painful bone metastases.
---------------------------------------------------------------------------

\79\ Coleman RE. Metastatic bone disease: Clinical features,
pathophysiology and treatment strategies. Cancer Treat Rev.
2001;27:165-176.
---------------------------------------------------------------------------

In October 2009, ASTRO organized a Task Force to perform an
assessment of existing recommendations in order to address a lack of
palliative radiotherapy guidelines. Based on a review of the
literature, the Task Force recommended the following EBRT dosing
schedules for patients with previously un-irradiated painful bone
metastases: 30 Gy over the course of 10 fractions, 24 Gy over the
course of 6 fractions, 20 Gy over the course of 5 fractions, and a
single 8 Gy fraction.\80\ Despite the recommendations, the actual doses
applied for EBRT continue to include dosing schedules as high as 25
fractions.\81\ Other studies support the conclusion that shorter EBRT
schedules produce similar pain relief outcomes when compared to longer
EBRT schedules, and that patients prefer shorter EBRT schedules because
of their convenience, increased tolerability, and reduced side
effects.\82\
---------------------------------------------------------------------------

\80\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for
bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
\81\ Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
\82\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for
bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
---------------------------------------------------------------------------

In addition, the ASTRO Task Force found that the frequency and
severity of side effects associated with a single fraction were the
same or less than those associated with multiple fraction regimens,
indicating that shorter treatment schedules may be preferable.\83\ The
proposed External Beam Radiotherapy for Bone Metastases measure seeks
to address the performance gap in treatment variation, ensure
appropriate use of EBRT, and prevent the overuse of radiation therapy.
We believe that this measure is necessary to support patient
preferences for shorter EBRT schedules as well as to ensure patient
safety, given that shorter treatment courses show similar or fewer side
effects while producing similar clinical outcomes.
---------------------------------------------------------------------------

\83\ FY 2013 IPPS/LTCH PPS final rule 77 FR 53561 (NQF
0223, 0559, and 0220).
---------------------------------------------------------------------------

We believe the proposed measure is applicable to the PCH setting
because it addresses cancer care associated with radiation therapy. The
adoption of measures that apply to multiple health care settings is one
of our objectives in promoting quality care consistently across all
health care settings. Detailed specifications for this proposed measure
can be found at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
In summary, in addition to the 18 measures that we previously
finalized for the PCHQR Program, we are proposing one new measure for
reporting beginning with the FY 2017 program. The proposed policies
regarding the form, manner, and timing of data collection for this
measure are discussed in later sections. The table below lists all
previously adopted measures as well as the proposed new measure for the
PCHQR Program for the FY 2017 program and subsequent years. We welcome
public comment on this proposal.

----------------------------------------------------------------------------------------------------------------
PCHQR program measures for the FY 2017 program and subsequent
Topic years (including proposed new measure)
----------------------------------------------------------------------------------------------------------------
Safety and Healthcare-Associated Infection--HAI
----------------------------------------------------------------------------------------------------------------
(NQF 0139) NHSN Central Line-Associated
Bloodstream Infection (CLABSI) Outcome Measure *.
(NQF 0138) NHSN Catheter-Associated Urinary
Tract Infections (CAUTI) Outcome Measure *.
(NQF 0753) Harmonized Procedure Specific
Surgical Site Infection (SSI) Outcome Measure\*\ (currently
includes SSIs following Colon Surgery and Abdominal Hysterectomy
Surgery).
----------------------------------------------------------------------------------------------------------------
Clinical Process/Cancer-Specific Treatments
----------------------------------------------------------------------------------------------------------------
(NQF 0223) Adjuvant Chemotherapy is Considered
or Administered Within 4 Months (120 days) of Surgery to Patients
Under the Age of 80 with AJCC III (lymph node positive) Colon
Cancer *.

[[Page 28256]]

(NQF 0559) Combination Chemotherapy is
Considered or Administered Within 4 Months (120 days) of
Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III
Hormone Receptor Negative Breast Cancer *.
(NQF 0220) Adjuvant Hormonal Therapy *.
----------------------------------------------------------------------------------------------------------------
SCIP
----------------------------------------------------------------------------------------------------------------
(NQF 0218) Surgery Patients who Received
Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24
Hrs After Surgery End Time *.
(NQF 0453) Urinary Catheter Removed on Post-
Operative Day 1 or Post-Operative Day 2 with Day of Surgery Being
Day Zero *.
(NQF 0527) Prophylactic Antibiotic Received
Within 1 Hr Prior to Surgical Incision *.
(NQF 0528) Prophylactic Antibiotic Selection for
Surgical Patients *.
(NQF 0529) Prophylactic Antibiotic Discontinued
Within 24 Hrs After Surgery End Time *.
(NQF 0284) Surgery Patients on Beta Blocker
Therapy Prior to Admission who Received a Beta Blocker During the
Perioperative Period *.
----------------------------------------------------------------------------------------------------------------
Clinical Process/Oncology Care Measures
----------------------------------------------------------------------------------------------------------------
(NQF 0382) Oncology-Radiation Dose Limits to
Normal Tissues *.
(NQF 0383) Oncology: Plan of Care for Pain *.
(NQF 0384) Oncology: Pain Intensity Quantified
*.
(NQF 0390) Prostate Cancer-Adjuvant Hormonal
Therapy for High-Risk Patients *.
(NQF 0389) Prostate Cancer-Avoidance of Overuse
Measure-Bone Scan for Staging Low-Risk Patients *.
----------------------------------------------------------------------------------------------------------------
Patient Engagement/Experience of Care
----------------------------------------------------------------------------------------------------------------
(NQF 0166) HCAHPS *.
----------------------------------------------------------------------------------------------------------------
Clinical Effectiveness Measure
----------------------------------------------------------------------------------------------------------------
(NQF 1822) External Beam Radiotherapy for Bone
Metastases **.
----------------------------------------------------------------------------------------------------------------
* Previously finalized measures.
** Proposed for the FY 2017 program and subsequent years in this proposed rule.

6. Possible New Quality Measure Topics for Future Years
We seek to develop a comprehensive set of quality measures for
widespread use for informed decision-making and quality improvement in
the PCH setting. Therefore, in future rulemaking, we intend to propose
to adopt new or updated measures, such as measures that assess the
safety and efficiency of the diagnosis and treatment of cancer,
measures that take into account novel diagnostic and treatment
modalities, measures that assess symptoms and functional status, and
measures of appropriate disease management. Additional measure topics
to be considered include patient centered care planning and care
coordination, shared decision making, measures of quality of life
outcomes, and measures of admissions for complications of cancer and
treatment for cancer. We believe that such measures will help us
further our goal of achieving better health care and improved health
for Medicare beneficiaries who obtain cancer services through the
widespread dissemination and use of quality of care information.
We welcome public comment and specific suggestions for measure
topics for the following measure domains: outcomes, quality of life,
clinical quality of care, care coordination, patient safety, patient
and caregiver experience of care, population/community health, and
efficiency. These domains align with those of the NQS, and we believe
that selecting measures to address these domains will promote better
cancer care while aligning the PCHQR Program with other established
quality reporting and pay for performance programs such as the Hospital
IQR Program, the Hospital OQR Program and the Hospital VBP Program.
Generally, we retain measures from the previous years' PCHQR
Program measure sets for subsequent years. However, in future years we
will consider developing criteria to determine whether or not to remove
or replace measures from the PCHQR Program measure set. In developing
removal criteria, we will consider those criteria used by other CMS
quality reporting programs in order to align the PCHQR Program with
those programs.
We welcome public comments on the criteria for removal or
replacement of measures from the PCHQR Program.
In an effort to reduce the reporting burden for PCHs, in future
years, we will consider proposing to require PCHs to report
electronically specified clinical quality measures for the PCHQR
Program. We believe that the collection and reporting of data through
health information technology would greatly simplify and streamline
reporting for many CMS quality reporting programs, including the PCHQR
Program. Through electronic reporting, PCHs would be able to leverage
EHRs to capture, calculate, and electronically submit quality data that
is currently manually chart-abstracted and submitted to CMS for the
PCHQR Program. In developing future proposals for electronic clinical
quality measures adoption, we will consider the need to align and
harmonize measures across various quality reporting programs to
minimize the reporting burden imposed on PCHs.
We welcome public comments on the development of electronic
clinical quality measure reporting criteria for future years.
7. Maintenance of Technical Specifications for Quality Measures
We maintain technical specifications for the PCHQR Program
measures, and we periodically update those specifications. The
specifications can be found on the QualityNet Web site at: https://qualitynet.org/dcs/ContentServer?cid=1228772356060&pagename=QnetPublic%2FPage%2FQnetTier2&c=Page.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through
53505), we finalized a policy under which we use

[[Page 28257]]

a subregulatory process to make nonsubstantive updates to measures used
for the Hospital IQR Program. We also adopted this process for all
measures adopted for the PCHQR Program. With respect to what
constitutes substantive versus non-substantive changes, we expect to
make this determination on a case-by-case basis. Examples of
nonsubstantive changes to measures might include updated diagnosis or
procedure codes, medication updates for categories of medications,
broadening of age ranges, and exclusions for a measure. We believe that
nonsubstantive changes may include updates to measures based upon
changes to guidelines upon which the measures are based.
We will continue to use rulemaking to adopt substantive updates to
the measures we have adopted for the PCHQR Program. Examples of changes
that we might consider to be substantive would be those in which the
changes are so significant that the measure is no longer the same
measure, or when a standard of performance assessed by a measure
becomes more stringent (for example: Changes in acceptable timing of
medication, procedure/process, or test administration). Another example
of a substantive change would be where the NQF has extended its
endorsement of a previously endorsed measure to a new setting, such as
extending a measure from the inpatient setting to hospice. We also note
that to the extent a PCHQR measure is endorsed by the NQF, the NQF
measure maintenance process incorporates an opportunity for public
comment and engagement.
We believe the endorsement processes, as well as our treatment of
substantive versus nonsubstantive measure changes, adequately balances
our need to incorporate updates to PCHQR Program measures in the most
expeditious manner possible while preserving the public's ability to
comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted.
8. Public Display Requirements Beginning With the FY 2014 Program
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making the data submitted under the PCHQR Program
available to the public. Such procedures must ensure that a PCH has the
opportunity to review the data that is to be made public with respect
to the PCH prior to such data being made public. Section 1866(k)(4) of
the Act also provides that the Secretary must report quality measures
of process, structure, outcome, patients' perspective on care,
efficiency, and costs of care that relate to services furnished in such
hospital on the CMS Web site.
In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53562 through 53563), we finalized our policy to
publicly display the submitted data on the Hospital Compare Web site
(https://www.hospitalcompare.hhs.gov/) and established a preview period
of 30 days prior to making such data public.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through
50848), we finalized our proposal to display publicly in 2014 and
subsequent years the data for the measures listed below:
Adjuvant Chemotherapy is considered or administered within
4 months (120 days) of surgery to patients under the age of 80 with
AJCC III (lymph node positive) colon cancer (NQF 0223); and
Combination Chemotherapy is considered or administered
within 4 months (120 days) of diagnosis for women under 70 with AJCC
T1c, or Stage II or III hormone receptor negative breast cancer (NQF
0559).
This year we are proposing to publicly display in 2015 and
subsequent years the data for the Adjuvant Hormonal Therapy measure
(NQF 0220).
We are also proposing to publicly display no later than 2017 and
for subsequent years the data for the measures listed below:
NHSN Catheter-Associated Urinary Tract Infections (CAUTI)
Outcome Measure (NQF 0138); and
NHSN Central Line-Associated Bloodstream Infection
(CLABSI) Outcome Measure (NQF 0139).
At present, all PCHs are reporting CLABSI and CAUTI data to the
NHSN under the PCHQR Program. However, due to the low volume of data
produced and reported by the small number of facilities (in fewer than
2 years), the CDC is unable to calculate reasonable and reliable
baseline estimates, or expected rates, which are needed for the purpose
of calculating these measure rates. Therefore, we estimate that the
first public posting of the CLABSI and CAUTI PCHQR Program data
reported to the NHSN from the PCHs will be no later than 2017.
We invite public comment on these proposals.
9. Form, Manner, and Timing of Data Submission Beginning With the FY
2017 Program
a. Background
Section 1866(k)(2) of the Act requires that, beginning with the FY
2014 PCHQR Program, each PCH must submit to the Secretary data on
quality measures specified under section 1866(k)(3) of the Act in a
form and manner, and at a time as specified by the Secretary.
Data submission requirements and deadlines for the PCHQR Program
are generally posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Proposed Reporting Requirements for the Proposed New Measure:
External Beam Radiotherapy for Bone Metastases (NQF 1822)
Beginning With the FY 2017 Program
We are proposing that PCHs report the proposed External Beam
Radiotherapy for Bone Metastases (NQF 1822) measure beginning
with January 1, 2015 discharges and for subsequent years. We are
proposing that PCHs would report this measure to CMS via a CMS Web-
based Measures Tool on an annual basis (July 1--August 15 of each
respective year). This approach is consistent with the data submission
deadlines finalized for the clinical process/oncology care measures (78
FR 50850 through 50851) and PCHs are already preparing to begin
submitting PCHQR data using this timeline. We also believe that annual
data submission of once per year (as opposed to quarterly data
submission of four times per year) will reduce PCH cost and burden. We
believe that these proposed dates will provide enough advance notice
for PCHs to prepare to report the measure.
We are proposing to collect the EBRT for Bone Metastases measure
rates for the FY 2017 program and subsequent years using all-patient
(both Medicare and non-Medicare) data from the four quarters (Q1, Q2,
Q3, and Q4) of CY 2015, and that PCHs must submit aggregated data for
the measure for each of these quarters during a data submission window
that would be open from July 1 through August 15, 2016. For the FY 2017
program and subsequent years, we refer readers to the reporting periods
and data submission window outlined in the table below in this section.
For data collection, we are proposing that PCHs submit aggregate-
level data through the CMS Web-based Measures Tool or submit an
aggregate data file through a vendor (via QualityNet infrastructure).
We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850
through 50851) for more information on the CMS Web-based aggregated
data collection tool.

[[Page 28258]]

We welcome public comment on the proposed reporting periods, data
submission timeframes, and data collection methods/modes for the
proposed measure for the FY 2017 program and subsequent years.

Proposed External Beam Radiotherapy for Bone Metastases (NQF 1822) Measure-Reporting Periods and
Submission Timeframes for the FY 2017 Program and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Program year (FY) Reporting periods (CY) Data submission deadlines
----------------------------------------------------------------------------------------------------------------
2017.......................... Q1 2015 discharges (January 1, 2015- July 1, 2016-August 15, 2016.
March 31, 2015).
Q2 2015 discharges (April 1, 2015-
June 30, 2015)
Q3 2015 discharges (July 1, 2015-
September 30, 2015)
Q4 2015 discharges (October 1, 2015-
December 31, 2015)
2018.......................... Q1 2016 discharges (January 1, 2016- July 1, 2017-August 15, 2017.
March 31, 2016).
Q2 2016 discharges (April 1, 2016-
June 30, 2016)
Q3 2016 discharges (July 1, 2016-
September 30, 2016)
Q4 2016 discharges (October 1, 2016-
December 31, 2016)
Subsequent Years.............. Q1 discharges (January 1-March 31 of July 1-August 15 of each year before the
each year 2 years before the program year.
program year).
Q2 discharges (April 1-June 30 of
each year 2 years before the
program year)
Q3 discharges (July 1-September 30
of each year 2 years before the
program year)
Q4 discharges (October 1-December 31
of each year 2 years before the
program year)
----------------------------------------------------------------------------------------------------------------

c. Proposed Reporting Options for the Clinical Process/Cancer Specific
Treatment Measures Beginning with the FY 2015 Program and the SCIP and
Clinical Process/Oncology Care Measures Beginning With the FY 2016
Program
We are proposing to modify the data submission requirements for the
three clinical process/cancer specific treatment measures \84\ that we
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53564), and the
six SCIP measures and five clinical process/oncology care measures that
we adopted in the FY 2014 IPPS/LTCH final rule (78 FR 50846). Under
those requirements, PCHs submit aggregate-level clinical process/cancer
specific treatment measure data to a CMS contractor, aggregate-level
clinical process/oncology care measure data through the CMS Web-based
Measures Tool, and patient-level SCIP measure data through the
QualityNet infrastructure. We are now proposing to allow PCHs to report
the clinical process/cancer specific treatment, SCIP, and clinical
process/oncology care data to CMS using one of two mechanisms. Under
the first option, which is newly proposed for the SCIP and clinical
process/oncology care measure sets, PCHs or their authorized vendors
can enter aggregate numerator and denominator data into a CMS Web page
located on the secure part of the CMS QualityNet infrastructure. Under
the second option, which is newly proposed for the clinical process/
cancer specific treatment, SCIP, and clinical process/oncology care
measures, PCHs or their authorized vendors can submit an aggregate data
file through a CMS secure QualityNet file exchange process. We are
proposing these options in order to decrease the reporting burden for
PCHs.
---------------------------------------------------------------------------

\84\ FY 2013 IPPS/LTCH PPS final rule; 77 FR 53561 (NQF
0223, 0559, and 0220).
---------------------------------------------------------------------------

We believe that the newly proposed submission option, which is
further described below for the SCIP measures, will result in a
considerable burden reduction for PCHs, as it includes once annually,
rather than once quarterly, submission deadlines and submission of
aggregate data as opposed to patient level data for the SCIP measures.
We are proposing this update to the SCIP measures submission
requirements in anticipation of a possible change to the Hospital IQR
Program IT infrastructure to discontinue patient level SCIP data
collection. This IT infrastructure change is due to the proposed
removal of SCIP measures from the Hospital IQR Program, which we are
proposing in section IX.A.2.b. of the preamble of this proposed rule.
We believe that providing PCHs with a choice regarding how they submit
data on these measures will result in a considerable burden reduction
for PCHs because under both options, PCHs will be able to submit the
data once annually and in an aggregate form.
We are proposing that PCHs submit an annual data file stratified by
four quarters for each of the SCIP measures. We believe that this
proposal provides the public with sufficiently reliable quality measure
information while reducing PCH burden through providing two data
collection options. We will provide detailed technical file format
specifications on the public QualityNet Web site (www.qualitynet.org)
following publication of this year's final rule. The newly proposed
submission deadlines for the SCIP measures are outlined in the table
below.
These proposed requirements would replace, for the purposes of the
PCHQR Program, the update to the SCIP timeline and IT infrastructure
that we finalized for the PCHQR Program in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50851 through 50852).

Proposed Update to the Six SCIP Measures-Reporting Periods and Submission Timeframes for the FY 2016 Program and
Subsequent Years
----------------------------------------------------------------------------------------------------------------
Program year (FY) Reporting periods (CY) Data submission deadlines
----------------------------------------------------------------------------------------------------------------
2016.......................... Q1 2015 discharges (January 1, 2015- July 1, 2015-August 15, 2015.
March 31, 2015).
2017.......................... Q2 2015 discharges (April 1, 2015- July 1, 2016-August 15, 2016.
June 30, 2015).

[[Page 28259]]

Q3 2015 discharges (July 1, 2015-
September 30, 2015)
Q4 2015 discharges (October 1, 2015-
December 31, 2015)
Subsequent Years.............. Q1 discharges (January 1-March 31 of July 1-August 15 of each year before the
each year two years before the program year.
program year).
Q2 discharges (April 1-June 30 of
each year two years before the
program year)
Q3 discharges (July 1-September 30
of each year two years before the
program year)
Q4 discharges (October 1-December 31
of each year two years before the
program year)
----------------------------------------------------------------------------------------------------------------

We invite public comment on the proposed new reporting mechanism
that would apply to the three clinical process/cancer specific
treatment measures, five clinical process/oncology care treatment
measures, and six SCIP measures.
We are not proposing any changes to the previously finalized
procedural requirements, Notice of Participation (NOP) requirements, or
Data Accuracy and Completeness Acknowledgement (DACA) requirements. We
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563
through 53567) for more information on these requirements.
d. Proposed New Sampling Methodology for the Clinical Process/Oncology
Care Measures Beginning With the FY 2016 Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50842), we adopted a
policy under which PCHs could report the five clinical process/oncology
care measures finalized for the FY 2016 program and subsequent years
using the same sampling methodology that we allow for the reporting of
those measures under the PQRS. We are proposing to replace the
previously adopted sampling methodology with a sampling methodology
similar to the one we have allowed hospitals to use to report the SCIP
measures under the Hospital IQR Program. The sampling methodology
specified in the PQRS Specifications Manual is specific to the
physician office setting. We believe that the methodology we are
proposing in this proposed rule is more applicable to PCHs because it
was developed for hospital level reporting.
The proposed methodology will allow for different numbers of cases
to be reported based on each PCH's cancer patient population size. This
is necessary for the PCHQR Program because bed size varies among PCHs
from 20 to >250 beds.\85\ The proposed sampling methodology for the
clinical process/oncology care measures is shown below, and we believe
it will decrease the reporting burden on PCHs while producing reliable
measure rates.
---------------------------------------------------------------------------

\85\ American Hospital Directory: https://www.ahd.com/freesearch.php.

------------------------------------------------------------------------
Average quarterly initial
population size ``N'' Minimum required sample size ``N''
------------------------------------------------------------------------
>125............................ 25.
51-125.......................... 20 percent of the initial patient
population.
10-50........................... 10.
<10............................. No sampling; 100 percent of the
initial patient population.
------------------------------------------------------------------------

We are also proposing that PCHs report population and sample size
counts (by measure) for Medicare and non-Medicare discharges by quarter
for the five clinical process/oncology care measures for the FY 2016
program and subsequent years.
We are proposing these requirements in order to support our effort
to align with existing reporting requirements used in other CMS quality
reporting programs, such as the Hospital IQR Program, which requires
participating hospitals to submit population and sample size counts for
certain measures in addition to the all payer data needed to calculate
measure rates. We view it as vital for PCHs to accurately determine
their aggregate population and appropriate sample size data in order
for CMS to assess PCHs' data reporting accuracy and completeness for
their total population of cases, including both Medicare and non-
Medicare patients.
We welcome public comments on these proposals for the clinical
process/oncology care measures for the FY 2016 program and subsequent
years.
10. Exceptions From Program Requirements
In our experience with other quality reporting and performance
programs, we have noted occasions when providers have been unable to
submit required quality data due to extraordinary circumstances that
are not within their control (for example, natural disasters). We do
not wish to unduly increase their burden during these times. Therefore,
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our
policy that, for the FY 2014 program and subsequent years, PCHs may
request and we may grant exceptions (formerly referred to as waivers)
with respect to the reporting of required quality data when
extraordinary circumstances beyond the control of the PCH warrant. When
exceptions are granted, we will notify the respective PCH. We are in
the process of revising the Extraordinary Circumstances/Disaster
Extension or Waiver Request form (CMS-10432), approved under OMB
control number 0938-1171.
We are not proposing any substantive changes to this PCHQR
exception process.

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

1. Background
In accordance with section 1886(m)(5) of the Act, as added by
section 3004(a) of the Affordable Care Act, the Secretary established
the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under
section 1886(m)(5)(A)(i) of the Act, for the rate year 2014 and each
subsequent rate year, in the case of an LTCH that does not submit data
to the Secretary in accordance with section 1886(m)(5)(C) of the Act
with respect to such a rate year, any annual update (which we also
refer to as a ``payment determination'') to a standard Federal rate for
discharges for the hospital during the rate year, and after

[[Page 28260]]

application of section 1886(m)(3) of the Act, shall be reduced by two
percentage points. As we discussed in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51743 through 51744), for the purposes of the LTCH PPS, the
term ``rate year'' and the term ``fiscal year'' both refer to the time
period beginning October 1 and ending September 30. In order to
eliminate any possible confusion, we will use the term ``fiscal year''
rather than ``rate year'' in our discussion of the LTCHQR Program.
Under section 1886(m)(5)(D)(i) of the Act, the quality measures for
the LTCHQR Program are measures selected by the Secretary that have
been endorsed by an entity that holds a contract with the Secretary
under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of
the Act applies. This contract is currently held by NQF. Additional
information regarding NQF and its measure review processes is available
at: https://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.
While as a general matter the Secretary must select endorsed
measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act
provides that an exception may be made in the case of a specified area
or medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the entity that
holds a contract with the Secretary under section 1890(a) of the Act.
In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the
Secretary to specify a measure that is not so endorsed, as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary.
The LTCHQR Program was implemented in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51743 through 51756).
2. General Considerations Used for Selection of Quality Measures for
the LTCHQR Program
We seek to promote higher quality and more efficient health care
for the beneficiaries we serve. Quality reporting programs, including
public reporting of quality information, advance such quality
improvement efforts. Quality measurement remains the key tool to the
success of these programs. Therefore, the selection of only the highest
caliber of measures is a priority for CMS.
We seek to adopt measures for the LTCHQR Program that promote
better, safer, and more efficient care. Our measure development and
selection activities for the LTCHQR Program take into account national
priorities, such as those established by the National Priorities
Partnership (https://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx), the HHS Strategic Plan (https://www.hhs.gov/secretary/about/priorities/priorities.html), the National
Quality Strategy (NQS) (https://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm), and the CMS Quality Strategy (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html).
We also must consider input from the NQF MAP when selecting
measures under the LTCHQR Program. The MAP is composed of multi-
stakeholder groups convened by the NQF, our current contractor under
section 1890 of the Act. The NQF must convene these stakeholders and
provide us with the stakeholders' input on the selection of certain
categories of quality and efficiency measures as part of a pre-
rulemaking process described in section 1890A of the Act. We, in turn,
must take this input into consideration in selecting those categories
of measures. The NQF MAP met in December 2013 and January 2014 and
provided input to CMS as required under section 1890A(a)(3) of the Act.
This input appears in the MAP's January 2014 Pre-Rulemaking Report
available for download at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Measures
proposed for the LTCHQR Program in this proposed rule are measures CMS
included under the List of Measures under Consideration (MUC List) for
December 1, 2013,\86\ a list that the Secretary must make available to
the public by December 1 of each year, as part of the pre-rulemaking
process, as described in section 1890A(a)(2) of the Act. The measures
we are proposing in this rule for the LTCHQR Program are discussed in
the MAP Pre-Rulemaking Report (pp. 192-193). The MAP reviewed each
measure proposed in this rule. We refer readers to the following
sections of the preamble of this proposed rule for more information on
the MAP's recommendations: IX.C.7.a.(1), Functional Status Quality
Measure: Percent of Long-Term Care Hospital Patients with an Admission
and Discharge Functional Assessment and a Care Plan That Addresses
Function; IX.C.7.a.(2), Functional Status Quality Measure: Functional
Outcome Measure: Change in Mobility among Long-Term Care Hospital
Patients Requiring Ventilator Support; and IX.C.7.b., Proposed Quality
Measure: National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure.
---------------------------------------------------------------------------

\86\ Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=74245.
---------------------------------------------------------------------------

After due consideration to any measures that may have been endorsed
or adopted by a consensus organization, including the NQF, for the LTCH
setting, we are proposing measures that are either fully supported by
the MAP for the LTCHQR Program, or that we believe most closely align
with the national priorities discussed in this section of the proposed
rule. In the absence of the MAP's full support, in some cases we are
proposing measures for which there is MAP conditional support and that
meet the exception criteria in section 1886(m)(5)(D)(ii) of the Act.
Further discussion of why each proposed measure is a high priority in
the LTCH setting is included below.
3. Policy for Retention of LTCHQR Program Measures Adopted for Previous
Payment Determinations
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through
53615), for the LTCHQR Program, we adopted a policy that once a quality
measure is adopted, it will be retained for use in subsequent years,
unless otherwise stated. For the purpose of streamlining the rulemaking
process, when we initially adopt a measure for the LTCHQR Program for a
payment determination, this measure will be automatically adopted for
all subsequent years or until we propose to remove, suspend, or replace
the measure. For further information on how measures are considered for
removal, suspension, or replacement, we refer readers to the FY 2013
IPPS/LTCH PPS final rule.
We are not proposing any changes to this policy for retaining
LTCHQR Program measures adopted for previous payment determinations.
4. Policy for Adopting Changes to LTCHQR Program Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through
53616), we adopted our policy that if the NQF updates an endorsed
measure that we have adopted for the LTCHQR Program in a manner that we
consider to not substantively change the nature of the measure, we will
use a subregulatory process to incorporate those updates to the measure
specifications that apply to the LTCHQR Program. With respect to

[[Page 28261]]

what constitutes a substantive versus a nonsubstantive change, we
expect to make this determination on a measure-by-measure basis.
Examples of such nonsubstantive changes might include updated diagnosis
or procedure codes, medication updates for categories of medications,
broadening of age ranges, and changes to exclusions for a measure. The
subregulatory process for nonsubstantive changes will include revision
of the LTCHQR Program Manual and posting of updates on our Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. Examples of changes that
we might consider to be substantive would be those in which the changes
are so significant that the measure is no longer the same measure, or
when a standard of performance assessed by a measure becomes more
stringent, such as changes in acceptable timing of medication,
procedure/process, test administration, or expansion of the measure to
a new setting.
We are not proposing any changes to this policy for adopting
changes to LTCHQR Program measures.
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY 2016
Payment Determinations and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53636), we retained the application of Percent of Residents with
Pressure Ulcers That are New or Worsened (Short-Stay) (NQF
0678) to the LTCH setting (initially adopted in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51745 through 51750)) for the FY 2015
payment determination and subsequent years, and adopted updated
versions of National Health Safety Network (NHSN) Catheter-Associated
Urinary Tract Infection (CAUTI) Outcome Measure (NQF 0138) and
NHSN Central Line-Associated Blood Stream Infection (CLABSI) Outcome
Measure (NQF 0139), for the FY 2014 payment determination and
subsequent years. We also adopted two new quality measures for the
LTCHQR Program for the FY 2016 payment determination and subsequent
years, in addition to the three previously adopted measures (the CAUTI
measure, CLABSI measure, and Pressure Ulcer measure): (1) Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680); and (2)
Influenza Vaccination Coverage among Healthcare Personnel (NQF
0431) (77 FR 53624 through 53636).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through
50863), we adopted the NQF-endorsed version of the Pressure Ulcer
measure, Percent of Residents or Patients with Pressure Ulcers That Are
New or Worsened (Short-Stay) (NQF 0678), for the LTCHQR
Program for the FY 2015 payment determination and subsequent years.
Set out below are the quality measures, both previously adopted
measures retained in the LTCHQR Program and measures adopted in FY 2013
and FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016
payment determinations and subsequent years.

LTCHQR Program Quality Measures Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years
----------------------------------------------------------------------------------------------------------------
NQF Measure ID Measure title Payment determination
----------------------------------------------------------------------------------------------------------------
NQF 0138.................... National Health Safety Network (NHSN) Catheter- FY 2015 and Subsequent
Associated Urinary Tract Infection (CAUTI) FYs.
Outcome Measure*.
NQF 0139.................... National Health Safety Network (NHSN) Central FY 2015 and Subsequent
Line-Associated Blood Stream Infection (CLABSI) FYs.
Outcome Measure*.
NQF 0678.................... Percent of Residents or Patients with Pressure FY 2015 and Subsequent
Ulcers That Are New or Worsened (Short-Stay)*. FYs.
NQF 0680.................... Percent of Residents or Patients Who Were FY 2016 and Subsequent
Assessed and Appropriately Given the Seasonal FYs.
Influenza Vaccine (Short-Stay)**.
NQF 0431.................... Influenza Vaccination Coverage among Healthcare FY 2016 and Subsequent
Personnel**. FYs.
----------------------------------------------------------------------------------------------------------------

b. Previously Adopted Quality Measures for the FY 2017 and FY 2018
Payment Determinations and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule, we adopted three
additional measures for the FY 2017 payment determination and
subsequent years (78 FR 50863 through 50874) and one additional measure
for the FY 2018 payment determination and subsequent years (78 FR 50874
through 50877). These measures are set out in the table below.

LTCHQR Program Quality Measures Previously Adopted for the FY 2017 and FY 2018 Payment Determinations and
Subsequent Years
----------------------------------------------------------------------------------------------------------------
NQF Measure ID Measure title Payment determination
----------------------------------------------------------------------------------------------------------------
NQF 1716.................... National Healthcare Safety Network (NHSN) FY 2017 and Subsequent
Facility-Wide Inpatient Hospital-Onset Years.
Methicillin-Resistant Staphylococcus aureus
(MRSA) Bacteremia Outcome Measure.
NQF 1717.................... National Healthcare Safety Network (NHSN) FY 2017 and Subsequent
Facility-Wide Inpatient Hospital-Onset Years.
Clostridium difficile Infection (CDI) Outcome
Measure.
NQF Review Pending (NQF 2512). Days Post[dash]Discharge from Long-Term Care Years.
Hospitals.
Application of NQF 0674..... Percent of Residents Experiencing One or More FY 2017 and Subsequent
Falls with Major Injury (Long-Stay). Years.
----------------------------------------------------------------------------------------------------------------

[[Page 28262]]

6. Proposed Revisions to Data Collection Timelines and Submission
Deadlines for Previously Adopted Quality Measures
We are proposing, for the FY 2016 payment determination and
subsequent years, to revise data collection timelines and submission
deadlines for a measure that we previously adopted for the LTCHQR
Program: Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680). We are also reproposing, for the FY 2018 payment
determination only, revised data collection timelines and submission
deadlines for the Application of Percent of Residents Experiencing One
or More Falls with Major Injury (Long-Stay) (Application of NQF
0674) measure. For all subsequent years (FY 2019 and beyond),
data collection for this measure would begin on January 1 and continue
through December 31.
a. Proposed Revisions to Data Collection Timelines and Submission
Deadlines for Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF
0680)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through
50861), we revised the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short
Stay) (NQF 0680) measure for the FY 2016 payment determination
and subsequent years. Specifically, we finalized that for the FY 2016
payment determination, LTCHs must collect data for any patient admitted
or discharged during the influenza vaccination season, from October 1,
2014, through April 30, 2015, and submit data for these patients by May
15, 2015.
We are seeking to better align the data collection timelines and
submission deadlines of the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short
Stay) (NQF 0680) measure with the data collection timelines
and submission deadlines of the Percent of Residents or Patients with
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF
0678) measure because both measures are reported using the
same data collection instrument, the LTCH Continuity Assessment Record
and Evaluation (CARE) Data Set. Therefore, for the FY 2016 payment
determination and subsequent years, we are proposing to revise the data
collection timelines and submission deadlines for the Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay) (NQF 0680) measure.
Specifically, we are proposing that the first data collection timeline
would take place during the fourth quarter of the CY preceding the
applicable FY (for example, October 2014 through December 2014 for the
FY 2016 payment determination), with data submission by February 15,
2015 and the second data collection timeline would take place during
the first quarter of the CY preceding the applicable FY (for example,
January 2015 through March 2015 for the FY 2016 payment determination),
with data submission by May 15, 2015. The proposed changes are
illustrated below for the FY 2016 and FY 2017 payment determinations
only, but similar collection timelines and submission deadlines would
also apply to subsequent years. By taking into account the influenza
vaccination season, these proposed changes would align data collection
and submission for this measure (NQF 0680) with the rest of
the LTCH CARE Data Set.

Proposed Data Collection Timelines and Submission Deadlines for LTCHQR Program Quality Data for the FY 2016 and
FY 2017 Payment Determinations: Percent of Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
----------------------------------------------------------------------------------------------------------------
Data collection timelines Submission deadlines Payment determination
----------------------------------------------------------------------------------------------------------------
October 1, 2014-December 31, 2014........ February 15, 2015........... FY 2016.
January 1, 2015-March 31, 2015........... May 15, 2015.
October 1, 2015-December 31, 2015........ February 15, 2016........... FY 2017.
January 1, 2016-March 31, 2016........... May 15, 2016.
----------------------------------------------------------------------------------------------------------------

We note that these proposed changes would only apply to the Percent
of Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay) (NQF 0680) for the
LTCHQR Program, and would not be applicable to any other LTCHQR Program
measures, proposed or adopted, unless explicitly stated.
We invite public comments on our proposal to revise the data
collection timelines and submission deadlines for this patient
influenza vaccination measure (NQF 0680) for the FY 2016
payment determination and subsequent years.
b. Proposed Revisions to Data Collection Timelines and Submission
Deadlines for the Application of Percent of Residents Experiencing One
or More Falls With Major Injury (Long-Stay) (NQF 0674)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 through
50877), we adopted this measure for the FY 2018 payment determination.
We further finalized that LTCHs should begin to collect and submit data
on this measure using the LTCH CARE Data Set starting January 1, 2016.
To ensure the successful implementation of new and updated versions
of LTCH CARE Data Set, we will be following an implementation cycle
beginning April 1, 2016, which will allow for a predictable future
release schedule. We believe that adherence to a predictable future
release schedule that takes into account both the changes that must be
made to the LTCH CARE Data Set, as well as requirements that are
managed by LTCHs for such changes, will help ensure successful
implementation. Therefore, we will be adhering to a date of April 1 of
any given year, when releasing future iterations of the LTCH CARE Data
Set. This change will effectively delay the implementation of the
January 1, 2016, release by three months, allowing LTCHs additional
time to become familiar with and to participate in trainings related to
the revised LTCH CARE Data Set, as well as time to incorporate given
changes into their existing IT infrastructure.
Therefore, we are proposing that for the FY 2018 payment
determination, data collection for this measure would begin on April 1,
2016. For all

[[Page 28263]]

subsequent years, data collection for this measure would begin on
January 1 and continue through December 31. The proposed changes are
illustrated below for the FY 2018 and FY 2019 payment determinations.

Proposed Data Collection Timelines and Submission Deadlines for LTCHQR Program Quality Data for the FY 2018 and
FY 2019 Payment Determinations: Application of Percent of Residents Experiencing One or More Falls With Major
Injury (Long-Stay) (NQF 0674)
----------------------------------------------------------------------------------------------------------------
Data collection timelines Submission deadlines Payment determination
----------------------------------------------------------------------------------------------------------------
April 1, 2016-June 30, 2016.............. August 15, 2016............. FY 2018.
July 1, 2016-September 30, 2016.......... November 15, 2016...........
October 1, 2016-December 31, 2016........ February 15, 2017...........
January 1, 2017-March 31, 2017........... May 15, 2017................ FY 2019
April 1, 2017-June 30, 2017.............. August 15, 2017.............
July 1, 2017-September 30, 2017.......... November 15, 2017...........
October 1, 2017-December 31, 2017........ February 15, 2018...........
----------------------------------------------------------------------------------------------------------------

We note that these proposed changes would be applicable only to the
Application of Percent of Residents Experiencing One or More Falls with
Major Injury (Long-Stay) (NQF 0674) measure, and not
applicable to any other LTCHQR Program measures, proposed or adopted,
unless specifically proposed for such measures.
We invite public comments on these proposals.
7. Proposed New LTCHQR Program Quality Measures for the FY 2018 Payment
Determination and Subsequent Years
We are proposing three new quality measures for the FY 2018 payment
determination and subsequent years. Two of these are related to
functional status, and one measure is related to ventilator-associated
events (VAE). One of the proposed functional status quality measures is
Percent of Long-Term Care Hospital Patients with an Admission and
Discharge Functional Assessment and a Care Plan That Addresses
Function. The second proposed functional status quality measure is
Functional Outcome Measure: Change in Mobility among Long-Term Care
Hospital Patients Requiring Ventilator Support. The quality measures
are described in more detail below.
a. Proposed New LTCHQR Program Functional Status Quality Measures for
the FY 2018 Payment Determination and Subsequent Years
Patients in LTCHs present with clinically complex conditions. In
addition to having complex medical care needs for an extended period of
time, LTCH patients often have functional limitations due to the nature
of their conditions, as well as deconditioning due to prolonged bed
rest and treatment requirements (for example, ventilator use). These
patients are therefore at high risk for functional decline during the
LTCH stay that is both condition-related and iatrogenic.
The National Committee on Vital and Health Statistics, Subcommittee
on Health,\87\ noted: ``[i]nformation on functional status is becoming
increasingly essential for fostering healthy people and a healthy
population. Achieving optimal health and well-being for Americans
requires an understanding across the life span of the effects of
people's health conditions on their ability to do basic activities and
participate in life situations in other words, their functional
status.''
---------------------------------------------------------------------------

\87\ Subcommittee on Health National Committee on Vital and
Health Statistics, ``Classifying and Reporting Functional Status''
(2001).
---------------------------------------------------------------------------

The functional assessment items included in the two functional
status quality measures were originally developed and tested as part of
the Post-Acute Care Payment Reform Demonstration version of the CARE
Item Set, which was designed to standardize assessment of patients'
status across acute and post-acute settings, including LTCHs, IRFs,
SNFs, and HHAs. The functional status items on the CARE Item Set are
daily activities that clinicians typically assess at the time of
admission and/or discharge in order to determine patients' needs,
evaluate patient progress and prepare patients and families for a
transition to home or to another setting.
The development of the CARE Item Set and a description and
rationale for each item is described in a report entitled ``The
Development and Testing of the Continuity Assessment Record and
Evaluation (CARE) Item Set: Final Report on the Development of the CARE
Item Set: Volume 1 of 3.'' \88\ Reliability and validity testing were
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration,
and we concluded that the functional status items have acceptable
reliability and validity. A description of the testing methodology and
results are available in several reports, including the report entitled
``The Development and Testing of the Continuity Assessment Record And
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume
2 of 3'' \89\ and the report entitled ``The Development and Testing of
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of
3.'' \90\ The reports are available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

\88\ Barbara Gage et al., ``The Development and Testing of the
Continuity Assessment Record and Evaluation (CARE) Item Set: Final
Report on the Development of the CARE Item Set'' (RTI International,
2012).
\89\ Ibid.
\90\ Ibid.
---------------------------------------------------------------------------

(1) Proposed Functional Status Quality Measure: Percent of Long-Term
Care Hospital Patients With an Admission and Discharge Functional
Assessment and a Care Plan That Addresses Function
The first functional status quality measure we are proposing for
the FY 2018 payment determination and subsequent years is a process
quality measure entitled Percent of Long-Term Care Hospital Patients
with an Admission and Discharge Functional Assessment and a Care Plan
That Addresses Function. This quality measure reports the percent of
LTCH patients with both an admission and a discharge functional
assessment and a care plan that addresses function.
This process measure requires the collection of admission and
discharge functional status data by trained clinicians using
standardized clinical assessment items, or data elements, that assess
specific functional activities (that

[[Page 28264]]

is, self-care, mobility, cognition, communication, and bladder
continence). The self-care and mobility function items are coded using
a 6-level rating scale that indicates the patient's level of
independence with the activity; higher scores indicate more
independence. The codes for rating the cognition, communication and
bladder items range from 2 to 7 levels. For this quality measure,
inclusion of function in the patient's care plan is determined based on
whether a functional goal is recorded at admission for at least one of
the standardized self-care or mobility function items using the 6-level
rating scale.
An increasing body of reported evidence has supported the safety
and feasibility of early mobilization and rehabilitation of critically
ill but stable patients, with minimal adverse events and risk to the
patient.^{91 92 93 94 95 96} Early mobility and rehabilitation
in these settings have been associated with improved patient outcomes.
Therefore, this quality measure addresses the importance of: (1)
Conducting a functional assessment at the time of admission addressing
self-care, mobility, cognition, communication, and bladder continence;
(2) incorporating the functional assessment findings made at the time
of admission into the patients' care plan and setting at least one
discharge self-care or mobility functional status goal; and (3)
conducting a functional assessment at the time of discharge addressing
self-care, mobility, cognition, communication, and bladder continence.
---------------------------------------------------------------------------

\91\ J. Adler and D. Malone, ``Early mobilization in the
intensive care unit: a systematic review,'' Cardiopulm Phys Ther J
23, no. 1 (2012).
\92\ J.P. Kress, ``Clinical trials of early mobilization of
critically ill patients,'' Crit Care Med 37, no. 10 Suppl (2009).
\93\ W.D. Schweickert and J.P. Kress, ``Implementing early
mobilization interventions in mechanically ventilated patients in
the ICU,'' Chest 140, no. 6 (2011).
\94\ W.D. Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: a
randomised controlled trial,'' Lancet 373, no. 9678 (2009).
\95\ J.M. Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: an observational pilot project,'' J Crit
Care 25, no. 2 (2010).
\96\ A. Drolet et al., ``Move to improve: the feasibility of
using an early mobility protocol to increase ambulation in the
intensive and intermediate care settings,'' Phys Ther 93, no. 2
(2013).
---------------------------------------------------------------------------

Functional limitations following critical illness are becoming
increasingly prevalent as a result of improving critical care medicine
and survival rates.\97\ Short-term and long-term adverse consequences
among critically ill and chronically, critically ill patients in LTCH
and Intensive Care Unit (ICU) settings include severe
weakness,^{98 99 100 101} muscle atrophy,\102\ connective-
tissue shortening,\103\ loss of bone mass,\104\ increased risk for
blood clots,\105\ increased risk for pressure ulcers,\106\
deconditioning,^{107 108} deficits in self-care and
ambulation,\109\ and functional impairment,\110\ fatigue,\111\ as well
as cognitive impairment, including profound and persistent deficits in
memory, attention/concentration, and executive
function,^{112 113 114} and the inability to return to work one
year after hospital discharge.^{115 116} Cognitive impairment
in survivors of critical illness has been associated with anxiety and
depression, inability to return to work, and inability of older persons
to return home.\117\ To mitigate these adverse consequences,
traditional practices of bed rest and immobility have been challenged
in recent years, and early mobility and rehabilitation have been
increasingly recognized as important to improve patients' long-term
functional outcomes,^{118 119 120} with recovery of function
being described as both desirable and possible.\121\ The lack of early
mobility initiation in ICU settings has also been described as a strong
predictor of patient outcomes.\122\
---------------------------------------------------------------------------

\97\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\98\ Ibid.
\99\ S.L. Dang, ``ABCDEs of ICU: Early mobility,'' Crit Care
Nurs Q 36, no. 2 (2013).
\100\ E.H. Skinner et al., ``Development of a physical function
outcome measure (PFIT) and a pilot exercise training protocol for
use in intensive care,'' Crit Care Resusc 11, no. 2 (2009).
\101\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].'' National
Institute for Health and Clinical Excellence (NICE), https://www.nice.org.uk/nicemedia/live/12137/43564/43564.pdf.
\102\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: an observational pilot project.''
\103\ Ibid.
\104\ Dang, ``ABCDEs of ICU: Early mobility.''
\105\ Ibid.
\106\ Ibid.
\107\ Schweickert and Kress, ``Implementing early mobilization
interventions in mechanically ventilated patients in the ICU.''
\108\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: an observational pilot project.''
\109\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\110\ Skinner et al., ``Development of a physical function
outcome measure (PFIT) and a pilot exercise training protocol for
use in intensive care.''
\111\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].''
\112\ Ibid.
\113\ M.E. Wilcox et al., ``Cognitive dysfunction in ICU
patients: risk factors, predictors, and rehabilitation
interventions,'' Crit Care Med 41, no. 9 Suppl 1 (2013).
\114\ N.E. Brummel et al., ``A combined early cognitive and
physical rehabilitation program for people who are critically ill:
the activity and cognitive therapy in the intensive care unit (ACT-
ICU) trial,'' Phys Ther 92, no. 12 (2012).
\115\ Dang, ``ABCDEs of ICU: Early mobility.''
\116\ H.J. Engel et al., ``ICU early mobilization: from
recommendation to implementation at three medical centers,'' Crit
Care Med 41, no. 9 Suppl 1 (2013).
\117\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
risk factors, predictors, and rehabilitation interventions.''
\118\ Drolet et al., ``Move to improve: the feasibility of using
an early mobility protocol to increase ambulation in the intensive
and intermediate care settings.''
\119\ Dang, ``ABCDEs of ICU: Early mobility.''
\120\ Z. Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review,'' Arch Phys Med Rehabil
94, no. 3 (2013).
\121\ C.L. Rochester, ``Rehabilitation in the intensive care
unit,'' Semin Respir Crit Care Med 30, no. 6 (2009).
\122\ Dang, ``ABCDEs of ICU: Early mobility.''
---------------------------------------------------------------------------

The clinical practice guideline Rehabilitation after Critical
Illness \123\ from the National Institute for Health and Clinical
Excellence (NICE) recommends performing clinical assessment to
determine the patient's risk of developing physical and nonphysical
morbidity during the critical care stay as early as clinically
possible, identifying current rehabilitation needs for patients at risk
of morbidity, establishing short-term and medium-term rehabilitation
goals based on the clinical assessment, starting an individualized
structured rehabilitation program as early as possible, and performing
clinical reassessment before discharge.
---------------------------------------------------------------------------

\123\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].''
---------------------------------------------------------------------------

The importance of standardized functional assessment in LTCH
settings is also supported by the high prevalence of therapy services
provided in this setting, as well as the need for care coordination for
patients returning home and receiving follow-up care in the community
and patients receiving additional institutional healthcare services
after discharge from an LTCH. A study \124\ of 1,419 ventilator-
dependent patients from 23 LTCHs reported that physical, occupational,
and speech therapy were the most commonly provided services among a
comprehensive list of 34 procedures, services, and treatments provided
during the LTCH stay. The high frequency of physical (84.8 percent),
occupational (81.5 percent), and speech (79.7 percent) therapy reflects
use of the rehabilitative model of care adopted by many post-ICU
ventilator weaning programs, which is important in restoration of
function. This high utilization of therapy services supports the need
for standardized functional

[[Page 28265]]

assessment at admission to document functional status, identify the
need for therapy, set functional status goals and assist with discharge
planning and care coordination.
---------------------------------------------------------------------------

\124\ D.J. Scheinhorn et al., ``Post-ICU mechanical ventilation
at 23 long-term care hospitals: a multicenter outcomes study,''
Chest 131, no. 1 (2007).
---------------------------------------------------------------------------

Whether an LTCH patient is discharged home or to another care
setting for continuing health care, functional status is an important
aspect of a person's health status to document at the time of
transition. The study \125\ also reported that 28.8 percent of patients
were discharged directly home or to assisted living, further supporting
the importance of functional assessment and early rehabilitation to
facilitate discharge planning and home discharge, when possible.
---------------------------------------------------------------------------

\125\ Ibid.
---------------------------------------------------------------------------

Reported benefits of early mobility and rehabilitation include: (1)
Improved strength ^{126 127 128} and functional status;
^{129 130 131} (2) earlier achievement of mobilization
milestones, such as out-of-bed mobilization; ^{132 133} (3)
improvement in mobility and self-care function scores from admission to
discharge; ^{134 135} (4) greater incidence of return to
functional baseline in mobility and self-care, greater unassisted
walking and walking distances, and improved self-reported physical
function scores at hospital discharge compared with persons not
participating in early mobility and rehabilitation; \136\ (5) enhanced
recovery of functional exercise capacity; \137\ (6) improved self-
perceived functional status; \138\ and (7) reduced physiological and
cognitive complications \139\ and improved cognitive function.\140\
Early mobility and rehabilitation have also been associated with
reduced ICU and hospital length of stay;
^{141 142 143 144 145 146} reduced incidence of delirium and
improved patient awareness; ^{147 148} increased ventilator-
free days and improved weaning outcomes; ^{149 150 151} greater
incidence of discharge home directly after hospitalization compared
with patients not receiving early mobilization; ^{152 153} and
reduced hospital readmission or death in the year following
hospitalization.^{154 155}
---------------------------------------------------------------------------

\126\ Schweickert and Kress, ``Implementing early mobilization
interventions in mechanically ventilated patients in the ICU.''
\127\ Dang, ``ABCDEs of ICU: Early mobility.''
\128\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\129\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\130\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: a
randomised controlled trial.''
\131\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\132\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\133\ P.E. Morris, ``Moving our critically ill patients:
Mobility barriers and benefits,'' Crit Care Clin 23, no. 1 (2007).
\134\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\135\ Scheinhorn et al., ``Post-ICU mechanical ventilation at 23
long-term care hospitals: a multicenter outcomes study.''
\136\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\137\ Dang, ``ABCDEs of ICU: Early mobility.''
\138\ Ibid.
\139\ Ibid.
\140\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\141\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\142\ Kress, ``Clinical trials of early mobilization of
critically ill patients.''
\143\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: a
randomised controlled trial.''
\144\ Dang, ``ABCDEs of ICU: Early mobility.''
\145\ Engel et al., ``ICU early mobilization: From
recommendation to implementation at three medical centers.''
\146\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\147\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\148\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: a
randomised controlled trial.''
\149\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\150\ Dang, ``ABCDEs of ICU: Early mobility.''
\151\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\152\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: a
randomised controlled trial.''
\153\ Engel et al., ``ICU early mobilization: From
recommendation to implementation at three medical centers.''
\154\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\155\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
---------------------------------------------------------------------------

Short-term and long-term cognitive impairment are very frequent
complications of critical illness, and negatively influence survivors'
abilities to function independently.^{156 157 158} Delirium
during hospitalization is highly prevalent in critically ill patients
and has been associated with longer lengths of stay, increased duration
of mechanical ventilation, and higher risk of death.\159\ A longer
duration of delirium has been associated with worse short- and long-
term cognition and executive function.^{160 161} Given these
adverse consequences, the importance of early assessment of cognitive
function, including possible delirium, and early initiation of
cognitive rehabilitation in critical care settings, is being
increasingly recognized.^{162 163} Also, given the positive
effects of physical exercise on cognitive function in other
populations, the potential positive influence of exercise on cognitive
function in the critically ill population is being examined by
researchers.
---------------------------------------------------------------------------

\156\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
Risk factors, predictors, and rehabilitation interventions.''
\157\ Brummel et al., ``A combined early cognitive and physical
rehabilitation program for people who are critically ill: The
activity and cognitive therapy in the intensive care unit (ACT-ICU)
trial.''
\158\ P.P. Pandharipande, T.D. Girard, and E.W. Ely, ``Long-term
cognitive impairment after critical illness,'' N Engl J Med 370, no.
2 (2014).
\159\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
Risk factors, predictors, and rehabilitation interventions.''
\160\ Ibid.
\161\ Pandharipande, Girard, and Ely, ``Long-term cognitive
impairment after critical illness.''
\162\ Brummel et al., ``A combined early cognitive and physical
rehabilitation program for people who are critically ill: The
activity and cognitive therapy in the intensive care unit (ACT-ICU)
trial.''
\163\ R.S. Miller et al., ``Outcomes of trauma patients who
survive prolonged lengths of stay in the intensive care unit,'' J
Trauma 48, no. 2 (2000).
---------------------------------------------------------------------------

A technical expert panel convened by our measure development
contractor provided input on the technical specifications of this
quality measure, including the items included in the quality measure,
inclusion and exclusion criteria and risk adjustors. We also solicited
public comment on the draft specifications of this quality measure on
the CMS Quality Measures Public Comment Page (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html) between February 21 and March 14 2014, and
received 22 responses from stakeholders with comments and suggestions.
Additional information regarding these comments may be found on our Web
site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Based on the evidence discussed above, we are proposing to adopt
for the LTCHQR Program for the FY 2018 payment determination and
subsequent years the quality measure entitled Percent of Long-Term Care
Hospital Patients with an Admission and Discharge Functional Assessment
and a Care Plan That Addresses Function. This quality measure was
developed by CMS, and we plan to submit the quality measure to the NQF
for review. The MAP met in December 2013 and January 2014, and provided
input to CMS as required under section 1890A(a)(3) of the Act. In its
January 2014 Pre-Rulemaking Report, the MAP

[[Page 28266]]

conditionally supported this proposed measure and stated that the
measure concept is promising, but requires modification or further
development, and that functional status is a critical area of
measurement. Since the time of the MAP meeting, we have continued
further development of the measure with input from technical experts,
including empirical data analysis. Subsequently, we released draft
specifications for the function quality measures, and requested public
comment between February 21 and March 14, 2014. We received 22
responses from stakeholders with comments and suggestions during the
public comment period, and have updated the quality measures
specifications based on these comments and suggestions. The updated
specifications are available for review at the LTCHQR Program Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-
Reporting/. We refer readers to section IX.C.2. of the preamble of this
proposed rule for more information on the MAP.
In section 1886(m)(5)(D)(ii) of the Act, the exception authority
provides that ``[i]n the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary.'' We reviewed the NQF's consensus endorsed
measures and were unable to identify any NQF-endorsed quality measures
focused on assessment of function for patients in the LTCH setting. We
are unaware of any other quality measures for functional assessment
that have been endorsed or adopted by another consensus organization
for the LTCH setting. Therefore, we are proposing to adopt this
functional assessment measure for use in the LTCHQR Program for the FY
2018 payment determination and subsequent years under the Secretary's
authority to select non-NQF-endorsed measures.
Additional information regarding the quality measure may be found
on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We are proposing that data for the proposed quality measure be
collected through the LTCH CARE Data Set, with the submission through
the Quality Improvement and Evaluation System (QIES) Assessment
Submission and Processing (ASAP) system. For more information on LTCHQR
Program reporting using the QIES ASAP system, we refer readers to our
Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data
Set to include new items that assess functional status, should this
proposed measure be adopted. These items, which assess specific
functional activities (that is, self-care, mobility, cognition,
communication, and bladder continence), would be based on functional
items included in the Post-Acute Care Payment Reform Demonstration
version of the CARE Item Set. The items have been carefully developed
and tested for reliability and validity.
We invite public comments on our proposal to adopt the quality
measure entitled Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function for the LTCHQR Program, with data collection
starting on April 1, 2016, for the FY 2018 payment determination and
subsequent years. We refer readers to section IX.C.9.c. of the preamble
of this proposed rule for more information on the proposed data
collection and submission timeline for this proposed quality measure.
(2) Proposed Functional Status Quality Measure: Functional Outcome
Measure: Change in Mobility Among Long-Term Care Hospital Patients
Requiring Ventilator Support
Section 1206(c) of Division B of Public Law 113-67, the Pathway to
SGR Reform Act of 2013, amended section 1886(m)(5)(D) of the Act to add
a new clause (iv) requiring the Secretary to establish by no later than
October 1, 2015, ``a functional status quality measure for change in
mobility among inpatients requiring ventilator support.'' Accordingly,
the second functional status quality measure that we are proposing is
an outcome quality measure entitled the Functional Outcome Measure:
Change in Mobility among Long-Term Care Hospital Patients Requiring
Ventilator Support. This measure estimates the risk-adjusted change in
mobility score between the time of admission and the time of discharge
among LTCH patients requiring ventilator support at the time of
admission. As noted above, LTCH patients often have functional
limitations and receive rehabilitation therapy services so that they
can become more independent when performing functional activities.
Functional improvement is particularly relevant for patients who
require ventilator support because these patients have traditionally
had limited mobility due to cardiovascular and pulmonary instability,
delirium, sedation, lack of rehabilitation therapy staff, and lack of
physician referral.\164\
---------------------------------------------------------------------------

\164\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: An observational pilot project.''
---------------------------------------------------------------------------

Several studies have examined functional improvement among patients
in the long-term care hospitals and setting. In a sample of 101
patients in LTCHs (three-quarters were ventilator-dependent), median
functional status scores using the Functional Status Score (FSS)-ICU
(rolling, supine-to-sit transfers, unsupported sitting, sit-to-stand
transfers, and ambulation) improved significantly from admission to
discharge, with significant change in all five functional items.\165\ A
separate study of 103 patients with respiratory failure examined
functional improvement and found that by the end of the respiratory ICU
stay, 69.4 percent of survivors ambulated more than 100 feet, 8.2
percent ambulated less than 100 feet, 15.3 percent could sit in a
chair, 4.7 percent could sit on the edge of the bed, and 2.4 percent
did not accomplish any of these activities.\166\
---------------------------------------------------------------------------

\165\ A. Thrush, M. Rozek, and J.L. Dekerlegand, ``The clinical
utility of the functional status score for the intensive care unit
(FSS-ICU) at a long-term acute care hospital: A prospective cohort
study,'' Phys Ther 92, no. 12 (2012).
\166\ P. Bailey et al., ``Early activity is feasible and safe in
respiratory failure patients,'' Crit Care Med 35, no. 1 (2007).
---------------------------------------------------------------------------

The importance of monitoring improvement in mobility skills among
LTCH patients who require ventilator support at the time of admission
is also supported by the high prevalence of therapy service provision
as part of the treatment plan and the percent of patients discharged
home after an LTCH stay. In a study of 1,419 ventilator-dependent
patients from 23 LTCHs with weaning programs,\167\ physical therapy,
occupational therapy, and speech therapy were the three most commonly
provided services among 34 procedures, services, and treatments
provided during the LTCH admission. The very high frequency of physical
(84.8 percent), occupational (81.5 percent), and speech (79.7 percent)
therapy reflects use of the rehabilitative model of care adopted by
many post-ICU

[[Page 28267]]

weaning programs, which is important in the restoration of function.
Improvement in functional status, including mobility and self-care was
noted from admission to discharge. Nearly 30 percent of all patients
discharged alive returned directly home or to assisted living.\168\
---------------------------------------------------------------------------

\167\ Scheinhorn et al., ``Post-ICU mechanical ventilation at 23
long-term care hospitals: A multicenter outcomes study.''
\168\ Ibid.
---------------------------------------------------------------------------

A technical expert panel convened by our measure development
contractor provided input on the technical specifications of this
quality measure. We also solicited public comment on the draft
specifications of this quality measure, on the CMS Quality Measures
Public Comment Page (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html) between
February 21 and March 14, 2014 and received 22 responses from
stakeholder with comments and suggestions.
Additional information regard the quality measure may be found on
our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We are proposing that data for the proposed quality measure be
collected through the LTCH CARE Data Set, with the submission through
the QIES ASAP system. For more information on LTCHQR Program reporting
using the QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. We
intend to revise the LTCH CARE Data Set to include new items that
assess the functional status and the risk adjustors, should this
proposed application of the measure be adopted. These items, which
assess specific functional activities (that is, self-care, mobility,
cognition, communication, and bladder continence), would be based on
functional status items included in the Post-Acute Care Payment Reform
demonstration version of the CARE Item Set. The items have been
carefully developed and tested for reliability and validity.
Based on the evidence discussed above, we are proposing to adopt
for the LTCHQR Program for the FY 2018 payment determination and
subsequent years the quality measure entitled Functional Outcome
Measure: Change in Mobility among Long-Term Care Hospital Patients
Requiring Ventilator Support. This quality measure is developed by CMS,
and we plan to submit the quality measure to the NQF for review. The
MAP met in December 2013 and January 2014, and the NQF provided the
MAP's input to CMS as required under section 1890A(a)(3) of the Act. In
its January 2014 Pre-Rulemaking Report, the MAP conditionally supported
this proposed measure and stated that the measure concept is promising,
but requires modification or further development, and that functional
status is a critical area of measurement. Since the time of the MAP
meeting, we have continued further development of the measure with
input from technical experts, including empirical data analysis.
Subsequently, we have released draft specifications for the function
quality measures, and requested public comment between February 21 and
March 14, 2014. We received 22 responses from stakeholders with
comments and suggestions during the public comment period, and have
updated the quality measures specifications based on these comments and
suggestions. The updated specifications are available for review at the
LTCHQR Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-Reporting/. We refer readers to
section IX.C.2. of the preamble of this proposed rule for more
information on the MAP.
In section 1886(m)(5)(D)(ii) of the Act, the exception authority
provides that ``[i]n the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary.'' We reviewed the NQF's consensus endorsed
measures and were unable to identify any NQF-endorsed quality measures
focused on improvement of function among patients in the LTCH setting.
We are unaware of any other quality measures for functional improvement
that have been endorsed or adopted by another consensus organization
for the LTCH setting. Moreover, as discussed above, the Secretary is
now required to establish such a measure by October 1, 2015. Therefore,
we are proposing to adopt this functional improvement measure for use
in the LTCHQR Program for the FY 2018 payment determination and
subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
We invite public comments on our proposal to adopt the quality
measure entitled Functional Outcome Measure: Change in Mobility among
Patients Requiring Ventilator Support for the LTCHQR Program, with data
collection starting on April 1, 2016, for the FY 2018 payment
determination and subsequent years. We refer readers to section
IX.C.9.c. of the preamble of this proposed rule for more information on
the proposed data collection and submission timeline for this proposed
quality measure.
b. Proposed Quality Measure: National Healthcare Safety Network (NHSN)
Ventilator-Associated Event (VAE) Outcome Measure
The third quality measure that we are proposing is the CDC-
developed National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) outcome measure. The term ``Ventilator-
Associated Events'' incorporates a range of ventilator-associated
events, including ventilator-associated pneumonia (VAP), pulmonary
edema, acute respiratory distress syndrome, sepsis, and
atelectasis.\169\ The NHSN VAE Outcome Measure provides increased
measure sensitivity, more objective definitions for ventilator-
associated conditions, and the potential for automated outcome
detection.\170\ The NHSN VAE Outcome Measure is designed for use across
multiple inpatient care settings, including LTCHs. The measure
specifications were created and tested in the acute care setting.
During CY 2013, 105 LTCHs submitted VAE data to CDC's NHSN.\171\
---------------------------------------------------------------------------

\169\ Klompas, M., Y. Khan, et al. (2011). ``Multicenter
Evaluation of a Novel Surveillance Paradigm for Complications of
Mechanical Ventilation.'' PLoS ONE 6(3): e18062.
\170\ Magill, S. S., M. Klompas, et al. (2013). ``Developing a
new, national approach to surveillance for ventilator-associated
events*.'' Crit Care Med 41(11): 2467-2475.
\171\ Data from CMS-CDC correspondence on February 10, 2014.
---------------------------------------------------------------------------

According to the CDC, ``more than 300,000 patients receive
mechanical ventilation in the United States each year.'' \172\ These
patients are at increased risk for infections, such as pneumonia and
sepsis, as well as other serious complications including pulmonary
edema, pulmonary embolism, and death.^{173 174 175} These
complications can

[[Page 28268]]

lead to longer stays in the ICU and hospital, increased health care
costs and increased risk of disability (or death).\176\ The estimated
mortality rate in patients aged 85 years and older with acute lung
injury on mechanical ventilation is 60 percent.\177\
---------------------------------------------------------------------------

\172\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
\173\ Esteban, A., A. Anzueto, et al. (2002). ``Characteristics
and outcomes in adult patients receiving mechanical ventilation: A
28-day international study.'' JAMA 287(3): 345-355.
\174\ Klompas, M., Y. Khan, et al. (2011). ``Multicenter
Evaluation of a Novel Surveillance Paradigm for Complications of
Mechanical Ventilation.'' PLoS ONE 6(3): e18062.
\175\ Rubenfeld, G.D., E. Caldwell, et al. (2005). ``Incidence
and outcomes of acute lung injury.'' N Engl J Med 353(16): 1685-
1693.
\176\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
\177\ Rubenfeld G.D, Caldwell E, Peabody E, et al. Incidence and
outcomes of acute lung injury. N Engl J Med 2005: 353:1685-93.
---------------------------------------------------------------------------

Ventilator-Associated Events represent a high-priority complication
in the LTCH setting, given the older, medically complex population in
LTCHs and the high prevalence of mechanical ventilation in this
setting. A MedPAC analysis of MedPAR data found that 16 percent of LTCH
patients used at least one ventilator-related service in 2012.\178\ In
FY 2012, MS-LTC-DRG 207, a diagnosis-related group that refers to
respiratory diagnosis with ventilator support for 96 or more hours,
represented the most frequently occurring diagnosis among LTCH
patients, at 11.3 percent of all LTCH discharges,\179\ and MS-LTC-DRG-
4, a diagnosis-related group that refers to tracheostomy with
ventilator support for 96 or more hours or primary diagnosis except
face, mouth, and neck without major OR procedure, represented an
additional 1.3 percent of all LTCH discharges. Together, the two
diagnosis-related groups account for a total of nearly 18,000
discharges. Furthermore, the number of ventilated patients in LTCHs is
increasing--the number of discharged patients with respiratory
diagnosis with ventilator support for 96 or more hours increased 7.4
percent between 2008 and 2011.\180\
---------------------------------------------------------------------------

\178\ MedPAC ``Report to Congress: Medicare Payment Policy''
Chapter 11 ``Long-term care hospital services.'' March 2014. https://www.medpac.gov/chapters/Mar14_Ch11.pdf.
\179\ Ibid.
\180\ Ibid.
---------------------------------------------------------------------------

Although there are no nationwide or LTCH-specific estimates of the
prevalence of ventilator-associated conditions (VACs) and infection-
related ventilator-associated complications (IVACs), a recent study of
mechanically ventilated patients in ICUs found that approximately 10
percent developed a VAC and 5 percent developed an IVAC.\181\ Adherence
to clinical practice guidelines for the prevention of VAP has been
associated with decreased VAC rates in ICUs.\182\ Because VAP, one type
of VAC, is considered preventable, surveillance and measurement of
infection rates is important to improving quality of care and patient
safety.
---------------------------------------------------------------------------

\181\ Muscedere, J., T. Sinuff, et al. (2013). ``The clinical
impact and preventability of ventilator-associated conditions in
critically ill patients who are mechanically ventilated.'' Chest
144(5): 1453-1460.
\182\ Ibid.
---------------------------------------------------------------------------

The importance of the NHSN VAE Outcome Measure in LTCHs was
underscored by the MAP, which stated in its January 2014 Pre-Rulemaking
Report that the measure addresses a National Quality Strategy aim or
priority that is currently not adequately addressed. The MAP supported
the addition of this measure addressing VAEs in the LTCH setting and
stated that ``although this measure is not NQF-endorsed, it provides
useful information for healthcare facilities to help them monitor
ventilator use and identify improvements for preventing
complications.'' \183\
---------------------------------------------------------------------------

\183\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: Public Comment Draft: January 2014.
Available: https://www.qualityforum.org/map/.
---------------------------------------------------------------------------

The exception authority found in section 1886(m)(5)(D)(ii) of the
Act provides that ``[i]n the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary.'' We reviewed the NQF's consensus endorsed
measures and were unable to identify any NQF-endorsed measures for VAEs
in the LTCH setting (or a related setting). We are unaware of any other
measures for VAEs that have been endorsed or adopted by another
consensus organization for the LTCH setting (or a related inpatient
setting). Therefore, we are proposing to adopt the NHSN VAE Outcome
Measure for use in the LTCHQR Program for the FY 2018 payment
determination and subsequent years under the Secretary's authority to
select non-NQF-endorsed measures.
We are proposing to use the CDC's NHSN reporting and submission
infrastructure for reporting of the proposed NHSN VAE Outcome Measure.
Details related to the procedures for using CDC's NHSN for data
submission and information on definitions, numerator data, denominator
data, data analyses, and measure specifications for the proposed NHSN
VAE Outcome Measure can be found at: https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
CDC's NHSN is the data collection and submission framework
currently used for reporting the CAUTI (NQF 0138) and CLABSI
(NQF 0139) measures for the LTCHQR Program. Further, CDC's
NHSN is the data collection and submission framework adopted for data
collection and reporting for the Influenza Vaccination Coverage among
Healthcare Personnel measure (NQF 0431) starting on October 1,
2014, and for the NHSN Facility-Wide Inpatient Hospital-Onset
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome
Measure (NQF 1716) and NHSN Facility-Wide Inpatient Hospital-
Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF
1717) starting on January 1, 2015. By building on the CDC's
NHSN reporting and submission infrastructure, we intend to reduce the
administrative burden related to data collection and submission for
this measure under the LTCHQR Program. We refer readers to section
IX.C.9.d. of the preamble of this proposed rule for more information on
the proposed data collection and submission timeline for this proposed
quality measure.
We invite public comments on our proposal to adopt the NHSN VAE
Outcome Measure for the LTCHQR Program, with data collection beginning
on January 1, 2016, for the FY 2018 payment determination and
subsequent years. We also invite public comments on our proposal to use
the CDC's NHSN for data collection and submission for this measure.
8. LTCHQR Program Quality Measures and Concepts Under Consideration for
Future Years
We are considering whether to propose one or more of the quality
measures and quality measure topics listed in the table below for
future years in the LTCHQR Program. We invite public comments on these
measures and measure topics. We specifically invite public comments
regarding the clinical importance of these measures and measure topics
in LTCH setting, feasibility of data collection and implementation,
current use of these measures and measure topics in the LTCH setting,
and the usability of data for these measures and measure topics

[[Page 28269]]

to inform future quality improvements in the LTCH setting.

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

-------------------------------------------------------------------------
National Quality Strategy Priority: Patient Safety:
Measures addressing Ventilator Bundle.
Measures addressing avoidable injuries secondary to
polypharmacy.
Application of Hospital-Based Inpatient Psychiatric
Services (HBIPS)-2 Hours of Physical Restraint Use (NQF 0640).
Application of Percent of Residents Who Were Physically
Restrained (Long Stay) (NQF 0687).
National Quality Strategy Priority: Effective Clinical Processes:
Severe Sepsis and Septic Shock: Management Bundle.
Venous Thromboembolism Prophylaxis (NQF 0371).
Ventilator Weaning Rate.
Pain Management.
National Quality Strategy Priority: Patient- and Caregiver-Centered
Care:
Depression Assessment and Management.
Application of Hospital Consumer Assessment of Healthcare
Providers and Systems (HCAHPS) (NQF 0166).
Measures addressing patients' experience of care.
Measures addressing pain control--patients' preference.
National Quality Strategy Priority: Communication and Coordination of
Care:
Application of Medication Reconciliation (NQF 0097).
Application of Medication Reconciliation Post-Discharge
(NQF 0554).
Reconciled Medication List Received by Discharged Patients
(Discharges from an Inpatient Facility to Home/Self Care or Any
Other Site of Care) (NQF 0646).
Transition Record with Specified Elements Received by
Discharged Patients (Discharges from an Inpatient Facility to Home/
Self Care or Any Other Site of Care) (NQF 0647).
Timely Transmission of Transition Record (Discharges from
an Inpatient Facility to Home/Self Care or Any Other Site of Care)
(NQF 0648).
Measures addressing care transitions.
------------------------------------------------------------------------

9. Form, Manner, and Timing of Quality Data Submission for the FY 2016
Payment Determination and Subsequent Years
a. Background
Section 1886(m)(5)(C) of the Act requires that, for the FY 2014
payment determination and subsequent years, each LTCH submit to the
Secretary data on quality measures specified by the Secretary and that
such data shall be submitted in a form and manner, and at a time,
specified by the Secretary. As required by section 1886(m)(5)(A)(i) of
the Act, for any LTCH that does not submit data in accordance with
section 1886(m)(5)(C) of the Act with respect to a given rate year, any
annual update to the standard Federal rate for discharges for the
hospital during the rate year must be reduced by two percentage points.
b. Finalized Timeline for Data Submission Under the LTCHQR Program for
the FY 2016 and FY 2017 Payment Determinations (Except NQF
0680 and NQF 0431)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861
and 50878 through 50881), we finalized the data submission timelines
and submission deadlines for measures for the FY 2016 and FY 2017
payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS
final rule for a more detailed discussion of these timelines and
deadlines. Specifically, we refer readers to the table at 78 FR 50878
of the FY 2014 IPPS/LTCH PPS final rule for the data collection
timelines and submission deadlines for the FY 2016 payment
determination and the tables at 78 FR 50881 of that final rule for the
data collection timelines and submission deadlines for the FY 2017
payment determination.
c. Proposed Revision to the Previously Adopted Data Collection
Timelines and Submission Deadlines for Percent of Residents or Patients
Who Were Assessed and Appropriately Given the Seasonal Influenza
Vaccine (Short-Stay) (NQF 0680) for the FY 2016 Payment
Determination and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through
50861), we revised the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short
Stay) (NQF 0680) measure for the FY 2016 payment determination
and subsequent years. In that rule (78 FR 50861, 50880 through 50882),
we also revised the data collection timelines and submission deadlines
for the FY 2016 through FY 2018 payment determinations for this
measure.
For the reasons discussed in section IX.C.6.a. of the preamble of
this proposed rule, we are proposing to change to the data collection
timeframes and submission deadlines for the FY 2016 payment
determination and subsequent years. Specifically, as discussed in
section IX.C.6.a. of the preamble of this proposed rule, for the FY
2016 payment determination, we are proposing submission deadlines of
February 15, 2015, and May 15, 2015, respectively, for this measure for
data collection periods October 1-December 31, 2014, and January 1-
March 31, 2015, respectively, instead of the previously finalized
submission deadline of May 15, 2015, for the data collection period of
October 1, 2014-April 30, 2015. The proposed changes applicable to this
measure (NQF 680) are illustrated below for the FY 2016
payment determination. Please refer to section IX.C.6 of the preamble
of this proposed rule for further information regarding this proposed
revision.

[[Page 28270]]

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2016 Payment Determination for Percent
of Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timelines (CY) LTCHQR Program FY 2016 payment
determination
------------------------------------------------------------------------
Q4 (October-December 2014)......... February 15, 2015.
Q1 (January-March 2015)............ May 15, 2015.
------------------------------------------------------------------------

Further, as discussed in section IX.C.6.a. of the preamble of this
proposed rule, we are proposing similar deadlines for the FY 2017
payment determination and subsequent years for the LTCHQR Program. The
proposed changes applicable to this measure (NQF 680) are
illustrated below.

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2017 Payment Determination and
Subsequent Years for Percent of Residents or Patients Who Were Assessed
and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timelines (CY) LTCHQR Program payment
determination (FY)
------------------------------------------------------------------------
Q4 of the CY two years before the February 15, of the FY preceding
payment determination year (for the payment determination year
example, October-December 2015 for (for example, February 15, 2016
the FY 2017 payment determination). for the FY 2017 payment
determination).
Q1 of the CY one year before the May 15 of the FY preceding the
payment determination year (for payment determination year (for
example, January-March 2016 for example, May 15, 2016 for the FY
the FY 2017 payment determination). 2017 payment determination).
------------------------------------------------------------------------

We invite public comment on the proposed submission deadlines for
this measure (NQF 0680) for the FY 2016 payment determination
and subsequent years.
d. Proposed Data Submission Mechanisms for the FY 2018 Payment
Determination and Subsequent Years for Proposed New LTCHQR Program
Quality Measures and for Proposed Revisions to Previously Adopted
Quality Measures
For the two proposed functional status measures and the application
of the Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674) measure, we are proposing that
all LTCHs would be required to collect data using the LTCH CARE Data
Set (Version 3.00).\184\ We will release the technical data submission
specifications and update LTCHQR Program Manual for the LTCH CARE Data
Set (Version 3.00) to include items related to the functional status
measures and the application of the Percent of Residents Experiencing
One or More Falls with Major Injury (Long-Stay) (NQF 0674)
measure in CY 2015. The QIES ASAP system would remain the data
submission mechanism for the LTCH CARE Data Set. Further information on
data submission of the LTCH CARE Data Set for the LTCHQR Program
Reporting using the QIES ASAP system is available at: https://www.qtso.com/ and https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
---------------------------------------------------------------------------

\184\ The LTCH CARE Data Set (Version 2.01) was approved on June
10, 2013, by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available on the Web
site at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html. CMS
will revise the LTCH CARE Data Set (Version 3.00) and submit for OMB
review for PRA approval to support data collection for the two
functional status measures and the application of the Percent of
Residents Experiencing One or More Falls with Major Injury (Long
Stay) (NQF 0674). LTCH CARE Data Set (Version 3.00) is
proposed for April 1, 2016, implementation date.
---------------------------------------------------------------------------

For the proposed VAE measure, we are proposing that LTCHs would be
required to use the CDC's NHSN reporting and submission infrastructure.
Details related to the procedures for using CDC's NHSN for data
submission and information on definitions, numerator data, denominator
data, data analyses, and measure specifications for the proposed NHSN
VAE Outcome Measure can be found at: https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
We invite public comments on these proposals.
e. Proposed Data Collection Timelines and Submission Deadlines Under
the LTCHQR Program for the FY 2018 Payment Determination
In sections IX.C.9.c. and f. of the preamble of this proposed rule,
we are proposing, for the FY 2016 payment determination and subsequent
years, to revise the data collection timelines and submission deadlines
for the Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680) measure and, for the FY 2018 payment determination and
subsequent years, to revise the data collection timelines and
submission deadlines for the application of the Percent of Residents
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF
0674) measure. In the FY 2014 IPPS/LTCH PPS final rule (78 FR
50882), we adopted the data collection timelines and submission
deadlines for the remaining quality measures applicable to the FY 2018
payment determination as listed in the following tables.

Timeframes for Data Collection of LTCHQR Program Quality Data for the FY
2018 Payment Determination
------------------------------------------------------------------------
NQF measure ID Data collection timelines
------------------------------------------------------------------------
NQF 0138.................. January 1, 2016-December 31, 2016.

[[Page 28271]]

NQF 0139.................. January 1, 2016-December 31, 2016.
NQF 0678.................. January 1, 2016-December 31, 2016.
NQF 0431.................. October 1, 2016 (or when vaccine
becomes available)-March 31, 2017.
NQF 1716.................. January 1, 2016-December 31, 2016.
NQF 1717.................. January 1, 2016-December 31, 2016.
------------------------------------------------------------------------

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

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

For the new measures that we are proposing to adopt for the FY 2018
payment determination and subsequent years, we are proposing the
following data collection timelines and submission deadlines.

Proposed Data Collection Timelines for New LTCHQR Program Measures for
the FY 2018 Payment Determination
------------------------------------------------------------------------
NQF Measure ID or Measure Name
(when NQF Measure ID not available) Data collection timeline
------------------------------------------------------------------------
National Healthcare Safety Network January 1, 2016-December 31, 2016.
(NHSN) Ventilator-Associated Event
(VAE) Outcome Measure.
Functional Outcome Measure: Change April 1, 2016-December 31, 2016.
in Mobility among Long-Term Care
Hospital Patients Requiring
Ventilator Support.
Percent of Long-Term Care Hospital April 1, 2016-December 31, 2016.
Patients with an Admission and
Discharge Functional Assessment
and a Care Plan That Addresses
Function.
------------------------------------------------------------------------

Proposed Submission Deadlines of LTCHQR Program Quality Data for the FY
2018 Payment Determination: National Healthcare Safety Network (NHSN)
Ventilator-Associated Event (VAE) Outcome Measure
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
Q1 (January-March 2016)............ May 15, 2016.
Q2 (April-June 2016)............... August 15, 2016.
Q3 (July-September 2016)........... November 15, 2016.
Q4 (October-December 2016)......... February 15, 2017.
------------------------------------------------------------------------

[[Page 28272]]

Proposed Submission Deadlines of LTCHQR Program Quality Data for the FY
2018 Payment Determination: Functional Outcome Measure: Change in
Mobility Among Long-Term Care Hospital Patients Requiring Ventilator
Support and Percent of Long-Term Care Hospital Patients With an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
Q2 (April-June 2016)............... August 15, 2016.
Q3 (July-September 2016)........... November 15, 2016.
Q4 (October-December 2016)......... February 15, 2017.
------------------------------------------------------------------------

We invite public comments on these data collection timelines and
submission deadlines for the three proposed new quality measures for FY
2018 payment determination.
f. Proposed Data Collection Timelines and Submission Deadlines for the
Application of Percent of Residents Experiencing One or More Falls with
Major Injury (Long Stay) (NQF 0674) for the FY 2018 Payment
Determination and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule, we revised the Application
of the Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674) measure for the FY 2018 payment
determination and subsequent years (78 FR 50874 through 50877). We are
proposing, for the FY 2018 payment determination only, to move the
start date for data collection of this measure to April 1, 2016,
instead of the previously finalized start date of January 1, 2016. Data
collection and submission of this measure would continue through
December 31, 2016, as previously finalized for the FY 2018 payment
determination. This proposed change in the data collection start date
would only affect CY 2016 data collection and submission for the LTCHQR
Program for the FY 2018 payment determination. For all subsequent
years, data collection for this measure would begin on January 1 and
continue through December 31. We note that these proposed changes would
be applicable only to the Application of Percent of Residents
Experiencing One or More Falls with Major Injury (Long Stay) (NQF
0674) measure, and not applicable to any other LTCHQR Program
measures, proposed or adopted, unless explicitly stated. We refer
readers to section IX.C.6. of the preamble of this proposed rule for
further information and rationale.

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2018 Payment Determination for the
Application of Percent of Residents Experiencing One or More Falls With
Major Injury (Long Stay) (NQF 0674)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline: CY 2016 LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
Q2 (April-June 2016)............... August 15, 2016.
Q3 (July-September 2016)........... November 15, 2016.
Q4 (October-December 2016)......... February 15, 2017.
------------------------------------------------------------------------

We invite public comment on the proposed data collection timeline
and quarterly submission deadlines for the Application of Percent of
Residents Experiencing One or More Falls with Major Injury (Long Stay)
(NQF 0674) for the FY 2018 payment determination.
g. Proposed Data Collection Timelines and Submission Deadlines Under
the LTCHQR Program for the FY 2019 Payment Determination and Subsequent
Years
For the quality measures applicable to the FY 2019 payment
determination and subsequent years, including those that we are
proposing in section IX.C.7. of the preamble of this proposed rule, if
finalized, we are proposing the following data collection timelines and
submission deadlines.

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2019 Payment Determination
------------------------------------------------------------------------
NQF Measure ID or Measure Name
(when NQF Measure ID not available) Data collection timeline
------------------------------------------------------------------------
National Healthcare Safety Network January 1, 2017-December 31, 2017.
(NHSN) Catheter-Associated Urinary
Tract Infection (CAUTI) Outcome
Measure (NQF 0138).
National Healthcare Safety Network January 1, 2017-December 31, 2017.
(NHSN) Central Line-Associated
Bloodstream Infection (CLABSI)
Outcome Measure (NQF 0139).
Percent of Residents or Patients January 1, 2017-December 31, 2017.
with Pressure Ulcers That Are New
or Worsened (Short-Stay) (NQF
0678).
Percent of Residents or Patients October 1, 2017-March 31, 2018.
Who Were Assessed and
Appropriately Given the Seasonal
Influenza Vaccine (Short-Stay)
(NQF 0680).
Influenza Vaccination Coverage October 1, 2017-March 31, 2018.
among Healthcare Personnel (NQF
0431).

[[Page 28273]]

National Healthcare Safety Network January 1, 2017-December 31, 2017.
(NHSN) Facility-Wide Inpatient
Hospital-Onset Methicillin-
resistant Staphylococcus areus
(MRSA) Bacteremia Outcome Measure
(NQF 1716).
National Healthcare Safety Network January 1, 2017-December 31, 2017.
(NHSN) Facility-Wide Inpatient
Hospital-Onset Clostridium
difficile Infection (CDI) Outcome
Measure (NQF 1717).
Application of Percent of Residents January 1, 2017-December 31, 2017.
Experiencing One or More Falls
with Major Injury (Long-Stay) (NQF
0674).
National Healthcare Safety Network January 1, 2017-December 31, 2017.
(NHSN) Ventilator-Associated Event
(VAE) Outcome Measure.
Functional Outcome Measure: Change January 1, 2017-December 31, 2017.
in Mobility among Patients
Requiring Ventilator Support.
Percent of LTCH Patients with an January 1, 2017-December 31, 2017.
Admission and Discharge Functional
Assessment and a Care Plan That
Addresses Function.
------------------------------------------------------------------------

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2019 Payment Determination for All
Measures Except Influenza Vaccination Coverage Among Healthcare
Personnel (NQF 0431) and Percent of Residents or Patients Who
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 0680)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline: CY 2017 LTCHQR Program FY 2019 payment
determination
------------------------------------------------------------------------
Q1 (January-March 2017)............ May 15, 2017.
Q2 (April-June 2017)............... August 15, 2017.
Q3 (July-September 2017)........... November 15, 2017.
Q4 (October-December 2017)......... February 15, 2018.
------------------------------------------------------------------------

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2019 Payment Determination: Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline LTCHQR Program FY 2019 payment
determination
------------------------------------------------------------------------
October 1, 2017-December 31, 2017.. February 15, 2018.
January 1, 2018-March 31, 2018..... May 15, 2018.
------------------------------------------------------------------------

Proposed Data Collection Timelines and Submission Deadlines of LTCHQR
Program Quality Data for the FY 2019 Payment Determination: Influenza
Vaccination Coverage Among Healthcare Personnel (NQF 0431)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeline LTCHQR Program FY 2019 payment
determination
------------------------------------------------------------------------
October 1 2017-March 31, 2018...... May 15, 2018.
------------------------------------------------------------------------

We invite public comment on these proposals.
10. Proposed LTCHQR Program Data Completion Thresholds for the FY 2016
Payment Determination and Subsequent Years
a. Overview
Section 1886(m)(5)(C) of the Act requires that, for the FY 2014
payment determination and subsequent years, each LTCH submit to the
Secretary data on quality measures specified by the Secretary in a form
and manner, and at a time, specified by the Secretary. As required by
section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit
data in accordance with section 1886(m)(5)(C) of the Act with respect
to a given fiscal year, any annual update to the standard Federal rate
for discharges for the hospital during the rate fiscal year must be
reduced by two percentage points. To date, we have not established a
standard for compliance other than that LTCHs submit all applicable
required data for all finalized measures, by the previously finalized
quarterly deadlines. In response to input from our stakeholders seeking
additional specificity related to the LTCHQR Program compliance
affecting FY payment update determinations and, due to the importance
of ensuring the integrity of quality data submitted to CMS, we are
proposing to set specific LTCHQR Program thresholds for completeness of
LTCH quality data beginning with data affecting the FY 2016 payment
determination and subsequent years.
The LTCHQR Program, through the FY 2012, FY 2013, and FY 2014 IPPS/
LTCH PPS final rules, requires LTCHs to submit quality data using two
separate

[[Page 28274]]

data collection/submission mechanisms: measures collected using the
LTCH CARE Data Set (LCDS) are submitted through the CMS Quality
Improvement Evaluation System (QIES); and measures stewarded by the CDC
(such as Healthcare Acquired Infection (HAI) and vaccination measures),
are submitted using the CDC's National Healthcare Safety Network
(NHSN). We have also previously finalized a claims-based measure (All-
Cause Unplanned Readmission Measure for 30 Days Post Discharge from
Long Term Care Hospitals); however, claims-based measures do not
require LTCHs to actually submit quality data to CMS, as they are
calculated using claims data submitted to CMS for payment purposes.
Thus, with claims-based measures, there is no submitted quality data to
which we could apply data completion thresholds.
To ensure that LTCHs are meeting an acceptable standard for
completeness of submitted data, we are proposing that for the FY 2016
payment determination and subsequent years, LTCHs meet or exceed two
separate program thresholds: one threshold for completion of quality
measures data collected using the LCDS and submitted through QIES; and
a second threshold for quality measures data collected and submitted
using the CDC's NHSN. We are proposing that LTCHs must meet or exceed
both thresholds discussed below, in order to avoid receiving a 2
percentage point reduction to their annual payment update for a given
FY, beginning with FY 2016.
We are proposing to hold LTCHs accountable for different data
completion thresholds for each of the two data submission mechanisms;
an 80 percent data completion threshold for data collected using the
LCDS and submitted through the QIES mechanism; and a 100 percent data
completion threshold for data submitted through the CDC's NHSN. We are
proposing to hold LTCHs to the higher data completion threshold for the
CDC's NHSN initially, because many LTCHs have been mandated by States
to report infection data using the CDC's NHSN system for surveillance
purposes, prior to the start of the LTCHQR Program on October 1, 2012,
and, therefore, we believe LTCHs are more familiar with the NHSN
collection and submission process.
In contrast, LTCHs had never submitted quality data using a
standardized data collection instrument before October 1, 2012, such as
the LCDS submitted through the QIES mechanism. In addition, we require
the submission of LCDS admission and discharge data through QIES, in
order for LTCHs to meet the proposed data accuracy compliance standard,
which with regard to discharge data, may be more difficult to collect
on patients that are discharged emergently or against medical advice,
in effect making it more difficult to meet a higher level of compliance
initially. Lastly, through the FY 2014 IPPS/LTCH PPS final rule, we
finalized accelerated quarterly deadlines for submission of quality
data, beginning January 2014, of 45 days beyond the end of each CY
quarter, as opposed to the previous 135 day post-quarterly deadline
LTCHs were previously required to meet. We feel that this is an
additional challenge that LTCHs may face. We invite comment on other
obstacles LTCHs may face in meeting a higher level of compliance with
regard to submission of quality data using the LCDS.
b. Proposed LTCHQR Program Data Completion Threshold for the Required
LTCH CARE Data Set (LCDS) Data Items
The LCDS is composed of data collection items designed to inform
quality measure calculations, including risk-adjustment calculations,
as well as internal consistency checks for logical inaccuracies. We are
proposing that beginning with quality data affecting the FY 2016
payment determination and subsequent years, LTCHs must meet or exceed a
proposed LCDS data completion threshold of 80 percent. We are proposing
to assess the completeness of submitted data by verifying that for all
LCDS assessments submitted by any given LTCH, at least 80 percent of
those LCDS Assessments must have 100 percent of the required quality
data items completed, where, for the purposes of this proposed rule,
``completed'' is defined as having provided actual patient data, as
opposed to a non-informative response, such as a dash (-), that
indicates the LTCH was unable to provide patient data. The proposed
threshold of 80 percent is based on the need for substantially complete
records, which allows appropriate analysis of quality measure data for
the purposes of updating quality measure specifications as they undergo
yearly and triennial measure maintenance reviews with the NQF. In
addition, complete data is needed to understand the validity and
reliability of quality data items, including risk-adjustment models.
Finally, we want to ensure complete quality data from LTCHs, which will
ultimately be reported to the public, allowing our beneficiaries to
gain an understanding of LTCH performance related to these quality
metrics, and helping them to make informed health care choices.
Our data suggest that the majority of current LTCHs are in
compliance with, or exceeding, this proposed threshold already. Our
decision to set this proposed data completion threshold at a lower
level initially, with the intent to raise the proposed 80 percent
threshold in subsequent program years, is based on our understanding
that LTCHs are still new to quality reporting, and that their
experience and understanding, with respect to reporting quality data
using a standardized data collection instrument, and thus their
compliance, will increase over time. However, we invite public comment
on circumstances that might prevent LTCHs from meeting this level of
compliance. All items that we are proposing to require under the LTCHQR
Program are identified in Appendix D of the LTCHQR Program Manual
version 2.01, which is available for download on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
We are also proposing that any LTCH that does not meet the proposed
requirement that 80 percent of all LCDS assessments submitted contain
100 percent of all required quality data items, will be subject to a
reduction of 2 percentage points to the applicable FY annual payment
update beginning with FY 2016. In order to establish this program
threshold, we analyzed all LCDS submissions from January 2013 through
September 2013, and we believe that the majority of LTCHs will be able
to meet the proposed 80 percent data completion threshold. It is our
intent to raise this threshold over the next 2 years, through the
formal notice-and-comment rulemaking process. As stated above, we feel
that as LTCHs continue to submit data using a standardized data
collection instrument, such as the LCDS, and as they continue to take
advantage of the resources we provide to guide LTCHs in their
submission of this data (national trainings, CMS Special Open Door
Forums, LTCHQR Program Manual, and technical trainings available on our
Web site), we feel LTCH performance with respect to data completion
will improve over time. We are proposing that this threshold will have
to be met by LTCHs, in addition to the CDC NHSN threshold discussed
below, in order to avoid receiving a 2 percentage point reduction to
the applicable FY annual payment update.

[[Page 28275]]

c. LTCHQR Program Data Completion Threshold For Measures Submitted
Using the Centers for Disease Control and Prevention (CDC) National
Healthcare Safety Network (NHSN)
The LTCHQR Program through the FY 2012, FY 2013, and FY 2014 IPPS/
LTCH PPS final rules, requires that LTCHs submit CDC-stewarded quality
measure data using the CDC's NHSN, including data for the previously
finalized CAUTI, CLABSI, and Influenza Vaccination Coverage among
Healthcare Personnel (HCP) quality measures. More specifically, we
require LTCHs follow CDC quality measure protocols, which require them
LTCHs to complete all data fields required for both numerator and
denominator data within NHSN, including the ``no events'' field for any
month during which no infection events were identified. LTCHs are
required to submit this data on a monthly basis (except for the HCP
measure, which is only required to be reported once per year). However,
LTCHs have until the associated quarterly deadline (45 calendar days
beyond the end of each CY quarter) by which to report infection data to
the CDC for each of the three months within any given quarter. For more
information on the LTCHQR Program quarterly deadlines, we refer readers
to section IX.C.9.b. of the preamble of this proposed rule.
We are proposing that beginning with FY 2016 payment determination
and subsequent years, this previously finalized requirement for monthly
reporting must be met in addition to the proposed LCDS data completion
threshold discussed above in order to avoid a 2 percentage point
reduction to the applicable FY annual payment update. That is, we are
proposing that LTCHs must meet a threshold of 100 percent for measures
submitted via the NHSN, achieved by submitting relevant infection,
vaccination, or other required quality measure data for each month of
any given CY, in addition to meeting the above-proposed data item
completion threshold for required quality data items on the LCDS. As
the LTCHQR Program expands, and LTCHs begin reporting measures that
were previously finalized, but not yet implemented, or newly proposed
and finalized measures, we are proposing to apply this same threshold.
d. Application of the 2 Percentage Point Reduction for LTCHs That Fail
To Meet the Proposed Data Completion Thresholds
Above we have proposed that LTCHs must meet two separate data
completion thresholds in order to avoid a 2 percentage point reduction
to their applicable FY annual payment update; a data completion
threshold of 80 percent for those required data elements collected
using the LCDS and submitted through QIES; and a second data completion
threshold of 100 percent for quality measure data submitted through the
CDC's NHSN. We are proposing that these data completion thresholds must
be met in addition to the data validation threshold of 75 percent we
are proposing below, in order to avoid a 2 percentage point reduction
to their applicable FY annual payment update. While we are proposing
that LTCHs must meet both the proposed data completion and data
validation thresholds, LTCHs cannot have their applicable annual
payment update reduced twice. That is, should an LTCH fail to meet
either one or both of the proposed thresholds, it will only receive one
reduction of 2 percentage points to its applicable fiscal year annual
payment update.
We invite public comment on these proposals.
11. Proposed Data Validation Process for the FY 2016 Payment
Determination and Subsequent Years
a. Proposed Data Validation Process
Historically, we have built consistency and internal validation
checks into our data submission specifications to ensure that the basic
elements of the LCDS assessments conform to requirements such as proper
format and facility information. These internal consistency checks are
automated and occur during the LTCH submission process, and help ensure
the integrity of the data submitted by LTCHs by rejecting submissions
or issuing warnings when LTCH data contain logical inconsistencies.
These internal consistency checks are referred to as ``system edits''
and are further outlined in the LTCH Data Submission Specifications
version 1.01, which are available for download on the LTCH Quality
Reporting Technical Information Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
Validation is intended to provide added assurance of the accuracy
of the data that will be reported to the public as required by section
1886(m)(5)(E) of the Act. We are proposing, for the FY 2016 payment
determination and subsequent years, to validate the data elements
submitted to CMS for quality purposes. Initially, for the FY 2016
payment determination, this data accuracy validation will apply only to
the LCDS items that inform the measures Percent of Patients or
Residents with Pressure Ulcers That are New or Worsened (Short-Stay)
(NQF 0678). We intend to expand this validation process for
quality measures affecting the FY 2017 payment determination and
subsequent years through future notice-and-comment rulemaking.
We are proposing to validate the data elements submitted to CMS for
Percent of Residents or Patients with Pressure Ulcers That are New or
Have Worsened (Short-Stay) (NQF 0678) under the LTCHQR Program
by requesting the minimum chart data necessary to confirm a
statistically valid random sample of 260 LTCHs. From the random sample
of 260 LTCHs, 5 LCDS assessments submitted through the National
Assessment Collection Database would be randomly selected by the CMS
validation contractor. In accordance with Sec. 164.512 (d)(1)(iii) of
the HIPAA Privacy Rule, we would request from these LTCHs the specified
portions of the 5 Medicare patient charts that correspond to the
randomly selected assessments, which would need to be copied and
submitted via traceable mail to a CMS contractor for validation. We are
proposing that the specific portions of the 5 beneficiary charts would
be identified in the written request, but may include: admission and
discharge assessments, relevant nursing notes following the admission,
relevant nursing notes preceding the discharge, physician admission
summary and discharge summary, and any Assessment of Pressure Ulcer
Form the facility may utilize. We are proposing that the CMS contractor
would utilize the portions of the patient charts to compare that
information with the quality data submitted to CMS. Differences that
would affect measure outcomes or measure rates would be identified and
reported to CMS. These differences could include but are not limited to
unreported worsened pressure ulcers.
We are proposing that all data that has been submitted to the
National Assessment Collection Database under the LTCHQR Program would
be subject to the data validation process. Specifically, we are
proposing that the contractor would request copies of the randomly
selected medical charts from each LTCH via certified mail (or other
traceable methods that require an LTCH representative to sign for CMS
correspondence), and the LTCH would have 45 days from the date of the
request (as documented on the request letter) to submit the requested
records to

[[Page 28276]]

the contractor. If the LTCH does not comply within 30 days, the
contractor would send a second certified letter to them, reminding the
LTCH that it must return copies of the requested medical records within
45 calendar days following the date of the initial contractor medical
record request. If the LTCH still does not comply, then the contractor
would assign a ``zero'' score to each measure in each missing record.
If, however, the LTCH does comply, the contractor would review the data
submitted by the LTCH on the LCDS assessments for the required data
elements associated with the Pressure Ulcer measure, until such time
that LTCHs begin to submit additional quality measures that are
collected using the LCDS. Initially, this review would consist solely
of those required data elements that inform the Pressure Ulcer measure
calculation and checks for logical inconsistencies. As LTCHs begin to
report additional finalized measures, we intend to expand this
validation process to quality measures affecting the FY 2017 payment
determination and subsequent years, through future notice-and-comment
rulemaking. The contractor would then calculate the percentage of
matching data elements which would constitute a validation score.
Because we would not be validating all records, we would need to
calculate a confidence interval that incorporates a potential sampling
error.
To receive the full FY 2016 annual payment update, we are proposing
that LTCHs in the random sample must attain at least a 75 percent
validation score, based upon our validation process, which would use
charts requested from patient assessments submitted for CY 2013. We
would calculate a 95 percent confidence interval associated with the
observed validation score. If the upper bound of this confidence
interval is below the 75 percent cutoff point, we would not consider a
hospital's data to be ``validated'' for payment purposes. We are
proposing that LTCHs failing the validation requirements would be
subject to the 2 percent annual payment update reduction, beginning
with their fiscal year annual payment update. In addition, all LTCHs
validated would receive educational feedback, including specific case
details.
b. Application of the 2 Percentage Point Reduction for LTCHs That Fail
To Meet the Proposed Data Accuracy Threshold
We are proposing that LTCHs must meet a data accuracy threshold of
75 percent in order to avoid receiving a 2 percentage point reduction
to their applicable fiscal year annual payment update. We are proposing
that this proposed data accuracy threshold of 75 percent must be met in
addition to the proposed data completion thresholds (80 percent for
data collected using the LTCH CARE Data Set and submitted using QIES,
and 100 percent for data submitted using the CDC's NHSN), in order to
avoid receiving a 2 percentage point reduction to their applicable FY
annual payment update. While we are proposing that LTCHs must meet both
the proposed data accuracy and data completion thresholds, LTCHs cannot
have their applicable annual payment update reduced twice. That is,
should an LTCH fail to meet either one or both of the proposed
thresholds (data completion and/or data accuracy), it will only receive
one reduction of 2 percentage points to its applicable FY annual
payment update.
We invite public comment on these proposals and suggestions to
improve the utility of the approach or to reduce the burden on LTCHs.
12. Public Display of Quality Measure Data for the LTCHQR Program
Under section 1886(m)(5)(E) of the Act, the Secretary is required
to establish procedures for making data submitted under section
1886(m)(5)(C) of the Act available to the public. Section 1886(m)(5)(E)
of the Act requires that such procedures shall ensure that an LTCH has
the opportunity to review the data that is to be made public with
respect to the LTCH prior to such data being made public. The statute
also requires that the Secretary report quality measures that relate to
services furnished in inpatient settings in LTCHs on our Web site. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we received and
responded to public comments regarding the public reporting of quality
data under the LTCHQR Program.
Currently, we are developing plans regarding the implementation of
these provisions. We appreciate the need for transparency into the
processes and procedures that will be implemented to allow for public
reporting of the LTCHQR Program data and to afford LTCHs the
opportunity to review that data before it is made public. At this time,
we have not established procedures or timelines for public reporting of
data, but we intend to include related proposals in future rulemaking.
We welcome public comment on what we should consider when
developing future proposals related to public reporting of quality
measures for the LTCHQR Program.
13. Proposed LTCHQR Program Submission Exception and Extension
Requirements for the FY 2017 Payment Determination and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50883 through
50885), we referred to these requirements as submission ``waiver''
requirements. We are proposing to instead use the phrase ``exception
and extension'' requirements for purposes of clarity. For the FY 2017
payment determination and subsequent years, we are proposing to
continue using the LTCHQR Program's requirements that we adopted in the
FY 2014 IPPS/LTCH PPS final rule for the FY 2015 payment determination
and subsequent years, although the term ``waiver'' is replaced by
``exception and extension.''
In the FY 2014 IPPS/LTCH PPS final rule, we finalized a process for
LTCHs to request and for us to grant waivers with respect to the
quality data reporting requirements of the LTCHQR Program for one or
more quarters, beginning with the FY 2015 payment determination, when
there are certain extraordinary circumstances beyond the control of the
LTCH. We are proposing to continue to use this previously finalized
process.
In the event that an LTCH seeks to request a submission exception
or extension for quality reporting purposes, the LTCH must request an
exception or extension within 30 days of the date that the
extraordinary circumstances occurred by submitting a written request to
CMS via email to the LTCH mailbox at
LTCHQRPReconsiderations@cms.hhs.gov. Exception or extension requests
sent to CMS through any other channel will not be considered as a valid
request for an exception or extension from the LTCHQR Program's
reporting requirements for any payment determination. The written
request must contain all of the finalized requirements in the FY 2014
IPPS/LTCH PPS final rule, and on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
When an exception or extension is granted, an LTCH will not incur
payment reduction penalties for failure to comply with the requirements
of the LTCHQR Program, for the timeframe specified by CMS. If an LTCH
is granted an exception, we will not require that the LTCH submit any
quality data for a given period of time. If we grant an extension to an
LTCH, the LTCH will

[[Page 28277]]

still remain responsible for submitting quality data collected during
the timeframe in question, although we will specify a revised deadline
by which the LTCH must submit this quality data.
In addition, in the FY 2014 IPPS/LTCH PPS final rule, we finalized
a policy that allowed CMS to grant exceptions or extensions to LTCHs
that have not requested them if it is determined that extraordinary
circumstances affects an entire region or locale. We stated that if
this determination was made, we will communicate this decision through
routine communication channels to LTCHs and vendors, including, but not
limited to, issuing memos, emails, and notices at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. More information on the LTCHQR Program
exception and extension requirements and processes, and all related
announcements may be found at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
For the FY 2017 payment determination and subsequent years, we are
proposing that we may grant an exception or extension to LTCHs if we
determine that a systemic problem with one of our data collection
systems directly affected the ability of the LTCH to submit data.
Because we do not anticipate that these types of systemic errors will
happen often, we do not anticipate granting a waiver or extension on
this proposed basis frequently. We are proposing that if we make the
determination to grant an exception or extension, we would communicate
this decision through routine communication channels to LTCHs and
vendors, including, but not limited to, issuing memos, emails, and
notices on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We invite public comment on these proposals.
14. Proposed LTCHQR Program Reconsideration and Appeals Procedures for
the FY 2016 Payment Determination and Subsequent Years
a. Previously Finalized LTCHQR Program Reconsideration and Appeals
Procedures for the FY 2014 and FY 2015 Payment Determinations
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50885 through
50887), we finalized a voluntary process that allowed LTCHs the
opportunity to seek reconsideration of our initial noncompliance
decision for the FY 2014 and FY 2015 payment determinations. We refer
readers to that rule for a discussion of this process.
b. Proposed LTCHQR Program Reconsideration and Appeals Procedures for
the FY 2016 Payment Determination and Subsequent Years
For the FY 2016 payment determination and subsequent years, we are
proposing to adopt an updated process, as described below, that will
enable an LTCH to request a reconsideration of our initial
noncompliance decision in the event that an LTCH believes that it was
incorrectly identified as being subject to the 2-percentage point
reduction to its annual payment due to noncompliance with the LTCHQR
Program reporting requirements for a given reporting period.
For the FY 2016 payment determination, and subsequent years, we are
proposing that an LTCH would receive a notification of noncompliance if
we determine that the LTCH did not submit data in accordance with
section 1886(m)(5)(C) of the Act with respect to the applicable fiscal
year and that the LTCH is therefore subject to a 2-percentage point
reduction in the applicable payment determination as required by
section 1886(m)(5)(A)(i) of the Act. We would only consider requests
for reconsideration after an LTCH has been found to be noncompliant and
not before.
An LTCH would have 30 days from the date of the initial
notification of noncompliance to review its payment determination and
submit to us a request for reconsideration. This proposed time frame
would allow us to balance our desire to ensure that LTCHs have the
opportunity to request reconsideration with our need to complete the
process and provide LTCHs with our reconsideration decision in a timely
manner. Notifications of noncompliance and any subsequent notifications
from CMS would be sent via a traceable delivery method, such as
certified U.S. mail or registered U.S. mail. We are proposing that an
LTCH may withdraw its request at any time and may file an updated
request within the proposed 30-day deadline. We also are proposing
that, in very limited circumstances, we may grant a request by an LTCH
to extend the proposed deadline for reconsideration requests. It would
be the responsibility of an LTCH to request an extension and
demonstrate that extenuating circumstances existed that prevented the
filing of the reconsideration request by the proposed deadline.
We also are proposing that as part of the LTCH's request for
reconsideration, the LTCH would be required to submit all supporting
documentation and evidence demonstrating: (1) Full compliance with all
LTCHQR Program reporting requirements during the reporting period; or
(2) extenuating circumstances that affected noncompliance if the LTCH
was not able to comply with the requirements during the reporting
period. We would not review any reconsideration request that fails to
provide the necessary documentation and evidence along with the
request. The documentation and evidence may include copies of any
communications that demonstrate its compliance with the program's
requirements, as well as any other records that support the LTCH's
rationale for seeking reconsideration. A sample list of acceptable
supporting documentation and evidence, as well as instructions for
LTCHs to retrieve copies of the data submitted to CMS for the
appropriate program year can be found on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
We are proposing that an LTCH wishing to request a reconsideration
of our initial noncompliance determination would be required to do so
by submitting an email to the following email address:
LTCHQRPReconsiderations@cms.hhs.gov. Any request for reconsideration
submitted to us by an LTCH would be required to follow the guidelines
outlined on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
Following receipt of a request for reconsideration, we will
provide--
An email acknowledgment, using the contact information
provided in the reconsideration request, to the CEO or CEO-designated
representative that the request has been received; and
Once we have reached a decision regarding the
reconsideration request, an email to the LTCH CEO or CEO-designated
representative, using the contact information provided in the
reconsideration request, regarding our decision.
We are proposing to require an LTCH that believes it was
incorrectly identified as being subject to the 2-percentage point
reduction to its annual

[[Page 28278]]

payment update to submit a timely request for reconsideration and
receive a decision on that request before the LTCH can file an appeal
with the PRRB. If the LTCH is dissatisfied with the decision rendered
at the reconsideration level, the LTCH could appeal the decision with
the PRRB under 42 CFR 405.1835. We believe this proposed process is
more efficient and less costly for CMS and for LTCHs because it
decreases the number of PRRB appeals by resolving issues earlier in the
process. Additional information about the reconsideration process
including requirements for submitting a reconsideration request is
posted on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
We invite public comment on the proposed procedures for
reconsideration and appeals.
15. Electronic Health Records (EHR) and Health Information Exchange
(HIE)
We are also interested in understanding the current state of
electronic health record (EHR) adoption and use of Health Information
Exchange (HIE) in the LTCH community. Therefore, we are soliciting
feedback and input from LTCHs and the public on EHR adoption and HIE
usage. We are especially interested in LTCH feedback and input on the
following questions:
Have you adopted an EHR in your LTCH setting?
If your LTCH setting uses EHRs, what functional aspects of
EHRs do you find most important (for example, the ability to send or
receive transfer of care information; the ability to support medication
orders/medication reconciliation)?
Does the EHR system used in your LTCH setting support
interoperable document exchange with other healthcare providers (for
example, acute care hospitals, physician practices, skilled nursing
facilities, etc.)?
In addition to seeking public feedback and input on the feasibility
and desirability of EHR adoption and use of HIE in LTCHs, we are also
interested in public comment on the need to develop electronic clinical
quality measures, and the benefits and limitations of implementing
these measures for LTCHs.

D. Electronic Health Record (EHR) Incentive Program and Meaningful Use
(MU)

1. Background
The HITECH Act (Title IV of Division B of the ARRA, together with
Title XIII of Division A of the ARRA) authorizes incentive payments
under Medicare and Medicaid for the adoption and meaningful use of
certified electronic health record (EHR) technology (CEHRT). We refer
to this program as the EHR Incentive Program. Eligible hospitals (EHs)
and critical access hospitals (CAHs) may qualify for these incentive
payments under Medicare (as authorized under sections 1886(n) and
1814(l) of the Act, respectively) if they successfully demonstrate
meaningful use of CEHRT, which includes reporting on clinical quality
measures (CQMs) using CEHRT. Sections 1886(b)(3)(B) and 1814(l) of the
Act also establish downward payment adjustments under Medicare,
beginning with fiscal year 2015, for eligible hospitals and CAHs that
are not meaningful users of CEHRT for certain associated reporting
periods. We refer to this part of the EHR Incentive Program as the
Medicare EHR Incentive Program. Sections 1903(a)(3)(F) and 1903(t) of
the Act provide the statutory basis for Medicaid incentive payments.
The set of CQMs from which eligible hospitals and CAHs will report
under the EHR Incentive Program beginning in FY 2014 is listed in Table
10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through
54087). We continue to believe there are important synergies with
respect to the Medicare EHR Incentive Program and the Hospital IQR
Program. We believe the financial incentives under the Medicare EHR
Incentive Program for the adoption and meaningful use of CEHRT by EHs
and CAHs will encourage the adoption and use of CEHRT for the
electronic reporting of CQMs under the Hospital IQR Program. We expect
that the electronic submission of quality data from EHRs under the EHR
Incentive Program will provide a foundation for establishing the
capacity of hospitals to send, and for CMS to receive, CQMs via CEHRT
for certain Hospital IQR Program measures.
2. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures With Hospital IQR
Program Reporting and Submission Timelines
We believe it is important to continue our goal of aligning the EHR
Incentive Program with the Hospital IQR Program because alignment of
these programs will serve to reduce hospital reporting burden and
encourage the adoption and meaningful use of CEHRT by eligible
hospitals and CAHs. Section 1886(n)(3)(B)(iii) of the Act requires
that, in selecting measures and establishing the form and manner for
reporting measures under the EHR Incentive Program, the Secretary shall
seek to avoid redundant or duplicative reporting with reporting
otherwise required, including reporting under section
1886(b)(3)(B)(viii) of the Act (the Hospital IQR Program). The
reporting and submission timelines for the EHR Incentive Program for
eligible hospitals and CAHs currently operate on a Federal fiscal year
basis, while the reporting and submission timelines for the Hospital
IQR Program currently operate on a calendar year basis. This difference
may create confusion and additional burden for hospitals attempting to
report data to both programs. To alleviate this possible confusion,
reduce provider burden, and strengthen our commitment to aligning
programs, we are proposing to align the reporting and submission
periods for clinical quality measures for the Medicare EHR Incentive
Program with that of the Hospital IQR Program on a calendar year basis
in 2015 and 2016.
We realize that aligning the Medicare EHR Incentive Program to the
calendar year would mean shifting the timeline for reporting and
submission of CQMs such that the submission period would continue
through February of the subsequent calendar year rather than ending in
November as it is currently done, and therefore would delay the
incentive eligibility assessment, and subsequently delay the EHR
incentive payments under Medicare made to eligible hospitals and CAHs.
In order to ease the transition of the reporting period to the calendar
year, and to prevent the delay of Medicare EHR incentive payments, we
are proposing to incrementally shift the Medicare EHR Incentive Program
reporting periods for CQMs. Specifically, for 2015 and 2016, we are
proposing for the Medicare EHR Incentive Program to require calendar
year reporting for CQM data that are submitted electronically, but
require that the data be reported only for the first three calendar
quarters (that is, January through March, April through June and July
through September) allowing the reporting period, incentive eligibility
assessment, and incentive payments to remain on their current schedule.
We note that this proposal would only apply for eligible hospitals
and CAHs submitting CQMs electronically for 2015

[[Page 28279]]

and 2016, and that hospitals demonstrating meaningful use for the first
time in 2015 or 2016 would still be required to report CQMs by
attestation for a continuous 90-day period in FY 2015 or 2016, or
report CQMs electronically for a 3-month calendar year quarter, by July
1 of the given year to avoid the Medicare penalty in the subsequent
year as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903
through 50905). Medicaid-only providers would continue to report
according to State requirements. The proposal would not change the
reporting periods or requirements for the meaningful use objectives and
associated measures under 42 CFR 495.6 or for CQMs that are reported by
attestation via the Registration and Attestation System. This proposal
would allow us to align the CQM reporting periods for the Medicare EHR
Incentive Program with that of the Hospital IQR Program without
delaying payment of the Medicare EHR incentive payments for 2015 and
2016.
To further align CQM reporting for the two programs, we are
proposing to require quarterly reporting of electronically reported
CQMs for the Medicare EHR Incentive Program to align with the currently
established quarterly electronic CQM reporting periods for the Hospital
IQR Program. Additionally, the Hospital IQR Program is proposing to
change its submission period for electronic CQMs from annual to
quarterly submission in this rule. We refer readers to the Hospital IQR
Program discussion in section IX.A.7.h. of the preamble of this
proposed rule for more information about this proposal. Therefore, for
the CY 2015 and 2016 reporting periods, we are also proposing to align
the Medicare EHR Incentive Program submission period with that being
proposed for the Hospital IQR Program. The table below illustrates the
current reporting periods, and the following table further illustrates
our proposals.

Current (2014) Timelines for EHR Incentive Program and Hospital IQR Program Reporting and Submission
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
EHR incentive program CQM reporting
requirements
Hospital IQR program reporting
requirements for FY 2016 payment
determination
----------------------------------------------------------------------------------------------------------------
2014 Reporting Period........... FY 2014 October 1, Report one full Q4 CY 2013........ October 1, 2013-
2013-September year OR. December 31,
30, 2014. 2013. N/A for
2014 Hospital IQR
Program
reporting.
----------------------------------------------------------------------------------------------------------------
Report one three- Q1 CY 2014........ January 1-March
month quarter OR. 31, 2014.
Report any Q2 CY 2014........ April 1-June 30,
continuous 90-day 2014.
period.
Q3 CY 2014........ July 1-September
30, 2014.

Submission Period............... Jan 2, 2014-Nov 30, 2014
October 1, 2013-November 30, 2014.
----------------------------------------------------------------------------------------------------------------

Proposed Timelines To Align the EHR Incentive Program With Proposed Hospital IQR Program Reporting and
Submission
----------------------------------------------------------------------------------------------------------------
EHR incentive program Hospital IQR program
CY reporting reporting Submission period **
requirements * requirements
----------------------------------------------------------------------------------------------------------------
2015 Reporting Period........ Q1..... January 1-March 31, January 1-March 31, Data must be submitted by
2015. 2015. May 30, 2015.
Q2..... April 1-June 30, 2015 April 1-June 30, 2015 Data must be submitted by
August 30, 2015.
Q3..... July 1-September 30, July 1-September 30, Data must be submitted by
2015. 2015. November 30, 2015.
Q4..... N/A for EHR Incentive October 1-December For Hospital IQR Program,
Program. 31, 2015. data must be submitted by
February 28, 2016.
2016 Reporting Period........ Q1..... January 1-March 31, January 1-March 31, Data must be submitted by
2016. 2016. May 30, 2016.
Q2..... April 1-June 30, 2016 April 1-June 30, 2016 Data must be submitted by
August 30, 2016.
Q3..... July 1-September 30, July 1-September 30, Data must be submitted by
2016. 2016. November 30, 2016.
Q4..... N/A for EHR Incentive October 1-December For Hospital IQR Program,
Program. 31, 2016. data must be submitted by
February 28, 2017.
----------------------------------------------------------------------------------------------------------------
* Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM
data only.
** Proposed EHR Incentive Program and Hospital IQR Program submission period would allow data submission on an
ongoing basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the
quarter.

We invite public comment on these proposals.
3. Quality Reporting Data Architecture Category III (QRDA-III) Option
in 2015
In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we
finalized two options for eligible hospitals and CAHs to electronically
submit CQMs beginning in FY 2014 under the Medicare EHR Incentive
Program. Option 1 was to electronically submit aggregate-level CQM data
using QRDA-III. Option 2 was to electronically submit data using a
method similar to the 2012 and 2013 EHR Incentive Program electronic
reporting pilot for EHs and CAHs, which used QRDA-I (patient-level
data). We also stated in

[[Page 28280]]

that final rule that, consistent with section 1886(n)(3)(B)(ii) of the
Act, in the event the Secretary does not have the capacity to receive
CQM data electronically, eligible hospitals and CAHs that are beyond
their first year of meaningful use may continue to report aggregate CQM
results through attestation.
We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50904
through 50905) that we had determined that the electronic submission of
aggregate-level data using QRDA-III would not be feasible in 2014 for
eligible hospitals and CAHs under the Medicare EHR Incentive Program.
Therefore, for the 2014 reporting period under the Medicare EHR
Incentive Program, eligible hospitals and CAHs would have the option to
continue to report aggregate CQM results through attestation. We stated
that we would reassess this policy for the 2015 and future reporting
periods.
We have determined that the electronic submission of aggregate-
level data using QRDA-III will not be feasible in 2015 for eligible
hospitals and CAHs under the Medicare EHR Incentive Program. Therefore,
for the 2015 reporting period under the Medicare EHR Incentive Program,
eligible hospitals and CAHs would have the option to continue to report
aggregate CQM results through attestation. We note that submissions of
aggregate CQM data via attestation would not satisfy the reporting
requirements for the Hospital IQR Program, and consistent with our
proposal above regarding alignment of these programs, attested CQM data
would need to be submitted for one full fiscal year in 2015 via the
Registration and Attestation System, and would not require quarterly
submissions. Hospitals in their first year of demonstrating meaningful
use in 2015 would still be required to report CQMs by attestation for a
continuous 90-day period in FY 2015, or report CQMs electronically for
a 3-month calendar year quarter, by July 1, 2015 to avoid the Medicare
penalty in FY 2016 as finalized in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50903 through 50905). We also note that this policy does not
apply to the Medicaid EHR Incentive Program. Therefore, States may
still require the submission of QRDA-III files to fulfill the CQM
reporting requirements for hospitals that participate in the Medicaid
EHR Incentive Program.
In order to remain aligned with the Hospital IQR Program, and
because over 66 percent of hospitals that participate in the Hospital
IQR Program are already meaningful users, we strongly recommend that
hospitals that are eligible to participate in both programs
electronically submit up to 16 electronic clinical quality measures of
the 28 inpatient measures identified by the Hospital IQR Program. We
believe that keeping the two programs aligned will ultimately reduce
reporting burden for hospitals. We note again that reporting via
attestation would not count towards the reporting requirements for the
Hospital IQR Program.
4. Electronically Specified Clinical Quality Measures (CQMs) Reporting
for 2015
In the EHR Incentive Program Stage 2 final rule, we finalized the
CQMs that eligible hospitals and CAHs would be required to report for
purposes of meeting the CQM component of meaningful use under the EHR
Incentive Program starting in 2014 (77 FR 54083 through 54077 Table
10). These CQMs are updated routinely to account for changes, including
but not limited to changes in billing and diagnosis codes and changes
in medical practices. The requirements specified in the EHR Incentive
Program Stage 2 final rule allow for the reporting of different
versions of the CQMs. For 2015, it is not technically feasible for CMS
to accept data that is electronically reported according to the
specifications of the older versions of the CQMs, including versions
that may be allowed for reporting under the EHR Incentive Program. We
stated in the EHR Incentive Program Stage 2 final rule that, consistent
with section 1886(n)(3)(B)(ii) of the Act, in the event that the
Secretary does not have the capacity to receive CQM data
electronically, eligible hospitals and CAHs may continue to report
aggregate CQM results through attestation (77 FR 54088). We are
proposing that eligible hospitals and CAHs that seek to report CQMs
electronically under the Medicare EHR Incentive Program must use the
most recent version of the electronic specifications for the CQMs and
have CEHRT that is tested and certified to the most recent version of
the electronic specifications for the CQMs.
Eligible hospitals and CAHs that do not wish to report CQMs
electronically using the most recent version of the electronic
specifications (for example, if their CEHRT has not been certified for
that particular version) would be allowed to report CQM data by
attestation for the Medicare EHR Incentive Program.
We invite public comment on these proposals.
5. Clarification Regarding Reporting Zero Denominators
As we stated in the EHR Incentive Program Stage 2 final rule (77 FR
54079) we expect eligible hospitals and CAHs to adopt EHR technology
that includes CQMs relevant to each eligible hospital's or CAH's
patient mix. We understand, however, that there are situations in which
an eligible hospital or CAH does not have data to report on a
particular CQM, and its EHR is not certified to additional CQMs that
can be used to replace that CQM with another for which it has data. For
example, a health system with multiple eligible hospitals or CAHs may
have an EHR certified for 16 CQMs, which is the minimum number of
required CQMs for reporting, but not all of the eligible hospitals or
CAHs in the health system may have cases to report on those particular
16 CQMs. We have received questions on how eligible hospitals and CAHs
should meet their reporting requirements in this situation; therefore,
we are clarifying our policy as set forth below regarding the reporting
of a zero denominator for the purposes of the EHR Incentive Program and
the Hospital IQR Program.
If the eligible hospital's or CAH's EHR is certified to a CQM, but
the eligible hospital or CAH does not have patients that meet the
denominator criteria of that CQM, the eligible hospital or CAH can
submit a zero in the denominator for that CQM. Submission of a zero in
the denominator for a CQM counts as a successful submission for that
CQM for both the EHR Incentive Program and the Hospital IQR Program.
For example, if the eligible hospital or CAH within the previously
mentioned health system does not provide maternity services, but one of
the 16 CQMs the health system's EHR is certified to is a maternity
measure, that eligible hospital's or CAH's EHR may render a zero in the
denominator for that CQM. The eligible hospital or CAH would therefore
report a zero denominator for that maternity care CQM, and this would
count toward the 16 required CQMs for the EHR Incentive Program and the
Hospital IQR Program. Eligible hospitals or CAHs within that health
system for which that maternity CQM does apply would provide data on
that measure.
6. Case Threshold Exemption Policy; Clarification for 2014 and Proposed
Change for 2015
In the EHR Incentive Program--Stage 2 final rule (77 FR 54080), we
finalized the policy that eligible hospitals and CAHs that have 5 or
fewer discharges per quarter in the same quarter as their

[[Page 28281]]

reporting period in FY 2014, or 20 or fewer discharges per full FY
reporting period beginning in FY 2015, for which data are being
electronically submitted (Medicare and non-Medicare combined) as
defined by the clinical quality measure's denominator population are
exempted from reporting the CQM. To be eligible for the exemption,
eligible hospitals and CAHs must submit their aggregate population and
sample size counts for Medicare and non-Medicare discharges for the CQM
for the reporting period.
In the Health Information Technology: Revisions to the 2014 Edition
Electronic Health Record Certification Criteria; and Medicare and
Medicaid Programs; Revisions to the Electronic Health Record Incentive
Program interim final rule, we revised the case threshold exemption
policy to make it applicable for eligible hospitals and CAHs in all
stages of meaningful use beginning with FY 2013, including those that
are demonstrating meaningful use for the first time and submitting CQMs
by attestation (77 FR 72988 through 72989). Eligible hospitals and CAHs
with 5 or fewer discharges during the relevant EHR reporting period (if
attesting to a 90-day EHR reporting period), or 20 or fewer discharges
during the year (if attesting to a full year EHR reporting period) as
defined by the CQM's denominator population would be exempted from
reporting on that CQM.
We stated in the interim final rule (77 FR 72989) that beginning in
FY 2014, the reporting requirement is to report 16 CQMs covering at
least 3 domains from a list of 29 CQMs. We stated further that in order
to be exempted from reporting fewer than 16 CQMs, the eligible hospital
or CAH would need to qualify for the case threshold exemption for more
than 13 of the 29 CQMs. If the eligible hospital or CAH does not meet
the criteria for a case threshold exemption for 13 or more CQMs, the
eligible hospital or CAH would be able to report at least 16 CQMs.
Likewise, we stated that if the CQMs for which the eligible hospital or
CAH can meet the case threshold of discharges do not cover at least 3
domains, the eligible hospital or CAH would be exempt from the
requirement to cover the remaining domains. For example, if the
eligible hospital or CAH does not meet the case threshold of discharges
for 13 clinical quality measures, and thus could report 16 clinical
quality measures, but the 16 clinical quality measures cover only 2 of
the 3 domains, the eligible hospital or CAH would be exempt from
covering the third domain.
For the reporting periods in 2014, our policy requires that an
eligible hospital or CAH that claims a case threshold exemption for one
CQM must choose another CQM on which to submit data, or continue to
invoke the case threshold exemption until it exceeds 13 case threshold
exemptions and may therefore report fewer than the 16 required CQMs.
This policy assumes that the eligible hospital or CAH has an EHR that
is certified to more than the minimum of 16 CQMs, and the eligible
hospital or CAH has other CQMs in its EHR to choose from for reporting.
We realize, however, that there could be many EHRs that are certified
to only the minimum of 16 CQMs required by ONC's regulations at 45 CFR
170.102 (the definition of ``Base EHR''), and for eligible hospitals
and CAHs using those EHRs, this policy may result in the eligible
hospital or CAH needing to submit data on a CQM for which the EHR is
not certified. It was not our intent to have eligible hospitals or CAHs
report on measures for which their EHRs are not certified.
Beginning with the reporting periods in 2015, we are proposing to
change the case threshold exemption policy so that if an eligible
hospital or CAH qualifies for an exemption from reporting on a
particular CQM, the exemption would count toward the 16 required CQMs.
For example, if the eligible hospital's or CAH's EHR is certified to
report 16 CQMs, and for one of those CQMs the eligible hospital or CAH
has 5 or fewer discharges during the relevant EHR reporting period (if
attesting to a 90-day EHR reporting period), or 20 or fewer discharges
during the year (if attesting to a full year EHR reporting period) as
defined by the CQM's denominator population, the eligible hospital or
CAH would report data for the 15 CQMs for which the case threshold
exemption does not apply, and invoke a case threshold exemption for the
one CQM for which the exemption does apply for a total of 16 CQMs.
We expect eligible hospitals and CAHs to adopt EHR technology that
includes CQMs relevant to the eligible hospital's or CAH's case mix,
though we understand that in some cases, the eligible hospital or CAH
may not meet the case threshold of discharges for a particular CQM. We
believe this proposed policy better reflects our intent for eligible
hospitals and CAHs to report on only those measures for which their
EHRs are certified while meeting the reporting requirements for the EHR
Incentive Program and Hospital IQR Program.
We invite public comment on this proposal.

X. Proposed Revision of Regulations Governing Use and Release of
Medicare Advantage Risk Adjustment Data

A. Background

Section 1853 of the Act requires the Secretary to make payments to
Medicare Advantage (MA) organizations offering local and regional MA
plans with respect to coverage of individuals enrolled under Medicare
Part C. Section 1853(a)(1)(C) of the Act requires the Secretary to
adjust such payments for such risk factors as age, disability status,
gender, institutional status, and such other factors as the Secretary
determines appropriate, including health status. To support these risk
adjustments, section 1853(a)(3)(B) of the Act requires submission of
data by MA organizations regarding the services provided to enrollees
and other information the Secretary deems necessary but does not limit
the Secretary's use of such data or information. In addition, section
1106 of the Act authorizes the Secretary to adopt regulations governing
release of information gathered in the course of administering programs
under the Act.
Implementing regulations at 42 CFR 422.310 set forth the
requirements for the submission of risk adjustment data that CMS uses
to risk-adjust payments. MA organizations must submit data, in
accordance with CMS instructions, to characterize the context and
purposes of items and services provided to their enrollees by a
provider, supplier, physician, or other practitioner. Section
422.310(d)(1) provides that MA organizations submit risk adjustment
data to CMS as specified by CMS. This includes comprehensive data
equivalent to Medicare fee-for-service claims data (often referred to
as encounter data) or data in abbreviated formats. Section 422.310(f)
currently specifies CMS' uses of the risk adjustment data.
In this proposed rule, we are proposing to revise the existing
regulation at Sec. 422.310(f) to broaden the specified uses of risk
adjustment data in order to strengthen program management and increase
transparency in the MA program and to specify the conditions for
release of risk adjustment data to entities outside of CMS.

B. Proposed Regulatory Changes

1. Proposed Expansion of Uses and Reasons for Disclosure of Risk
Adjustment Data
We are first proposing to revise a reference in existing Sec.
422.310(f) (now proposed paragraph (f)(1)) from ``data obtained under
this section'' to ``data described in paragraphs (a) through (d) of
this section'' in order to indicate that

[[Page 28282]]

the data used or released under proposed paragraph (f)(1) would not
include the medical records and other data collected separately under
paragraph (e) for the purpose of risk adjustment data validation (RADV)
audits. We do not intend for the proposed Sec. 422.310(f) to authorize
any additional use or release of the data described in paragraph (e).
The data described in paragraphs (a) through (d) would include those
elements that constitute an encounter data record, including contract,
plan, and provider identifiers, with the exception of disaggregated
payment data as discussed below. In addition, we note that paragraph
(d)(1) also authorizes the collection of abbreviated data.
The existing regulation at Sec. 422.310(f) specifies five purposes
for which CMS may use risk adjustment data obtained from MA
organizations. We are clarifying in this proposed rule that CMS' uses
of these data may include disclosure to CMS contractors or other agents
that perform activities or analyses on CMS' behalf in connection with
authorized use of the data. The existing specified purposes are: (1) To
determine the risk adjustment factors used to adjust payments, as
required under Sec. Sec. 422.304(a) and (c); (2) to update risk
adjustment models; (3) to calculate Medicare DSH percentages; (4) to
conduct quality review and improvement activities; and (5) for Medicare
coverage purposes. Under our proposal, paragraph (f) would be
restructured to identify the purposes for which CMS may use and release
risk adjustment data and to impose certain conditions on any release of
that data.
We are proposing to revise paragraph (f) to add four purposes for
which CMS may use risk adjustment data submitted by MA organizations:
(1) To conduct evaluations and other analysis to support the Medicare
program (including demonstrations) and to support public health
initiatives and other health care-related research; (2) for activities
to support the administration of the Medicare program; (3) for
activities conducted to support program integrity; and (4) for purposes
permitted by other laws. These new authorized purposes are proposed at
Sec. 422.310(f)(1)(vi) through (f)(1)(ix). In general, we anticipate
that comprehensive risk adjustment data submitted by MA organizations,
which MA organizations began submitting to CMS effective CY 2012, will
enable CMS to generate improved data analyses that could support
Medicare program evaluations, demonstration designs, and CMS' effective
and efficient operational management of the Medicare program. Risk
adjustment data also could be useful to support public health
initiatives by governmental entities and to advance health care-related
research by universities and other research organizations. We also
believe that risk adjustment data can support CMS' program integrity
activities in the Medicare program and other Federal health care and
related programs; we intend this general term to encompass audits,
investigations, efforts to combat waste, fraud, and abuse, and any
other actions designed to ensure that the program operates within its
authority. This includes audits, evaluations, and investigations by the
Office of the Inspector General (OIG) as well as CMS' own efforts. In
addition, risk adjustment data may be useful in supporting Medicare
administrative activities, such as the review of the validity of bid
and medical loss ratio data submitted by MA organizations. Finally, we
are proposing to acknowledge that other laws may permit other uses of
risk adjustment data and that this regulation is not intended to
supersede such other laws.
Regarding the use of risk adjustment data outside of CMS, we are
proposing at Sec. 422.310(f)(2) that other HHS agencies, other Federal
executive branch agencies, States, and external entities would only be
able to obtain from CMS and use risk adjustment data for one or more of
the purposes listed in proposed paragraph (f)(1). An external entity
may be an individual, group, or organization. We anticipate that other
HHS agencies and other Federal executive branch agencies may request
this data for the same purposes CMS proposes to use the data and
believe such use is appropriate. Under our proposal, other agencies
that evaluate and analyze the Medicare program, perform health care-
related research, support public health initiatives, perform activities
in the administration of the Medicare program, or conduct activities to
support program integrity in the Medicare program and other Federal
health care and related programs would be able to access and use risk
adjustment data for these purposes. States, such as while conducting
program integrity activities for Medicaid programs or in the
administration of Medicare-Medicaid demonstrations (for example, refer
to the Web site at: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/FinancialModelstoSupportStatesEffortsinCareCoordination.html), may
access and use risk adjustment data under this proposal. We anticipate
that nongovernmental external entities would generally only gain access
to risk adjustment data under this proposal in connection with public
health initiatives and health care-related research, as such external
entities appear to have limited, if any, roles in the other purposes
identified in our proposal.
CMS is seeking to balance protection of confidential beneficiary
information and the proprietary interests of MA organizations with the
need to effectively administer Federal health care programs and to
encourage research into better ways to provide health care. CMS is
seeking public comments on the proposed uses and release of data and
how else to achieve the necessary balance. In particular, we are
soliciting public comment on the extent to which a commercial purpose
underlying a request for risk adjustment data should be a factor in
evaluating whether the request is for one of the purposes that permit a
disclosure under this regulation or if one of the purposes in paragraph
(f)(1) of Sec. 422.310, for which CMS would disclose data under this
section, should address commercial uses of the data.
2. Proposed Conditions for CMS Release of Data
The existing regulations at Sec. 422.310 do not specify conditions
for release by CMS of risk adjustment data that are submitted by MA
organizations to CMS. We are proposing to add a paragraph (2) to Sec.
422.310(f) to address CMS' release of such data to non-CMS entities.
First, as discussed above in connection with proposed paragraph (f)(1),
our proposal is limited to the risk adjustment data described in Sec.
422.310(a) through (d) and does not include the medical records and
other data collected separately under paragraph (e) for the purpose of
risk adjustment data validation (RADV) audits. We do not intend for the
proposed revision to Sec. 422.310(f) to authorize any additional use
or release of the data described in paragraph (e).
Second, we are proposing that CMS would release only the minimum
data that CMS determines is necessary to fulfill the analytical or
operational goal for a particular project. In other words, CMS may
determine that the appropriate data release for an approved research
project is a subset of encounter data records requested to conduct the
proposed inquiry (instead of all encounter data in CMS' systems for all
years and provider types) or is a subset of the abbreviated data
requested.
Third, we are proposing that CMS may release data under this
authority to

[[Page 28283]]

Federal executive branch agencies, States, and external entities, only
for purposes identified in paragraph (f)(1) (discussed above) and
subject to a number of additional limitations: (i) Applicable Federal
laws; (ii) CMS data sharing procedures; (iii) protection of beneficiary
identifier elements and beneficiary confidentiality, including: (A) a
prohibition against public disclosure of beneficiary identifying
information; (B) release of beneficiary identifying information to
other HHS agencies, other Federal executive branch agencies,
Congressional support agencies, and States only when such information
is needed to accomplish the purpose(s) of the disclosure; and (C)
release of beneficiary identifying information to external entities
only to the extent needed to link datasets; and (iv) the aggregation of
payment data to protect commercially sensitive data.
These limitations are included at proposed paragraphs (f)(2)(i)
through (f)(2)(iv), respectively, of Sec. 422.310. We are soliciting
public comment on other conditions or limitations on the release of
this data that will help maintain a balance between protecting
confidential and proprietary information with the need to effectively
administer Federal health care programs and to encourage research into
better ways to provide health care.
Under the provisions at proposed Sec. 422.310(f)(2)(iv), we would
not release payment data at the encounter level. We believe that
release of payment data at the level of the encounter record might
reveal proprietary negotiated payment rates between MA plans and
providers. Given the commercially sensitive nature of this information,
we are not proposing to release payment data at the level of the
encounter record. In the interest of providing as much transparency as
possible, while at the same time protecting proprietary information, we
are proposing to authorize release of aggregate payment information.
For example, we could aggregate the payment data by service category,
by plan, by contract, or across contracts. We are seeking public
comments on these or other approaches to aggregating payment data for
release and whether the specified options are sufficiently aggregated
to protect commercially sensitive information. In addition, we are
seeking public comment on our conclusion that releasing payment rates
at the level of the encounter data record would reveal proprietary
negotiated payment rates. Specifically, we are requesting public
comment on what strategies might be used under which payment data could
be released while protecting commercially sensitive information.
To the extent that a requestor has separate statutory authority for
requiring CMS disclosure of data, these proposed provisions do not
limit or supersede such authority. For example, some Congressional
support agencies may compel release of data under separate statutory
authority, such as 31 U.S.C. 716; 2 U.S.C. 166(d)(1) and 601(d); and
section 1805 of the Act (42 U.S.C. 1395b-6), for the purposes of
conducting Congressional oversight, monitoring, making recommendations
and analysis of the Medicare program. In addition, the OIG has separate
statutory authority under section 1128J of the Act (42 U.S.C. 1320a-
7k), coupled with section 6(a) of the Inspector General Act of 1978 (5
U.S.C. App. 3) authorizing the OIG to access data as necessary to
perform its responsibilities. This regulation would not limit that
authority.
3. Proposed Technical Change
We are proposing to amend Sec. 422.300, which identifies the basis
and scope of the regulations for payments to MA organizations, to add a
reference to section 1106 of the Social Security Act, which governs the
release of information gathered in the course of administering our
programs under the Act.

XI. Proposed Changes to Enforcement Provisions for Organ Transplant
Centers

A. Background

In February 2004, the Office of the Inspector General (OIG)
published a report entitled ``Medicare-Approved Heart Transplant
Centers'' (OEI-01-02-00520), in which the OIG outlined three
recommendations for CMS' oversight of heart transplant centers: (1)
That CMS expedite the development of continuing criteria for volume and
survival-rate performance and for periodic recertification; (2) that
CMS develop guidelines and procedures for taking actions against
centers that do not meet Medicare criteria for volume and survival-rate
performance requirements; and (3) that CMS take immediate steps to
improve its ability to maintain accurate and timely data regarding the
performance of transplant centers.
As part of CMS' efforts to strengthen oversight of organ transplant
centers, we published the final rule ``Medicare Program: Hospital
Conditions of Participation, Requirements for Approval and Reapproval
of Transplant Centers To Perform Organ Transplants'' on March 30, 2007
in the Federal Register (72 FR 15198) that established conditions of
participation (CoPs) for organ transplant centers and applied the
survey and certification enforcement process (that is used for all
other providers and suppliers of Medicare services) to Medicare-
approved transplant centers. In the preamble of that final rule, we
discussed our efforts to improve organ donation and transplantation
services and our goals to: (1) Protect patients who are awaiting organs
for transplantation; (2) establish key quality and procedural
standards; and (3) improve outcomes for patients (such as patient
survival) and reduce Medicare expenses by decreasing the likelihood
that a transplant would fail.
In the March 30, 2007 final rule, we codified the CoPs for
transplant centers at 42 CFR Part 482, Subpart E (Sec. Sec. 482.68
through 482.104) and the special procedures for approval and re-
approval of organ transplant centers at 42 CFR 488.61. The CoPs set
forth explicit expectations for outcomes, patient safety, informed
choice, and quality of transplantation services. In particular,
Sec. Sec. 482.80 and 482.82 specify that a transplant center's
outcomes are not acceptable if, among other factors, the number of
observed patient deaths or graft failures 1 year after receipt of a
transplant exceeds the risk-adjusted expected number by 1.5 times,
based on the most recent program-specific report from the Scientific
Registry of Transplant Recipients (SRTR).
Failure to meet the transplant center requirements will lead CMS to
deny approval or re-approval of a center's Medicare participation under
Sec. 488.61. However, Sec. Sec. 488.61(a)(4) and (c)(4) authorize CMS
to consider mitigating factors when determining approval and re-
approval, respectively, for a transplant center that has not met the
data submission, clinical experience, or outcome requirements, or other
CoPs, if the center submits a formal, written request for such a
review. The existing regulations do not limit the factors that CMS may
consider, but enumerates, at a minimum, the following factors to be
considered: (1) The extent to which outcome measures are met or
exceeded; (2) the availability of Medicare-approved transplant centers
in the area; and (3) extenuating circumstances that may have a
temporary effect on a transplant center meeting the requirements under
the CoPs, such as a natural disaster. CMS approval or re-approval based
on mitigating factors permits a transplant center to operate as a
Medicare-approved transplant center under certain circumstances despite
a finding of noncompliance. Under existing regulations at

[[Page 28284]]

Sec. Sec. 488.61(b)(4)(iv) and (c)(4)(iv), CMS will not approve a
center with condition-level deficiencies but may re-approve a center
with standard-level deficiencies.

B. Basis for Proposals in This Proposed Rule

In this proposed rule, we are proposing to strengthen, clarify, and
provide additional transparency for the survey, certification, and
enforcement procedures under Sec. 488.61 for transplant centers that
are requesting initial approval or re-approval for participation in the
Medicare program when the centers have not met one or more of the CoPs
but wish to have certain mitigating factors taken into consideration.
1. Proposed Expansion of Mitigating Factors Based on CMS' Experience
The existing organ transplant enforcement regulation at Sec.
488.61 does not provide detailed information on the factors generally
needed for approval or re-approval of a request based on mitigating
factors that a transplant center may make in order to participate, or
continue to participate, in Medicare. However, since the adoption of
the organ transplant CoPs and corresponding enforcement regulations, we
have expanded our knowledge regarding: (a) The factors and processes
that promote improvement in transplant center outcomes; and (b) other
mitigating factors that merit explicit recognition under CMS
regulations.
The preponderance of requests for initial approval or re-approval
based on mitigating factors that we have approved are for the
transplant centers that have been able to effect substantial program
improvements and, based on meaningful post-transplant survival data,
demonstrated much-improved patient and graft survival subsequent to
those program reforms. These performance improvements occurred after
the program was cited for substandard performance by CMS and was at
risk of losing Medicare participation, usually while the program was
operating during the mitigating factors review process or under a
binding Systems Improvement Agreement (SIA) with CMS. Under an SIA, CMS
agrees to extend the effective date of a prospectively scheduled
termination from Medicare participation (that is, denial of re-
approval) and holds in temporary abeyance a final review of the
transplant center's mitigating factors request if the transplant center
agrees to engage in a structured regimen of quality improvement to
improve performance during a specified period of time. At the end of
the SIA period (typically 12 months), we review the transplant center's
performance and make a final decision as to whether: (a) The transplant
center's patient and graft survival is within the acceptable limits set
forth in the regulations; or (b) the transplant center qualifies for
approval or re-approval based on mitigating factors.
As of August 2013, CMS had rendered a final determination for 129
requests for approval to operate as a Medicare-approved transplant
center based on mitigating factors. Of those determinations, 48 of the
requests (37.8 percent) were approved based on information provided by
the transplant center on its mitigating factors alone (that is, without
entering into an SIA) because the transplant center had implemented
substantial program improvements during the extended CMS review period,
and CMS concluded that the most recent patient and graft survival data
(taking into consideration the lag time in data inherent in the SRTR
reports) demonstrated compliance with outcome requirements; 33 of the
requests (25.6 percent) were eventually approved on the basis of the
transplant center's successful SIA completion and much-improved
outcomes data for the affected program; 24 of the requests (18.6
percent) involved transplant centers that were approved and the
transplant centers were permitted to continue operation because CMS
determined that the transplant centers met the outcome requirements
during the time period it took for CMS to review the mitigating factors
request; 2 of the requests (1.6 percent) were approved where the
transplant center did not enter into a SIA but had made extensive use
of innovative practices that were not included in the SRTR risk-
adjustment methodology; 2 of the requests (1.6 percent) were approved
because natural disasters temporarily impacted the transplant centers;
and 20 of the requests (15.5 percent) were denied because the center
failed to meet the outcome or clinical experience requirements and
therefore voluntarily withdrew its participation from the Medicare
program.
2. Coordination With Efforts of the Organ Procurement and
Transplantation Network (OPTN) and Health Resources and Services
Administration
When we adopted the outcome standards for transplant programs in
2007, we sought to harmonize CMS' outcome standards with standards of
the Organ Procurement and Transplantation Network (OPTN) so that
transplant centers would have a single, consistent set of outcome
expectations on which to focus. We also sought to organize CMS
activities in a manner that would reinforce and continue the OPTN as
the first line of external review and quality improvement for
transplant centers.
The OPTN is the unified transplant network established under the
National Organ Transplant Act (NOTA) of 1984. The NOTA called for the
network to be operated by a private, nonprofit organization under
Federal contract. The OPTN is a public-private partnership that links
all of the professionals involved in the donation and transplantation
system. The primary goals of the OPTN are to: (a) Increase the
effectiveness and efficiency of organ-sharing and equity in the
national system of organ allocation; and (b) increase the supply of
donated organs available for transplantation. For more details about
the OPTN, we refer readers to the Web site at: https://optn.transplant.hrsa.gov/optn/profile.asp.
The OPTN and the Health Resources and Services Administration
(HRSA) are considering adoption of an alternative methodology for
calculating expected transplant outcomes, known as the ``Bayesian''
methodology, and for setting a threshold that would ``flag'' a
transplant center for OPTN review of performance. However, CMS has
insufficient experience with the new ``Bayesian'' methodology, and
insufficient data to determine an appropriate threshold for a Medicare
outcomes deficiency under a ``Bayesian'' methodology. Therefore, we are
not proposing any changes in our regulations regarding this new
methodology. However, we wish to continue to coordinate with, and
reinforce, the OPTN's efforts if the OPTN chooses to adopt a new
methodology. Therefore, we are proposing that if a program has been
cited for an outcomes deficiency by CMS, but has not been flagged for
review by the OPTN, CMS would take these facts into consideration if
the transplant program has requested approval based on mitigating
factors. For a perspective on the ``Bayesian'' methodology, we refer
readers to the Web site at: https://www.srtr.org/faqs/16.aspx.

C. Provisions of the Proposed Regulations

We are proposing to revise the regulations at Sec. 488.61 to
include specific additional provisions describing and expanding the
mitigating factors that CMS may consider when determining requests and
explain the conditions under which each factor would apply.

[[Page 28285]]

1. Proposed Expansion of Mitigating Factors List
Existing Sec. Sec. 488.61(a)(4) and (c)(4) provide three specific
mitigating factors for review by CMS when determining whether a
transplant center can be approved or re-approved, respectively, based
on mitigating factors. These mitigating factors are: (1) The extent to
which outcome measures are met or exceeded; (2) the availability of
Medicare-approved transplant centers in the area; and (3) extenuating
circumstances that may have a temporary effect on meeting the CoPs. We
are proposing to move the listing of mitigating factors from paragraphs
(a)(4)(i) through (a)(4)(iii) and (c)(4)(i) through (c)(4)(iii) to new
proposed paragraphs (f), (g), and (h) under Sec. 488.61, and to
include additional factors under these three new proposed paragraphs
that may be reviewed in addition to the existing three factors. We are
proposing to move existing paragraphs (a)(4)(iv) and (c)(4)(iv) to the
proposed new paragraph (g)(2). We also are proposing to provide
clarification of the existing three mitigating factors and the
conditions under which they would apply. Finally, we are proposing to
revise existing paragraphs (a)(4) and (c)(4) of Sec. 488.61 to include
cross-references to the new proposed paragraphs (f), (g), and (h).
Under proposed new paragraph (f) of Sec. 488.61, we are proposing
to relist the existing three mitigating factors under paragraphs
(a)(4)(i) through (a)(4)(iii) and paragraphs (c)(4)(i) through
(c)(4)(iii) and expand the mitigating factors that CMS may consider by
adding more description to those factors, as well as by adding new
factors for review. We also are proposing to specify the procedures and
timeframes for transplant centers to request consideration for approval
based on mitigating factors.
Specifically, in proposed new paragraph (f)(1), we are proposing to
specify the mitigating factors, except for situations of immediate
jeopardy, as follows:
The extent to which outcome measures are not met or
exceeded (existing paragraphs (a)(4)(i) and (c)(4)(i); now proposed
paragraph (f)(1)(i)).
Availability of Medicare-approved transplant centers in
the area (existing paragraphs (a)(4)(ii) and (c)(4)(ii); now proposed
paragraph (f)(1)(ii)).
Extenuating circumstances (for example, natural disaster)
that may have a temporary effect on meeting the CoPs (existing
paragraphs (a)(4)(iii) and (c)(4)(iii); now proposed paragraph
(f)(1)(iii)).
Program improvements that substantially address root
causes of graft failures or patient deaths and that have been
implemented and institutionalized on a sustainable basis (proposed new
paragraph (f)(1)(iv)).
Recent patient and graft survival data to determine if
there is sufficient clinical experience and survival for CMS to
conclude that the program is in compliance with CMS requirements,
except for the data lag inherent in the reports from the SRTR (proposed
new paragraph (f)(1)(v)).
Extensive use of innovative transplantation practices
relative to other transplant programs, such as a high rate of
transplantation of individuals who are highly sensitized or children
who have undergone the Fontan procedure, where CMS finds that the
innovative practices are supported by evidence-based, published
research or nationally recognized standards or Institutional Review
Board (IRB) approvals, and the SRTR risk-adjustment methodology does
not take the relevant key factors into consideration (proposed new
paragraph (f)(1)(vi)).
The program's performance, based on the OPTN method of
calculating patient and graft survival, is within the OPTN's thresholds
for acceptable performance and does not flag OPTN performance review
under the applicable OPTN policy (proposed new paragraph (f)(1)(vii)).
Under proposed new paragraph (f)(2), we are proposing to include
details on the content of the request for consideration of mitigating
factors, based on examples that have proven to be most useful in
considering successful mitigating requests. Specifically, we are
proposing that a request for consideration of mitigating factors
include sufficient information to permit an adequate review and
understanding of the transplant program, the factors that have
contributed to outcomes, program improvements or innovations that have
been implemented or planned, and, in the case of natural disasters, the
recovery actions planned. Examples of information to be submitted with
each request could include, but are not limited to, the following:
(i) The name and contact information for the transplant hospital
and the names and roles of key personnel of the transplant program;
(ii) The type of organ transplant program(s) for which approval is
requested;
(iii) The CoPs that the program failed to meet, and with respect to
which the transplant center is requesting CMS' review of mitigating
factors;
(iv) The rationale and relevant supporting evidence for CMS' review
must include, but not be limited to--
[cir] Root Cause Analysis of patient deaths and graft failures,
including factors the program has identified as likely causal or
contributing factors for patient deaths and graft failures;
[cir] Program improvements or innovations (where applicable) that
have been implemented and improvements that are planned;
[cir] Patient and donor/organ selection criteria and evaluation
protocols, including methods for pre-transplant patient evaluation by
cardiologists, hematologists, nephrologists, and psychiatrists or
psychologists, to the extent applicable;
[cir] Organizational chart with full-time equivalent levels, roles,
and structure for reporting to hospital leadership;
[cir] Waitlist management protocols and practices relevant to
outcomes;
[cir] Pre-operative management protocols and practices;
[cir] Immunosuppression/infection prophylaxis protocols;
[cir] Post-transplant monitoring and management protocols and
practices;
[cir] Quality Assessment and Performance Improvement (QAPI) Program
meeting minutes from the most recent four meetings and attendance
rosters from the most recent 12 months;
[cir] Quality dashboard and other performance indicators;
[cir] Recent outcomes data for both patient survival and graft
survival; and
[cir] Documentation of whether the program has engaged with the
OPTN to review program outcomes, the status of any such review, and any
steps taken to address program outcomes in accordance with the OPTN
review.
Under proposed new paragraph (f)(3), we are proposing to specify a
timeline for the transplant program to submit a request for mitigating
factors and to make clear that, for requests related to clinical
experience or outcomes, the program has additional time within which to
submit supporting information. Specifically, we are proposing that
within 10 days after CMS has issued formal written notice of a
condition-level deficiency to the program, CMS must receive notice of
the program's request to seek consideration of mitigating factors. CMS
would require that all information necessary for consideration be
received within 30 days of CMS' initial notification for any
deficiency, except a deficiency based on insufficient clinical
experience or outcomes; and within 120 days of CMS' written
notification for a

[[Page 28286]]

deficiency based on insufficient clinical experience or outcomes.
Failure of a transplant program to meet these timeframes may be the
basis for denial of requests for consideration based on mitigating
factors.
2. Content and Timeframe for Mitigating Factors Requests
Under proposed new Sec. 488.61(g), we propose to clarify and
expand on the description of the mitigating factors application and
review process. Under existing regulations, a transplant center seeking
initial approval or re-approval of Medicare participation based on the
presence of mitigating factors is required to submit a formal written
request to the CMS Central Office, as described earlier. If there are
no deficiencies that constitute immediate jeopardy to a patient's
health and safety, in limited circumstances, CMS may approve continued
Medicare participation based on mitigating factors. However, where a
transplant program demonstrates that it is making significant progress
toward correction and program improvement, but does not yet qualify for
approval based on mitigating factors, we believe there may be merit in
many cases to temporarily extend the effective date of the program's
Medicare participation termination in exchange for a hospital's
agreement to engage in a significant and directed regimen of further
quality improvement under a Systems Improvement Agreement (SIA). As we
noted above, programs that have entered into SIAs have demonstrated
significant improvements. Therefore, we are proposing to provide an
explicit procedure in the regulations at proposed new Sec.
488.61(g)(1)(iii) for CMS to offer an SIA and hold in abeyance a final
decision on the mitigating factors request until the SIA period has
ended. Proposed new paragraphs (g)(1)(i), (g)(1)(ii), and (g)(1)(iii)
outline the three outcomes of CMS mitigating factors decisions: (i)
Initial approval or re-approval of a program's Medicare participation
based upon consideration of mitigating factors; (ii) denial of the
program's request; or (iii) offer of a time-limited SIA when a
transplant program has waived its appeal rights, has committed to
substantial program improvements that address root causes and are
institutionally supported by the hospital's governing body on a
sustainable basis, and has requested more time to design or implement
additional improvements or demonstrate compliance with CMS outcome
requirements. The proposed new paragraph (g)(1)(iii) would clarify
that, during the SIA, CMS holds the mitigating factors request in
abeyance and makes a final decision to approve or deny Medicare
participation when the SIA is ended, based on the results of the
program's performance of the SIA.
Existing regulations at Sec. Sec. 488.61(a)(4)(iv) and (c)(4)(iv))
state that CMS will not approve any program with a condition-level
deficiency. However, CMS could approve a program with a standard-level
deficiency upon receipt of an acceptable plan of correction. A
condition-level deficiency represents a serious classification and,
unless the deficiency is remedied, precludes a provider from
participating in Medicare. A standard-level deficiency represents a
less serious deficiency, such as one in which just a small part of a
CoP is found to be out of compliance. We are proposing to move this to
the proposed new paragraph Sec. 488.61(g)(2).
3. System Improvement Agreements (SIAs)
We are proposing to add proposed new paragraph (h) to Sec. 488.61
to set forth the purpose, intent, and contents of an SIA and the
timeframes for an approved SIA with CMS.
a. Purpose and Intent of an SIA
Based on information and documentation provided by the transplant
program at the time of its request, CMS may determine that, despite a
deficiency or deficiencies, the transplant center has made substantial
progress, has full support of the hospital governing body, and is on a
quality improvement path that promises to improve prospects for patient
survival. In such cases, we exercise our limited discretion to offer
the transplant program the opportunity to enter into an SIA. In the
absence of a written request for consideration on the basis of
mitigating factors, CMS would otherwise proceed with the proposed date
of termination based on noncompliance with one or more of the CoPs. In
this proposed regulation, we are clarifying and specifying the terms
for such SIAs.
CMS may offer an SIA to a transplant program if the transplant
center can show that it has identified, or is actively improving its
identification of, the root causes of its noncompliance and if the
transplant center has initiated actions to correct those root causes.
However, if we conclude that a transplant center does not qualify for
initial approval or re-approval based on mitigating factors, the
proposed rule would explicitly provide CMS with the option of offering
a time-limited SIA to those transplant centers that have demonstrated
progress in making substantive program improvements to address root
causes of deficient outcomes, agree to undertake a structured regimen
of further quality improvement, and agree to waive their appeal rights.
In some instances, a voluntary period of inactivity of the transplant
center is warranted, or a period of inactivity may be required by CMS
as a condition of an SIA approval, as a requirement of initiating an
SIA for a specified period, or until certain milestones are achieved.
During the SIA period, CMS' oversight and enforcement authority
continue and CMS may conduct routine unannounced surveys, complaint
investigations, and/or terminate the transplant center's participation
in the Medicare program if there is not substantial compliance with
Federal requirements under 42 CFR Part 482 or if the program fails to
follow the terms of the SIA. In consideration for the opportunity to
continue to participate in the Medicare program under an SIA during the
time that structured improvements and corrections are made, despite
having been found to be in noncompliance with the requirements, a
transplant center would be required to waive any appeal rights that
they may have, either administratively or judicially, if CMS ultimately
terminates Medicare participation or denies initial approval of the
transplant center. We are proposing that such a waiver applies,
regardless of whether revocation or termination of approval/re-approval
occurs due to a finding that the hospital failed to fulfill the terms
of the SIA or due to the deficiency findings that the SIA was designed
to address, pursuant to CMS' enforcement authority under the
regulations.
A transplant center's approval to operate as a Medicare-approved
transplant center does not guarantee any subsequent re-approvals and
may be time-limited. The transplant center must submit a separate
request for consideration of mitigating factors, including updated
supporting documentation each time a CMS review (generally a 3-5 year
cycle) or complaint investigation determines that the transplant center
does not meet one or more of the data submission, clinical experience,
and outcomes requirements, or other CoPs. At such time, we would review
any prior mitigating factors approval to determine if the circumstances
that originally warranted approval would still apply. However, in the
case of past mitigating factors approval based on innovative practice,
CMS may seek information in advance of a recertification survey to
determine

[[Page 28287]]

if the reasons for past approval still prevail and, in such a case, CMS
may consider mitigating factors concomitantly with the recertification
survey.
b. Description and Contents of an SIA
The SIA is a binding agreement between CMS and the hospital within
which a transplant center operates. A transplant center, in turn, may
have one or more organ-specific programs, such as a heart, kidney,
pancreas, liver, or lung transplant program. Each SIA is focused on a
particular organ transplant program. The SIA is a plan for a series of
actions, activities, and goals that provide opportunities for the
hospital and transplant center to conduct internal improvement analysis
and action, and engage external experts to ensure that the transplant
center is in compliance with evidence-based standards and advances in
the field that would optimize the care provided to patients.
Through an SIA, CMS is able to offer transplant centers additional
time to achieve compliance with the CoPs through a structured and
monitored process. In particular, the use of the formal SIA process
reflects CMS' recognition that it may sometimes require more than the
usual time to correct the 1-year post-transplant patient or graft
survival and have the results of such improvement become manifest in
the tracking data, or to develop and implement a plan to correct low-
volume performance rates. We generally do not expect to use an SIA in
cases of noncompliance with other CoPs, although we do not preclude
such a possibility if highly unusual circumstances are present.
The SIA process (discussed in more detail below) has demonstrated
effectiveness in improving patient and graft survival. An important
measure of outcome is the extent to which observed patient deaths 1
year after transplant compare with the risk-adjusted expected number of
deaths or graft failure for a particular transplant program. The SRTR
risk adjustment methodology (used to calculate the expected numbers)
takes into consideration the organs transplanted and the
characteristics of the donors and recipients (for example, factors that
have a bearing on the risk to patient or graft survival, such as
diabetes, hypertension, advanced age, cold ischemic time of the organ
to be transplanted, among others). For example, the national number of
expected deaths 1 year after transplant for all transplant centers in
the United States is 1.0. A transplant center that had twice the
expected number of deaths would have a standardized mortality ratio
(SMR) of 2.0. As of August 2013, adult kidney transplant programs cited
by CMS for substandard outcomes and placed on a Medicare enforcement
track, for which there was a 2-year post-CMS survey tracking period
(N=15), improved their average SMR for 1-year post-transplant patient
survival performance rate from 2.05 to 1.17 (close to the 1.0 national
average). The transplant centers under an approved SIA improved their
outcomes from an average SMR ranging from 2.41 before the SIA to 0.76
after the SIA (much better than the national average). Transplant
centers not cited for substandard kidney transplant outcomes improved
outcomes slightly from 0.89 to 0.84.\185\
---------------------------------------------------------------------------

\185\ Hamilton, Thomas E., Regulatory Oversight in
Transplantation: Are Patients Really Better Off, Curr Opin Organ
Transplant 2013, 18:203-209. Available at: at https://www.co-transplantation.com.
---------------------------------------------------------------------------

The proposed new Sec. 488.61(h) explicitly incorporates and
specifies elements that have been important to the successful use of
the SIA structure. We propose to define an SIA as a binding agreement,
entered into voluntarily by the hospital and CMS, through which CMS
extends the effective date of a prospectively scheduled termination of
the center's Medicare participation (thereby permitting the program
additional time to achieve compliance with the CoPs), contingent on the
hospital's agreement to participate in a structured regimen of quality
improvement activities and subsequent demonstration of improved
outcomes. In some cases, transplant programs have entered a period of
inactivity--voluntarily, or imposed as a condition of the SIA.
Under proposed new Sec. 488.61(h)(1)(i) through (h)(1)(x), we are
proposing that in the SIA, in exchange for additional time to initiate
or continue activities to achieve compliance with the CoPs, the
transplant center must agree to a regimen of specified activities,
including (but not limited to) all of the following:
Patient notification about the degree and type of
noncompliance by the program, an explanation of what the program
improvement efforts mean for patients, and financial assistance to
defray the out-of-pocket costs of copayments and testing expenses for
any wait-listed individual who wishes to be listed with another program
(proposed paragraph (h)(1)(i)).
An external independent peer review team that conducts an
onsite assessment of program policies, staffing, operations,
relationship to hospital services, and factors that contribute to
program outcomes; that suggests quality improvements the hospital
should consider; that provides both verbal and written feedback to the
hospital; and that provides a verbal debriefing to CMS. Neither the
hospital nor the peer review team may be required to provide a written
report to CMS. The peer review team would include a transplant surgeon
with expertise in the relevant organ type(s), a transplant
administrator, an individual with expertise in transplant QAPI systems,
a social worker or psychologist or psychiatrist, and a specialty
physician with expertise in conditions particularly relevant to the
applicable organ types(s) such as a cardiologist, nephrologist, or
hepatologist. Except for the transplant surgeon, CMS may permit
substitution of an individual with one type of expertise for another
individual who has expertise particularly needed for the type of
challenges experienced by the program, such as substitution of an
infection control specialist in lieu of, or in addition to, a social
worker (proposed paragraph (h)(1)(ii)).
An action plan that addresses systemic quality
improvements and is updated after the onsite peer review (proposed
paragraph (h)(1)(iii)).
An onsite consultant whose qualifications are approved by
CMS, and who provides services for 8 days per month on average for the
duration of the agreement, except that CMS may permit a portion of the
time to be spent offsite and may agree to fewer consultant days each
month after the first 3 months of the SIA (proposed paragraph
(h)(1)(iv)).
A comparative effectiveness analysis that compares
policies, procedures, and protocols of the transplant program with
those of other programs in areas of endeavor that are relevant to the
transplant center's current quality improvement needs (proposed
paragraph (h)(1)(v)).
Development of increased proficiency, or demonstration of
current proficiency, with patient-level data from the SRTR and the use
of registry data to analyze outcomes and inform quality improvement
efforts (proposed paragraph (h)(1)(vi)).
A staffing analysis that examines the level, type,
training, and skill of staff in order to inform transplant center
efforts to ensure the engagement and appropriate training and
credentialing of staff (proposed paragraph (h)(1)(vii)).
Activities to strengthen performance of the Quality
Assessment and Performance Improvement (QAPI) Program to ensure full
compliance with

[[Page 28288]]

the requirements at Sec. 482.96 (proposed paragraph (h)(1)(viii)).
Monthly (unless otherwise specified) reporting and
conference calls with CMS regarding the status of programmatic
improvements, the results of the actions, data, reports, or other
deliverables specified in the SIA, and regarding the number of
transplants, the death and graft failures that occur within 1 year
post-transplant (proposed paragraph (h)(1)(ix)).
Additional or alternative requirements specified by CMS,
tailored to the transplant program type and circumstances (proposed
paragraph (h)(1)(x)).
c. Effective Period for an SIA
Under proposed new Sec. 488.61(h)(2), we are proposing to specify
that an SIA will be established for a 12-month period, subject to CMS'
discretion to determine if a shorter time period would suffice. At the
hospital's request and at CMS's discretion, CMS may extend an SIA for
up to one additional 6-month period.

XII. MedPAC Recommendations

Under section 1886(e)(4)(B) of the Act, the Secretary must consider
MedPAC's recommendations regarding hospital inpatient payments. Under
section 1886(e)(5) of the Act, the Secretary must publish in the annual
proposed and final IPPS rules the Secretary's recommendations regarding
MedPAC's recommendations. We have reviewed MedPAC's March 2014 ``Report
to the Congress: Medicare Payment Policy'' and have given the
recommendations in the report consideration in conjunction with the
proposed policies set forth in this proposed rule. MedPAC
recommendations for the IPPS for FY 2015 are addressed in Appendix B to
this proposed rule.
For further information relating specifically to the MedPAC reports
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226,
or visit MedPAC's Web site at: https://www.medpac.gov.

XIII. Other Required Information

A. Requests for Data From the Public

In order to respond promptly to public requests for data related to
the prospective payment system, we have established a process under
which commenters can gain access to raw data on an expedited basis.
Generally, the data are now available on compact disc (CD) format.
However, many of the files are available on the Internet at: https://
www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/. Data files and the cost for each file, if
applicable, are listed below. Anyone wishing to purchase data tapes,
cartridges, or diskettes should submit a written request along with a
company check or money order (payable to CMS-PUF) to cover the cost to
the following address: Centers for Medicare & Medicaid Services, Public
Use Files, Accounting Division, P.O. Box 7520, Baltimore, MD 21207-
0520, (410) 786-3691. Files on the Internet may be downloaded without
charge.
1. CMS Wage Data Public Use File
This file contains the hospital hours and salaries from Worksheet
S-3, Parts II and III from FY 2011 Medicare cost reports used to create
the proposed FY 2015 prospective payment system wage index. Multiple
versions of this file are created each year. For a complete schedule on
the release of different versions of this file, we refer readers to the
wage index schedule in section III.J. of the preamble of this proposed
rule.

------------------------------------------------------------------------
Processing year Wage data year PPS fiscal year
------------------------------------------------------------------------
2014 2011 2015
2013 2010 2014
2012 2009 2013
2011 2008 2012
2010 2007 2011
2009 2006 2010
2008 2005 2009
2007 2004 2008
------------------------------------------------------------------------

Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
Periods Available: FY 2007 through FY 2015 IPPS Update.
2. CMS Occupational Mix Data Public Use File
This file contains the 2010 occupational mix survey data to be used
to compute the occupational mix adjustment wage indexes. Multiple
versions of this file are created each year. For a complete schedule on
the release of different versions of this file, we refer readers to the
wage index schedule in section III.J. of the preamble of this proposed
rule.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational
Category Public Use File
This file contains each hospital's occupational mix adjustment
factors by occupational category. Two versions of these files are
created each year to support the rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
4. Other Wage Index Files
CMS releases other wage index analysis files after each proposed
and final rule.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
Periods Available: FY 2005 through FY 2015 IPPS Update.
5. FY 2015 IPPS SSA/FIPS CBSA State and County Crosswalk
This file contains a crosswalk of State and county codes used by
the Social Security Administration (SSA) and the Federal Information
Processing Standards (FIPS), county name, and a historical list of
Metropolitan Statistical Areas (MSAs).
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
6. HCRIS Cost Report Data
The data included in this file contain cost reports with fiscal
years ending on or after September 30, 1996. These data files contain
the highest level of cost report status.
Media: Internet at: https://www.cms.hhs.gov/CostReports/02_HospitalCostReport.asp and Compact Disc (CD).
File Cost: $100.00 per year.
7. Provider-Specific File
This file is a component of the PRICER program used in the MAC's
system to compute DRG/MS-DRG payments for individual bills. The file
contains records for all prospective payment system eligible hospitals,
including hospitals in waiver States, and data elements used in the
prospective payment system recalibration processes and related
activities. Beginning with December 1988, the individual records were
enlarged to include pass-through per diems and other elements.
Media: Internet at: https://www.cms.hhs.gov/ProspMedicareFeeSvcPmtGen/03_psf_text.asp.
Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
This file contains the Medicare case-mix index by provider number
as published in each year's update of the

[[Page 28289]]

Medicare hospital inpatient prospective payment system. The case-mix
index is a measure of the costliness of cases treated by a hospital
relative to the cost of the national average of all Medicare hospital
cases, using DRG/MS-DRG weights as a measure of relative costliness of
cases. Two versions of this file are created each year to support the
rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Periods Available: FY 1985 through FY 2015.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
This file contains a listing of MS-DRGs, MS-DRG narrative
descriptions, relative weights, and geometric and arithmetic mean
lengths of stay for the annual rulemaking. There are two versions of
this file to support the rulemaking. (We note that Table 5 is issued
concurrently with the proposed rule and the final rule and is available
only via the Internet on the CMS Web site.)
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Periods Available: FY 2005 through FY 2015 IPPS Update.
10. IPPS Payment Impact File
This file contains data used to estimate payments under Medicare's
hospital inpatient prospective payment systems for operating and
capital-related costs. The data are taken from various sources,
including the Provider-Specific File, HCRIS Cost Report Data, Minimum
Data Sets, and prior impact files. The data set is abstracted from an
internal file used for the impact analysis of the changes to the
prospective payment systems published in the Federal Register. Two
versions of this file are created each year to support the rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/HIF/list.asp#TopOfPage.
Periods Available: FY 1994 through FY 2015 IPPS Update.
11. AOR/BOR Tables
This file contains data used to develop the MS-DRG relative
weights. It contains mean, maximum, minimum, standard deviation, and
coefficient of variation statistics by MS-DRG for length of stay and
standardized charges. The BOR tables are ``Before Outliers Removed''
and the AOR is ``After Outliers Removed.'' (Outliers refer to
statistical outliers, not payment outliers.)
Two versions of this file are created each year to support the
rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Periods Available: FY 2005 through FY 2015 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
This file contains information that standardizes the charges used
to calculate relative weights to determine payments under the hospital
inpatient operating and capital prospective payment systems. Variables
include wage index, cost-of-living adjustment (COLA), case-mix index,
indirect medical education (IME) adjustment, disproportionate share,
and the Core-based Statistical Area (CBSA). The file supports the
rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
13. Hospital Readmissions Reduction Program File
This file contains information on the calculation of the Hospital
Readmissions Reduction Program payment adjustment. Variables include
the proxy excess readmission ratios for acute myocardial infarction,
pneumonia and heart failure and the proxy readmissions payment
adjustment for each provider included in the program. The file supports
the rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
14. Medicare Disproportionate Share Hospital (DSH) Supplemental File
This file contains information on the calculation of the
uncompensated care payments for FY 2015. Variables include a hospital's
SSI days and Medicaid days used to determine a hospital's share of
uncompensated care payments, total uncompensated care payments and
estimated per claim uncompensated care payment amounts. The file
supports the rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
15. Hospital-Acquired Condition (HAC) Reduction Program File
This file contains information on the calculation of the payment
adjustment under the HAC Reduction Program. Variables include the
current estimate of a hospital's total HAC Score for use in the FY 2015
HAC reduction program, the associated percentile, and a flag if the
hospital would be subject to the FY 2015 reduction under section
1886(p)(1) of the Act based on this percentile. The file supports the
rulemaking.
Media: Internet at: https://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
Period Available: FY 2015 IPPS Update.
For further information concerning these data tapes, contact the
CMS Public Use Files Hotline at (410) 786-3691.
Commenters interested in discussing any data used in constructing
this proposed rule should contact Nisha Bhat at (410) 786-5320.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In this proposed rule, we are soliciting public comment on each of
these issues for the following sections of this document that contain
information collection requirements (ICRs).
2. ICRs for Add-On Payments for New Services and Technologies
Section II.I.1. of the preamble of this proposed rule discusses
add-on payments for new services and technologies. Specifically, this
section states that applicants for add-on payments for new medical
services or technologies for FY 2016 must submit a formal request. A
formal request includes a full description of the clinical applications
of the medical service or technology and the results of

[[Page 28290]]

any clinical evaluations demonstrating that the new medical service or
technology represents a substantial clinical improvement. In addition,
the request must contain a significant sample of the data to
demonstrate that the medical service or technology meets the high-cost
threshold.
We believe the burden associated with this requirement is exempt
from the PRA under 5 CFR 1320.3(c), which defines the agency collection
of information subject to the requirements of the PRA as information
collection imposed on 10 or more persons within any 12-month period.
This information collection does not impact 10 or more entities in a
12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, FY 2014,
and FY 2015, we received 1, 4, 5, 3, 3, 5, 5, and 7 applications,
respectively.
3. ICRs for the Proposed Occupational Mix Adjustment to the Proposed FY
2015 Index (Hospital Wage Index Occupational Mix Survey)
Section III.F. of the preamble of this proposed rule discusses the
occupational mix adjustment to the proposed FY 2015 wage index,
respectively. While the preamble of this proposed rule does not contain
any new ICRs, we note that there is an OMB approved information
collection request associated with the hospital wage index.
Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E)
of the Act to require CMS to collect data at least once every 3 years
on the occupational mix of employees for each short-term, acute care
hospital participating in the Medicare program in order to construct an
occupational mix adjustment to the wage index. We collect the data via
the occupational mix survey.
The burden associated with this information collection requirement
is the time and effort required to collect and submit the data in the
Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned
burden is subject to the PRA; it is currently approved under OCN 0938-
0907.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
Section III.H.2. of the preamble of this proposed rule discusses
proposed changes to the wage index based on hospital reclassifications.
As stated in that section, under section 1886(d)(10) of the Act, the
MGCRB has the authority to accept short-term IPPS hospital applications
requesting geographic reclassification for wage index and to issue
decisions on these requests by hospitals for geographic
reclassification for purposes of payment under the IPPS.
The burden associated with this application process is the time and
effort necessary for an IPPS hospital to complete and submit an
application for reclassification to the MGCRB. The burden associated
with this requirement is subject to the PRA. It is currently approved
under OCN 0938-0573.
5. ICRs for Application for GME Resident Slots
The information collection requirements associated with the
preservation of resident cap positions from closed hospitals, addressed
under section IV.J.3. of this preamble, are not subject to the
Paperwork Reduction Act, as stated in section 5506 of the Affordable
Care Act.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
The Hospital IQR Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment (RHQDAPU) Program) was
originally established to implement section 501(b) of the MMA, Public
Law 108-173. This program expanded our voluntary Hospital Quality
Initiative. The Hospital IQR Program originally consisted of a
``starter set'' of 10 quality measures. The collection of information
associated with the original starter set of quality measures was
previously approved under OMB control number 0938-0918. All of the
information collection requirements previously approved under OMB
control number 0938-0918 have been combined with the information
collection request previously approved under OMB control number 0938-
1022. We no longer use OMB control number 0938-0918.
We added additional quality measures to the Hospital IQR Program
and submitted the information collection request to OMB for approval.
This expansion of the Hospital IQR measures was part of our
implementation of section 5001(a) of the DRA. Section
1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the
DRA, requires that the Secretary expand the ``starter set'' of 10
quality measures that were established by the Secretary as of November
1, 2003, to include measures ``that the Secretary determines to be
appropriate for the measurement of the quality of care furnished by
hospitals in inpatient settings.'' The burden associated with these
reporting requirements was previously approved under OMB control number
0938-1022.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated
that, for the FY 2016 payment determinations and subsequent years
updates, we sought OMB approval for a revised information collection
request using the same OMB control number (0938-1022). The FY 2014
IPPS/LTCH PPS final rule (78 FR 50955) does not change the method for
information collection requests. In a revised request for the FY 2017
payment determination, we will add the 4 claims-based measures that we
are proposing in this proposed rule: (1) Hospital 30-day, all-cause,
unplanned, risk-standardized readmission rate (RSRR) following coronary
artery bypass graft (CABG) surgery; (2) Hospital 30-day, all-cause,
risk-standardized mortality rate (RSMR) following coronary artery
bypass graft (CABG) surgery; (3) Hospital-level, risk-standardized 30-
day episode-of-care payment measure for pneumonia; and (4) Hospital-
level, risk-standardized 30-day episode-of-care payment measure for
heart failure. We will also add the chart-abstracted measure we are
proposing in this proposed rule: Severe sepsis and septic shock:
management bundle (NQF0500).
In addition, we believe there will be a reduction in the burden
associated with the removal of 20 total measures proposed for removal
in this rule: \186\ (1) AMI-1 Aspirin at Arrival; (2) AMI-3 ACEI/ARB
for left ventricular systolic dysfunction; (3) AMI-5 Beta-blocker
prescribed at discharge; (4) AMI-8a Timing of Receipt of Primary
Percutaneous Coronary Intervention (PCI); (5) HF-2 Evaluation of left
ventricular systolic function; (6) SCIP-INF-1 Prophylactic antibiotic
received within 1 hour prior to surgical incision; (7) SCIP-INF-2
Prophylactic antibiotic selection for surgical patients; (8) SCIP INF-3
Prophylactic antibiotics discontinued within 24 hours after surgery end
time (48 hours for cardiac surgery); (9) SCIP INF-4: Cardiac surgery
patients with controlled 6AM postoperative serum glucose; (10) SCIP
INF-6 Appropriate hair removal; (11) SCIP-INF-9 Postoperative urinary
catheter removal on post-operative day 1 or 2 with day of surgery being
day zero; (12) SCIP-VTE-2: Surgery patients who received appropriate
VTE prophylaxis within 24 hours pre/post-surgery; (13) SCIP
Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival
who received a Beta Blocker during the perioperative period; (14) PN-6
Appropriate initial antibiotic

[[Page 28291]]

selection; (15) STK-2 Antithrombotic therapy for ischemic stroke; (16)
STK-3 Anticoagulation therapy for Afib/flutter; (17) STK-5
Antithrombotic therapy by the end of hospital day 2; (18) STK-10
Assessed for rehab; and (19) VTE-4 Patients receiving un-fractionated
Heparin with doses/labs monitored by protocol, and (20) one structural
measure: Participation in a systematic database for cardiac surgery.
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\186\ We note that some of these measures are being proposed to
be removed as chart-abstracted measures, but are being proposed to
be retained as electronic clinical quality measures. We refer
readers to section IX.A.2.b. of the preamble of this proposed rule
for further discussion.
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Because claims-based measures can be calculated based on data that
are already reported to the Medicare program for payment purposes, we
believe no additional information collection will be required from the
hospitals for the four proposed claims-based measures. However, we
believe that the proposed chart-abstracted measure will cause some
additional burden. For the FY 2017 payment determination, we estimate
the burden to be 1,775 hours annually per hospital. We estimate the
total burden for chart abstraction and structural measures for the
approximately 3,300 Hospital IQR Program-participating hospitals to be
5.86 million hours. The table below describes the hospital burden
associated with the all Hospital IQR Program requirements.

Burden Impact of Hospital IQR Program Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per hospital for Burden per hospital for all
Hospital IQR program requirement Number of hospitals impacted previously finalized requirements as proposed Net change in burden
requirements (continuing, removed, added) per hospital
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chart-abstracted and structural 3,300......................... 1,291 hours................... 963 hours.................... -328 hours.
measures, forms.
Review reports for claims-based 3,300......................... 4 hours....................... 4 hours...................... 0.
measures.
Reporting of voluntary Unknown....................... -570 hours.................... -554 hours................... 16 hours.
electronic clinical quality
measures (E-CQM) in place of
chart-abstracted measures.
Validation templates............ Up to 600..................... 144 hours..................... 144 hours.................... 0.
E-CQM validation test........... Up to 100..................... 0............................. 16 hours..................... 16 hours.
Validation charts photocopying.. Up to 600..................... $8,640........................ $8,496....................... -$144.
--------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, we believe that there will be a reduction in burden
for 15 of the 20 chart-abstracted measures that we are proposing for
removal: (1) AMI-8a Timing of Receipt of Primary Percutaneous Coronary
Intervention (PCI); (2) HF-2 Evaluation of left ventricular systolic
function; (3) SCIP-INF-1 Prophylactic antibiotic received within 1 hour
prior to surgical incision; (4) SCIP-INF-2 Prophylactic antibiotic
selection for surgical patients; (5) SCIP INF-3 Prophylactic
antibiotics discontinued within 24 hours after surgery end time (48
hours for cardiac surgery); (6) SCIP INF-4: Cardiac surgery patients
with controlled 6AM postoperative serum glucose; (7) SCIP-INF-9
Postoperative urinary catheter removal on postoperative day 1 or 2 with
day of surgery being day zero; (8) SCIP-VTE-2: Surgery patients who
received appropriate VTE prophylaxis within 24 hours pre/postsurgery;
(9) SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to
arrival who received a Beta Blocker during the perioperative period;
(10) PN-6 Appropriate initial antibiotic selection; (11) STK-2
Antithrombotic therapy for ischemic stroke; (12) STK-3 Anticoagulation
therapy for Afib/flutter; (13) STK-5 Antithrombotic therapy by the end
of hospital day 2; (14) STK-10 Assessed for rehab; and (15) VTE-4
Patients receiving un-fractionated Heparin with doses/labs monitored by
protocol.
The four chart-abstracted measures that we are proposing to remove
have been suspended from the program; therefore, their removal will not
impact the reporting burden. The structural measure we have proposed to
remove, participation in a systematic database for cardiac surgery (NQF
0113), has an estimated a burden of nearly zero hours;
therefore, its removal will not result a reduction in a significant
burden reduction. Therefore, for the FY 2017 payment determination, we
estimate a reduction in burden from our proposed removal of 20 measures
(both chart-abstracted and structural) to be 1,775 hours annually per
hospital. We estimate the total reduction in burden for chart
abstraction and structural measures for the approximately 3,300
Hospital IQR Program-participating hospitals to be 5.86 million hours.
Utilizing the estimates above, we estimate an overall reduction in
burden from the from the FY 2016 estimate of 5.9 million hours annually
to 3.7 million hours annually for the FY 2017 payment determination
year. This burden estimate includes both the new proposed measures and
the measures which we are reproposing. It excludes the burden
associated with the NHSN and HCAHPS measures, both of which are
submitted under separate information collection requests and are
approved under separate OMB control numbers.
We intend to enroll up to 100 hospitals in a voluntary large scale
test of validation for electronic clinical quality measures for the
Hospital IQR Program. We estimate a total of 16 hours each. We intend
to reimburse hospitals $26 per hour for up to 16 hours for their
participation in this test. Details regarding this reimbursement rate
are as follows:
The labor performed can be accomplished by medical records
and health information technology staff, with a mean hourly wage in
general medical and surgical hospitals of $19.24.\187\
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\187\ In May 2012, the hourly wage was $18.68. Occupational
employment and wages, May 2012, 29-2071 Medical records and health
information technicians. Bureau of Labor Statistics, https://www.bls.gov/oes/2012/may/oes292071.htm, last accessed 3/31/2014. We
increased this wage by 3.0 percent to account for inflation in the
past 24 months. U.S. Inflation Calculator. https://www.usinflationcalculator.com/inflation/current-inflation-rates/,
last accessed 3/31/2014.
---------------------------------------------------------------------------

Applying OMB Circular A-76, we assumed full fringe
benefits of 36.25 percent, for a fully burdened labor rate of $26.25
per hour, rounding to $26 per hour, that accounts for the full cost of
labor. The circular is available at https://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a076/a76_incl_tech_correction.pdf.
For the FY 2017 payment determination, we also are encouraging
hospitals to voluntarily submit up to 16 measures electronically for
the Hospital IQR Program in a manner that would permit eligible
hospitals to partially align Hospital IQR Program requirements with
some requirements under the Medicare EHR Incentive Program. We estimate
that the total burden associated with the electronic

[[Page 28292]]

clinical quality measure reporting option will be similar to the burden
outlined for hospitals in the EHR Incentive Program Stage 2 final rule
(77 FR 53968 through 54162). As described above for participation in
the test of validation for electronic clinical quality metrics in the
Hospital IQR Program, we believe an individual with commensurate skills
will submit electronic clinical quality measures on behalf of the
hospital at a rate of approximately $26.00 per hour. Therefore, we
believe it will cost a hospital approximately $277.33 ($26.00 x 10
hours and 40 minutes) to report 16 electronic clinical quality
measures. Additional information about the chart abstraction burden is
detailed in section II.K. of Appendix A to this proposed rule.
Previously, we required hospitals to provide 96 patient charts for
validation per hospital per year, including 36 charts for HAI
validation (with an average page length of 1,500) and 60 charts for
clinical process of care measure validation (with an average page
length of 300) for a total of 72,000 pages per hospital per year. For
the FY 2017 payment determination and subsequent years, we are
proposing to reduce this requirement to 72 charts per hospital per
year, including 40 charts for HAI validation and 36 charts for clinical
process of care validation, for a total of 70,800 pages per hospital
per year--a decrease of 1,200 pages per hospital per year. We reimburse
hospitals at 12 cents per photocopied page (68 FR 67956 and 70 FR
23667). Therefore, the reduced burden is $144 per hospital for up to
600 hospitals.
To support validation of four HAI measures for the FY 2017 payment
determination and subsequent years, we estimate an annual burden of
43,200 hours. This estimate is based on up to 600 hospitals completing
HAI Templates averaging 18 hours per quarter over 4 quarters. This
burden is 10,800 hours more than that for the FY 2016 payment
determination as finalized in the FY 2014 IPPPS/LTCH PPS final rule (78
FR 50822 through 50825) of 32,400 hours because the HAI measures are to
be validated for 4 quarters instead of 3 quarters.
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
As discussed in section IX.B. of the preamble of this proposed
rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014
and each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year.
In this proposed rule, we are proposing to adopt one new clinical
effectiveness measure (External Beam Radiotherapy for Bone Metastases)
for the FY 2017 program and subsequent years, which, if finalized,
would increase the total number of measures for the FY 2017 PCHQR
measure set to 19 measures.
We also are proposing to update the specifications for the 5
previously finalized clinical process/oncology care measures to require
PCHs to report all-patient data for each of these measures, and to
adopt a new sampling methodology that PCHs can use to report these
measures. Furthermore, we are proposing to require PCHs to submit
population and sample size counts for these measures.
We believe that requiring PCHs to submit the proposed new clinical
effectiveness measure data as well as the proposed sample and
population size data will not prove burdensome. At least seven PCHs are
currently reporting quality measure data (including population and
sampling data for HCAHPS measures) on a voluntary basis to CMS. PCHs
may also have experience submitting quality and population/sample size
data to other entities, such as State survey agencies and The Joint
Commission. As a result, we believe that the new reporting requirements
we are proposing to adopt will not significantly impact PCHs.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50957 through
50959), we included burden estimates for the FY 2015 and FY 2016
programs. We noted in that final rule that those estimates represented
a worst case scenario of estimated burden. In this proposed rule, we
are providing a revised burden estimate for FY 2016 and a burden
estimate for FY 2017. The revised estimate for FY 2016 takes into
account our proposal to adopt a new sampling methodology that PCHs can
use to report the five clinical process/oncology care measures. The
revised FY 2016 and new FY 2017 burden estimates also incorporate the
sampling methodology allowed for the SCIP measures and HCAHPS Survey
because last year's burden reflected the ``worst-case scenario'' of our
burden estimates (78 FR 50958). The anticipated revised burden on PCHs
for the FY 2016 program and the anticipated new burden on PCHs for the
FY 2017 program consist of the following: new measure training and
measure maintenance, as well as the time required for collection,
aggregation, and submission of data for all measures.
We estimate that 11 PCHs will submit quality measure data on
approximately 37,496 cancer cases annually beginning with FY 2016 and
43,266 cancer cases annually beginning with FY 2017.\188\ In addition,
we estimate that PCHs will spend 0.5 hours on chart abstraction and
data submission per case/event, 0.5 hours on training per each new
measure, 0.25 hours on measure maintenance per each existing measure,
and a maximum of 5 hours summarizing and reporting population and
sample size counts for the six SCIP measures and five oncology care
measures.
---------------------------------------------------------------------------

\188\ FY 2011 CMS MedPAR file based on Medicare data alone.
---------------------------------------------------------------------------

We are reducing the burden estimates for the HCAHPS Survey, the six
SCIP measures, and the five clinical process/oncology care measures in
this proposed rule to take into consideration the sampling that PCHs
may use for these measures. As a result, we estimate that the reporting
burden on each PCH for the FY 2016 program will be 18,758 hours. We
estimate that the reporting burden on each PCH for FY 2017 would
increase by 2,885 hours because PCHs would be required to report an
additional quality measure (External Beam Radiotherapy for Bone
Metastases). Therefore, we estimate the overall burden for all of the
FY 2017 PCHQR Program requirements to be 21,643 hours per PCH. This FY
2017 estimate, which includes an additional proposed measure,
represents a decrease of 30,287 hours \189\ per PCH from the FY 2016
burden estimate that we published in the FY 2014 IPPS/LTCH final rule
(78 FR 50957 through 50959), or an overall decrease of 58 percent in
the number of hours for each PCH. Coupled with our estimated salary
costs,\190\ this revised estimate results in a net reduction in
estimated cost of $285,252 per PCH. We believe that this burden
estimate more accurately captures the hour and cost impact on PCHs
participating in the PCHQR Program and reflects efforts to minimize the
burden impact through the proposed adoption of a new sampling
methodology that PCHs can use to report the clinical process/oncology
care measures.
---------------------------------------------------------------------------

\189\ Represents the difference between previous burden estimate
(51,930 hours) in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50958)
and current burden estimate (21,643 hours).
\190\ We are now estimating an hourly salary of $33 (https://swz.salary.com/salarywizard/Staff-Nurse-RN-Hourly-Salary-Details.aspxper). After accounting for employee benefits and
overhead, this results in a total cost of $66 per labor hour.
---------------------------------------------------------------------------

However, we note that these estimates are based on PCH reporting of
Medicare data only. We intend to update the burden estimate to more
accurately reflect the burden to PCHs for reporting

[[Page 28293]]

all-patient data in future years, should we adopt our proposal to use
all-patient data.
We will be submitting a revision of the information collection
request currently approved under ONC 0938-1175 to account for the
aforementioned proposed changes to the program when they are finalized.
8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
In section IV.I. of the preamble of this proposed rule, we discuss
requirements for the Hospital VBP Program. Specifically, in this
proposed rule, we are proposing to adopt three new measures for the FY
2017 Hospital VBP Program: (1) Methicillin-Resistant Staphylococcus
aureus (MRSA) Bacteremia; (2) Clostridium difficile are measures of
healthcare-associated infections reported via the CDC's National
Healthcare Safety Network; and (3) PC-01: Elective Delivery Prior to 39
Completed Weeks Gestation is a chart-abstracted measure. We also are
proposing to adopt Hospital-level Risk-Standardized Complication Rate
(RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and
Total Knee Arthroplasty (TKA) for the FY 2019 Hospital VBP Program.
As provided for in section 1886(o)(2)(A) of the Act, all of these
additional measures are required for the Hospital IQR Program.
Therefore, their inclusion in the Hospital VBP Program does not result
in any additional burden because the Hospital VBP Program uses data
that are required for the Hospital IQR Program.
9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program
As discussed in sections IX.C.3. through IX.C.5. of the preamble of
this proposed rule, for the LTCHQR Program, for the FY 2015 payment
determination and subsequent years, we are retaining the following
three quality measures: (1) National Healthcare Safety Network (NHSN)
Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure
(NQF 0138); (2) National Healthcare Safety Network (NHSN)
Central Line Catheter-Associated Blood Stream Infection Event (CLABSI)
Outcome Measure (NQF 0139); and (3) and Percent of Residents
or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay)
(NQF 0678). For the FY 2016 payment determination and
subsequent years, we are retaining the following two measures in
addition to the measures finalized for previous years: (1) Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680); and (2)
Influenza Vaccination Coverage among Healthcare Personnel (NQF
0431). For the FY 2017 payment determination and subsequent
years, we are retaining the following three measures in addition to the
measures finalized for previous years: (1) National Health Safety
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
1716); (2) National Health Safety Network (NHSN) Facility-Wide
Inpatient Hospital-Onset Clostridium Difficile Infection (CDI) Outcome
Measure (NQF 1717); and (3) All-Cause Unplanned Readmission
Measure for 30 Days Post-Discharge from Long-Term Care Hospitals. For
the FY 2018 payment determination and subsequent years, we are
retaining the following measure in addition to the measures finalized
for previous years: Application of Percent of Residents Experiencing
One or More Falls with Major Injury (Long Stay) (NQF 0674).
As discussed in section IX.C.7.of the preamble of this proposed
rule, we are proposing three new quality measures for inclusion in the
LTCHQR Program for the FY 2018 payment determination and subsequent
years: (1) Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function; (2) Functional Outcome Measure: Change in Mobility
among Long-Term Care Hospital Patients Requiring Ventilator Support;
and (3) National Healthcare Safety Network (NHSN) Ventilator-Associated
Event (VAE) Outcome Measure.
Six of the previously adopted and newly proposed measures either
will or would be collected via the NHSN. The NHSN is a secure,
Internet-based healthcare-associated infection (HAI) tracking system
maintained and managed by the CDC. The NHSN enables health care
facilities to collect and use data about HAIs, adherence to clinical
practices known to prevent HAIs, and other adverse events within their
organizations. NHSN data collection occurs via a Web-based tool hosted
by the CDC and provided free of charge to facilities. We believe that
any burden increase related to complying with the submission of the
proposed NHSN VAE Outcome Measure would be minimal because LTCHs have
already completed the initial setup of the NHSN submission process and
have become familiar with reporting data in the NHSN system due to the
requirement to report CAUTI and CLABSI measures. While this requirement
is subject to the PRA, we believe that the associated burden is
approved under OMB control number 0920-0666, for those measures
previously finalized, with an expiration date of November, 31, 2016.
The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Long-Term Care Hospitals is a Medicare claims-based
measure. Because claims-based measures can be calculated based on data
that are already reported to the Medicare program for payment purposes,
we believe that this measure will not add any additional reporting
burden for LTCHs.
The remaining five previously adopted and newly proposed measures
either will or would be collected utilizing the LTCH CARE Data Set. The
LTCH CARE Data Set, in its current form, has been approved under OMB
control number 0938-1163. Additions will need to be made to the LTCH
CARE Data Set in order to allow for collection of the two functional
status measures we are proposing in section IX.C.7.a. of the preamble
of this proposed rule: (1) Percent of Long-Term Care Hospital Patients
with an Admission and Discharge Functional Assessment and a Care Plan
That Addresses Function; and (2) Functional Outcome Measure: Change in
Mobility among Long-Term Care Hospital Patients Requiring Ventilator
Support. The revised data collection will be resubmitted to OMB for
approval. While this requirement is subject to the PRA, we believe the
associated burden is either approved under OMB control number 0938-
1163, for those measures previously finalized, with an expiration date
of June 30, 2016, or will be contained in the updated information
collection request.
Assuring data accuracy is vital to public reporting programs. In
section IX.C.11. of the preamble of this proposed rule, we are
proposing, for the FY 2016 payment determination and subsequent years,
to validate data submitted to CMS on the LTCH CARE Data Set by
requesting that a statistically valid random sample of 260 LTCHs copy
and send portions of five patient charts each from a given CY (for a
total of portions of 1,300 LTCH patient charts) to a CMS validation
contractor. We are proposing that the specific portions of the patient
charts would be identified in the written request, but may include the
following sections, which are listed with our estimated number of pages
for each: first 3 days of nurses' notes would be approximately 15
pages; the last 3 days of nurses' notes would be approximately 10
pages; the physician, physician's assistant, or nurse practitioner's
admission history

[[Page 28294]]

and physical would be approximately 30 pages; the physician,
physician's assistant, or nurse practitioner's discharge summary would
be approximately 15 pages; the nurses' admission database would be
approximately 40 pages; pressure ulcer assessments will would
approximately 30 pages; physician's progress notes would be
approximately 30 pages; physician's orders would be approximately 30
pages; and laboratory reports would be approximately 70 pages. We
estimate the total submission to be no more than 270 pages in length.
We estimate that 1,300 charts will allow us to validate data submitted
to CMS with an estimated reliability of 70 percent, with a 5-percent
margin of error, at a 95-percent confidence level. Although charts will
be randomly selected, we are proposing to limit the request to specific
portions of five charts per LTCH.
10. Electronic Health Record (EHR) Incentive Program and Meaningful Use
(MU)
In section IX.D. of the preamble of this proposed rule, we are
proposing to align the Medicare EHR Incentive Program reporting and
submission timelines for clinical quality measures for eligible
hospitals and CAHs with the Hospital IQR Program's reporting and
submission timelines. In addition, we provide guidance and
clarification of certain policies for reporting zero denominators on
clinical quality measures and our policy on case threshold exemptions.
Because these proposals for data collection would align with the
reporting requirements in place for the Hospital IQR Program, we do not
believe there is any additional burden for this collection of
information.
11. ICR Regarding Proposed Revision of Regulations Governing Use and
Release of Medicare Advantage (MA) Risk Adjustment Data (Sec.
422.310(f))
Medicare Advantage (MA) organizations are required to submit risk
adjustment data to CMS organizations under current authority at Sec.
422.310(b) through (d). The proposed changes we are proposing to make
to the use and release of MA risk adjustment data under section X. of
the preamble of this proposed rule provision do not change the
requirements on MA organizations for submission of information to CMS,
which have been in place for several years. Therefore, this proposal
does not impose new information collection requirements on MA
organizations. Consequently, because there are no new information
collection requirements in our proposal, the proposal does not require
a review by OMB under the authority of the Paperwork Reduction Act of
1995.
If you comment on these information collection and recordkeeping
requirements, please submit your comments electronically as specified
in the ADDRESSES section of this proposed rule.

C. Response to Public Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all public comments we
receive by the date and time specified in the DATES section of this
preamble, and, when we proceed with a subsequent document, we will
respond to the public comments in the preamble of that document.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping,
rural areas, X-rays.

42 CFR Part 412

Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.

42 CFR Part 415

Health facilities, Health professions, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 422

Administrative practice and procedure, Health facilities, Health
maintenance, organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.

42 CFR Part 424

Emergency medical services, Health facilities, Health professions,
Medicare.

42 CFR Part 485

Grant programs--health, Health facilities, Medicaid, Medicare,
Reporting and recordkeeping requirements.

42 CFR Part 488

Administrative practice and procedure, Health facilities, Medicare,
Reporting and recordkeeping requirements.

For the reasons stated in the preamble of this proposed rule, the
Centers for Medicare & Medicaid Services is proposing to amend 42 CFR
Chapter IV as set forth below:

Title 42--Public Health

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart R--Provider Reimbursement Determinations and Appeals

0
1. The authority citation for Subpart R is revised to read as follows:

Authority: Secs. 205, 1102, 1814(b), 1815(a), 1816, 1833,
1861(v), 1871, 1872, 1874A, 1878, and 1886 of the Social Security
Act (42 U.S.C. 405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v),
1395hh, 1395ii, 1395oo, and 1395ww).

0
2. Section 405.1801 is amended by--
0
a. Removing the definition of ``Intermediary determination'' under
paragraph (a).
0
b. Adding in alphabetical order a new definition of ``Medicare
Administrative Contractor determination (contractor determination)''
under paragraph (a).
0
c. Revising paragraph (b)(1).
The additions and revisions read as follows:

Sec. 405.1801 Introduction.

(a) * * *
Medicare Administrative Contractor determination (contractor
determination) means the following:
(1) With respect to a provider of services that has filed a cost
report under Sec. Sec. 413.20 and 413.24 of this chapter, the term
means a final determination of the amount of total reimbursement due
the provider, pursuant to Sec. 405.1803 following the close of the
provider's cost reporting period, for items and services furnished to
beneficiaries for which reimbursement may be made on a reasonable cost
basis under Medicare for the period covered by the cost report.
(2) With respect to a hospital that receives payments for inpatient
hospital services under the prospective payment system (part 412 of
this chapter), the term means a final determination of the total amount
of payment due the hospital, pursuant to Sec. 405.1803 following the
close of the hospital's cost reporting period, under that system for
the period covered by the final determination.
(3) For purposes of appeal to the Provider Reimbursement Review
Board, the term is synonymous with the phrases ``intermediary's final
determination,'' ``final determination of the organization serving as
its fiscal

[[Page 28295]]

intermediary,'' ``Secretary's final determination'' and ``final
determination of the Secretary'', as those phrases are used in section
1878(a) of the Act, and with the phrases ``final Medicare
administrative contractor determination, '' ``final contractor
determination'', and ``final Secretary determination'' as those phrases
are used in this subpart.
(4) For purposes of Sec. 405.376 concerning claims collection
activities, the term does not include an action by CMS with respect to
a compromise of a Medicare overpayment claim, or termination or
suspension of collection action on an overpayment claim, against a
provider or physician or other supplier.
* * * * *
(b) * * *(1) Providers. In order to be paid for covered services
furnished to Medicare beneficiaries, a provider must file a cost report
with its contractor as specified in Sec. 413.24 of this chapter. For
purposes of this subpart, the term ``provider'' includes a hospital (as
described in part 482 of this chapter), hospice program (as described
in Sec. 418.3 of this chapter), critical access hospital (CAH),
comprehensive outpatient rehabilitation facility (CORF), renal dialysis
facility, Federally qualified health center (FQHC), home health agency
(HHA), rural health clinic (RHC), skilled nursing facility (SNF), and
any other entity included under the Act. (FQHCs and RHCs are providers,
for purposes of this subpart, effective with cost reporting periods
beginning on or after October 1, 1991).
* * * * *
0
3. Section 405.1803 is amended by revising the section heading and
paragraph (a) introductory text to read as follows:

Sec. 405.1803 Contractor determination and notice of amount of
program reimbursement.

(a) General requirement. Upon receipt of a provider's cost report,
or amended cost report where permitted or required, the contractor must
within a reasonable period of time (as described in Sec.
405.1835(a)(2)(ii)), furnish the provider and other parties as
appropriate (see Sec. 405.1805) a written notice reflecting the
contractor's final determination of the total amount of reimbursement
due the provider. The contractor must include the following information
in the notice, as appropriate:
* * * * *
0
4. Section 405.1811 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraph (a).
0
c. Revising paragraph (b) introductory text and paragraphs (b)(1) and
(b)(2).
0
d. Revising paragraphs (c)(1), (c)(2), and (c)(3).
The revisions read as follows:

Sec. 405.1811 Right to contractor hearing; contents of, and adding
issues to, hearing request.

(a) Right to a contractor hearing on final contractor
determination. A provider (but no other individual, entity, or party)
has a right to a contractor hearing, as a single provider appeal, for
specific items claimed for a cost reporting period that is subject to a
final contractor or Secretary determination if--
(1) The amount in controversy (as determined in accordance with
Sec. 405.1839) is at least $1,000 but less than $10,000; and
(2) Unless the provider qualifies for a good cause extension under
Sec. 405.1813, the date of receipt by the contractor of the provider's
hearing request is--
(i) No later than 180 days after the date of receipt by the
provider of the final contractor or Secretary determination; or
(ii) If the final contractor determination is not issued (through
no fault of the provider) within 12 months of the date of receipt by
the contractor of the provider's perfected cost report or amended cost
report (as specified in Sec. 413.24(f) of this chapter), no later than
180 days after the expiration of the 12-month period for issuance of
the final contractor determination. The date of receipt by the
contractor of the provider's perfected cost report or amended cost
report is presumed to be the date the contractor stamped ``Received''
unless it is shown by a preponderance of the evidence that the
contractor received the cost report on an earlier date.
(b) Contents of request for a contractor hearing. The provider's
request for a contractor hearing must be submitted in writing to the
contractor, and the request must include the elements described in
paragraphs (b)(1) through (b)(3) of this section. If the provider
submits a hearing request that does not meet the requirements of
paragraph (b)(1), (b)(2), or (b)(3) of this section, the contractor
hearing officer may dismiss with prejudice the appeal, or take any
other remedial action he or she considers appropriate.
(1) A demonstration that the provider satisfies the requirements
for a contractor hearing as specified in paragraph (a) of this section,
including a specific identification of the final contractor or
Secretary determination under appeal.
(2) For each specific item under appeal, a separate explanation of
why, and a description of how, the provider disagrees with the specific
aspects of the final contractor or Secretary determination under
appeal, including an account of all of the following:
(i) Why the provider believes Medicare payment is incorrect for
each disputed item (or, where applicable, why the provider is unable to
determine whether Medicare payment is correct because it allegedly does
not have access to underlying information concerning the calculation of
its payment);
(ii) How and why the provider believes Medicare payment should be
determined differently for each disputed item; and
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
* * * * *
(c) * * *
(1) The request to add issues complies with the requirements of
paragraphs (a) and (b) of this section as to each new specific item at
issue.
(2) The specific items raised in the initial hearing request and
the specific matters identified in subsequent requests to add issues,
when combined, satisfy the requirements of paragraph (a)(1) of this
section.
(3) The contractor hearing officer receives the requests to add
issues no later than 60 days after the expiration of the applicable
180-day period prescribed in paragraph (a)(2) of this section.

Sec. 405.1813 [Amended]

0
5. In Sec. 405.1813, paragraphs (a) and (b) are amended by removing
the cross-reference ``Sec. 405.1811(a)(3)'' and adding in its place
the cross-reference ``Sec. 405.1811(a)(2)''.

Sec. 405.1814 [Amended]

0
6. Section 405.1814 is amended by removing paragraph (b)(3).
0
7. A new Sec. 405.1832 is added to read as follows:

Sec. 405.1832 Contractor hearing officer review of compliance with
the substantive reimbursement requirement of an appropriate cost report
claim.

(a) General. In order to receive or potentially qualify for
reimbursement for a specific item, the provider must include in its
cost report an appropriate

[[Page 28296]]

claim for the specific item (as prescribed in Sec. 413.24(j) of this
chapter). If the provider files an appeal to the contractor seeking
reimbursement for a specific item and any party to such appeal
questions whether the provider's cost report included an appropriate
claim for the specific item, the contractor hearing officer(s) must
address such questions in accordance with the procedures set forth in
this section.
(b) Summary of procedures. (1) Preliminary steps. The contractor
hearing officer(s) must give each party to the appeal an adequate
opportunity to submit factual evidence and legal argument regarding the
question of whether the provider's cost report included an appropriate
claim for the specific item under appeal. Upon receipt of timely
submitted factual evidence and legal argument (if any), the contractor
hearing officer(s) must review such evidence and argument, and prepare
written specific findings of fact and conclusions of law on the
question of whether the provider's cost report complied with, for the
specific item under appeal, the cost report claim requirements
prescribed in Sec. 413.24(j) of this chapter. In reaching such
specific factual findings and legal conclusions, the contractor hearing
officer(s) must follow the procedures set forth in Sec. 413.24(j)(3)
of this chapter for determining whether the provider's cost report
included an appropriate claim for the specific item under appeal. The
contractor hearing officer(s) must promptly give a copy of such written
specific factual findings and legal conclusions to each party to the
appeal, and such factual findings and legal conclusions must be
included in the record of administrative proceedings for the appeal (as
prescribed in Sec. 405.1827).
(2) Limits on contractor hearing officer(s) actions. The contractor
hearing officer(s)'s specific findings of fact and conclusions of law
(pursuant to paragraph (b)(1) of this section) must not be invoked or
relied on by the contractor hearing officer(s) as a basis to deny, or
decline to exercise, jurisdiction over a specific item or take any
other of the actions specified in paragraph (c) of this section. Upon
giving the parties to the appeal the contractor hearing officer(s)'s
written specific factual findings and legal conclusions (pursuant to
paragraph (b)(1) of this section) on the question of whether the
provider's cost report included an appropriate cost report claim for
the specific item under appeal, the contractor hearing officer(s) must
proceed to issue one of the two types of overall decisions specified in
paragraphs (d) and (e) of this section with respect to the specific
item. If the contractor hearing officer(s) issues an overall contractor
hearing decision (as specified in paragraph (d) of this section)
regarding the specific item under appeal, the contractor hearing
officer(s)'s written specific factual findings and legal conclusions
(pursuant to paragraph (b)(1) of this section) must be included in such
overall contractor hearing decision regarding the specific item, along
with the other matters that are required by the regulations for an
overall contractor hearing decision. However, if the contractor hearing
officer(s) issues an overall jurisdictional dismissal decision (as
specified in paragraph (e) of this section) regarding the specific item
under appeal, the contractor hearing officer(s)'s written specific
factual findings and legal conclusions (pursuant to paragraph (b)(1) of
this section) must not be included in the overall jurisdictional
dismissal decision regarding the specific item. The contractor hearing
officer(s) may permit reimbursement for the specific item under appeal,
as part of an overall contractor hearing decision, but such
reimbursement may be permitted only to the extent authorized by
paragraph (f) of this section.
(c) Prohibition of certain types of decisions, orders, and other
actions. (1) If the contractor hearing officer(s) determines, in its
findings of fact and conclusions of law (as prescribed by paragraph
(b)(1) of this section), that the provider's cost report did not
include an appropriate claim for the specific item under appeal, the
contractor hearing officer(s) may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the contractor hearing officer(s)'s factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section);
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the contractor hearing
officer(s)'s factual findings and legal conclusions (reached under
paragraph (b)(1) of this section); or
(iii) Impose any sanction or take any other action against the
interests of any party to the appeal except as provided in paragraph
(f) of this section, based on (in whole or in part) the contractor
hearing officer(s)'s factual findings and legal conclusions (reached
under paragraph (b)(1) of this section).
(2) Regardless of whether the contractor hearing officer(s)
determines, in its findings of fact and conclusions of law (as
prescribed by paragraph (b)(1) of this section), that the provider's
cost report did or did not include an appropriate claim for the
specific item under appeal, the contractor hearing officer(s) may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the absence, in the final contractor or Secretary
determination under appeal, of an adjustment, revision, correction, or
other change to the specific item under appeal, or the lack of a
particular determination by the contractor or the Secretary regarding
the specific item. Exception: If the provider's appeal of the specific
item is based on a reopening of such item (pursuant to Sec. 405.1885)
where the specific item is not revised, adjusted, corrected, or
otherwise changed in a revised final contractor or Secretary
determination, the contractor must deny jurisdiction over the specific
item under appeal (as prescribed in Sec. Sec. 405.1887(d) and
405.1889(b));
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the absence, in the final
contractor or Secretary determination under appeal, of an adjustment,
revision, correction, or other change to the specific item under
appeal, or the lack of a particular determination by the contractor or
the Secretary regarding the specific item; or
(iii) Impose any sanction or take any other action against the
interests of any party to the appeal except as provided in paragraph
(f) of this section, based on (in whole or in part) the absence, in the
final contractor or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item.
(d) Contractor hearing decision must include any factual findings
and legal conclusions under paragraph (b)(1) of this section. If the
contractor hearing officer(s) issues a hearing decision regarding the
specific item under appeal (pursuant to Sec. 405.1831), any specific
findings of fact and conclusions of law by the contractor hearing
officer(s) (reached under paragraph (b)(1) of this section), on the
question of whether the provider's cost report included an appropriate
claim for the specific item, must be included in such hearing decision
along with the other matters prescribed by Sec. 405.1831. The
contractor hearing officer(s)'s factual findings and legal conclusions
(reached under paragraph (b)(1) of this section) about whether there
was an appropriate cost report claim for the specific item under appeal
are subject to the provisions of

[[Page 28297]]

Sec. 405.1833 just as those provisions apply to the other parts of the
contractor hearing decision. If the contractor hearing officer(s)
determines that the provider's cost report--
(1) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the
contractor hearing decision must also address whether the other
substantive reimbursement requirements for the specific item are also
satisfied; or
(2) Did not include an appropriate claim for the specific item
under appeal, the contractor hearing officer(s) has discretion whether
or not to address in the contractor hearing decision whether the other
substantive reimbursement requirements for the specific item are also
satisfied.
(e) Contractor jurisdictional dismissal decision must not include
factual findings and legal conclusions under paragraph (b)(1) of this
section. If the contractor hearing officer(s) issues a jurisdictional
dismissal decision regarding the specific item under appeal (pursuant
to Sec. 405.1814(c)), the contractor hearing officer(s)'s specific
findings of fact and conclusions of law (reached under paragraph (b)(1)
of this section) on the question of whether the provider's cost report
included an appropriate claim for the specific item must not be
included in such jurisdictional dismissal decision.
(f) Effects of the contractor hearing officer(s)'s factual findings
and legal conclusions under paragraph (b)(1) of this section when part
of a final contractor hearing decision. If the contractor hearing
officer(s) determines, as part of a final and binding contractor
hearing decision (pursuant to Sec. 405.1833 and paragraphs (b)(1) and
(d) of this section), that the provider's cost report--
(1) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only if
the contractor hearing officer(s) further determines in such final
contractor hearing decision that all the other substantive
reimbursement requirements for the specific item are also satisfied; or
(2) Did not include an appropriate cost report claim for the
specific item under appeal, then the specific item is not reimbursable,
regardless of whether the contractor hearing officer(s) further
determines in such final contractor hearing decision that the other
substantive reimbursement requirements for the specific item are or are
not satisfied.
0
8. Section 405.1834 is amended by adding a new paragraph (b)(2)(iii) to
read as follows:

Sec. 405.1834 CMS reviewing official procedure.

* * * * *
(b) * * *
(2) * * *
(iii) If the CMS reviewing official reviews an contractor hearing
decision regarding a specific item, the CMS reviewing official's review
of such a contractor hearing decision will include, and any decision
issued by the CMS reviewing official (under paragraph (e) of this
section) will address, the contractor hearing officer(s)'s specific
findings of fact and conclusions of law in such contractor hearing
decision (as prescribed in Sec. 405.1832(b)(1) and (d)) on the
question of whether the provider's cost report included an appropriate
claim for the specific item under appeal (as prescribed in Sec.
413.24(j) of this chapter).
* * * * *
0
9. Section 405.1835 is amended by--
0
a. Revising paragraph (a).
0
b. Revising paragraphs (b)(1), (b)(2) introductory text, and
(b)(2)(iii).
0
c. Revising paragraphs (c)(1), (c)(2), and (c)(3).
The revisions read as follows:

Sec. 405.1835 Right to Board hearing; contents of, and adding issues
to, hearing request.

(a) Right to hearing on final contractor determination. A provider
(but no other individual, entity, or party) has a right to a Board
hearing, as a single provider appeal, for specific items claimed in its
cost report for a cost reporting period that is subject to a final
contractor or Secretary determination, if--
(1) The amount in controversy (as determined in accordance with
Sec. 405.1839) is $10,000 or more; and
(2) Unless the provider qualifies for a good cause extension under
Sec. 405.1836, the date of receipt by the Board of the provider's
hearing request is--
(i) No later than 180 days after the date of receipt by the
provider of the final contractor or Secretary determination; or
(ii) If the final contractor determination is not issued (through
no fault of the provider) within 12 months of the date of receipt by
the contractor of the provider's perfected cost report or amended cost
report (as specified in Sec. 413.24(f) of this chapter), no later than
180 days after the expiration of the 12-month period for issuance of
the final contractor determination. The date of receipt by the
contractor of the provider's perfected cost report or amended cost
report is presumed to be the date the contractor stamped ``Received''
unless it is shown by a preponderance of the evidence that the
contractor received the cost report on an earlier date.
(b) * * *
(1) A demonstration that the provider satisfies the requirements
for a Board hearing as specified in paragraph (a) of this section,
including a specific identification of the final contractor or
Secretary determination under appeal.
(2) For each specific item under appeal, a separate explanation of
why, and a description of how, the provider disagrees with the specific
aspects of the final contractor or Secretary determination under
appeal, including an account of all of the following:
* * * * *
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
* * * * *
(c) * * *
(1) The request to add issues complies with the requirements of
paragraphs (a) and (b) of this section as to each new specific item at
issue.
(2) The specific items raised in the initial hearing request and
the specific items identified in subsequent requests to add issues,
when combined, satisfy the requirements of paragraph (a)(2) of this
section.
(3) The Board receives the request to add issues no later than 60
days after the expiration of the applicable 180-day period prescribed
in paragraph (a)(2) of this section.

Sec. 405.1836 [Amended]

0
10. In Sec. 405.1836, paragraphs (a) and (b) are amended by removing
the cross-reference ``Sec. 405.1835(a)(3)'' and adding in its place
the cross-reference ``Sec. 405.1835(a)(2)''.
0
11. Section 405.1837 is amended by revising paragraphs (a)(1), (c)(2)
introductory text, (c)(2)(iii) and (e)(4) to read as follows:

Sec. 405.1837 Group appeals.

(a) * * *
(1) The provider satisfies individually the requirements for a
Board hearing under Sec. 405.1835(a)(1);
* * * * *
(c) * * *
(2) An explanation (for each specific item at issue) of each
provider's

[[Page 28298]]

disagreement with its final contractor or Secretary determination under
appeal, including an account of--
* * * * *
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
* * * * *
(e) * * *
(4) A provider may submit a request to the Board to join a group
appeal any time before the Board issues one of the decisions specified
in Sec. 405.1875(a)(1). By submitting a request, the provider agrees
that, if the request is granted, the provider is bound by the Board's
actions and decision in the appeal. If the Board denies a request, the
Board's action is without prejudice to any separate appeal the provider
may bring in accordance with Sec. 405.1811, Sec. 405.1835, or this
section. For purposes of determining timeliness for the filing of any
separate appeal and for the adding of issues to such appeal, the date
of receipt of the provider's request to form or join the group appeal
is considered the date of receipt for purposes of meeting the
applicable 180-day period prescribed in Sec. 405.1835(a)(2).
* * * * *

Sec. 405.1839 [Amended]

0
12. In 405.1839, paragraph (a)(1) is amended by removing the cross-
reference ``Sec. 405.1811(a)(2) of this subpart'' and adding in its
place the cross-reference ``Sec. 405.1811(a)(1)''; and by removing the
cross-reference ``Sec. 405.1835(a)(2) of this subpart'' and adding in
its place the cross-reference ``Sec. 405.1835(a)(1)''.

Sec. 405.1840 [Amended]

0
13. Section 405.1840 is amended by removing paragraph (b)(3).
0
14. A new Sec. 405.1873 is added to read as follows:

Sec. 405.1873 Board review of compliance with the reimbursement
requirement of an appropriate cost report claim.

(a) General. In order to receive or potentially receive
reimbursement for a specific item, the provider must include in its
cost report an appropriate claim for the specific item (as prescribed
in Sec. 413.24(j) of this chapter). If the provider files an appeal to
the Board seeking reimbursement for the specific item and any party to
such appeal questions whether the provider's cost report included an
appropriate claim for the specific item, the Board must address such
question in accordance with the procedures set forth in this section.
(b) Summary of procedures. (1) Preliminary steps. The Board must
give the parties an adequate opportunity to submit factual evidence and
legal argument regarding the question of whether the provider's cost
report included an appropriate claim for the specific item under
appeal. Upon receipt of timely submitted factual evidence or legal
argument (if any), the Board must review such evidence and argument and
prepare written specific findings of fact and conclusions of law on the
question of whether the provider's cost report complied with, for the
specific item under appeal, the cost report claim requirements
prescribed in Sec. 413.24(j) of this chapter. In reaching such
specific factual findings and legal conclusions, the Board must follow
the procedures set forth in Sec. 413.24(j)(3) of this chapter for
determining whether the provider's cost report included an appropriate
claim for the specific item under appeal. The Board must promptly give
a copy of such written specific factual findings and legal conclusions
to each party to the appeal, and such factual findings and legal
conclusions must be included in the record of administrative
proceedings for the appeal (as prescribed in Sec. 405.1865).
(2) Limits on Board actions. The Board's specific findings of fact
and conclusions of law (pursuant to paragraph (b)(1) of this section)
must not be invoked or relied on by the Board as a basis to deny, or
decline to exercise, jurisdiction over a specific item or take any
other of the actions specified in paragraph (c) of this section. Upon
giving the parties to the appeal the Board's written specific factual
findings and legal conclusions (pursuant to paragraph (b)(1) of this
section) on the question of whether the provider's cost report included
an appropriate cost report claim for the specific item under appeal,
the Board must proceed to issue one of the four types of overall
decisions specified in paragraphs (d) and (e) of this section with
respect to the specific item. If the Board issues either of two types
of overall Board decisions (as specified in paragraph (d) of this
section) regarding the specific item under appeal, the Board's written
specific factual findings and legal conclusions (pursuant to paragraph
(b)(1) of this section) must be included in such overall Board decision
regarding the specific item, along with the other matters that are
required by the regulations for the pertinent type of overall Board
decision. However, if the Board issues either of two other types of
overall Board decisions (as specified in paragraph (e) of this section)
regarding the specific item under appeal, the Board's written specific
factual findings and legal conclusions (pursuant to paragraph (b)(1) of
this section) must not be included in the overall Board decision
regarding the specific item. The Board may permit reimbursement for the
specific item under appeal, as part of one of the two types of overall
Board decisions that are specified in paragraph (d) of this section,
but such reimbursement may be permitted only to the extent authorized
by paragraph (f) of this section.
(c) Prohibition of certain types of decisions, orders, and other
actions. (1) If the Board determines, in its findings of fact and
conclusions of law (as prescribed by paragraph (b)(1) of this section),
that the provider's cost report did not include an appropriate claim
for the specific item under appeal, the Board may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the Board's factual findings and legal
conclusions (reached under paragraph (b)(1) of this section);
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the Board's factual findings and
legal conclusions (reached under paragraph (b)(1) of this section); or
(iii) Take any of the actions set forth in Sec. 405.1868(b), (c),
or (d), impose any sanction, or take any other action against the
interests of any party to the appeal, except as provided in paragraph
(f) of this section, based on (in whole or in part) the Board's factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section).
(2) Regardless of whether the Board determines, in its findings of
fact and conclusions of law (as prescribed by paragraph (b)(1) of this
section), that the provider's cost report did or did not include an
appropriate claim for the specific item under appeal, the Board may
not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the absence, in the final contractor
determination or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item. Exception: If
the provider's appeal of the specific item is based on a reopening of
such item (pursuant to Sec. 405.1885) where the specific item is not
revised, adjusted, corrected, otherwise changed

[[Page 28299]]

in a revised final contractor or Secretary determination, the Board
must deny jurisdiction over the specific item under appeal (as
prescribed in Sec. Sec. 405.1887(d) and 405.1889(b));
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the absence, in the final
contractor determination or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item; or
(iii) Take any of the actions set forth in Sec. 405.1868(b), (c),
or (d), impose any sanction, or take any other action against the
interests of any party to the appeal, except as provided in paragraph
(f) of this section, based on (in whole or in part) the absence, in the
final contractor determination or Secretary determination under appeal,
of an adjustment, revision, correction, or other change to the specific
item under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item.
(d) Two types of Board decisions that must include any factual
findings and legal conclusions under paragraph (b)(1) of this section.
(1) Board hearing decision. If the Board issues a hearing decision
regarding the specific item under appeal (pursuant to Sec. 405.1871),
any specific findings of fact and conclusions of law by the Board
(reached under paragraph (b)(1) of this section), on the question of
whether the provider's cost report included an appropriate claim for
the specific item, must be included in such hearing decision along with
the other matters prescribed by Sec. 405.1871(a). The Board's factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section), about whether there was an appropriate cost report claim for
the specific item under appeal, are subject to the provisions of Sec.
405.1871(b) just as those provisions apply to the other parts of the
Board's hearing decision. If the Board determines that the provider's
cost report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the Board's
hearing decision must also address whether the other substantive
reimbursement requirements for the specific item are also satisfied; or
(ii) Did not include an appropriate claim for the specific item
under appeal, the Board has discretion whether or not to address in the
Board's hearing decision whether the other substantive reimbursement
requirements for the specific item are also satisfied.
(2) Board expedited judicial review (EJR) decision, where EJR is
granted. If the Board issues an EJR decision where EJR is granted
regarding a legal question that is relevant to the specific item under
appeal (pursuant to Sec. 405.1842(f)(1)), the Board's specific
findings of fact and conclusions of law (reached under paragraph (b)(1)
of this section), on the question of whether the provider's cost report
included an appropriate claim for the specific item, must be included
in such EJR decision along with the other matters prescribed by Sec.
405.1842(f)(1). The Board's factual findings and legal conclusions
(reached under paragraph (b)(1) of this section) about whether there
was an appropriate cost report claim for the specific item under appeal
are subject to the provisions of Sec. 405.1842(g)(1), (g)(2), (h)(1),
and (h)(3) just as those provisions apply to the other parts of the
Board's EJR decision.
(e) Two other types of Board decisions that must not include the
Board's factual findings and legal conclusions under paragraph (b)(1)
of this section. (1) Board jurisdictional dismissal decision. If the
Board issues a jurisdictional dismissal decision regarding the specific
item under appeal (pursuant to Sec. 405.1840(c)), the Board's specific
findings of fact and conclusions of law (reached under paragraph (b)(1)
of this section), on the question of whether the provider's cost report
included an appropriate claim for the specific item, must not be
included in such jurisdictional dismissal decision.
(2) Board expedited judicial review (EJR) decision, where EJR is
denied. If the Board issues an EJR decision where EJR is denied
regarding a legal question that is relevant to the specific item under
appeal (pursuant to Sec. 405.1842(f)(2)), the Board's specific
findings of fact and conclusions of law (reached under paragraph (b)(1)
of this section), on the question of whether the provider's cost report
included an appropriate claim for the same item, must not be included
in such EJR decision. If the Board conducts further proceedings and
issues another decision (as specified in Sec. 405.1842(h)(2)(i)), the
Board's specific findings of fact and conclusions of law (reached under
paragraph (b)(1) of this section)--
(i) Must be included in any further hearing decision or EJR
decision where EJR is granted regarding the specific item under appeal
(as prescribed in paragraph (d) of this section); but
(ii) Must not be included in any further jurisdictional dismissal
decision or EJR decision where EJR is denied regarding the specific
item under appeal (as prescribed in paragraph (e) of this section).
(f) Effects of the Board's factual findings and legal conclusions
under paragraph (b)(1) of this section in two types of final decisions.
(1) When part of a final hearing decision. If the Board determines, as
part of a final and binding hearing decision (pursuant to Sec.
405.1871(b) and paragraphs (b)(1) and (d)(1) of this section), that the
provider's cost report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only if
the Board further determines in such final hearing decision that all
the other substantive reimbursement requirements for the specific item
are also satisfied; or
(ii) Did not include an appropriate cost report claim for the
specific item under appeal, then the specific item is not reimbursable,
regardless of whether the Board further determines in such final
hearing decision that the other substantive reimbursement requirements
for the specific item are or are not satisfied.
(2) When part of a final EJR decision that grants EJR. If the Board
determines or the Administrator of CMS determines (pursuant to Sec.
405.1875), as applicable, in a final and binding EJR decision that
grants EJR regarding a legal question that is relevant to the specific
item under appeal (pursuant to Sec. 405.1842(g)(1) and paragraphs
(b)(1) and (d)(2) of this section), that the provider's cost report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only to
the extent permitted by the final decision of a Federal court pursuant
to the EJR provisions of section 1878(f)(1) of the Act (see also
Sec. Sec. 405.1842 and 405.1877)); or
(ii) Did not include an appropriate claim for the specific item
under appeal, then the specific item is not reimbursable, unless--
(A) The specific factual findings and legal conclusions (reached
under paragraph (b)(1) of this section) of the Board or the
Administrator, as applicable, on the question of whether the provider's
cost report included an appropriate claim for the specific item under
appeal, are reversed or modified by the final decision of a Federal
court (pursuant to section 1878(f)(1) of the Act and Sec. 405.1877);
and

[[Page 28300]]

(B) Only to the extent otherwise permitted by the final decision of
a Federal court pursuant to the EJR provisions of section 1878(f)(1) of
the Act (see also Sec. Sec. 405.1842 and 405.1877) and by Medicare
policy.
0
15. Section 405.1875 is amended by--
0
a. Revising the last sentence of paragraph (a) introductory text.
0
b. Adding a new paragraph (a)(2)(v).
0
c. Revising paragraph (f)(5).
The revisions and additions read as follows:

Sec. 405.1875 Administrator review.

(a) * * * The Board is required to send to the Office of the
Attorney Advisor a copy of each decision specified in paragraphs
(a)(2)(i), (a)(2)(ii), and (a)(2)(iii) of this section upon issuance of
the decision.
* * * * *
(2) * * *
(v) If the Administrator reviews a Board hearing decision regarding
a specific item, or for a Board EJR decision, on the question of
whether there is Board jurisdiction over a specific item, the
Administrator's review of such a hearing decision or EJR decision, as
applicable, will include, and any decision issued by the Administrator
(under paragraph (e) of this section) will address, the Board's
specific findings of fact and conclusions of law in such hearing
decision or EJR decision (as prescribed in Sec. 405.1873(b)(1) and
(d)) on the question of whether the provider's cost report included an
appropriate claim for the specific item under appeal (as prescribed in
Sec. 413.24(j) of this chapter).
* * * * *
(f) * * *
(5) In addition to ordering a remand to the Board, the
Administrator may order a remand to any component of HHS or CMS or to a
contractor under appropriate circumstances, including, but not limited
to, for the purpose of effectuating a court order (as described in
Sec. 405.1877(g)(2)). When the contractor's denial of the relief, that
the provider sought before the Board and that is under review by the
Administrator, was based on procedural grounds (such as the alleged
failure of the provider to satisfy a time limit) or was based on the
alleged failure to supply adequate documentation to support the
provider's claim, and the Administrator rules that the basis of the
contractor's denial is invalid, the Administrator remands to the
contractor for the contractor to make a determination on the merits of
the provider's claim.

Nomenclature Changes

Subpart R--[Amended]

0
16. Amend Subpart R of part 405 by removing the term or phrase in the
first column and replacing it with the term or phrase in the second
column:

Remove Add

an intermediary........................... ``a contractor''
intermediary.............................. ``contractor''
intermediaries............................ ``contractors''
intermediaries............................ ``contractors'''
``intermediary's''........................ ``contractor's''

Subpart X--Rural Health Clinic and Federally Qualified Health
Center Services

0
17. The authority citation for Subpart X, continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

0
18. Section 405.2468 is amended by revising paragraph (f)(1) to read as
follows:

Sec. 405.2468 Allowable costs.

* * * * *
(f) * * *
(1) Effective for portions of cost reporting periods occurring on
or after January 1, 1999, if an RHC or an FQHC incurs ``all or
substantially all'' of the costs for the training program in the
nonhospital setting as defined in Sec. 413.75(b) of this chapter, the
RHC or FQHC may receive direct graduate medical education payment for
those residents. However, in connection with cost reporting periods for
which ``all or substantially all of the costs for the training program
in the nonhospital setting'' is not defined in Sec. 413.75(b) of this
chapter, if an RHC or an FQHC incurs the salaries and fringe benefits
(including travel and lodging where applicable) of residents training
at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical
education payments for those residents.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
19. The authority citation for Part 412 is revised to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), sec. 124 of Public Law 106-113 (113 Stat.
1501A-332), sec. 1206 of Public Law 113-67, and sec. 112 of Public
Law 113-93.
0
20. Section 412.23 is amended by--
0
a. Revising paragraphs (e)(6)(i), (e)(6)(ii) introductory text, and
(e)(6)(ii)(B)(2).
0
b. Revising paragraphs (e)(7)(i) and (e)(7)(ii) introductory text.
0
c. Adding new paragraph (e)(7)(iii).
The revisions and additions read as follows:

Sec. 412.23 Excluded hospitals: Classifications.

* * * * *
(e) * * *
(6) * * * (i) General rule. Except as specified in paragraphs
(e)(6)(ii) and (e)(6)(iii) of this section for the period beginning
December 29, 2007 and ending December 28, 2012, and the period
beginning April 1, 2014 and ending September 30, 2017, a moratorium
applies to the establishment and classification of a long-term care
hospital as described in paragraphs (e) and (e)(1) through (e)(5) of
this section or a long-term care hospital satellite facility as
described in Sec. 412.22(h).
(ii) Exception. The moratorium specified in paragraph (e)(6)(i) of
this section is not applicable to the establishment and classification
of a long-term care hospital that meets the requirements of paragraphs
(e) and (e)(1) through (e)(5) of this section, or a long-term care
hospital satellite facility that meets the requirements of Sec.
412.22(h), if the long-term care hospital or long-term care satellite
facility meets the following criteria on or before December 29, 2007,
or on or before April 1, 2014, as applicable:
* * * * *
(B) * * *
(2)(i) Has expended before December 29, 2007, at least 10 percent
(or, if less, $2.5 million) of the estimated cost of the project
specified in paragraph (e)(6)(ii)(B)(1) of his section;
(ii) Has expended, before April 1, 2014, at least 10 percent (or,
if less, $2.5 million) of the estimated cost of the project specified
in paragraph (e)(6)(ii)(B)(1) of this section.
* * * * *
(7) * * * (i) For purposes of this paragraph, an existing long-term
care hospital or long-term care hospital satellite facility means a
long-term care hospital that meets the requirements of paragraph (e) of
this section or long-term care hospital satellite facility that meets
the requirements of Sec. 412.22(h) and received payment under the
provisions of subpart O of this part prior to the dates noted in the
following moratorium clauses.
(ii) December 29, 2007, through December 28, 2007--
* * * * *
(iii) April 1, 2014 through September 30, 2017--The number of
Medicare-certified beds in an existing long-term

[[Page 28301]]

care hospital or an existing long-term care hospital satellite facility
must not be increased beyond the number of Medicare-certified beds on
April 1, 2014.
* * * * *
0
21. Section 412.64 is amended by--
0
a. Removing paragraph (b)(1)(ii)(D).
0
b. Revising paragraph (b)(3)(i).
0
c. Revising paragraphs (d)(1), (d)(2)(i) introductory text, (d)(2)(ii),
and (d)(3) introductory text.
0
d. In paragraphs (h)(4) and (h)(4)(vi), removing the date ``October 1,
2014'' and adding in its place the date ``October 1, 2015''.
The revisions read as follows:

Sec. 412.64 Federal rates for inpatient operating costs for Federal
fiscal year 2005 and subsequent fiscal years.

* * * * *
(b) * * *
(3)(i) For discharges occurring on or after October 1, 2004, a
hospital that is located in a rural county adjacent to one or more
urban areas is deemed to be located in an urban area and receives the
Federal payment amount for the urban area to which the greater number
of workers in the county commute if the rural county would otherwise be
considered part of an urban area, under the standards for designating
MSAs if the commuting rates used in determining outlying counties were
determined on the basis of the aggregate number of resident workers who
commute to (and, if applicable under the standards, from) the central
county or central counties of all adjacent MSAs. Qualifying counties
are determined based upon OMB standards, using the most recent OMB
standards for delineating statistical areas adopted by CMS.
* * * * *
(d) * * *
(1) The applicable percentage change for updating the standardized
amount for all hospitals in all areas is--
(i) For fiscal year 2005 through fiscal year 2009, the percentage
increase in the market basket index (as defined in Sec. 413.40(a)(3)
of this chapter) for prospective payment hospitals, subject to the
provisions of paragraph (d)(2) of this section.
(ii) For fiscal year 2010, for discharges--
(A) On or after October 1, 2009 and before April 1, 2010, the
percentage increase in the market basket index (as defined in Sec.
413.40(a)(3) of this chapter) for prospective payment hospitals,
subject to the provisions of paragraph (d)(2) of this section; and
(B) On or after April 1, 2010 and before October 1, 2010, the
percentage increase in the market basket index (as defined in Sec.
413.40(a)(3) of this chapter) for prospective payment hospitals,
subject to the provisions of paragraph (d)(2) of this section, less
0.25 percentage point.
(iii) For fiscal year 2011, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this subchapter) for
prospective payment hospitals, subject to the provisions of paragraph
(d)(2) of this section, less 0.25 percentage point.
(iv) For fiscal years 2012 and 2013, the percentage increase in the
market basket index (as defined in Sec. 413.40(a)(3) of this chapter)
for prospective payment hospitals, subject to the provisions of
paragraph (d)(2) of this section, less a multifactor productivity
adjustment (as determined by CMS) and less 0.1 percentage point.
(v) For fiscal year 2014, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this chapter) for
prospective payment hospitals, subject to the provisions of paragraph
(d)(2) of this section, less a multifactor productivity adjustment (as
determined by CMS) and less 0.3 percentage point.
(vi) For fiscal year 2015, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this chapter) for
prospective payment hospitals, subject to the provisions of paragraphs
(d)(2) and (d)(3) of this section, less a multifactor productivity
adjustment (as determined by CMS) and less 0.2 percentage point.
(2)(i) In the case of a ``subsection (d) hospital,'' as defined
under section 1886(d)(1)(B) of the Act, that does not submit quality
data on a quarterly basis to CMS, in the form and manner specified by
CMS, the percentage increase in the market basket index (as defined in
Sec. 413.40(a)(3) of this chapter) for prospective payment hospitals
is reduced--
* * * * *
(ii) Any reduction pursuant to this paragraph (d)(2) will apply
only to the fiscal year involved and will not be taken into account in
computing the applicable percentage change for a subsequent fiscal
year.
(3) Beginning fiscal year 2015, in the case of a ``subsection (d)
hospital,'' as defined under section 1886(d)(1)(B) of the Act, that is
not a meaningful electronic health record (EHR) user as defined in Part
495 of this chapter for the applicable EHR reporting period and does
not receive an exception, three-fourths of the percentage increase in
the market basket index (as defined in Sec. 413.40(a)(3) of this
chapter) for prospective payment hospitals is reduced--
* * * * *
0
22. Section 412.101 is amended by revising paragraphs (b)(2)(i),
(b)(2)(ii), (c)(1), (c)(2) introductory text, and (d) to read as
follows:

Sec. 412.101 Special treatment: Inpatient hospital payment adjustment
for low-volume hospitals.

* * * * *
(b) * * *
(2) * * *
(i) For FY 2005 through FY 2010 and the portion of FY 2015
beginning on April 1, 2015, and subsequent fiscal years, a hospital
must have fewer than 200 total discharges, which includes Medicare and
non-Medicare discharges, during the fiscal year, based on the
hospital's most recently submitted cost report, and be located more
than 25 road miles (as defined in paragraph (a) of this section) from
the nearest ``subsection (d)'' (section 1886(d) of the Act) hospital.
(ii) For FY 2011 through FY 2014, and the portion of FY 2015 before
April 1, 2015, a hospital must have fewer than 1,600 Medicare
discharges, as defined in paragraph (a) of this section, during the
fiscal year, based on the hospital's Medicare discharges from the most
recently available MedPAR data as determined by CMS, and be located
more than 15 road miles, as defined in paragraph (a) of this section,
from the nearest ``subsection (d)'' (section 1886(d) of the Act)
hospital.
* * * * *
(c) * * *
(1) For FY 2005 through FY 2010 and the portion of FY 2015
beginning on April 1, 2015 and subsequent fiscal years, the adjustment
is an additional 25 percent for each Medicare discharge.
(2) For FY 2011 through FY 2014 and the portion of FY 2015 before
April 1, 2015, the adjustment is as follows:
* * * * *
(d) Eligibility of new hospitals for the adjustment. For FYs 2005
through 2010 and the portion of FY 2015 beginning on April 1, 2015, and
subsequent fiscal years, a new hospital will be eligible for a low-
volume adjustment under this section once it has submitted a cost
report for a cost reporting period that indicates that it meets
discharge requirements during the applicable fiscal year and has
provided its fiscal intermediary or Medicare administrative contractor
with sufficient evidence that it meets the distance requirement, as
specified under paragraph (b)(2) of this section.
0
23. Section 412.102 is revised to read as follows:

[[Page 28302]]

Sec. 412.102 Special treatment: Hospitals located in areas that are
changing from urban to rural as a result of a geographic redesignation.

An urban hospital that was part of an MSA, but was redesignated as
rural as a result of the most recent OMB standards for delineating
statistical areas adopted by CMS, may receive an adjustment to its
rural Federal payment amount for operating costs for 2 successive
fiscal years as provided in paragraphs (a) and (b) of this section.
(a) First year adjustment. (1) Effective on or after October 1,
1983 and before October 1, 2014, the hospital's rural average
standardized amount and disproportionate share payments as described in
Sec. 412.106 are adjusted on the basis of an additional amount that
equals two-thirds of the difference between the urban standardized
amount and disproportionate share payments applicable to the hospital
before its geographic redesignation and the rural standardized amount
and disproportionate share payments otherwise applicable to the Federal
fiscal year for which the adjustment is made.
(2) Effective on or after October 1, 2014, the hospital's rural
disproportionate share payments as described in Sec. 412.106 are
adjusted on the basis of an additional amount that equals two-thirds of
the difference between the disproportionate share payments as an urban
hospital applicable to the hospital before its geographic redesignation
to a rural area as a result of implementation of the most recent OMB
standards for delineating statistical areas adopted by CMS and the
rural disproportionate share payment otherwise applicable to the
Federal fiscal year for which the adjustment is made.
(b) Second year adjustment. (1) Effective on or after October 1,
1983 and before October 1, 2014, if a hospital's status continues to be
rural as a result of geographic redesignation, its rural average
standardized amount and disproportionate share payments are adjusted on
the basis of an additional amount that equals one-third of the
difference between the urban standardized amount and disproportionate
share payments applicable to the hospital before its redesignation and
the rural standardized amounts and disproportionate share payments
otherwise applicable to the Federal fiscal year for which the
adjustment is made.
(2) Effective on or after October 1, 2014, if a hospital's status
continues to be rural as a result of geographic redesignation, its
disproportionate share payments are adjusted on the basis of an
additional amount that equals one-third of the difference between the
disproportionate share payments applicable to the hospital before its
geographic redesignation to a rural area as a result of implementation
of the most recent OMB standards for delineating statistical areas
adopted by CMS and the rural disproportionate share payments otherwise
applicable to the Federal fiscal year for which the adjustment is made.
0
24. Section 412.103 is amended by adding a new paragraph (a)(6) to read
as follows:

Sec. 412.103 Special treatment: Hospitals located in urban areas and
that apply for reclassification as rural.

(a) * * *
(6) For any period on or after October 1, 2014, a CAH in a county
that was not in an urban area as defined by the Office of Management
and Budget (OMB), but was included in an urban area as a result of the
most recent OMB standards for delineating statistical areas adopted by
CMS and the most recent Census Bureau data, may be reclassified as
being located in a rural area for purposes of meeting the rural
location requirement at Sec. 485.610(b) of this chapter for a period
of 2 years, beginning with the date of the implementation of the new
labor market area delineations, if it meets any of the requirements
under paragraph (a)(1), (a)(2), or (a)(3) of this section.
* * * * *
0
25. Section 412.105 is amended by revising paragraphs (a)(1)(ii),
(f)(1)(iv)(D), and (f)(1)(v), to read as follows:

Sec. 412.105 Special treatment: Hospitals that incur indirect costs
for graduate medical education programs.

* * * * *
(a) * * *
(1) * * *
(ii) (A) For new programs started prior to October 1, 2012, the
exception for new programs described in paragraph (f)(1)(vii) of this
section applies to each new program individually for which the full-
time equivalent cap may be adjusted based on the period of years equal
to the minimum accredited length of each new program.
(B) For new programs started on or after October 1, 2012, the
exception for new programs described in paragraph (f)(1)(vii) of this
section applies to each new program individually during the cost
reporting periods prior to the beginning of the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the first new program started, for hospitals for which the full-time
equivalent cap may be adjusted in accordance with Sec. 413.79(e)(1) of
this chapter, and prior to the beginning of the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the each individual new program started, for hospitals for which the
full-time equivalent cap may be adjusted in accordance with Sec.
413.79(e)(3) of this chapter.
* * * * *
(f) * * *
(1) * * *
(iv) * * *
(D) A rural hospital redesignated as urban after September 30,
2004, as a result of the most recent census data and implementation of
the new labor market area definitions announced by OMB on June 6, 2003,
may retain the increases to its full-time equivalent resident cap that
it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this
section while it was located in a rural area. Effective for cost
reporting periods beginning on or after October 1, 2014, if a rural
hospital is redesignated as urban due to the most recent OMB standards
for delineating statistical areas adopted by CMS and was training
residents in a new program prior to the redesignation becoming
effective, the redesignated urban hospital may retain any existing
increases to its full-time equivalent resident cap and receive an
increase to its full-time equivalent resident cap for the new program
in which it was training residents when the redesignation became
effective, in accordance with paragraph (f)(1)(vii) of this section.
(v)(A) For a hospital's cost reporting periods beginning on or
after October 1, 1997, and before October 1, 1998, the total number of
full-time equivalent residents for payment purposes is equal to the
average of the actual full-time equivalent resident counts (subject to
the requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of
this section) for that cost reporting period and the preceding cost
reporting period.
(B) For a hospital's cost reporting periods beginning on or after
October 1, 1998, the total number of full-time equivalent residents for
payment purposes is equal to the average of the actual full-time
equivalent resident count (subject to the requirements set forth in
paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost
reporting period and the preceding two cost reporting periods.
(C) For new programs started prior to October 1, 2012, if a
hospital qualified for an adjustment to the limit

[[Page 28303]]

established under paragraph (f)(1)(iv) of this section for new medical
residency programs created under paragraph (f)(1)(vii) of this section,
the count of residents participating in new medical residency training
programs above the number included in the hospital's full-time
equivalent count for the cost reporting period ending during calendar
year 1996 is added after applying the averaging rules in paragraphs
(f)(l)(v)(A), (f)(1)(v)(B), and this paragraph (f)(1)(v)(C) for a
period of years. Residents participating in new medical residency
training programs are included in the hospital's full-time equivalent
count before applying the averaging rules after the period of years has
expired. For purposes of this paragraph, for each new program started,
the period of years equals the minimum accredited length for each new
program. The period of years for each new program begins when the first
resident begins training in each new program.
(D) For new programs started on or after October 1, 2012, for
hospitals for which the full-time equivalent cap may be adjusted in
accordance with Sec. 413.79(e) of this chapter, full-time equivalent
residents participating in new medical residency training programs are
excluded from the hospital's full-time equivalent count before applying
the averaging rules during the cost reporting periods prior to the
beginning of the applicable hospital's cost reporting period that
precedes the start of the sixth program year of the first new program
started, for hospitals for which the full-time equivalent cap may be
adjusted in accordance with Sec. 413.79(e)(1) of this chapter, and
prior to the beginning of the applicable hospital's cost reporting
period that precedes the start of the sixth program year of the each
individual new program started, for hospitals for which the full-time
equivalent cap may be adjusted in accordance with Sec. 413.79(e)(3) of
this chapter. After the applicable hospital's cost reporting period
that precedes the start of the sixth program year of the first new
program started for hospitals for which the full-time equivalent cap
may be adjusted in accordance with Sec. 413.79(e)(1) of this chapter,
and after the applicable hospital's cost reporting period that precedes
the start of the sixth program year of each individual new program
started for hospitals for which the full-time equivalent cap may be
adjusted in accordance with Sec. 413.79(e)(3) of this chapter, full-
time equivalent residents participating in new medical residency
training programs are included in the hospital's full-time equivalent
count before applying the averaging cap.
(E) Subject to the provisions of paragraph (f)(1)(ix) of this
section, full-time equivalent residents that are displaced by the
closure of either another hospital or another hospital's program are
added to the full-time equivalent count after applying the averaging
rules in this paragraph (f)(1)(v)(B) for the receiving hospital for the
duration of time that the displaced residents are training at the
receiving hospital.
(F) Subject to the provisions of paragraph (f)(1)(x) of this
section, effective for cost reporting periods beginning on or after
April 1, 2000, full-time equivalent residents at an urban hospital in a
rural track program are included in the urban hospital's rolling
average calculation described in this paragraph (f)(1)(v)(B).
* * * * *
0
26. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to
read as follows:

Sec. 412.106 Special treatment: Hospitals that serve a
disproportionate share of low-income patients.

* * * * *
(g) * * *
(1)
(iii) * * *
(C) For fiscal year 2014 and for fiscal year 2015, CMS will base
its estimates of the amount of hospital uncompensated care on the most
recent available data on utilization for Medicaid and Medicare SSI
patients, as determined by CMS in accordance with paragraphs (b)(2)(i)
and (b)(4) of this section.
* * * * *

Sec. 412.108 [Amended]

0
27. In Sec. 412.108, paragraph (a)(1) introductory text and paragraph
(c)(2)(iii) introductory text, remove the date ``April 1, 2014'' and
add in its place the date ``April 1, 2015''.
0
28. Section 412.140 is amended by revising paragraph (c)(2) to read as
follows:

Sec. 412.140 Participation, data submission, and validation
requirements under the Hospital Inpatient Quality Reporting (IQR)
Program.

* * * * *
(c) * * *
(2) Exception. Upon request by a hospital, CMS may grant an
extension or exemption of one or more data submission deadlines in the
event of extraordinary circumstances beyond the control of the
hospital. Specific requirements for submission of a request for an
extension or exemption are available on QualityNet.org.
* * * * *
0
29. Section 412.152 is amended by revising the definition of
``Applicable hospital'' to read as follows:

Sec. 412.152 Definitions for the Hospital Readmissions Reduction
Program.

* * * * *
Applicable hospital is a hospital described in section
1886(d)(1)(B) of the Act or a hospital paid under section 1814(b)(3) of
the Act.
* * * * *

Sec. 412.154 [Amended]

0
30. Section 412.154 is amended by removing and reserving paragraph (d).
0
31. Section 412.160 is amended by revising the definitions of ``Base
operating DRG payment amount'' and ``Performance standards'' to read as
follows:

Sec. 412.160 Definitions for the Hospital Value-Based Purchasing
(VBP) Program.

* * * * *
Base operating DRG payment amount means the following:
(1) With respect to a subsection (d) hospital (as defined in
section 1886(d)(1)(B) of the Act), the wage-adjusted DRG operating
payment plus any applicable new technology add-on payments under
subpart F of this part. This amount is determined without regard to any
payment adjustments under the Hospital Readmissions Reduction Program,
as specified under Sec. 412.154. This amount does not include any
additional payments for indirect medical education under Sec. 412.105,
the treatment of a disproportionate share of low-income patients under
Sec. 412.106, outliers under subpart F of this part, or a low volume
of discharges under Sec. 412.101.
(2) With respect to a Medicare-dependent, small rural hospital that
receives payments under Sec. 412.108(c) or a sole community hospital
that receives payments under Sec. 412.92(d), the wage-adjusted DRG
operating payment plus any applicable new technology add-on payments
under subpart F of this part. This amount does not include any
additional payments for indirect medical education under Sec. 412.105,
the treatment of a disproportionate share of low-income patients under
Sec. 412.106, outliers under subpart F of this part, or a low volume
of discharges under Sec. 412.101. With respect to a Medicare-
dependent, small rural hospital that receives payments under Sec.
412.108(c) (for discharges occurring in FY 2013) or a sole community
hospital that receives

[[Page 28304]]

payments under Sec. 412.92(d), this amount also does not include the
difference between the hospital-specific payment rate and the Federal
payment rate determined under subpart D of this part.
* * * * *
Performance standards are the levels of performance that hospitals
must meet or exceed in order to earn points under the Hospital VBP
Program, and are calculated with respect to a measure for a fiscal year
no later than 60 days prior to the start of the performance period for
that measure for that fiscal year. The performance standards for a
measure may be updated as follows:
(1) To make a single correction to correct a calculation error,
data issue, or other problem that would significantly change the
performance standards; or
(2) To incorporate nonsubstantive technical updates made to the
measure between the time that CMS first displays the performance
standards for that measure for a fiscal year and the time that CMS
calculates hospital performance on that measure at the conclusion of
the performance period for that measure for a fiscal year.
* * * * *
0
32. Section 412.161 is revised to read as follows:

Sec. 412.161 Applicability of the Hospital Value-Based Purchasing
(VBP) Program

The Hospital VBP Program applies to hospitals, as that term is
defined in Sec. 412.160.

Sec. 412.172 [Amended]

0
33. Section 412.172 is amended by removing and reserving paragraph (c).
0
34. Section 412.232 is amended by revising paragraph (b)(2) to read as
follows:

Sec. 412.232 Criteria for all hospitals in a rural county seeking
urban redesignation.

* * * * *
(b) * * *
(2) For fiscal years beginning with FY 2005, the group of hospitals
must demonstrate that the county in which the hospitals are located
meets the standards for redesignation to an MSA as an outlying county
using the most recent OMB standards for delineating statistical areas
adopted by CMS and the most recent Census Bureau data.
* * * * *
0
35. Section 412.234 is amended by revising paragraph (a)(3)(iv) to read
as follows:

Sec. 412.234 Criteria for all hospitals in an urban county seeking
redesignation to another urban area.

(a) * * *
(3) * * *
(iv) For Federal fiscal year 2008 and thereafter, hospitals located
in counties that are in the same Combined Statistical Area (CSA) or
Core-Based Statistical Area (CBSA) (under the most recent OMB standards
for delineating statistical areas adopted by CMS and the most recent
Census Bureau data) as the urban area to which they seek redesignation
qualify as meeting the proximity requirement for reclassification to
the urban area to which they seek redesignation.
* * * * *
0
36. Section 412.500 is amended by adding paragraphs (a)(4), (a)(5), and
(a)(6) to read as follows:

Sec. 412.500 Basis and scope of subpart.

(a) * * *
(4) Section 4302(a) of Public Law 111-5, which amended sections
114(c) and (d) of Public Law 110-173 relating to several moratoria on
the establishment of new long-term care hospitals and satellite
facilities and on the increase in the number of beds in existing long-
term care hospitals and satellite facilities under the long-term care
hospital prospective payment system.
(5) Sections 3106(a) and 10312(a) of Public Law 111-148, which
extended certain payment rules and moratoria under the long-term care
hospital prospective payment system by further amending sections 114(c)
and (d) of Public Law 110-173.
(6) Section 1206 of Public Law 113-67, which further extended
certain payment rules and moratoria under the long-term care hospital
prospective payment system by amending sections 114(c) and (d) of
Public Law 110-173, and which:
(i) Added a new section 1886(m)(6) to the Act to establish a site
neutral payment amount for long-term care hospital discharges that fail
to meet the applicable criteria in cost reporting periods beginning on
or after October 1, 2015; and
(ii) Requires the Secretary's review of the payment rates and
regulations governing long-term care hospitals established under
section 1886(d)(1)(B)(iv)(II) of the Act and application of payment
adjustments based on that review.
* * * * *
0
37. Section 412.521 is amended by revising paragraph (a)(2) to read as
follows:

Sec. 412.521 Basis for payment.

(a) * * *
(2) Except as provided for in Sec. 412.526, the amount of payment
under the prospective payment system is based on the Federal payment
rate established in accordance with Sec. 412.523, including
adjustments described in Sec. 412.525, and, if applicable during a
transition period, on a blend of the Federal payment rate and the cost-
based reimbursement rate described in Sec. 412.533.
* * * * *
0
38. Section 412.523 is amended by adding a new paragraph (c)(3)(xi) to
read as follows:

Sec. 412.523 Methodology for calculating the Federal prospective
payment rates.

* * * * *
(c) * * *
(3) * * *
(xi) For long-term care hospital prospective payment system fiscal
year beginning October 1, 2014, and ending September 30, 2015. The
standard Federal rate for the long-term care hospital prospective
payment system beginning October 1, 2014, and ending September 30,
2015, is the standard Federal rate for the previous long-term care
hospital prospective payment system fiscal year updated by 2.1 percent,
and further adjusted, as appropriate, as described in paragraph (d) of
this section.
* * * * *

Sec. 412.525 [Amended]

0
39. Section 412.525 is amended by removing and reserving paragraph
(d)(3).
0
40. A new Sec. 412.526 is added to read as follows:

Sec. 412.526 Payment provisions for a ``subclause (II)'' long-term
care hospital.

(a) Definition. A ``subclause (II)'' long-term care hospital is a
hospital that qualifies as an LTCH under section 1886(d)(1)(B)(iv)(II)
of the Act.
(b) Method of payment.--(1) For cost reporting periods beginning on
or after October 1, 2003 and before September 30, 2014, payment to a
``subclause (II)'' long-term care hospital is made under the
prospective payment system specified in Sec. 412.1(a)(4) and Subpart O
of this part.
(2) For cost reporting periods beginning on or after October 1,
2014, payment to a ``subclause (II)'' long-term care hospital is made
under the prospective payment system specified in Sec. 412.1(a)(4) and
under Subpart O of this part, as adjusted. The adjusted payment amount
is determined based on reasonable cost, as described at Sec.
412.526(c).
(c) Determining the adjusted payment for Medicare inpatient
operating and capital-related costs under the

[[Page 28305]]

reasonable cost-based reimbursement rules. Medicare inpatient operating
costs are paid based on reasonable cost, subject to a ceiling. The
ceiling is the aggregate upper limit on the amount of a hospital's net
Medicare inpatient operating costs that the program will recognize for
payment purposes, as determined under paragraph (c)(1) of this section.
(1) Ceiling. For each cost reporting period, the ceiling is
determined by multiplying the updated target amount, as defined in
paragraph (c)(2) of this section, for that period by the number of
Medicare discharges paid under this subpart during that period.
(2) Target amounts.--(i) For cost reporting periods beginning
during Federal fiscal year 2015, the target amount equals the
hospital's target amount determined under Sec. 413.40(c)(4) for its
cost reporting period beginning during Federal fiscal year 2000,
updated by the applicable annual rate-of-increase percentages specified
in Sec. 413.40(c)(3) to the subject period.
(ii) For subsequent cost reporting periods, the target amount
equals the hospital's target amount for the previous cost reporting
period updated by the applicable annual rate-of-increase percentage
specified in Sec. 413.40(c)(3) for the subject cost reporting period.
(3) Payment for inpatient operating costs. For cost reporting
periods subject to this section, the hospital's Medicare allowable net
inpatient operating costs for that period (as defined at Sec.
413.40(a)(3)) are paid on a reasonable cost basis, subject to that
hospital's ceiling (as determined under paragraph (c)(1) of this
section) for that period.
(4) Payment for inpatient capital-related costs. Medicare allowable
net inpatient capital costs are paid on a reasonable cost basis, in
accordance with the regulations under Part 413 of this chapter.
0
41. Section 412.531 is amended by--
0
a. Revising paragraph (a)(2) introductory text.
0
b. Adding a new paragraph (a)(3).
0
c. Revising paragraph (b)(4) introductory text.
0
d. Adding a new paragraph (b)(5).
The revisions and additions read as follows:

Sec. 412.531 Special payment provisions when an interruption of a
stay occurs in a long-term care hospital.

(a) * * *
(2) A greater than 3-day interruption of stay defined. For long-
term care hospital discharges occurring on or before September 30,
2014, ``a greater than 3-day or less interruption of stay'' means a
stay in a long-term care hospital during which a Medicare inpatient is
discharged from the long-term care hospital to an acute care hospital,
an IRF, or a SNF for a period of greater than 3 days but within the
applicable fixed-day period specified in paragraphs (a)(2)(i) through
(a)(2)(iii) of this section before being readmitted to the same long-
term care hospital.
* * * * *
(3) For long-term care hospital discharges occurring on or after
October 1, 2014, ``a greater than 3-day or less interruption of stay''
means a stay in a long-term care hospital during which a Medicare
inpatient is discharged from the long-term care hospital to an acute
care hospital, an IRF, or a SNF for a fixed day period of between 4
days and 30 consecutive days before being readmitted to the same long-
term care hospital.
(b) * * *
(4) Except as provided in paragraph (b)(5) of this section, if a
patient who has been discharged from a long-term care hospital to
another facility and is readmitted to the long-term care hospital for
additional treatment or services in the long-term care hospital
directly following the stay at the other facility, the subsequent
admission to the long-term care hospital is considered a new stay, even
if the case is determined to fall into the same MS-LTC-DRG, and the
long-term care hospital will receive two separate Federal prospective
payments if one of the following conditions are met:
* * * * *
(5) For long-term care hospital discharges occurring on or after
October 1, 2014, if a patient who has been discharged from a long-term
care hospital to another facility is readmitted to the long-term care
hospital for additional treatment or services directly following the
stay at the other facility, the subsequent admission to the long-term
care hospital is considered a new stay, even if the case is determined
to fall into the same MS-LTC-DRG, and the long-term care hospital will
receive two separate Federal prospective payments only if the patient
has a length of stay at the other facility that exceeded 30 days from
the initial date of discharge from the long-term care hospital.
* * * * *

Sec. 412.532 [Removed]

0
42. Section 412.532 is removed.
0
43. Section 412.534 is amended by--
0
a. Revising and paragraph (c)(1).
0
b. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraph (c)(1)(i) and (ii) and (c)(2) paragraph heading.
0
c. Revising paragraph (c)(3).
0
d. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraphs (d)(1) heading, (d)(1)(i), and (d)(2) heading.
0
e. Revising paragraph (d)(3).
0
f. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraphs (e)(1) heading, (e)(1)(i), and (e)(2) heading.
0
g. Revising paragraph (e)(3).
0
h. Revising paragraphs (h) introductory text, (h)(4), and (h)(5).
0
i. Removing paragraph (h)(6).
The revisions read as follows:

Sec. 412.534 Special payment provisions for long-term care hospitals
within hospitals and satellites of long-term care hospitals.

* * * * *
(c) * * *
(1) For cost reporting periods beginning on or after October 1,
2004 and before October 1, 2007 and for cost reporting periods
beginning on or after October 1, 2016. (i) Except as provided in
paragraphs (c)(3), (g), and (h) of this section, for any cost reporting
period beginning on or after October 1, 2004 and before October 1,
2007, and for cost reporting periods beginning on or after October 1,
2016 in which the long-term care hospital or its satellite facility has
a discharged Medicare inpatient population of whom no more than 25
percent were admitted to the hospital or its satellite facility from
the co-located hospital, payments are made under the rules at
Sec. Sec. 412.500 through 412.541 in this subpart with no adjustment
under this section.
* * * * *
(3) For a long-term care hospital satellite facility described in
Sec. 412.22(h)(3)(i), for cost reporting periods beginning on or after
July 1, 2007 and before July 1, 2016, payments will be determined using
the methodology specified in paragraph (c)(1) of this section, except
that the applicable percentage threshold for Medicare discharges is 50
percent.
(d) * * *
(3) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, payment for a long-term care hospital
satellite facility described in Sec. 412.22(h)(3)(i) will be
determined using the methodology specified in paragraph (c)(1) of this
section, except that the applicable percentage threshold for Medicare
discharges is 75 percent.
(e) * * *
(3) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, payments for a long-term care hospital
satellite facility described in Sec. 412.22(h)(3)(i) will be

[[Page 28306]]

determined using the methodology specified in paragraph (c)(1) of this
section, except that the applicable percentage threshold for Medicare
discharges is 75 percent.
* * * * *
(h) Effective date of policies in this section for certain co-
located long-term care hospitals and satellite facilities of long-term
care hospitals. Except as specified in paragraph (h)(4) of this
section, the policies set forth in this paragraph (h) apply to Medicare
patient discharges that were admitted from a hospital located in the
same building or on the same campus as a long-term care hospital
described in Sec. 412.23(e)(2)(i) that meets the criteria in Sec.
412.22(f) and a satellite facility of a long-term care hospital as
described under Sec. 412.22(h)(3)(i) for discharges occurring in cost
reporting periods beginning on or after July 1, 2007.
* * * * *
(4) For a long-term care hospital described in Sec.
412.23(e)(2)(i) that meets the criteria in Sec. 412.22(f), the
policies set forth in this paragraph (h) and in Sec. 412.536 do not
apply for discharges occurring in cost reporting periods beginning on
or after July 1, 2007.
(5) For a long-term care hospital or a satellite facility that, as
of December 29, 2007, was co-located with an entity that is a provider-
based, off-campus location of a subsection (d) hospital which did not
provide services payable under section 1886(d) of the Act at the off-
campus location, the policies set forth in this paragraph (h) and in
Sec. 412.536 do not apply for discharges occurring in cost reporting
periods beginning on or after July 1, 2007 and before July 1, 2016.
0
44. Section 412.536 is amended by--
0
a. Removing and reserving paragraph (a)(1)(iii).
0
b. Revising paragraph (a)(2) introductory text.
0
c. Removing and reserving paragraph (a)(2)(ii).
0
d. Removing paragraph (a)(3).
The revisions read as follows:

Sec. 412.536 Special payment provisions for long-term care hospitals
and satellites of long-term care hospitals that discharged Medicare
patients admitted from a hospital not located in the same building or
on the same campus as the long-term care hospital or satellite of the
long-term care hospital.

(a) * * *
(1) * * *
(iii) [Reserved].
* * * * *
(2) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, the policies set forth in this section are not
applicable to discharges from:
* * * * *
(ii) [Reserved].
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
45. The authority for Part 413 continues to read as follows:

Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Nomenclature Changes

PART 413 [Amended]

0
46. Throughout Part 413, according to the list below, remove the term
or phrase in the first column and replace it with the term or phrase in
the second column:

Remove Add

an intermediary's......................... ``a contractor's''
fiscal intermediary....................... ``contractor''
fiscal intermediary's..................... ``contractor's''
intermediary.............................. ``contractor''
intermediaries............................ ``contractors''
intermediary's............................ ``contractor's''

0
47. Section 413.24 is amended by reserving paragraph (i) and adding a
new paragraph (j) to read as follows:

Sec. 413.24 Adequate cost data and cost finding.

* * * * *
(i) [Reserved]
(j) Substantive reimbursement requirement of an appropriate cost
report claim. (1) General requirement. In order for a provider to
receive or potentially qualify for reimbursement for a specific item
for its cost reporting period, the provider's cost report, whether
determined on an as submitted, as amended, or as adjusted basis (as
prescribed in paragraph (j)(3) of this section), must include an
appropriate claim for the specific item, by either--
(i) Claiming full reimbursement in the provider's cost report for
the specific item in accordance with Medicare policy, if the provider
seeks payment for the item that it believes comports with program
policy; or
(ii) Self-disallowing the specific item in the provider's cost
report, if the provider seeks payment that it believes may not be
allowable or may not comport with Medicare policy (for example, if the
provider believes the contractor lacks the authority or discretion to
award the reimbursement the provider seeks for the item), by following
the procedures (set forth in paragraph (j)(2) of this section) for
properly self-disallowing the specific item in the provider's cost
report as a protested amount.
(2) Self-disallowance procedures. In order to properly self-
disallow a specific item, the provider must--
(i) Include an estimated reimbursement amount for each specific
self-disallowed item in the protested amount line (or lines) of the
provider's cost report; and
(ii) Attach a separate work sheet to the provider's cost report for
each specific self-disallowed item, explaining why the provider self-
disallowed each specific item (instead of claiming full reimbursement
in its cost report for the specific item) and describing how the
provider calculated the estimated reimbursement amount for each
specific self-disallowed item.
(3) Procedures for determining whether there is an appropriate cost
report claim. Whether the provider's cost report for its cost reporting
period includes an appropriate claim for a specific item (as prescribed
in paragraph (j)(1) of this section) must be determined by reference to
the cost report that the provider submits originally to, and was
accepted by, the contractor for such period, provided that none of the
following exceptions applies:
(i) If the provider submits an amended cost report for its cost
reporting period and such amended cost report is accepted by the
contractor, whether there is an appropriate cost report claim for the
specific item must be determined by reference to such amended cost
report, provided that neither of the exceptions set forth in paragraphs
(j)(3)(ii) and (j)(3)(iii) of this section applies;
(ii) If the contractor adjusts the provider's cost report, as
submitted originally by the provider and accepted by the contractor or
as amended by the provider and accepted by the contractor, whichever is
applicable, with respect to the specific item, whether there is an
appropriate cost report claim for the specific item must be determined
by reference to the provider's cost report, as such cost report claim
is adjusted for the specific item in the initial contractor
determination (as defined in Sec. 405.1801(a) of this chapter) for the
provider's cost reporting period, provided that the exception set forth
in paragraph (j)(3)(iii) of this section does not apply;
(iii) If the contractor reopens either the initial contractor
determination for

[[Page 28307]]

the provider's cost reporting period (pursuant to Sec. 405.1885 of
this chapter) or a revised contractor determination for such period
(issued pursuant to Sec. 405.1889 of this chapter) and the contractor
adjusts the provider's cost report with respect to the specific item,
whether there is an appropriate cost report claim for the specific item
must be determined by reference to the provider's cost report, as such
cost report claim is adjusted for the specific item in the most recent
revised contractor determination for such period.
(4) Reimbursement effects of contractor's determination of whether
there is an appropriate cost report claim. If the contractor determines
that the provider's cost report included an appropriate claim for a
specific item (as specified in paragraphs (j)(1), (j)(2), and (j)(3) of
this section) and that all the other substantive reimbursement
requirements for the specific item are also satisfied, the final
contractor determination (as defined in Sec. 405.1801(a) of this
chapter) must include reimbursement for the specific item to the extent
permitted by Medicare policy. If the contractor determines that the
provider made an appropriate cost report claim for a specific item but
the contractor disagrees with material aspects of the provider's claim
for the specific item, the contractor must make appropriate adjustments
to the provider's cost report and include reimbursement for the
specific item in the final contractor determination in accordance with
such cost report adjustments and to the extent permitted by program
policy. If the contractor determines that the provider did not make an
appropriate cost report claim for a specific item, the final contractor
determination must not include any reimbursement for the specific item,
regardless of whether the other substantive reimbursement requirements
for the specific item are or are not satisfied.
(5) Administrative review of whether there is an appropriate cost
report claim. If the provider files an administrative appeal (pursuant
to Part 405, Subpart R of this chapter) seeking reimbursement for a
specific item and any party to such appeal questions whether the
provider's cost report included an appropriate claim for the specific
item under appeal (as specified in paragraphs (j)(1), (j)(2), (j)(3),
and (j)(4) of this section), the reviewing entity (as defined in Sec.
405.1801(a) of this chapter) must follow the procedures prescribed in
Sec. 405.1873 of this chapter (if the appeal was filed originally with
the Board), or the procedures set forth in Sec. 405.1832 of this
chapter (if the appeal was filed initially with the contractor), for
review of whether the substantive reimbursement requirement of an
appropriate cost report claim for the specific item under appeal is
satisfied. The reviewing entity must follow the procedures set forth in
paragraph (j)(3) of this section in determining whether the provider's
cost report included an appropriate claim for the specific item under
appeal. The reviewing entity may permit reimbursement for the specific
item under appeal solely to the extent authorized by Sec. 405.1873(f)
of this chapter (if the appeal was filed originally with the Board) or
by Sec. 405.1832(f) of this chapter (if the appeal was filed initially
with the contractor).
0
48. Section 413.75 is amended by revising the definition of ``Rural
track FTE limitation'' under paragraph (b) to read as follows:

Sec. 413.75 Direct GME payments: General requirements.

* * * * *
(b) * * *
Rural track FTE limitation means the maximum number of residents
(as specified in Sec. 413.79(k)) training in a rural track residency
program that an urban hospital may include in its FTE count and that is
in addition to the number of FTE residents already included in the
hospital's FTE cap.
* * * * *
0
49. Section 413.78 is amended by revising paragraph (g)(6) to read as
follows:

Sec. 413.78 Direct GME payment: Determination of the total number of
FTE residents.

* * * * *
(g) * * *
(6) The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and
(g)(5) of this section shall not be applied in a manner that requires
reopening of any settled cost reports as to which there is not a
jurisdictionally proper appeal pending as of March 23, 2010, on direct
GME or IME payments. Cost reporting periods beginning before July 1,
2010 are not governed by paragraph (g) of this section.
* * * * *
0
50. Section 413.79 is amended by revising paragraphs (c)(6), (d)(5),
and (k)(7), to read as follows:

Sec. 413.79 Direct GME payments: Determination of the weighted number
of FTE residents.

* * * * *
(c) * * *
(6) FTE resident caps for rural hospitals that are redesignated as
urban. A rural hospital redesignated as urban after September 30, 2004,
as a result of the most recent census data and implementation of the
new MSA definitions announced by OMB on June 6, 2003, may retain the
increases to its FTE resident cap that it received under paragraphs
(c)(2)(i), (e)(1)(iii), and (e)(3) of this section while it was located
in a rural area. Effective for cost reporting periods beginning on or
after October 1, 2014, if a rural hospital is redesignated as urban due
to the most recent OMB standards for delineating statistical areas
adopted by CMS, and was training residents in a new program prior to
the redesignation becoming effective, the redesignated urban hospital
may retain any existing increases to its FTE resident cap, and receive
an increase to its FTE resident cap for the new program in which it was
training residents when the redesignation became effective, in
accordance with paragraph (e) of this section.
(d) * * *
(5)(i) For new programs started prior to October 1, 2012, if a
hospital qualifies for an adjustment to the limit established under
paragraph (c)(2) of this section for new medical residency programs
created under paragraph (e) of this section, the count of the residents
participating in new medical residency training programs above the
number included in the hospital's FTE count for the cost reporting
period ending during calendar year 1996 is added after applying the
averaging rules in this paragraph (d), for a period of years. Residents
participating in new medical residency training programs are included
in the hospital's FTE count before applying the averaging rules after
the period of years has expired. For purposes of this paragraph (d),
for each new program started, the period of years equals the minimum
accredited length for each new program. The period of years begins when
the first resident begins training in each new program.
(ii) For new programs started on or after October 1, 2012, for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e) of this chapter, FTE residents participating in new
medical residency training programs are excluded from the hospital's
FTE count before applying the averaging rules during the cost reporting
periods prior to the beginning of the applicable hospital's cost
reporting period that precedes the start of the sixth program year of
the first new program started, for hospitals for which the FTE may be
adjusted in accordance with Sec. 413.79(e)(1) of this chapter, and

[[Page 28308]]

prior to the beginning of the applicable hospital's cost reporting
period that precedes the start of the sixth program year of the each
individual new program started, for hospitals for which the FTE cap may
be adjusted in accordance with Sec. 413.79(e)(3) of this chapter.
After the applicable hospital's cost reporting period that precedes the
start of the sixth program year of the first new program started for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e)(1) of this chapter, and after the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the each individual new program started for hospitals for which the
FTE cap may be adjusted in accordance with Sec. 413.79(e)(3) of this
chapter, FTE residents participating in new medical residency training
programs are included in the hospital's FTE count before applying the
averaging rules.
* * * * *
(k) * * *
(7) (i) Effective for cost reporting periods beginning prior to
October 1, 2014, if an urban hospital had established a rural track
training program under the provisions of this paragraph (k) with a
hospital located in a rural area and that rural area subsequently
becomes an urban area due to the most recent census data and
implementation of the new labor market area definitions announced by
OMB on June 6, 2003, the urban hospital may continue to adjust its FTE
resident limit in accordance with this paragraph (k) for the rural
track programs established prior to the adoption of such new labor
market area definitions. In order to receive an adjustment to its FTE
resident cap for a new rural track residency program, the urban
hospital must establish a rural track program with hospitals that are
designated rural based on the most recent geographical location
delineations adopted by CMS.
(ii) Effective for cost reporting periods beginning on or after
October 1, 2014, if an urban hospital had started a rural track
training program under the provisions of this paragraph (k) with a
hospital located in a rural area and, during the 3-year period that is
used to calculate the urban hospital's rural track FTE limit, that
rural area subsequently becomes an urban area due to the most recent
OMB standards for delineating statistical areas adopted by CMS and the
most recent Census Bureau data, the urban hospital may continue to
adjust its FTE resident limit in accordance with this paragraph (k) and
subject to paragraph (k)(7)(iii) for the rural track programs
established prior to the adoption of such new OMB standards for
delineating statistical areas.
(iii) Effective for cost reporting periods beginning on or after
October 1, 2014, if an urban hospital had established a rural track
training program under the provisions of this paragraph (k) with a
hospital located in a rural area and that rural area subsequently
becomes an urban area due to the most recent OMB standards for
delineating statistical areas adopted by CMS and the most recent Census
Bureau data, regardless of whether the redesignation of the rural
hospital occurs during the 3-year period that is used to calculate the
urban hospital's rural track FTE limit, or after the 3-year period used
to calculate the urban hospital's rural track FTE limit, the urban
hospital may continue to adjust its FTE resident limit in accordance
with this paragraph (k) based on the rural track programs established
prior to the change in the hospital's geographic designation. In order
for the urban hospital to receive or use the adjustment to its FTE
resident cap for training FTE residents in the rural track residency
program that was established prior to the most recent OMB standards for
delineating statistical areas adopted by CMS, one of the following two
conditions must be met by the end of a 2-year period that begins when
the most recent OMB standards for delineating statistical areas are
adopted by CMS: the hospital that has been redesignated from rural to
urban must reclassify as rural under Sec. 412.103 of this chapter, for
purposes of IME only; or the urban hospital must find a new site that
is geographically rural consistent with the most recent geographical
location delineations adopted by CMS. In order to receive an adjustment
to its FTE resident cap for an additional new rural track residency
program, the urban hospital must establish a rural track program with
sites that are geographically rural based on the most recent
geographical location delineations adopted by CMS.
* * * * *

PART 415--SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS,
SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN
CERTAIN SETTINGS

0
51. The authority citation for Part 415 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106-113 (113
Stat. 1501A-332).

0
52. Section 415.70 is amended by revising paragraph (b) to read as
follows:

Sec. 415.70 Limits on compensation for physician services in
providers.

* * * * *
(b) Methodology for establishing limits. (1) For cost reporting
periods beginning before January 1, 2015. CMS establishes a methodology
for determining annual reasonable compensation equivalency limits and,
to the extent possible, considers average physician incomes by
specialty and type of location using the best available data.
(2) For cost reporting periods beginning on or after January 1,
2015. CMS establishes a methodology for determining annual reasonable
compensation equivalency limits and, to the extent possible, considers
average physician incomes by specialty using the best available data.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

0
53. The authority citation for Part 422 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

0
54. Section 422.300 is revised to read as follows:

Sec. 422.300 Basis and scope.

This subpart is based on sections 1106, 1853, 1854, and 1858 of the
Act. It sets forth the rules for making payments to Medicare Advantage
(MA) organizations offering local and regional MA plans, including
calculation of MA capitation rates and benchmarks, conditions under
which payment is based on plan bids, adjustments to capitation rates
(including risk adjustment), collection of risk adjustment data,
conditions for use and disclosure of risk adjustment data, and other
payment rules. See Sec. 422.458 in subpart J for rules on risk sharing
payments to MA regional organizations.
0
55. Section 422.310 is amended by revising paragraph (f) to read as
follows:

Sec. 422.310 Risk adjustment data.

* * * * *
(f) Use and release of data.
(1) CMS use of data. CMS may use the data described in paragraphs
(a) through (d) of this section for the following purposes:
(i) To determine the risk adjustment factors used to adjust
payments, as required under Sec. Sec. 422.304(a) and (c);
(ii) To update risk adjustment models;
(iii) To calculate Medicare DSH percentages;
(iv) To conduct quality review and improvement activities;
(v) For Medicare coverage purposes;

[[Page 28309]]

(vi) To conduct evaluations and other analysis to support the
Medicare program (including demonstrations) and to support public
health initiatives and other health care-related research;
(vii) For activities to support the administration of the Medicare
program;
(viii) For activities conducted to support program integrity; and
(ix) For purposes permitted by other laws.
(2) CMS release of data. Regarding data described in paragraphs (a)
through (d) of this section, CMS may release the minimum data it
determines is necessary for one or more of the purposes listed in
paragraph (f)(1) of this section to other HHS agencies, other Federal
executive branch agencies, States, and external entities in accordance
with the following:
(i) Applicable Federal laws;
(ii) CMS data sharing procedures;
(iii) Subject to the protection of beneficiary identifier elements
and beneficiary confidentiality, including--
(A) A prohibition against public disclosure of beneficiary
identifying information;
(B) Release of beneficiary identifying information to other HHS
agencies, other Federal executive branch agencies, Congressional
support agencies, and States only when such information is needed; and
(C) Release of beneficiary identifying information to external
entities only to the extent needed to link datasets.
(iv) Subject to the aggregation of payment data to protect
commercially sensitive data.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
56. The authority citation for Part 424 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
57. Section 424.11 is amended by revising paragraph (d)(5) to read as
follows:

Sec. 424.11 General procedures.

* * * * *
(d) * * *
(5) For all inpatient hospital services, including inpatient
psychiatric facility services, a delayed certification may not extend
past discharge.
* * * * *
0
58. Section 424.15 is amended by revising paragraph (b) to read as
follows:

Sec. 424.15 Requirements for inpatient CAH services.

* * * * *
(b) Certification begins with the order for inpatient admission.
The certification must be completed, signed, and documented in the
medical record no later than 1 day before the date on which the claim
for payment for the inpatient CAH service is submitted.
* * * * *

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
59. The authority citation for Part 485 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
60. Section 485.610 is amended by revising paragraph (b) introductory
text and adding a new paragraph (b)(5) to read as follows:

Sec. 485.610 Conditions of participation: Status and location.

* * * * *
(b) Standard: Location in a rural area or treatment as rural. The
CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this
section or the requirements of paragraph (b)(3), (b)(4), or (b)(5) of
this section.
* * * * *
(5) Effective on or after October 1, 2014, for a period of 2 years
beginning with the effective date of the most recent Office of
Management and Budget (OMB) standards for delineating statistical areas
adopted by CMS, the CAH no longer meets the location requirements in
either paragraph (b)(1) or (b)(2) of this section and is located in a
county that, prior to the most recent OMB standards for delineating
statistical areas adopted by CMS and the most recent Census Bureau
data, was located in a rural area as defined by OMB, but under the most
recent OMB standards for delineating statistical areas adopted by CMS
and the most recent Census Bureau data, is located in an urban area.
* * * * *

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
61. The authority citation for Part 488 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
62. Section 488.61 is amended by--
0
a. Revising paragraphs (a)(4) and (c)(4).
0
b. Adding new paragraphs (f), (g), and (h).
The revisions and additions read as follows:

Sec. 488.61 Special procedures for approval and re-approval of organ
transplant centers.

* * * * *
(a) * * *
(4) CMS will consider mitigating factors in accordance with
paragraphs (f), (g), and (h) of this section.
* * * * *
(c) * * *
(4) CMS will consider mitigating factors in accordance with
paragraphs (f), (g), and (h) of this section.
* * * * *
(f) Consideration of mitigating factors in initial approval and re-
approval survey, certification, and enforcement actions for transplant
centers.
(1) Factors. Except for situations of immediate jeopardy, CMS will
consider mitigating factors, including (but not limited to) the
following, in making a decision of initial and re-approval of a
transplant center that does not meet the data submission, clinical
experience, or outcome requirements, or other conditions of
participation:
(i) The extent to which outcome measures are not met or exceeded;
(ii) Availability of Medicare-approved transplant centers in the
area;
(iii) Extenuating circumstances (for example, natural disaster)
that have a temporary effect on meeting the conditions of
participation;
(iv) Program improvements that substantially address root causes of
graft failures or patient deaths and that have been implemented and
institutionalized on a sustainable basis;
(v) Recent patient and graft survival data to determine if there is
sufficient clinical experience and survival for CMS to conclude that
the program is in compliance with CMS requirements, except for the data
lag inherent in the reports from the Scientific Registry of Transplant
Recipients (SRTR);
(vi) Whether the program has made extensive use of innovative
transplantation practices relative to other transplant programs, such
as a high rate of transplantation of individuals who are highly
sensitized or children who have undergone a Fontan procedure compared
to most other transplant programs, where CMS finds that the innovative
practices are supported by evidence-based published research literature
or nationally recognized standards or Institution Review Board (IRB)
approvals, and the SRTR risk-adjustment methodology does not take the
relevant key factors into consideration; and
(vii) Whether the program's performance, based on the OPTN method
of calculating patient and graft survival, is within the OPTN's

[[Page 28310]]

thresholds for acceptable performance and does not flag OPTN
performance review under the applicable OPTN policy.
(2) Content. A request for consideration of mitigating factors must
include sufficient information to permit an adequate review and
understanding of the transplant program, the factors that have
contributed to outcomes, program improvements or innovations that have
been implemented or planned, and in the case of natural disasters, the
recovery actions planned. Examples of information to be submitted with
each request include (but are not limited to) the following:
(i) The name and contact information for the transplant hospital
and the names and roles of key personnel of the transplant program;
(ii) The type of organ transplant program(s) for which approval is
requested;
(iii) The conditions of participation that the program does not
meet for which the transplant center is requesting CMS' review for
mitigating factors;
(iv) The rationale and supporting evidence for CMS' review may
include (but is not limited to)--
(A) Root Cause Analysis for patient deaths and graft failures,
including factors the program has identified as likely causal or
contributing factors for patient deaths and graft failures;
(B) Program improvements or innovations (where applicable) that
have been implemented and improvements that are planned;
(C) Patient and donor/organ selection criteria and evaluation
protocols, including methods for pre-transplant patient evaluation by
cardiologists, hematologists, nephrologists, and psychiatrists or
psychologists to the extent applicable;
(D) Organizational chart with full-time equivalent levels, roles,
and structure for reporting to hospital leadership;
(E) Waitlist management protocols and practices relevant to
outcomes;
(F) Pre-operative management protocols and practices;
(G) Immunosuppression/infection prophylaxis protocols;
(H) Post-transplant monitoring and management protocols and
practices;
(I) Quality Assessment and Performance Improvement (QAPI) Program
meeting minutes from the most recent four meetings and attendance
rosters from the most recent 12 months;
(J) Quality dashboard and other performance indicators;
(K) Recent outcomes data for both patient survival and graft
survival; and
(L) Whether the program has engaged with the OPTN to review program
outcomes, the status of any such review, and any steps taken to address
program outcomes pursuant to the OPTN review.
(3) Timing. Within 10 days after CMS has issued formal written
notice of a condition-level deficiency to the program, CMS must receive
notification of the program's intent to seek mitigating factors
approval or re-approval, and receive all information for consideration
of mitigating factors within 30 days of the CMS written notification
for any deficiency that is not for insufficient clinical experience or
outcomes, and 120 days of the CMS written notification for a deficiency
due to clinical experience or outcomes. Failure to meet these
timeframes may be the basis for denial of mitigating factors.
(g) Results of mitigating factors review.
(1) Actions. Upon review of the request to consider mitigating
factors, CMS may take the following actions:
(i) Approve initial approval or re-approval of a program's Medicare
participation based upon approval of mitigating factors;
(ii) Deny the program's request for Medicare approval or re-
approval based on mitigating factors.
(iii) Offer a time-limited Systems Improvement Agreement, in
accordance with paragraph (h) of this section, when a transplant
program has waived its appeal rights, has implemented substantial
program improvements that address root causes and are institutionally
supported by the hospital's governing body on a sustainable basis, and
has requested more time to design or implement additional improvements
or demonstrate compliance with CMS outcome requirements. Upon
completion of the Systems Improvement Agreement or a CMS finding that
the hospital has failed to meet the terms of the Agreement, CMS makes a
final determination of whether to approve or deny a program's request
for Medicare approval or re-approval based on mitigating factors. A
Systems Improvement Agreement follows the process specified in
paragraph (h) of this section.
(2) Limitation. CMS will not approve any program with a condition-
level deficiency. However, CMS may approve a program with a standard-
level deficiency upon receipt of an acceptable plan of correction.
(h) Transplant Systems Improvement Agreement. A Systems Improvement
Agreement is a binding agreement, entered into voluntarily by the
hospital and CMS, through which CMS extends a prospective Medicare
termination date and offers the program additional time to achieve
compliance with the conditions of participation, contingent on the
hospital's agreement to participate in a structured regimen of quality
improvement activities, demonstrate improved outcomes, and waive the
right to appeal termination based on the identified deficiency or
deficiencies that led to the Agreement in consideration for more time
to demonstrate compliance. In some cases, transplant programs may enter
a period of inactivity--voluntarily, or imposed as a condition of the
Systems Improvement Agreement.
(1) Content. In exchange for the additional time to initiate or
continue activities to achieve compliance with the conditions of
participation, the hospital must agree to a regimen of specified
activities, including (but not limited to) all of the following:
(i) Patient notification about the degree and type of noncompliance
by the program, an explanation of what the program improvement efforts
mean for patients, and financial assistance to defray the out-of-pocket
costs of copayments and testing expenses for any wait-listed individual
who wishes to be listed with another program;
(ii) An external independent peer review team that conducts: An
onsite assessment of program policies, staffing, operations,
relationship to hospital services, and factors that contribute to
program outcomes; that suggests quality improvements the hospital
should consider; that provides both verbal and written feedback to the
hospital; and that provides a verbal debriefing to CMS. Neither the
hospital nor the peer review team is required to provide a written
report to CMS. The peer review team must include a transplant surgeon
with expertise in the relevant organ type(s), a transplant
administrator, an individual with expertise in transplant QAPI systems,
a social worker or psychologist or psychiatrist, and a specialty
physician with expertise in conditions particularly relevant to the
applicable organ types(s) such as a cardiologist, nephrologist, or
hepatologist. Except for the transplant surgeon, CMS may permit
substitution of one type of expertise for another individual who has
expertise particularly needed for the type of challenges experienced by
the program, such as substitution of an infection control specialist in
lieu of, or in addition to, a social worker;
(iii) An action plan that addresses systemic quality improvements
and is updated after the onsite peer review;

[[Page 28311]]

(iv) An onsite consultant whose qualifications are approved by CMS,
and who provides services for 8 days per month on average for the
duration of the agreement, except that CMS may permit a portion of the
time to be spent offsite and may agree to fewer consultant days each
month after the first 3 months of the Systems Improvement Agreement;
(v) A comparative effectiveness analysis that compares policies,
procedures, and protocols of the transplant program with those of other
programs in areas of endeavor that are relevant to the center's current
quality improvement needs;
(vi) Development of increased proficiency, or demonstration of
current proficiency, with patient-level data from the Scientific
Registry of Transplant Recipients and the use of registry data to
analyze outcomes and inform quality improvement efforts;
(vii) A staffing analysis that examines the level, type, training,
and skill of staff in order to inform transplant center efforts to
ensure the engagement and appropriate training and credentialing of
staff.
(viii) Activities to strengthen performance of the Quality
Assessment and Performance Improvement Program to ensure full
compliance with the requirements of Sec. 482.96 of this chapter;
(ix) Monthly (unless otherwise specified) reporting and conference
calls with CMS regarding the status of programmatic improvements,
results of the deliverables in the Systems Improvement Agreement, and
the number of transplants, deaths, and graft failures that occur within
1 year post-transplant; and
(x) Additional or alternative requirements specified by CMS,
tailored to the transplant program type and circumstances.
(2) Timeframe. A Systems Improvement Agreement will be established
for up to a 12-month period, subject to CMS' discretion to determine if
a shorter timeframe may suffice. At the hospital's request, CMS may
extend the agreement for up to an additional 6-month period.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778,
Medical Assistance)

Dated: April 18, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: April 22, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

Note: The following Addendum and Appendixes will not appear in
the Code of Federal Regulations.

Addendum--Proposed Schedule of Standardized Amounts, Update Factors,
and Rate-of-Increase Percentages Effective With Cost Reporting Periods
Beginning On or After October 1, 2014 and Payment Rates for LTCHs
Effective for Discharges Occurring On or After October 1, 2014.

I. Summary and Background

In this Addendum, we are setting forth a description of the methods
and data we used to determine the proposed prospective payment rates
for Medicare hospital inpatient operating costs and Medicare hospital
inpatient capital-related costs for FY 2015 for acute care hospitals.
We also are setting forth the proposed rate-of-increase percentages for
updating the target amounts for certain hospitals excluded from the
IPPS for FY 2015. We note that, because certain hospitals excluded from
the IPPS are paid on a reasonable cost basis subject to a rate-of-
increase ceiling (and not by the IPPS), these hospitals are not
affected by the figures for the standardized amounts, offsets, and
budget neutrality factors. Therefore, in this proposed rule, we are
proposing the rate-of-increase percentages for updating the target
amounts for certain hospitals excluded from the IPPS that are effective
for cost reporting periods beginning on or after October 1, 2014.
In addition, we are setting forth a description of the methods and
data we used to determine the proposed standard Federal rate that will
be applicable to Medicare LTCHs for FY 2015.
In general, except for SCHs, MDHs and hospitals located in Puerto
Rico, for FY 2015, each hospital's payment per discharge under the IPPS
is based on 100 percent of the Federal national rate, also known as the
national adjusted standardized amount. This amount reflects the
national average hospital cost per case from a base year, updated for
inflation.
SCHs are paid based on whichever of the following rates yields the
greatest aggregate payment: the Federal national rate (including, as
discussed in section IV.F. of the preamble to this proposed rule,
uncompensated care payments under section 1886(r)(2) of the Act); the
updated hospital-specific rate based on FY 1982 costs per discharge;
the updated hospital-specific rate based on FY 1987 costs per
discharge; the updated hospital-specific rate based on FY 1996 costs
per discharge; or the updated hospital-specific rate based on FY 2006
costs per discharge.
We note that, as discussed in section IV.G. of the preamble of this
proposed rule, section 1106 of the Pathway to SGR Reform Act of 2013
(Pub. L. 113-67), enacted on December 26, 2013, extended the MDH
program from the end of FY 2013 (that is, for discharges occurring
after September 30, 2013) through the first half of FY 2014 (that is,
for discharges occurring before April 1, 2014). Subsequently, section
106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93),
enacted on April 1, 2014, further extended the MDH program through the
first half of FY 2015 (that is, for discharges occurring before April
1, 2015). Prior to the enactment of Public Law 113-67, the MDH program
was only to be in effect through the end of FY 2013. Under current law,
the MDH program will expire for discharges on or after April 1, 2015.
Under section 1886(d)(5)(G) of the Act, MDHs historically have been
paid based on the Federal national rate or, if higher, the Federal
national rate plus 50 percent of the difference between the Federal
national rate and the updated hospital-specific rate based on FY 1982,
FY 1987, or FY 2002 costs per discharge, whichever was higher. Section
5003(c) of Public Law 109-171 further required that MDHs be paid based
on the Federal national rate or, if higher, the Federal national rate
plus 75 percent of the difference between the Federal national rate and
the updated hospital-specific rate. Further, based on the provisions of
section 5003(d) of Public Law 109-171, MDHs are no longer subject to
the 12-percent cap on their DSH payment adjustment factor.
For hospitals located in Puerto Rico, the payment per discharge is
based on the sum of 25 percent of an updated Puerto Rico-specific rate
based on average costs per case of Puerto Rico hospitals for the base
year and 75 percent of the Federal national rate. (We refer readers to
section II.D.2. of this Addendum for a complete description.)
As discussed below in section II. of this Addendum, we are
proposing to make changes in the determination of the prospective
payment rates for Medicare inpatient operating costs for acute care
hospitals for FY 2015. In

[[Page 28312]]

section III. of this Addendum, we discuss our proposed policy changes
for determining the prospective payment rates for Medicare inpatient
capital-related costs for FY 2015. In section IV. of this Addendum, we
are setting forth our proposed changes for determining the rate-of-
increase limits for certain hospitals excluded from the IPPS for FY
2015. In section V. of this Addendum, we discuss proposed policy
changes for determining the standard Federal rate for LTCHs paid under
the LTCH PPS for FY 2015. The tables to which we refer in the preamble
of this proposed rule are listed in section VI. of this Addendum and
are available via the Internet.

II. Proposed Changes to Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2015

The basic methodology for determining prospective payment rates for
hospital inpatient operating costs for acute care hospitals for FY 2005
and subsequent fiscal years is set forth under Sec. 412.64. The basic
methodology for determining the prospective payment rates for hospital
inpatient operating costs for hospitals located in Puerto Rico for FY
2005 and subsequent fiscal years is set forth under Sec. Sec. 412.211
and 412.212. Below we discuss the factors we are using for determining
the proposed prospective payment rates for FY 2015.
In summary, the standardized amounts set forth in Tables 1A, 1B,
and 1C that are listed and published in section VI. of this Addendum
(and available via the Internet) reflect--
Equalization of the standardized amounts for urban and
other areas at the level computed for large urban hospitals during FY
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of
the Act.
The labor-related share that is applied to the
standardized amounts and Puerto Rico-specific standardized amounts to
give the hospital the highest payment, as provided for under sections
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act.

For FY 2015, depending on whether a hospital submits quality data under
the rules established in accordance with section 1886(b)(3)(B)(viii) of
the Act (hereafter referred to as a hospital that submits quality data)
and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
there are four possible applicable percentage increases that can be
applied to the national standardized amount. We refer the reader to
section IV.B. of the preamble of this proposed rule for a complete
discussion on the FY 2015 proposed inpatient hospital update. Below is
a table with these four options:

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2015 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate-of-Increase.................. 2.7 2.7 2.7 2.7
Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.675 -0.675
under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR 0.0 -0.675 0.0 -0.675
User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi) -0.4 -0.4 -0.4 -0.4
of the Act.....................................
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied 2.1 1.425 1.425 0.75
to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

A proposed update of 2.1 percent to the Puerto Rico-
specific standardized amount (that is, the FY 2015 estimate of the
market basket rate-of-increase of 2.7 percent less a proposed
adjustment of 0.4 percentage point for MFP and less 0.2 percentage
point), in accordance with section 1886(d)(9)(C)(i) of the Act, as
amended by section 401(c) of Public Law 108-173, which sets the update
to the Puerto Rico-specific standardized amount equal to the applicable
percentage increase set forth under section 1886(b)(3)(B)(i) of the
Act.
An adjustment to the standardized amount to ensure budget
neutrality for DRG recalibration and reclassification, as provided for
under section 1886(d)(4)(C)(iii) of the Act.
An adjustment to ensure the wage index changes are budget
neutral, as provided for under section 1886(d)(3)(E)(i) of the Act. We
note that section 1886(d)(3)(E)(i) of the Act requires that when we
compute such budget neutrality, we assume that the provisions of
section 1886(d)(3)(E)(ii) of the Act (requiring a 62 percent labor-
related share in certain circumstances) had not been enacted.
An adjustment to ensure the effects of geographic
reclassification are budget neutral, as provided for under section
1886(d)(8)(D) of the Act, by removing the FY 2014 budget neutrality
factor and applying a revised factor.
As discussed below and in section III. of the preamble of
this proposed rule, an adjustment to offset the cost of the
transitional wage index provisions provided by CMS as a result of the
proposed adoption of the new OMB labor market area delineations.
An adjustment to ensure the effects of the rural community
hospital demonstration program required under section 410A of Public
Law 108-173, as amended by sections 3123 and 10313 of Public Law 111-
148, which extended the demonstration program for an additional 5
years, are budget neutral as required under section 410A(c)(2) of
Public Law 108-173.
An adjustment to remove the FY 2014 outlier offset and
apply an offset for FY 2015, as provided for under section
1886(d)(3)(B) of the Act.
As discussed below and in section II.D. of the preamble of
this proposed rule, a proposed recoupment to meet the requirements of
section 631 of ATRA to adjust the standardized amount to offset the
estimated amount of the increase in aggregate payments as a result of
not completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013.
Beginning in FY 2008, we applied the budget neutrality adjustment
for the rural floor to the hospital wage indices rather than the
standardized amount. As we did for FY 2014, for FY 2015, consistent
with current law, we are proposing to continue to apply the rural floor
budget neutrality adjustment to hospital wage indexes rather than the
standardized amount. Also, consistent with section 3141 of the
Affordable Care Act, instead of applying a State level rural floor
budget neutrality adjustment

[[Page 28313]]

to the wage index, we are proposing to apply a uniform, national budget
neutrality adjustment to the proposed FY 2015 wage index for the rural
floor. We note that, in section III.G.2.b. of the preamble to this
proposed rule, we are proposing to extend the imputed floor policy
(both the original methodology and alternative methodology) for another
year, through September 30, 2015.
Therefore, for this proposed rule, we are proposing to continue to
include the imputed floor (calculated under the original and
alternative methodologies) in calculating the uniform, national rural
floor budget neutrality adjustment, which will be reflected in the
proposed FY 2015 wage index.

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts
In general, the national standardized amount is based on per
discharge averages of adjusted hospital costs from a base period
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in
accordance with the provisions of section 1886(d) of the Act. For
Puerto Rico hospitals, the Puerto Rico-specific standardized amount is
based on per discharge averages of adjusted target amounts from a base
period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise
adjusted in accordance with the provisions of section 1886(d)(9) of the
Act. The September 1, 1983 interim final rule (48 FR 39763) contained a
detailed explanation of how base-year cost data (from cost reporting
periods ending during FY 1981) were established for urban and rural
hospitals in the initial development of standardized amounts for the
IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains
a detailed explanation of how the target amounts were determined and
how they are used in computing the Puerto Rico rates.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to
update base-year per discharge costs for FY 1984 and then standardize
the cost data in order to remove the effects of certain sources of cost
variations among hospitals. These effects include case-mix, differences
in area wage levels, cost-of-living adjustments for Alaska and Hawaii,
IME costs, and costs to hospitals serving a disproportionate share of
low-income patients.
In accordance with section 1886(d)(3)(E) of the Act, the Secretary
estimates, from time-to-time, the proportion of hospitals' costs that
are attributable to wages and wage-related costs. In general, the
standardized amount is divided into labor-related and nonlabor-related
amounts; only the proportion considered to be the labor-related amount
is adjusted by the wage index. Section 1886(d)(3)(E) of the Act
requires that 62 percent of the standardized amount be adjusted by the
wage index, unless doing so would result in lower payments to a
hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II)
of the Act extends this provision to the labor-related share for
hospitals located in Puerto Rico.)
For FY 2015, we are proposing to use the national and Puerto Rico-
specific labor-related and nonlabor-related shares established for FY
2014, using the FY 2010-based hospital market basket. Specifically,
under section 1886(d)(3)(E) of the Act, the Secretary estimates from
time to time the proportion of payments that are labor-related: ``[T]he
Secretary shall adjust the proportion, (as estimated by the Secretary
from time to time) of hospitals' costs which are attributable to wages
and wage-related costs, of the DRG prospective payment rates . . . .''
We refer to the proportion of hospitals' costs that are attributable to
wages and wage-related costs as the ``labor-related share.'' For FY
2015, as discussed in section III. of the preamble of this proposed
rule, we are proposing to establish a labor-related share of 69.6
percent for the national standardized amounts, and 63.2 percent for the
Puerto Rico-specific standardized amount, if the hospital has a wage
index value that is greater than 1.0000. Consistent with section
1886(d)(3)(E) of the Act, we are proposing to apply the wage index to a
labor-related share of 62 percent of the national standardized amount
for all IPPS hospitals whose wage index values are less than or equal
to 1.0000. For all IPPS hospitals whose wage indices are greater than
1.0000, we are proposing to apply the wage index to a labor-related
share of 69.6 percent of the national standardized amount. For FY 2015,
all Puerto Rico hospitals have a proposed wage index value that is less
than 1.0000 because the proposed average hourly rate of every hospital
in Puerto Rico divided by the proposed national average hourly rate
(the sum of all salaries and hours for all hospitals in the 50 United
States and Puerto Rico) results in a proposed wage index that is below
1.0000. However, when we divide the proposed average hourly rate of
every hospital located in Puerto Rico by the proposed Puerto Rico-
specific national average hourly rate (the sum of all salaries and
hours for all hospitals located only in Puerto Rico), we determine a
proposed Puerto Rico-specific wage index value for some hospitals that
is either above, or below 1.0000, depending on the hospital's location
within Puerto Rico.
Therefore, for hospitals located in Puerto Rico, we are proposing
to apply a labor-related share of 63.2 percent if its Puerto Rico-
specific wage index is greater than 1.0000. For hospitals located in
Puerto Rico whose Puerto Rico-specific wage index values are less than
or equal to 1.0000, we are proposing to apply a labor share of 62
percent.
The proposed standardized amounts for operating costs appear in
Tables 1A, 1B, and 1C that are listed and published in section VI. of
the Addendum to this proposed rule and are available via the Internet.
2. Computing the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning
with FY 2004 and thereafter, an equal standardized amount be computed
for all hospitals at the level computed for large urban hospitals
during FY 2003, updated by the applicable percentage update. Section
1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific
urban and rural area rates. Accordingly, we are proposing to calculate
the FY 2015 national average standardized amount and Puerto Rico-
specific standardized amount irrespective of whether a hospital is
located in an urban or rural location.
3. Updating the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
Section 1886(b)(3)(B) of the Act specifies the applicable
percentage increase used to update the standardized amount for payment
for inpatient hospital operating costs. We note that, in compliance
with section 404 of the MMA, in this proposed rule, we are using the
revised and rebased FY 2010-based IPPS operating and capital market
baskets for FY 2015 (which replaced the FY 2006-based IPPS operating
and capital market baskets in FY 2014). As discussed in section IV.B.
of the preamble of this proposed rule, in accordance with section
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the
Affordable Care Act, we are proposing to reduce the proposed FY 2015
applicable percentage increase (which is based on IHS Global Insight,
Inc.'s (IGI's) first quarter 2014 forecast of the FY 2010-based IPPS
market basket) by the proposed MFP adjustment (the

[[Page 28314]]

10-year moving average of MFP for the period ending FY 2015) of 0.4
percentage point, which is calculated based on IGI's first quarter 2014
forecast.
In addition, in accordance with section 1886(b)(3)(B)(i) of the
Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care
Act, we are proposing to further update the standardized amount for FY
2015 by the estimated market basket percentage increase less 0.2
percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi)
and (xii) of Act, as added and amended by sections 3401(a) and 10319(a)
of the Affordable Care Act, further state that these adjustments may
result in the applicable percentage increase being less than zero. The
percentage increase in the market basket reflects the average change in
the price of goods and services comprising routine, ancillary, and
special care unit hospital inpatient services.
Based on IGI's 2014 first quarter forecast of the hospital market
basket increase (as discussed in Appendix B of this proposed rule), the
most recent forecast of the hospital market basket increase for FY 2015
is 2.7 percent. As discussed above, for FY 2015, depending on whether a
hospital submits quality data under the rules established in accordance
with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR
user under section 1886(b)(3)(B)(ix) of the Act, there are four
possible applicable percentage increases that could be applied to the
standardized amount. We refer readers to section IV. of the preamble of
this proposed rule for a complete discussion on the FY 2015 proposed
inpatient hospital update to the standardized amount. We also refer
readers to the table above for the four possible proposed applicable
percentage increases that would be applied to update the national
standardized amount. The proposed standardized amounts shown in Tables
1A through 1C that are published in section VI. of this Addendum and
that are available via the Internet reflect these differential amounts.
Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges occurring
in a fiscal year (beginning with FY 2004), the Secretary shall compute
an average standardized amount for hospitals located in any area of
Puerto Rico that is equal to the average standardized amount computed
under subclause (I) for FY 2003 for hospitals in a large urban area
(or, beginning with FY 2005, for all hospitals in the previous fiscal
year) increased by the applicable percentage increase under subsection
(b)(3)(B) for the fiscal year involved. Therefore, the update to the
Puerto Rico-specific operating standardized amount is subject to the
applicable percentage increase set forth under section 1886(b)(3)(B)(i)
of the Act, as amended by sections 3401(a) and 10319(a) of the
Affordable Care Act (that is, the same update factor as for all other
hospitals subject to the IPPS). Accordingly, we are proposing to
establish an applicable percentage increase to the Puerto Rico-specific
standardized amount of 2.1 percent for FY 2015.
Although the update factors for FY 2015 are set by law, we are
required by section 1886(e)(4) of the Act to recommend, taking into
account MedPAC's recommendations, appropriate update factors for FY
2015 for both IPPS hospitals and hospitals and hospital units excluded
from the IPPS. Section 1886(e)(5)(A) of the Act requires that we
publish our proposed recommendations in the Federal Register for public
comment. Our recommendation on the update factors is set forth in
Appendix B of this proposed rule.
4. Other Adjustments to the Average Standardized Amount
As in the past, we are proposing to adjust the FY 2015 standardized
amount to remove the effects of the FY 2014 geographic
reclassifications and outlier payments before applying the proposed FY
2015 updates. We then apply budget neutrality offsets for outliers and
geographic reclassifications to the proposed standardized amount based
on proposed FY 2015 payment policies.
We do not remove the prior year's budget neutrality adjustments for
reclassification and recalibration of the DRG relative weights and for
updated wage data because, in accordance with sections
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate
payments after updates in the DRG relative weights and wage index
should equal estimated aggregate payments prior to the changes. If we
removed the prior year's adjustment, we would not satisfy these
conditions.
Budget neutrality is determined by comparing aggregate IPPS
payments before and after making changes that are required to be budget
neutral (for example, changes to MS-DRG classifications, recalibration
of the MS-DRG relative weights, updates to the wage index, and
different geographic reclassifications). We include outlier payments in
the simulations because they may be affected by changes in these
parameters.
In order to appropriately estimate aggregate payments in our
modeling, we make several inclusions and exclusions so that the
appropriate universe of claims and charges are included. We discuss IME
Medicare Advantage payment amounts, fee-for-service only claims, and
charges for anti-hemophilic blood factor and organ acquisition below.
First, consistent with our methodology established in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME
Medicare Advantage payments are made to IPPS hospitals under section
1886(d) of the Act, we believe these payments must be part of these
budget neutrality calculations. However, we note that it is not
necessary to include Medicare Advantage IME payments in the outlier
threshold calculation or the outlier offset to the standardized amount
because the statute requires that outlier payments be not less than 5
percent nor more than 6 percent of total ``operating DRG payments,''
which does not include IME and DSH payments. We refer readers to the FY
2011 IPPS/LTCH PPS final rule for a complete discussion on our
methodology of identifying and adding the total Medicare Advantage IME
payment amount to the budget neutrality adjustments.
Second, consistent with the methodology in the FY 2012 IPPS/LTCH
PPS final rule, in order to ensure that we capture only fee-for-service
claims, we are only including claims with a ``Claim Type'' of 60 (which
is a field on the MedPAR file that indicates a claim is a fee-for-
service claim).
Third, consistent with our methodology established in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the
MedPAR file and removed pharmacy charges for anti-hemophilic blood
factor (which are paid separately under the IPPS) with an indicator of
``3'' for blood clotting with a revenue code of ``0636'' from the
covered charge field for the budget neutrality adjustments. We also
removed organ acquisition charges from the covered charge field for the
budget neutrality adjustments because organ acquisition is a pass-
through payment not paid under the IPPS.
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include

[[Page 28315]]

financial and performance accountability for episodes of care. On
January 31, 2013, CMS announced the health care organizations selected
to participate in the BPCI initiative. For additional information on
the BPCI initiative, we refer readers to the CMS Center for Medicare
and Medicaid Innovation's Web site at: https://innovation.cms.gov/initiatives/Bundled-Payments/.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through
53343), for FY 2013 and subsequent fiscal years, we finalized a
methodology to treat hospitals that participate in the BPCI initiative
the same as prior fiscal years for the IPPS payment modeling and
ratesetting process (which includes recalibration of the MS-DRG
relative weights, ratesetting, calculation of the budget neutrality
factors, and the impact analysis) without regard to a hospital's
participation within these bundled payment models (that is, as if they
are not participating in those models under the BPCI initiative).
Therefore, for FY 2015, as discussed in section II.H.4.of the preamble
to this proposed rule, we are proposing to continue to include all
applicable data from subsection (d) hospitals participating in BPCI
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer the reader to the FY 2013 IPPS/LTCH PPS final
rule for a complete discussion on our final policy for the treatment of
hospitals in the BPCI initiative in our rate setting process.
The Affordable Care Act established the Hospital Readmissions
Reduction Program and the Hospital VBP Program which adjust payments to
certain IPPS hospitals beginning with discharges on or after October 1,
2012. Because the adjustments made under these programs affect the
estimation of aggregate IPPS payments, in this proposed rule,
consistent with our methodology established in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53687 through 53688), we believe that it is
appropriate to include adjustments for these programs within our budget
neutrality calculations. We discuss the treatment of these two programs
in the context of budget neutrality adjustments below.
Section 1886(q) of the Act establishes the ``Hospital Readmissions
Reduction Program'' effective for discharges from an ``applicable
hospital'' beginning on or after October 1, 2012, under which payments
to those hospitals under section 1886(d) of the Act are reduced to
account for certain excess readmissions. Under the Hospital
Readmissions Reduction Program, for discharges beginning on October 1,
2012 discharges from an ``applicable hospital'' are paid at an amount
equal to the product of the ``base operating DRG payment amount'' and
an ``adjustment factor'' that accounts for excess readmissions for the
hospital for the fiscal year plus any applicable add-on payments. We
refer readers to section IV.H. of the preamble of this proposed rule
for full details of our implementation of and proposed FY 2015 policy
changes to the Hospital Readmissions Reduction Program. We also note
that the Hospital Readmissions Reduction Program provided for under
section 1886(q) of the Act is not budget neutral.
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which, for discharges beginning on October
1, 2012, value-based incentive payments are made in a fiscal year to
eligible subsection (d) hospitals that meet performance standards
established for a performance period for that fiscal year. As specified
under section 1886(o)(7)(B)(i) of the Act, these value-based incentive
payments are funded by a reduction applied to each eligible hospital's
base-operating DRG payment amount, for each discharge occurring in the
fiscal year. As required by section 1886(o)(7)(A) of the Act, the total
amount of allocated funds available for value-based incentive payments
with respect to a fiscal year is equal to the total amount of base-
operating DRG payment reductions, as estimated by the Secretary. In a
given fiscal year, hospitals may earn a value-based incentive payment
amount for a fiscal year that is greater than, equal to, or less than
the reduction amount, based on their performance on quality measures
under the Hospital VBP Program. Thus, the Hospital VBP Program is
estimated to have no net effect on overall payments. We refer readers
to section IV.I. of the preamble of this proposed rule for full details
regarding the Hospital VBP Program.
Both the hospital readmissions payment adjustment (reduction) and
the hospital VBP payment adjustment (redistribution) are applied on a
claim-by-claim basis by adjusting, as applicable, the base-operating
DRG payment amount for individual subsection (d) hospitals, which
affects the overall sum of aggregate payments on each side of the
comparison within the budget neutrality calculations. For example, when
we calculate the budget neutrality factor for MS-DRG reclassification
and recalibration of the relative weights, we compare aggregate
payments estimated using the prior year's GROUPER and relative weights
to estimated payments using the new GROUPER and relative weights. (We
refer readers to section II.A.4.a. of this Addendum for full details.)
Other factors, such as the DSH and IME payment adjustments, are the
same on both sides of the comparison because we are only seeking to
ensure that aggregate payments do not increase or decrease as a result
of the changes of MS-DRG reclassification and recalibration.
In order to properly determine aggregate payments on each side of
the comparison, as we did for FY 2014, for FY 2015 and subsequent
years, we are proposing to continue to apply the hospital readmissions
payment adjustment and the hospital VBP payment adjustment on each side
of the comparison, consistent with the methodology that we adopted in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That
is, we are proposing to apply the readmissions payment adjustment
factor and the hospital VBP payment adjustment factor on both sides of
our comparison of aggregate payments when determining all budget
neutrality factors described in section II.A.4. of this Addendum.
For the purpose of calculating the proposed FY 2015 readmissions
payment adjustment factors, we are proposing to use excess readmission
ratios and aggregate payments for excess readmissions based on
admissions from the prior fiscal year's applicable period because
hospitals have had the opportunity to review and correct these data
before the data were made public under the policy we adopted regarding
the reporting of hospital-specific readmission rates, consistent with
section 1886(q)(6) of the Act. For this proposed rule, we are proposing
to calculate the readmissions payment adjustment factors using excess
readmission ratios and aggregate payments for excess readmissions based
on admissions from the finalized applicable period for FY 2015 as
hospitals have had the opportunity to review and correct these data
under our policy regarding the reporting of hospital-specific
readmission rates consistent with section 1886(q)(6) of the Act. We
discuss our policy regarding the reporting of hospital-specific
readmission rates for FY 2015 in section IV.H.3.f. of the preamble of
this proposed rule. (For additional information on our general policy
for the reporting of hospital-specific readmission rates, consistent
with section 1886(q)(6) of the Act, we refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53399 through 53400).)
In addition, for this proposed rule, for the purpose of modeling
aggregate

[[Page 28316]]

payments when determining all budget neutrality factors, we are
proposing to use proxy hospital VBP payment adjustment factors for FY
2015 that are based on data from a historical period because hospitals
have not yet had an opportunity to review and submit corrections for
their data from the FY 2015 performance period. (For additional
information on our policy regarding the review and correction of
hospital-specific measure rates under the Hospital VBP Program,
consistent with section 1886(o)(10)(A)(ii) of the Act, we refer readers
to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 through 53581),
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74544
through 74547), and the Hospital Inpatient VBP final rule (76 FR 26534
through 26536).)
The Affordable Care Act also established section 1886(r) of the
Act, which modifies the methodology for computing the Medicare DSH
payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS
hospitals receiving Medicare DSH payment adjustments will receive an
empirically justified Medicare DSH payment equal to 25 percent of the
amount that would previously have been received under the current
statutory formula set forth under section 1886(d)(5)(F) of the Act
governing the Medicare DSH payment adjustment. In accordance with
section 1886(r)(2) of the Act, the remaining amount, equal to an
estimate of 75 percent of what otherwise would have been paid as
Medicare DSH payments, reduced to reflect changes in the percentage of
individuals under age 65 who are uninsured, will be available to make
additional payments to Medicare DSH hospitals based on their share of
the total amount of uncompensated care reported by Medicare DSH
hospitals for a given time period. In order to properly determine
aggregate payments on each side of the comparison for budget
neutrality, prior to FY2014, we included estimated Medicare DSH
payments on both sides of our comparison of aggregate payments when
determining all budget neutrality factors described in section II.A.4.
of this Addendum.
To do this for FY 2015 and subsequent years (as we did for FY
2014), we are proposing to include estimated empirically justified
Medicare DSH payments that will be paid in accordance with section
1886(r)(1) of the Act and also to include estimates of the additional
uncompensated care payments made to hospitals receiving Medicare DSH
payment adjustments as described by section 1886(r)(2) of the Act. That
is, we are proposing to consider estimated empirically justified
Medicare DSH payments at 25 percent of what would otherwise have been
paid, and also the estimated additional uncompensated care payments for
hospitals receiving Medicare DSH payment adjustments on both sides of
our comparison of aggregate payments when determining all budget
neutrality factors described in section II.A.4. of this Addendum.
We note that, when calculating total payments for budget
neutrality, to determine total payments for SCHs we model total
hospital-specific rate payments and total federal rate payments and
then include whichever one of the total payments are greater. As
discussed in section IV.F. of the preamble to this proposed rule and
below, we are continuing the FY 2014 finalized methodology under which
we will take into consideration uncompensated care payments in the
comparison of payments under the Federal rate and the hospital-specific
rate for SCHs. Therefore, we are including estimated uncompensated care
payments in this comparison.
Similarly, for MDHs, as discussed in section IV. of the preamble to
this proposed rule, when computing the Federal national rate plus 75
percent of the difference between the Federal national rate and the
updated hospital-specific rate, we are continuing to take into
consideration uncompensated care payments in the computation of
payments under the Federal rate and the hospital-specific rate for
MDHs.
Also, for FY 2015, CMS has yet to finalize a list of hospitals that
are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the
Act. Therefore, we are proposing not to include this adjustment to the
standardized amount (for those hospitals that are not meaningful EHR
users) in our modeling of aggregate payments for budget neutrality for
FY 2015. CMS intends to release a final list of hospitals that are not
meaningful EHR user in September 2014. Hospitals identified on this
list will be paid based on the applicable proposed standardized amount
in Table 1A for discharges occurring in FY 2015.
We finally note that the wage index value is calculated and
assigned to a hospital based on the hospital's labor market area. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by the Office of Management and Budget (OMB). The
current statistical areas used in FY 2014 are based on OMB standards
published on December 27, 2000 (65 FR 82228) and Census 2000 data and
Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No.
10-02). For purposes of determining all of the FY 2014 budget
neutrality factors, we determined aggregate payments on each side of
the comparison for our budget neutrality calculations using wage
indexes based on the current CBSAs.
As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552)
and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB
Bulletin No. 13-01, which established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas, and provided guidance on the use of the
delineations of these statistical areas. In order to implement these
changes for the IPPS, it is necessary to identify the new OMB labor
market area delineation for each county and hospital in the country. In
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we
intended to propose changes to the wage index policy based on the new
OMB delineations in this FY 2015 proposed rule. As discussed in section
III. of the preamble of this proposed rule, we are proposing to adopt
the new OMB labor market area delineations as described in the February
28, 2013 OMB Bulletin No. 13-01, effective for the FY 2015 IPPS wage
index.
Consistent with our proposal to adopt the new OMB delineations, in
order to properly determine aggregate payments on each side of the
comparison for our budget neutrality calculations, we are proposing to
use wage indexes based on the new OMB delineations in the determination
of all of the proposed budget neutrality factors discussed below (with
the exception of the proposed transitional budget neutrality factor and
proposed outlier threshold as explained below). We also note that,
consistent with past practice as finalized in the FY 2005 IPPS final
rule (69 FR 49034), we are not adopting the new OMB delineations
themselves in a budget neutral manner. We continue to believe that the
revision to the labor market areas in and of itself do not constitute
an ``adjustment or update'' to the adjustment for area wage
differences, as provided under section 1886(d)(3)(E) of the Act.
a. Proposed Recalibration of MS-DRG Relative Weights and Updated Wage
Index--Budget Neutrality Adjustment
Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in
FY 1991, the annual DRG reclassification and recalibration of the
relative weights must be made in a manner that ensures that aggregate
payments to hospitals are not affected. As discussed in section II.H.
of the preamble of this proposed

[[Page 28317]]

rule, we normalized the recalibrated MS-DRG relative weights by an
adjustment factor so that the average case relative weight after
recalibration is equal to the average case relative weight prior to
recalibration. However, equating the average case relative weight after
recalibration to the average case relative weight before recalibration
does not necessarily achieve budget neutrality with respect to
aggregate payments to hospitals because payments to hospitals are
affected by factors other than average case relative weight. Therefore,
as we have done in past years, we are proposing to make a budget
neutrality adjustment to ensure that the requirement of section
1886(d)(4)(C)(iii) of the Act is met.
Section 1886(d)(3)(E)(i) of the Act requires us to update the
hospital wage index on an annual basis beginning October 1, 1993. This
provision also requires us to make any updates or adjustments to the
wage index in a manner that ensures that aggregate payments to
hospitals are not affected by the change in the wage index. Section
1886(d)(3)(E)(i) of the Act requires that we implement the wage index
adjustment in a budget neutral manner. However, section
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent
for hospitals with a wage index less than or equal to 1.0000, and
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall
calculate the budget neutrality adjustment for the adjustments or
updates made under that provision as if section 1886(d)(3)(E)(ii) of
the Act had not been enacted. In other words, this section of the
statute requires that we implement the updates to the wage index in a
budget neutral manner, but that our budget neutrality adjustment should
not take into account the requirement that we set the labor-related
share for hospitals with wage indices less than or equal to 1.0 at the
more advantageous level of 62 percent. Therefore, for purposes of this
budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act
prohibits us from taking into account the fact that hospitals with a
wage index less than or equal to 1.0000 are paid using a labor-related
share of 62 percent. Consistent with current policy, for FY 2015, we
are proposing to adjust 100 percent of the wage index factor for
occupational mix. We describe the proposed occupational mix adjustment
in section III.F. of the preamble of this proposed rule.
For FY 2015, to comply with the requirement that MS-DRG
reclassification and recalibration of the relative weights be budget
neutral for the Puerto Rico standardized amount and the hospital-
specific rates, we used FY 2013 discharge data to simulate payments and
compared the following:
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, the FY 2014 relative weights, and
the FY 2014 pre-reclassified wage data, and applied the proposed FY
2015 hospital readmissions payment adjustments and estimated FY 2015
hospital VBP payment adjustments; and
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, the proposed FY 2015 relative
weights, and the FY 2014 pre-reclassified wage data, and applied the
same hospital readmissions payment adjustments and estimated hospital
VBP payment adjustments applied above.
Based on this comparison, we computed a proposed budget neutrality
adjustment factor equal to 0.992938. As discussed in section IV. of
this Addendum, we also are proposing to apply the proposed MS-DRG
reclassification and recalibration budget neutrality factor of 0.992938
to the hospital-specific rates that are effective for cost reporting
periods beginning on or after October 1, 2014.
In order to meet the statutory requirements that we do not take
into account the labor-related share of 62 percent when computing wage
index budget neutrality, it was necessary to use a three-step process
to comply with the requirements that MS-DRG reclassification and
recalibration of the relative weights and the updated wage index and
labor-related share have no effect on aggregate payments for IPPS
hospitals. Under the first step, we determined a proposed MS-DRG
reclassification and recalibration budget neutrality factor of 0.992938
(by using the same methodology described above to determine the MS-DRG
reclassification and recalibration budget neutrality factor for the
Puerto Rico standardized amount and hospital-specific rates). Under the
second step, to compute a proposed budget neutrality factor for wage
index and labor-related share changes we used FY 2013 discharge data to
simulate payments and compared the following:
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, proposed FY 2015 relative weights
and the FY 2014 pre-reclassified wage indices, applied the FY 2014
labor-related share of 69.6 percent to all hospitals (regardless of
whether the hospital's wage index was above or below 1.0), and applied
the proposed FY 2015 hospital readmissions payment adjustment and the
proposed FY 2015 estimated hospital VBP payment adjustment; and
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, proposed FY 2015 relative weights
and the proposed FY 2015 pre-reclassified wage indices, applied the
proposed labor-related share for FY 2015 of 69.6 percent to all
hospitals (regardless of whether the hospital's wage index was above or
below 1.0), and applied the same proposed FY 2015 hospital readmissions
payment adjustments and estimated proposed FY 2015 hospital VBP payment
adjustments applied above.
In addition, we applied the proposed MS-DRG reclassification and
recalibration budget neutrality factor (derived in the first step) to
the payment rates that were used to simulate payments for this
comparison of aggregate payments from FY 2014 to FY 2015. By applying
this methodology, we determined a proposed budget neutrality adjustment
factor of 1.000578 for changes to the wage index. Finally, we
multiplied the proposed MS-DRG reclassification and recalibration
budget neutrality adjustment factor of 0.992938 (derived in the first
step) by the proposed budget neutrality adjustment factor of 1.000578
for changes to the wage index (derived in the second step) to determine
the proposed MS-DRG reclassification and recalibration and updated wage
index budget neutrality adjustment factor of 0.993512.
b. Reclassified Hospitals--Budget Neutrality Adjustment
Section 1886(d)(8)(B) of the Act provides that certain rural
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act
provides for the reclassification of hospitals based on determinations
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be
reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is required
to adjust the standardized amount to ensure that aggregate payments
under the IPPS after implementation of the provisions of sections
1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the
aggregate prospective payments that would have been made absent these
provisions. We note that the wage index adjustments provided for under
section 1886(d)(13) of the Act are not budget neutral. Section
1886(d)(13)(H) of the Act provides that any increase in a wage index
under section 1886(d)(13) shall not be taken into account in ``applying
any budget neutrality adjustment with respect to such index'' under
section

[[Page 28318]]

1886(d)(8)(D) of the Act. To calculate the proposed budget neutrality
factor for FY 2015, we used FY 2013 discharge data to simulate payments
and compared the following:
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, proposed FY 2015 relative weights,
and proposed FY 2015 wage data prior to any reclassifications under
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied
the proposed FY 2015 hospital readmissions payment adjustments and the
proposed estimated FY 2015 hospital VBP payment adjustments; and
Aggregate payments using the new OMB labor market area
delineations proposed for FY 2015, proposed FY 2015 relative weights,
and proposed FY 2015 wage data after such reclassifications, and
applied the same proposed hospital readmissions payment adjustments and
the estimated hospital VBP payment adjustments applied above.
We note that the reclassifications applied under the second
simulation and comparison are those listed in Tables 9A2 and 9C2, which
are posted on the CMS Web site. These tables reflect reclassification
crosswalks based on the new OMB labor market area delineations proposed
for FY 2015, and apply the policies explained in section III. of the
preamble to this proposed rule. Based on these simulations, we
calculated a proposed budget neutrality adjustment factor of 0.991412
to ensure that the effects of these provisions are budget neutral,
consistent with the statute.
The proposed FY 2015 budget neutrality adjustment factor was
applied to the proposed standardized amount after removing the effects
of the FY 2014 budget neutrality adjustment factor. We note that the
proposed FY 2015 budget neutrality adjustment reflects proposed FY 2015
wage index reclassifications approved by the MGCRB or the
Administrator.
c. Proposed Rural Floor Budget Neutrality Adjustment
Under Sec. 412.64(e)(4), we make an adjustment to the wage index
to ensure that aggregate payments after implementation of the rural
floor under section 4410 of the BBA (Pub. L. 105-33) and the imputed
floor under Sec. 412.64(h)(4) are equal to the aggregate prospective
payments that would have been made in the absence of such provisions.
Consistent with section 3141 of the Affordable Care Act and as
discussed in section III.G. of the preamble of this proposed rule and
codified at Sec. 412.64(e)(4)(ii), the budget neutrality adjustment
for the rural and imputed floor is a national adjustment to the wage
index.
As noted above and as discussed in section III.G.2.b. of the
preamble of this proposed rule, in the FY 2012 IPPS/LTCH PPS final
rule, we extended the imputed floor calculated under the original
methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH PPS
final rule, we established an alternative methodology for calculating
the imputed floor and established a policy that the minimum wage index
value for an all-urban state would be the higher of the value
determined under the original methodology or the value computed using
the alternative methodology (77 FR 53368 through 53369). Consistent
with the methodology for treating the imputed floor, similar to the
methodology we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53368 through 53369), we included this alternative methodology for
computing the imputed floor index in the calculation of the uniform,
national rural floor budget neutrality adjustment for FY 2014. For FY
2015, as discussed in section III.G.2.b. of the preamble of this
proposed rule, we are proposing to extend the imputed floor using the
higher of the value determined under the original methodology or the
alternative methodology for FY 2015. Therefore, in order to ensure that
aggregate payments to hospitals are not affected, similar to prior
years, we would follow our policy of including the imputed floor in the
rural floor budget neutrality adjustment to the wage index.
As discussed above, for FY 2015, we are proposing to implement the
new OMB delineations as described in the February 28, 2013 OMB Bulletin
No. 13-01, effective for the FY 2015 IPPS wage index. Therefore, the
budget neutrality adjustment for the rural floor and imputed floor
would be calculated using the new OMB delineations.
Under the OMB delineations used for FY 2014, the imputed floor
(both the original methodology and alternative methodology) was applied
to New Jersey and Rhode Island because these were the only two all-
urban States. Under OMB's 2010 revised delineations based on Census
2010 data, in addition to New Jersey and Rhode Island, Delaware would
become an all-urban state. Therefore, for FY 2015, the proposed imputed
floor would be applied to New Jersey, Rhode Island, and Delaware.
Similar to our calculation in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51593 and 51788), the FY 2013 IPPS/LTCH PPS final rule (77 FR
53689), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50975 through
50976), for FY 2015, we are calculating a proposed national rural
Puerto Rico wage index (used to adjust the labor-related share of the
national standardized amount for hospitals located in Puerto Rico which
receive 75 percent of the national standardized amount) and a proposed
rural Puerto Rico-specific wage index (which is used to adjust the
labor-related share of the Puerto Rico-specific standardized amount for
hospitals located in Puerto Rico that receive 25 percent of the Puerto
Rico-specific standardized amount). Because there are no rural Puerto
Rico hospitals with established wage data, our calculation of the FY
2015 rural Puerto Rico wage index is based on the policy adopted in the
FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we
will use the unweighted average of the wage indexes from all CBSAs
(urban areas) that are contiguous (share a border with) to the rural
counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under
the new OMB labor market area delineations, except for Arecibo, Puerto
Rico (CBSA 11640), all other Puerto Rico urban areas are contiguous to
a rural area. Therefore, based on our existing policy, the FY 2015
rural Puerto Rico wage index is calculated based on the average of the
FY 2015 wage indices for the following urban areas: Aguadilla-Isabela,
PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420);
Ponce, PR (CBSA 38660), San German, PR (CBSA 41900) and San Juan-
Carolina-Caguas, PR, PR (CBSA 41980).
To calculate the proposed national rural floor and imputed floor
budget neutrality adjustment factor and the proposed Puerto Rico-
specific rural floor budget neutrality adjustment factor, we used FY
2013 discharge data to simulate payments, the proposed FY 2015 new OMB
labor market area delineations, and post-reclassified national and
Puerto Rico-specific wage indices and compared the following:
The national and Puerto Rico-specific simulated payments
without the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied; and
The national and Puerto Rico-specific simulated payments
with the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied.
Based on this comparison, we determined a proposed national rural
budget neutrality adjustment factor of 0.989455 and the proposed Puerto
Rico-

[[Page 28319]]

specific budget neutrality adjustment factor of 0.991359. The proposed
national adjustment was applied to the proposed national wage indexes
to produce a proposed national rural floor budget neutral wage index
and the proposed Puerto Rico-specific adjustment was applied to the
proposed Puerto Rico-specific wage indexes to produce a proposed Puerto
Rico-specific rural floor budget neutral wage index.
d. Proposed Wage Index Transition Budget Neutrality
As discussed in section III. of the preamble to this proposed rule,
in the past, we have provided for transition periods when adopting
changes that have significant payment implications, particularly large
negative impacts.
Similar to FY 2005, for FY 2015, we have determined that the
proposed transition to using the new OMB delineations would have the
largest impact on hospitals that are currently located in an urban
county that would become rural under the new OMB delineations. To
alleviate the decreased payments associated with having a rural wage
index, in calculating the area wage index, similar to the transition
provided in the FY 2005 IPPS final rule, we generally are proposing a
policy to assign them the urban wage index value of the CBSA to which
they are physically located for FY 2014 for FYs 2015, 2016, and 2017.
In addition to the 3-year transition adjustment for hospitals being
transitioned from urban to rural status as discussed above, we are
proposing a 1-year blended wage index for all hospitals that would
experience any decrease in their actual payment wage index (that is, a
hospital's actual wage index used for payment, which accounts for all
applicable effects of reclassification and redesignation) exclusively
due to the proposed implementation of the new OMB delineations. Similar
to the policy adopted in the FY 2005 IPPS final rule (69 FR 49033), we
are proposing that a post-reclassified wage index with the rural and
imputed floor applied would be computed based on the hospital's FY 2014
CBSA (that is, using all of its FY 2014 constituent county/ies), and
another post-reclassified wage index with the rural and imputed floor
applied would be computed based on the hospital's new FY 2015 CBSA
(that is, the FY 2015 constituent county/ies). We are proposing to
compare these two wage indexes. If the proposed FY 2015 wage index with
FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with
FY 2014 CBSAs, we are proposing that a blended wage index would be
computed, consisting of 50 percent of each of the two wage indexes
added together. We are proposing that this blended wage index would be
the hospital's wage index for FY 2015. Hospitals that benefit from the
proposed adoption of the new OMB delineations would receive their new
wage index based on the new OMB delineations. We refer readers to
section III. of the preamble to this proposed rule for a completer
discussion on the transitional wage index policy.
In the past, CMS has budget neutralized transitional wage indexes.
Because we are proposing a policy that allows for the application of a
transitional wage index only when it would benefit the hospital, we
believe that it would be appropriate to ensure that such a transitional
policy does not increase aggregate Medicare payments beyond the
payments that would be made had we simply adopted the new OMB
delineations without any transitional provisions. Therefore, for FY
2015, we are proposing to use our exceptions and adjustments authority
under section 1886(d)(5)(I)(i) of the Act to make an adjustment to the
national and Puerto Rico-specific standardized amounts to ensure that
total payments, including the effect of the transitional wage index
provisions, would equal what payments would have been if we had
proposed to fully adopt the new OMB delineations without any
transitional provisions.
As stated above, the proposed 50/50 blended wage indexes would use
post-reclassified wage index data with the rural and imputed floor
applied computed based on FY 2014 CBSAs. Because the proposed 50/50
blend methodology would use data based on FY 2014 CBSAs, in order to
properly calculate the proposed transitional budget neutrality factor,
it was first necessary to calculate the following proposed budget
neutrality factors based on the FY 2014 CBSAs: An MS-DRG and a wage
index budget neutrality, a reclassification budget neutrality, and a
rural floor budget neutrality. It was necessary to compute the first
three budget neutrality factors of MS-DRG, wage index, and
reclassification budget neutrality (which are applied to the
standardized amount) to ensure that the calculation of the rural and
imputed floor budget neutrality factor applied to the wage index based
on FY 2014 CBSAs is accurate. We calculated these four budget
neutrality factors using the same methodology stated above, but used
the FY 2014 CBSAs instead of the proposed FY 2015 CBSAs on both the
sides of the comparison.
After calculating all of the proposed budget neutrality factors
using FY 2014 and FY 2015 CBSAs, to calculate the proposed transitional
wage index budget neutrality factor for FY 2015, we used FY 2013
discharge data to simulate payments and compared the following:
Aggregate payments using new OMB delineations proposed for
FY 2015, the proposed FY 2015 relative weights, proposed FY 2015 wage
data after such reclassifications under sections 1886(d)(8)(B) and (C)
and 1886(d)(10) of the Act (using the new OMB delineations), applied
the proposed rural floor budget neutrality factor to the wage index
(using the new OMB delineations), and applied the proposed FY 2015
hospital readmissions payment adjustments and the proposed estimated FY
2015 hospital VBP payment adjustments; and
Aggregate payments using proposed FY 2015 relative
weights, proposed FY 2015 wage data after applying the transitional
wage indexes, and applied the same proposed hospital readmissions
payment adjustments and the estimated hospital VBP payment adjustments
applied above. We note that hospitals that did not receive the proposed
transitional 50/50 blended wage index were assigned the post-
reclassified wage index values with the proposed rural floor budget
neutrality based on the proposed FY 2015 new OMB delineations.
Based on these simulations, we calculated a proposed budget
neutrality adjustment factor of 0.998856. Therefore, for FY 2015, we
are proposing to apply a transitional wage index budget neutrality
adjustment factor of 0.998856 to the national average and Puerto Rico-
specific standardized amounts to ensure that the effects of these
proposed transitional wage indices are budget neutral.
We note that the proposed budget neutrality adjustment factor
calculated above is based on the increase in payments in FY 2015 that
would result from the transitional wage indexes. Therefore, we are
proposing to apply this budget neutrality adjustment factor as a one-
time adjustment to the FY 2015 national and Puerto Rico-specific
standardized amounts in order to offset the increase in payments in FY
2015 as a result of these transitional wage indexes. For subsequent
fiscal years, we are proposing to not take into consideration the
adjustment factor applied to the national and Puerto Rico-specific
standardized amounts in the previous fiscal year's update when
calculating the current fiscal year transitional wage index budget
neutrality adjustment factor (that is, we

[[Page 28320]]

are proposing that this adjustment would not be applied cumulatively).
Because we are proposing a 3-year transitional wage index policy for
urban hospitals that became rural as a result of the proposed adoption
of the new OMB delineations, we intend to propose transitional wage
index budget neutrality adjustment factors to apply to the FY 2016 and
FY 2017 national and Puerto Rico-specific standardized amounts during
those respective rulemaking cycles. Similar to the proposal for FY
2015, we plan on proposing that the FYs 2016 and 2017 adjustments would
be applied as ``one-time'' adjustments and not cumulative adjustments
applied each fiscal year.
d. Proposed Case-Mix Budget Neutrality Adjustment
Below we summarize the proposed recoupment adjustment to the
proposed FY 2015 payment rates, as required by section 631 of ATRA, to
account for the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. We refer readers to
section II.D. of the preamble of this proposed rule for a complete
discussion regarding our proposed policies for FY 2015 in this proposed
rule and previously finalized policies (including our historical
adjustments to the payment rates) relating to the effect of changes in
documentation and coding that do not reflect real changes in case-mix.
(1) Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA) to the National
Standardized Amount
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment
totaling $11 billion by FY 2017. Our actuaries estimated that if CMS
were to fully account for the $11 billion recoupment required by
section 631 of ATRA in FY 2014, a one-time -9.3 percent adjustment to
the standardized amount would be necessary. It is often our practice to
delay or phase-in payment rate adjustments over more than 1 year, in
order to moderate the effect on payment rates in any 1 year. Therefore,
consistent with the policies that we have adopted in many similar
cases, for FY 2014, we applied a -0.8 percent adjustment to the
standardized amount. In this proposed rule, we are proposing to apply
an additional -0.8 percent adjustment to the standardized amount for FY
2015. We note that, as section 631 of the ATRA instructs the Secretary
to make a recoupment adjustment only to the standardized amount, this
adjustment would not apply to the Puerto Rico-specific standardized
amount and hospital-specific payment rates.
e. Rural Community Hospital Demonstration Program Adjustment
As discussed in section IV.L. of the preamble of this proposed
rule, section 410A of Public Law 108-173 originally required the
Secretary to establish a demonstration program that modifies
reimbursement for inpatient services for up to 15 small rural
hospitals. Section 410A(c)(2) of Public Law 108-173 requires that
``[i]n conducting the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have paid
if the demonstration program under this section was not implemented.''
Sections 3123 and 10313 of the Affordable Care Act extended the
demonstration program for an additional 5-year period, and allowed up
to 30 hospitals to participate in 20 States with low population
densities determined by the Secretary. (In determining which States to
include in the expansion, the Secretary is required to use the same
criteria and data that the Secretary used to determine the States for
purposes of the initial 5-year period.) In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53449 through 53453), in order to achieve budget
neutrality, we adjusted the national IPPS payment rates by an amount
sufficient to account for the added costs of this demonstration program
as described in section IV.K. of that final rule. In other words, we
applied budget neutrality across the payment system as a whole rather
than merely across the participants of this demonstration program,
consistent with past practice. We stated that we believe the language
of the statutory budget neutrality requirement permits the agency to
implement the budget neutrality provision in this manner. The statutory
language requires that ``aggregate payments made by the Secretary do
not exceed the amount which the Secretary would have paid if the
demonstration . . . was not implemented,'' but does not identify the
range across which aggregate payments must be held equal.
As we did for FY 2014, for FY 2015, we are proposing to adjust the
national IPPS payment rates according to the same methodology that we
used for FY 2013, as set forth in section IV.L. of the preamble of this
proposed rule, to account for the estimated additional costs of the
demonstration program for FY 2015. For this proposed rule, the
estimated amount of this proposed budget neutrality adjustment factor
applied to the national IPPS payment rates for FY 2015 is $53,673,008.
In addition, similar to previous years, we are proposing to include in
the budget neutrality offset amount the amount by which the actual
demonstration costs corresponding to an earlier given year (which would
be determined once we have finalized cost reports for that year)
exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. For this FY 2015 IPPS/LTCH PPS
proposed rule, we have calculated the amount by which the actual costs
of the demonstration in FY 2008, (that is, the costs of the
demonstration for the 10 hospitals that participated in FY 2008, as
shown in these hospitals' finalized cost reports for the cost report
period beginning in that calendar year), exceeded the amount that was
finalized in the FY 2008 IPPS final rule. We are proposing a budget
neutrality offset amount of $10,389,771 for this proposed rule, but we
note that this amount may change based on data used for the FY 2015
IPPS/LTCH PPS final rule subject to methodological refinements. We also
are currently working with the MACs that service the hospitals
participating in the demonstration to obtain finalized cost reports for
FYs 2009, 2010, and 2011). Depending on our progress in obtaining these
cost reports, we may also include in the FY IPPS final rule the
difference between the demonstration costs for one or more of these
years and the amounts that were finalized in the respective fiscal
years' final rules.
Therefore, the final total budget neutrality offset amount that we
are proposing to be applied to the FY 2015 IPPS rates is $ 64,062,779.
This amount is the sum of two separate components: (1) The difference
between the total estimated FY 2014 reasonable cost amount to be paid
under the demonstration to the 22 participating hospitals participating
in the demonstration program for covered inpatient services, and the
total estimated amount that would be otherwise be paid to the
participating hospitals in FY 2014 without the demonstration
($53,673,008); and (2) the amount by which the actual costs of
demonstration for FY 2008, which are calculated in accordance with the
finalized cost reports for the hospitals that participated in the
demonstration during FY 2008, exceed the budget neutrality offset
amount that was

[[Page 28321]]

finalized in the FY 2008 IPPS final rule ($10,389,771).
Accordingly, using the most recent data available to account for
the estimated costs of the demonstration program, for FY 2015, we
computed a proposed factor of 0.999283 for the rural community hospital
demonstration program budget neutrality adjustment that will be applied
to the IPPS standard Federal payment rate.
g. Proposed Outlier Payments
Section 1886(d)(5)(A) of the Act provides for payments in addition
to the basic prospective payments for ``outlier'' cases involving
extraordinarily high costs. To qualify for outlier payments, a case
must have costs greater than the sum of the prospective payment rate
for the DRG, any IME and DSH payments, any new technology add-on
payments, and the ``outlier threshold'' or ``fixed-loss'' amount (a
dollar amount by which the costs of a case must exceed payments in
order to qualify for an outlier payment). We refer to the sum of the
prospective payment rate for the DRG, any IME and DSH payments, any new
technology add-on payments, and the outlier threshold as the outlier
``fixed-loss cost threshold.'' To determine whether the costs of a case
exceed the fixed-loss cost threshold, a hospital's CCR is applied to
the total covered charges for the case to convert the charges to
estimated costs. Payments for eligible cases are then made based on a
marginal cost factor, which is a percentage of the estimated costs
above the fixed-loss cost threshold. The marginal cost factor for FY
2015 is 80 percent, the same marginal cost factor we have used since FY
1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier
payments for any year are projected to be not less than 5 percent nor
more than 6 percent of total operating DRG payments (which does not
include IME and DSH payments) plus outlier payments. When setting the
outlier threshold, we compute the 5.1 percent target by dividing the
total operating outlier payments by the total operating DRG payments
plus outlier payments. We do not include any other payments such as IME
and DSH within the outlier target amount. Therefore, it is not
necessary to include Medicare Advantage IME payments in the outlier
threshold calculation. Section 1886(d)(3)(B) of the Act requires the
Secretary to reduce the average standardized amount by a factor to
account for the estimated proportion of total DRG payments made to
outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires
the Secretary to reduce the average standardized amount applicable to
hospitals located in Puerto Rico to account for the estimated
proportion of total DRG payments made to outlier cases. More
information on outlier payments may be found on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.html.
(1) Proposed FY 2015 Outlier Fixed-Loss Cost Threshold
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977-50983), in
response to public comments on the FY 2013 IPPS/LTCH proposed rule, we
made changes to our methodology for projecting the outlier fixed-loss
cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/LTCH
PPS final rule for detailed discussion of the changes. In this proposed
rule, for FY 2015, we are proposing to continue to use the outlier
threshold methodology used in FY 2014.
As we have done in the past, to calculate the proposed FY 2015
outlier threshold, we simulated payments by applying proposed FY 2015
payment rates and policies using cases from the FY 2013 MedPAR file.
Therefore, in order to determine the proposed FY 2015 outlier
threshold, we inflated the charges on the MedPAR claims by 2 years,
from FY 2013 to FY 2015. As discussed in the FY 2014 IPPS/LTCH PPS
final rule, we believe a methodology that is based on 1-year of charge
data will provide a more stable measure to project the average charge
per case because our prior methodology used a 6-month measure, which
inherently uses fewer claims than a 1-year measure and makes it more
susceptible to fluctuations in the average charge per case as a result
of any significant charge increases or decreases by hospitals. Under
this new methodology, to compute the 1-year average annualized rate-of-
change in charges per case for FY 2015, we are proposing to compare the
second quarter of FY 2012 through the first quarter of FY 2013 (January
1, 2012, through December 31, 2012) to the second quarter of FY 2013
through the first quarter of FY 2014 (January 1, 2013, through December
31, 2013). This rate-of-change is 5.6 percent (1.055736) or 11.5
percent (1.114579) over 2 years.
As we have done in the past, we are proposing to establish the
proposed FY 2015 outlier threshold using hospital CCRs from the
December 2013 update to the Provider-Specific File (PSF)--the most
recent available data at the time of this proposed rule. For FY 2015,
we also are proposing to continue to apply an adjustment factor to the
CCRs to account for cost and charge inflation (as explained below). In
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a new
methodology to adjust the CCRs. Specifically, we finalized a policy to
compare the national average case-weighted operating and capital CCR
from the most recent update of the PSF to the national average case-
weighted operating and capital CCR from the same period of the prior
year.
Therefore, as we did for FY 2014, for FY 2015, we are proposing to
adjust the CCRs from the December 2013 update of the PSF by comparing
the percentage change in the national average case-weighted operating
CCR and capital CCR from the December 2012 update of the PSF to the
national average case-weighted operating CCR and capital CCR from the
December 2013 update of the PSF. We note that we used total transfer
adjusted cases from FY 2013 to determine the national average case-
weighted CCRs for both sides of the comparison. As stated in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is
appropriate to use the same case count on both sides of the comparison
as this will produce the true percentage change in the average case-
weighted operating and capital CCR from one year to the next without
any effect from a change in case count on different sides of the
comparison.
Using the proposed methodology above, we calculated a December 2012
operating national average case-weighted CCR of 0.295101 and a December
2013 operating national average case-weighted CCR of 0.289587. We then
calculated the percentage change between the two national operating
case-weighted CCRs by subtracting the December 2012 operating national
average case-weighted CCR from the December 2013 operating national
average case-weighted CCR and then dividing the result by the December
2012 national operating average case-weighted CCR. This resulted in a
proposed national operating CCR adjustment factor of 0.981315.
We also used the same methodology proposed above to adjust the
capital CCRs. Specifically, we calculated a December 2012 proposed
capital national average case-weighted CCR of 0.025079 and a December
2013 proposed capital national average case-weighted CCR of 0.024868.
We then calculated the percentage change between the two national
capital case-weighted CCRs by subtracting the

[[Page 28322]]

December 2012 capital national average case-weighted CCR from the
December 2013 capital national average case-weighted CCR and then
dividing the result by the December 2012 capital national average case-
weighted CCR. This resulted in a proposed national capital CCR
adjustment factor of 0.991587.
Consistent with our methodology in the past and as stated in the FY
2009 IPPS final rule (73 FR 48763), we continue to believe that it is
appropriate to apply only a 1-year adjustment factor to the CCRs. On
average, it takes approximately 9 months for a fiscal intermediary or
MAC to tentatively settle a cost report from the fiscal year end of a
hospital's cost reporting period. The average ``age'' of hospitals'
CCRs from the time the fiscal intermediary or the MAC inserts the CCR
in the PSF until the beginning of FY 2015 is approximately 1 year.
Therefore, as stated above, we believe a 1-year adjustment factor to
the CCRs is appropriate.
As stated above, for FY 2015, we applied the proposed FY 2015
payment rates and policies using cases from the FY 2013 MedPAR files in
calculating the proposed outlier threshold.
As discussed above, for FY 2015, we are proposing to apply
transitional wage indexes because of the proposed adoption of the new
OMB labor market area delineations. Also, as discussed in section
III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50160 and 50161) and in section III.G.3. of the preamble of this
proposed rule, in accordance with section 10324(a) of the Affordable
Care Act, beginning in FY 2011, we created a wage index floor of 1.00
for all hospitals located in States determined to be frontier States.
We note that the frontier State floor adjustments will be calculated
and applied after rural and imputed floor budget neutrality adjustments
are calculated for all labor market areas, in order to ensure that no
hospital in a frontier State will receive a wage index lesser than 1.00
due to the rural and imputed floor adjustment. In accordance with
section 10324(a) of the Affordable Care Act, the frontier State
adjustment will not be subject to budget neutrality, and will only be
extended to hospitals geographically located within a frontier State.
However, for purposes of estimating the proposed outlier threshold for
FY 2015, it was necessary to apply the proposed transitional wage
indexes and adjust the wage index of those eligible hospitals in a
frontier State when calculating the outlier threshold that results in
outlier payments being 5.1 percent of total payments for FY 2015. If we
did not take the above into account, our estimate of total FY 2015
payments would be too low, and, as a result, our proposed outlier
threshold would be too high, such that estimated outlier payments would
be less than our projected 5.1 percent of total payments.
As we did in establishing the FY 2009 outlier threshold (73 FR
57891), in our projection of FY 2015 outlier payments, we are proposing
not to make any adjustments for the possibility that hospitals' CCRs
and outlier payments may be reconciled upon cost report settlement. We
continue to believe that, due to the policy implemented in the June 9,
2003 Outlier final rule (68 FR 34494), CCRs will no longer fluctuate
significantly and, therefore, few hospitals will actually have these
ratios reconciled upon cost report settlement. In addition, it is
difficult to predict the specific hospitals that will have CCRs and
outlier payments reconciled in any given year. We also note that
reconciliation occurs because hospitals' actual CCRs for the cost
reporting period are different than the interim CCRs used to calculate
outlier payments when a bill is processed. Our simulations assume that
CCRs accurately measure hospital costs based on information available
to us at the time we set the outlier threshold. For these reasons, we
are proposing not to make any assumptions about the effects of
reconciliation on the outlier threshold calculation.
As described in sections IV.H. and IV.I., respectively, of the
preamble of this proposed rule, sections 1886(q) and 1886(o) of the Act
establish the Hospital Readmissions Reduction Program and the Hospital
VBP Program, respectively. We do not believe that it is appropriate to
include the hospital VBP payment adjustments and the hospital
readmissions payment adjustments in the outlier threshold calculation
or the outlier offset to the standardized amount. Specifically,
consistent with our definition of the base operating DRG payment amount
for the Hospital Readmissions Reduction Program under Sec. 412.152 and
the Hospital VBP Program under Sec. 412.160, outlier payments under
section 1886(d)(5)(A) of the Act are not affected by these payment
adjustments. Therefore, outlier payments would continue to be
calculated based on the unadjusted base DRG payment amount (as opposed
to using the base-operating DRG payment amount adjusted by the hospital
readmissions payment adjustment and the hospital VBP payment
adjustment). Consequently, we are proposing to exclude the hospital VBP
payment adjustments and the hospital readmissions payment adjustments
from the calculation of the outlier fixed-loss cost threshold.
We note, to the extent section 1886(r) of the Act modifies the
existing DSH payment methodology under section 1886(d)(5)(F), the new
uncompensated care payment under section 1886(r)(2), like the
empirically justified Medicare DSH payment under section 1886(r)(1),
may be considered an amount payable under section 1886(d)(5)(F) of the
Act such that it would be reasonable to include the payment in the
outlier determination under section 1886(d)(5)(A). As we did for FY
2014, for FY 2015 we also are proposing to allocate an estimated per-
discharge uncompensated care payment amount to all cases for the
hospitals eligible to receive the uncompensated care payment amount in
the calculation of the outlier fixed-loss cost threshold methodology.
We continue to believe that allocating an eligible hospital's estimated
uncompensated care payment to all cases equally in the calculation of
the outlier fixed-loss cost threshold would best approximate the amount
we would pay in uncompensated care payments during the year because,
when we make claim payments to a hospital eligible for such payments,
we would be making estimated per-discharge uncompensated care payments
to all cases equally. Furthermore, we continue to believe that using
the estimated per-claim uncompensated care payment amount to determine
outlier estimates provides predictability as to the amount of
uncompensated care payments included in the calculation of outlier
payments. Therefore, consistent with the methodology used in FY 2014 to
calculate the outlier fixed-loss cost threshold, for FY 2015, we are
proposing to include estimated FY 2015 uncompensated care payments in
the computation of the proposed outlier fixed-loss cost threshold.
Specifically, we are proposing to use the estimated per-discharge
uncompensated care payments to hospitals eligible for the uncompensated
care payment for all cases in the calculation of the outlier fixed-loss
cost threshold methodology.
Using this methodology, we calculated a proposed outlier fixed-loss
cost threshold for FY 2015 equal to the proposed prospective payment
rate for the MS-DRG, plus any IME, empirically justified Medicare DSH
payments, estimated uncompensated care payment, and any add-on payments
for new technology, plus $25,799.
We note that, the proposed FY 2015 fixed-loss cost threshold is
higher than the FY 2014 final outlier fixed-loss cost

[[Page 28323]]

threshold of $21,748. We believe that the increase in the charge
inflation factor (compared to the FY 2014 charge inflation factor)
contributed to a higher proposed outlier fixed-loss threshold for FY
2015. As charges increase, so do outlier payments. As a result, it
would be necessary for us to raise the outlier fixed-loss cost
threshold to decrease the amount of outlier payments expended in order
to reach the 5.1 percent target.
(2) Other Proposed Changes Concerning Outliers
As stated in the FY 1994 IPPS final rule (58 FR 46348), we
establish an outlier threshold that is applicable to both hospital
inpatient operating costs and hospital inpatient capital-related costs.
When we modeled the combined operating and capital outlier payments, we
found that using a common threshold resulted in a lower percentage of
outlier payments for capital-related costs than for operating costs. We
project that the thresholds for FY 2015 will result in outlier payments
that will equal 5.1 percent of operating DRG payments and 6.26 percent
of capital payments based on the Federal rate.
In accordance with section 1886(d)(3)(B) of the Act, we are
proposing to reduce the proposed FY 2015 standardized amount by the
same percentage to account for the projected proportion of payments
paid as outliers.
The proposed outlier adjustment factors that would be applied to
the standardized amount based on the FY 2015 outlier threshold are as
follows:

------------------------------------------------------------------------
Operating
standardized Capital Federal
amounts rate
------------------------------------------------------------------------
National............................ 0.949000 0.937425
Puerto Rico......................... 0.928942 0908313
------------------------------------------------------------------------

We are proposing to apply the outlier adjustment factors to the
proposed FY 2015 payment rates after removing the effects of the FY
2014 outlier adjustment factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we
apply hospital-specific CCRs to the total covered charges for the case.
Estimated operating and capital costs for the case are calculated
separately by applying separate operating and capital CCRs. These costs
are then combined and compared with the outlier fixed-loss cost
threshold.
Under our current policy at Sec. 412.84, we calculate operating
and capital CCR ceilings and assign a statewide average CCR for
hospitals whose CCRs exceed 3.0 standard deviations from the mean of
the log distribution of CCRs for all hospitals. Based on this
calculation, for hospitals for which the fiscal intermediary or MAC
computes operating CCRs greater than 1.22 or capital CCRs greater than
0.173, or hospitals for which the fiscal intermediary or MAC is unable
to calculate a CCR (as described under Sec. 412.84(i)(3) of our
regulations), statewide average CCRs are used to determine whether a
hospital qualifies for outlier payments. Table 8A listed in section VI.
of this Addendum (and available only via the Internet) contains the
proposed statewide average operating CCRs for urban hospitals and for
rural hospitals for which the fiscal intermediary or MAC is unable to
compute a hospital-specific CCR within the above range. Effective for
discharges occurring on or after October 1, 2014, these statewide
average ratios would replace the ratios posted on our Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Tables.html. Table 8B listed in section VI. of
this Addendum (and available via the Internet) contains the proposed
comparable statewide average capital CCRs. Again, the CCRs in Tables 8A
and 8B would be used during FY 2015 when hospital-specific CCRs based
on the latest settled cost report are either not available, or are
outside the range noted above. Table 8C listed in section VI. of this
Addendum (and available via the Internet) contains the proposed
statewide average total CCRs used under the LTCH PPS as discussed in
section V. of this Addendum.
We finally note that we published a manual update (Change Request
3966) to our outlier policy on October 12, 2005, which updated Chapter
3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual
update covered an array of topics, including CCRs, reconciliation, and
the time value of money. We encourage hospitals that are assigned the
statewide average operating and/or capital CCRs to work with their
fiscal intermediary or MAC on a possible alternative operating and/or
capital CCR as explained in Change Request 3966. Use of an alternative
CCR developed by the hospital in conjunction with the fiscal
intermediary or MAC can avoid possible overpayments or underpayments at
cost report settlement, thereby ensuring better accuracy when making
outlier payments and negating the need for outlier reconciliation. We
also note that a hospital may request an alternative operating or
capital CCR ratio at any time as long as the guidelines of Change
Request 3966 are followed. In addition, as mentioned above, we
published an additional manual update (Change Request 7192) to our
outlier policy on December 3, 2010, which also updated Chapter 3,
Section 20.1.2 of the Medicare Claims Processing Manual. The manual
update outlines the outlier reconciliation process for hospitals and
Medicare contractors. To download and view the manual instructions on
outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.
(3) FY 2013 and FY 2014 Outlier Payments
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50983 through
50984), we stated that, based on available data, we estimated that
actual FY 2013 outlier payments would be approximately 4.77 percent of
actual total MS-DRG payments. This estimate was computed based on
simulations using the FY 2012 MedPAR file (discharge data for FY 2012
claims). That is, the estimate of actual outlier payments did not
reflect actual FY 2013 claims, but instead reflected the application of
FY 2013 payment rates and policies to available FY 2012 claims.
Our current estimate, using available FY 2013 claims data, is that
actual outlier payments for FY 2013 were approximately 4.81 percent of
actual total MS-DRG payments. Therefore, the data indicate that, for FY
2013, the percentage of actual outlier payments relative to actual
total payments is lower than we projected for FY 2013. Consistent with
the policy and statutory interpretation we have maintained since the
inception of the IPPS, we do not make retroactive adjustments to
outlier

[[Page 28324]]

payments to ensure that total outlier payments for FY 2013 are equal to
5.1 percent of total MS-DRG payments.
We currently estimate that, using the latest CCRs from the December
2013 update of the PSF, actual outlier payments for FY 2014 will be
approximately 5.79 percent of actual total MS-DRG payments,
approximately 0.69 percentage point higher than the 5.1 percent we
projected when setting the outlier policies for FY 2014. This estimate
of 5.79 percent is based on simulations using the FY 2013 MedPAR file
(discharge data for FY 2013 claims).
5. Proposed FY 2015 Standardized Amount
The adjusted standardized amount is divided into labor-related and
nonlabor-related portions. Tables 1A and 1B listed and published in
section VI. of this Addendum (and available via the Internet) contain
the proposed national standardized amounts that we are proposing to
apply to all hospitals, except hospitals located in Puerto Rico, for FY
2015. The proposed Puerto Rico-specific amounts are shown in Table 1C
listed and published in section VI. of this Addendum (and available via
the Internet). The proposed amounts shown in Tables 1A and 1B differ
only in that the labor-related share applied to the standardized
amounts in Table 1A is 69.6 percent, and the labor-related share
applied to the standardized amounts in Table 1B is 62 percent. In
accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the
Act, we are proposing to apply a labor-related share of 62 percent,
unless application of that percentage would result in lower payments to
a hospital than would otherwise be made. In effect, the statutory
provision means that we will apply a labor-related share of 62 percent
for all hospitals whose wage indices are less than or equal to 1.0000.
In addition, Tables 1A and 1B include the proposed standardized
amounts reflecting the proposed applicable percentage increases for FY
2015.
Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of
the Puerto Rico payment rate is based on the discharge-weighted average
of the national large urban standardized amount (this amount is set
forth in Table 1A). The proposed labor-related and nonlabor-related
portions of the national average standardized amounts for Puerto Rico
hospitals for FY 2015 are set forth in Table 1C listed and published in
section VI. of this Addendum (and available via the Internet). This
table also includes the proposed Puerto Rico-specific standardized
amounts. The labor-related share applied to the Puerto Rico-specific
standardized amount is the proposed labor-related share of 63.2
percent, or 62 percent, depending on which provides higher payments to
the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by
section 403(b) of Public Law 108-173, provides that the labor-related
share for hospitals located in Puerto Rico be 62 percent, unless the
application of that percentage would result in lower payments to the
hospital.)
The following table illustrates the proposed changes from the FY
2014 national standardized amount. The second through fifth columns
display the proposed changes from the FY 2014 standardized amounts for
each applicable FY 2015 proposed standardized amount. The first row of
the table shows the updated (through FY 2014) average standardized
amount after restoring the FY 2014 offsets for outlier payments,
demonstration budget neutrality, the geographic reclassification budget
neutrality, and the retrospective documentation and coding adjustment
under section 7(b)(1)(B) of Public Law 110-90. The MS-DRG
reclassification and recalibration wage index budget neutrality
adjustment factors are cumulative. Therefore, those FY 2014 adjustment
factors are not removed from this table.

Comparison of FY 2014 Standardized Amounts to the FY 2015 Proposed Standardized Amounts
----------------------------------------------------------------------------------------------------------------
Hospital submitted Hospital did NOT Hospital did NOT
Hospital submitted quality data and submit quality submit quality
quality data and is NOT a data and is a data and is NOT a
is a meaningful meaningful EHR meaningful EHR meaningful EHR
EHR user user user user
----------------------------------------------------------------------------------------------------------------
FY 2014 Base Rate after If Proposed Wage If Proposed Wage If Proposed Wage If Proposed Wage
removing: Index is Greater Index is Greater Index is Greater Index is Greater
1. FY 2014 Geographic Than 1.0000: Than 1.0000: Than 1.0000: Than 1.0000:
Reclassification Budget Labor (69.6%): Labor (69.6%): Labor (69.6%): Labor (69.6%):
Neutrality (0.990718) $4,230.38 $4,230.38 $4,230.38 $4,230.38
2. FY 2014 Rural Community Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%):
Hospital Demonstration Program $1,847.75. $1,847.75. $1,847.75. $1,847.75.
Budget Neutrality (0.999415) If Proposed Wage If Proposed Wage If Proposed Wage If Proposed Wage
3. Cumulative Factor: FY 2008, Index is less Index is less Index is less Index is less
FY 2009, FY 2012, FY 2013, and Than or Equal to Than or Equal to Than or Equal to Than or Equal to
FY 2014 Documentation and 1.0000: Labor 1.0000: Labor 1.0000: Labor 1.0000: Labor
Coding Adjustment as Required (62%): $3,768.45 (62%): $3,768.45 (62%): $3,768.45 (62%): $3,768.45
under Sections 7(b)(1)(A) and Nonlabor (38%): Nonlabor (38%): Nonlabor (38%): Nonlabor (38%):
7(b)(1)(B) of Public Law 110-90 $2,309.70. $2,309.70. $2,309.70. $2,309.70.
and Documentation and Coding
Recoupment Adjustment as
required under Section 631 of
the American Taxpayer Relief
Act of 2012 (0.9403)
4. FY 2014 Operating Outlier
Offset (0.948995)
Proposed FY 2015 Update Factor.. 1.021............. 1.01425........... 1.01425........... 1.0075.
Proposed FY 2015 MS[dash]DRG 0.993512.......... 0.993512.......... 0.993512.......... 0.993512.
Recalibration and Wage Index
Budget Neutrality Factor.
Proposed FY 2015 0.991412.......... 0.991412.......... 0.991412.......... 0.991412.
Reclassification Budget
Neutrality Factor.
Proposed FY 2015 Rural Community 0.999283.......... 0.999283.......... 0.999283.......... 0.999283.
Demonstration Program Budget
Neutrality Factor.
Proposed FY 2015 Operating 0.949000.......... 0.949000.......... 0.949000.......... 0.949000.
Outlier Factor.

[[Page 28325]]

Cumulative Factor: FY 2008, FY 0.9329............ 0.9329............ 0.9329............ 0.9329.
2009, FY 2012, FY 2013, FY 2014
and FY 2015 Documentation and
Coding Adjustment as Required
under Sections 7(b)(1)(A) and
7(b)(1)(B) of Public Law 110-90
and Documentation and Coding
Recoupment Adjustment as
required under Section 631 of
the American Taxpayer Relief
Act of 2012.
Proposed FY 2015 New Labor 0.998856.......... 0.998856.......... 0.998856.......... 0.998856.
Market Delineation Wage Index
Transition Budget Neutrality
Factor.
Proposed National Standardized Labor: $3,759.46.. Labor: $3,734.61.. Labor: $3,734.61.. Labor: $3,709.75.
Amount for FY 2015 if Wage Nonlabor: Nonlabor: Nonlabor: Nonlabor:
Index is Greater Than 1.0000; $1,642.06. $1,631.20. $1,631.20. $1,620.35.
Labor/Non-Labor Share
Percentage (69.6/30.4).
Proposed National Standardized Labor: $3,384.94.. Labor: $3,326.80.. Labor: $3,326.80.. Labor: $3,304.66.
Amount for FY 2015 if Wage Nonlabor: Nonlabor: Nonlabor: Nonlabor:
Index is less Than or Equal to $2,052.58. $2,039.01. $2,039.01. $2,025.44.
1.0000; Labor/Non-Labor Share
Percentage (62/38).
----------------------------------------------------------------------------------------------------------------

The following table illustrates the proposed changes from the FY
2014 Puerto Rico-specific payment rate for hospitals located in Puerto
Rico. The second column shows the proposed changes from the FY 2014
Puerto Rico specific payment rate for hospitals with a Puerto Rico-
specific wage index greater than 1.0000. The third column shows the
proposed changes from the FY 2014 Puerto Rico specific payment rate for
hospitals with a Puerto Rico-specific wage index less than or equal to
1.0000. The first row of the table shows the updated (through FY 2014)
Puerto Rico-specific payment rate after restoring the FY 2014 offsets
for Puerto Rico-specific outlier payments, rural community hospital
demonstration program budget neutrality, and the geographic
reclassification budget neutrality. The MS-DRG recalibration budget
neutrality adjustment factor is cumulative and is not removed from this
table.

Comparison of FY 2014 Puerto Rico-Specific Payment Rate to the FY 2015
Proposed Puerto Rico-Specific Payment Rate
------------------------------------------------------------------------
Update (2.1
percent); proposed Update (2.1
wage index is percent); proposed
greater than wage index is less
1.0000; labor/non- than or equal to
labor share 1.0000; labor/non-
percentage (63.2/ labor share
36.8) percentage (62/38)
------------------------------------------------------------------------
FY 2014 Puerto Rico Base Rate,
after removing:
1. FY 2014 Geographic Labor: $1,722.31.. Labor: $1,689.61
Reclassification Budget Nonlabor: Nonlabor:
Neutrality (0.990718) $1,002.86. $1,035.56.
2. FY 2014 Rural Community
Hospital Demonstration Program
Budget Neutrality (0.999415)
3. FY 2014 Puerto Rico Operating
Outlier Offset (0.943455)
Proposed FY 2015 Update Factor.. 1.021............. 1.021.
Proposed FY 2015 MS-DRG 0.992938.......... 0.992938.
Recalibration Budget Neutrality
Factor.
Proposed FY 2015 0.991412.......... 0.991412.
Reclassification Budget
Neutrality Factor.
Proposed FY 2015 Rural Community 0.999283.......... 0.999283.
Hospital Demonstration Program
Budget Neutrality Factor.
Proposed FY 2015 New Labor 0.998856.......... 0.998856.
Market Delineation Wage Index
Transition Budget Neutrality
Factor.
Proposed FY 2015 Puerto Rico 0.928942.......... 0.928942.
Operating Outlier Factor.
Proposed Puerto Labor: $1,605.07.. Labor: $1,574.59.
Rico[dash]Specific Payment Rate Nonlabor: $934.59. Nonlabor: $965.07.
for FY 2015.
------------------------------------------------------------------------

B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

Tables 1A through 1C, as published in section VI. of this Addendum
(and available via the Internet), contain the proposed labor-related
and nonlabor-related shares that we used to calculate the proposed
prospective payment rates for hospitals located in the 50 States, the
District of Columbia, and Puerto Rico for FY 2015. This section
addresses two types of adjustments to the standardized amounts that are
made in determining the prospective payment rates as described in this
Addendum.
1. Proposed Adjustment for Area Wage Levels
Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require
that we make an adjustment to the labor-related portion of the national
and Puerto Rico prospective payment rates,

[[Page 28326]]

respectively, to account for area differences in hospital wage levels.
This adjustment is made by multiplying the labor-related portion of the
adjusted standardized amounts by the appropriate wage index for the
area in which the hospital is located. In section III. of the preamble
of this proposed rule, we discuss the data and methodology for the
proposed FY 2015 wage index.
2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii
Section 1886(d)(5)(H) of the Act provides discretionary authority
to the Secretary to make ``such adjustments . . . as the Secretary
deems appropriate to take into account the unique circumstances of
hospitals located in Alaska and Hawaii.'' Higher labor-related costs
for these two States are taken into account in the adjustment for area
wages described above. To account for higher nonlabor-related costs for
these two States, we multiply the nonlabor-related portion of the
standardized amount for hospitals located in Alaska and Hawaii by an
adjustment factor.
In the FY 2013 IPPS/LTCH PPS final rule, we established a
methodology to update the COLA factors for Alaska and Hawaii that were
published by the U.S. Office of Personnel Management (OPM) every 4
years (at the same time as the update to the labor-related share of the
IPPS market basket), beginning in FY 2014. We refer readers to the FY
2013 IPPS/LTCH PPS proposed and final rules for additional background
and a detailed description of this methodology (77 FR 28145 through
28146 and 77 FR 53700 through 53701, respectively).
For FY 2014, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50985
through 50987), we updated the COLA factors published by OPM for 2009
(as these are the last COLA factors OPM published prior to
transitioning from COLAs to locality pay) using the methodology that we
finalized in the FY 2013 IPPS/LTCH PPS final rule.
Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, we are proposing to use the same COLAs factors established in FY
2014 for FY 2015 to adjust the nonlabor-related portion of the
standardized amount for hospitals located in Alaska and Hawaii. Below
is a table listing the proposed COLA factors for FY 2015.

Proposed FY 2015 Cost-of-Living Adjustment Factors: Alaska and Hawaii
Hospitals
------------------------------------------------------------------------
Cost of living
Area adjustment factor
------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50-mile) 1.23
radius by road.................................
City of Fairbanks and 80-kilometer (50-mile) 1.23
radius by road.................................
City of Juneau and 80-kilometer (50-mile) radius 1.23
by road........................................
Rest of Alaska.................................. 1.25
Hawaii:
City and County of Honolulu..................... 1.25
County of Hawaii................................ 1.19
County of Kauai................................. 1.25
County of Maui and County of Kalawao............ 1.25
------------------------------------------------------------------------

Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, the next update to the COLA factors for Alaska and Hawaii would
occur in FY 2018.

C. Calculation of the Proposed Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY
2015
In general, the operating prospective payment rate for all
hospitals paid under the IPPS located outside of Puerto Rico, except
SCHs and MDHs, for FY 2015 equals the Federal rate (which includes
uncompensated care payments).
We note that, as discussed in section IV.G. of the preamble of this
proposed rule, section 1106 of the Pathway to SGR Reform Act of 2013
(Pub. L. 113-67), enacted on December 26, 2013, extended the MDH
program from the end of FY 2013 through the first half of FY 2014 (that
is, for discharges occurring before April 1, 2014). Subsequently,
section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L.
113-93), enacted on April 1, 2014, further extended the MDH program
through the first half of FY 2015 (that is, for discharges occurring
before April 1, 2015). Prior to the enactment of Public Law 113-67, the
MDH program was only to be in effect through the end of FY 2013. Under
current law, the MDH program will expire for discharges beginning on
April 1, 2015.
SCHs are paid based on whichever of the following rates yields the
greatest aggregate payment: The Federal national rate (which, as
discussed in section IV.F. of the preamble of this proposed rule,
includes uncompensated care payments); the updated hospital-specific
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs per discharge; or the
updated hospital-specific rate based on FY 2006 costs per discharge to
determine the rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2015 equals the higher
of the applicable Federal rate, or the hospital-specific rate as
described below.
The prospective payment rate for MDHs for FY 2015 discharges
occurring before April 1, 2015 equals the higher of the Federal rate or
the Federal rate plus 75 percent of the difference between the Federal
rate and the hospital-specific rate as described below. For MDHs, the
updated hospital-specific rate is based on FY 1982, FY 1987 or FY 2002
costs per discharge, whichever yields the greatest aggregate payment.
The prospective payment rate for hospitals located in Puerto Rico
for FY 2015 equals 25 percent of the Puerto Rico-specific payment rate
plus 75 percent of the applicable national rate.
1. Federal Rate
The Federal rate is determined as follows:
Step 1--Select the applicable average standardized amount depending
on whether the hospital submitted qualifying quality data and is a
meaningful EHR user, as described above.
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable wage index for the geographic area in which
the hospital is

[[Page 28327]]

located or the area to which the hospital is reclassified.
Step 3--For hospitals located in Alaska and Hawaii, multiply the
nonlabor-related portion of the standardized amount by the applicable
cost-of-living adjustment factor.
Step 4--Add the amount from Step 2 and the nonlabor-related portion
of the standardized amount (adjusted, if applicable, under Step 3).
Step 5--Multiply the final amount from Step 4 by the relative
weight corresponding to the applicable MS-DRG (Table 5 listed in
section VI. of this Addendum and available via the Internet).
The Federal payment rate as determined in Step 5 may then be
further adjusted if the hospital qualifies for either the IME or DSH
adjustment. In addition, for hospitals that qualify for a low-volume
payment adjustment under section 1886(d)(12) of the Act and 42 CFR
412.101(b), the payment in Step 5 would be increased by the formula
described in section IV.D. of the preamble of this proposed rule. The
base-operating DRG payment amount may be further adjusted by the
hospital readmissions payment adjustment and the hospital VBP payment
adjustment as described under sections 1886(q) and 1886(o) of the Act,
respectively. Finally, we add the uncompensated care payment to the
total claim payment amount. We note that, as discussed above, we take
uncompensated care payments into consideration when calculating outlier
payments.
2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
Section 1886(b)(3)(C) of the Act provides that SCHs are paid based
on whichever of the following rates yields the greatest aggregate
payment: The Federal rate (which, as discussed in section IV.F. of the
preamble of this proposed rule, includes uncompensated care payments);
the updated hospital-specific rate based on FY 1982 costs per
discharge; the updated hospital-specific rate based on FY 1987 costs
per discharge; the updated hospital-specific rate based on FY 1996
costs per discharge; or the updated hospital-specific rate based on FY
2006 costs per discharge to determine the rate that yields the greatest
aggregate payment.
As discussed previously, currently MDHs are paid based on the
Federal national rate or, if higher, the Federal national rate plus 75
percent of the difference between the Federal national rate and the
greater of the updated hospital-specific rates based on either FY 1982,
FY 1987, or FY 2002 costs per discharge.
For a more detailed discussion of the calculation of the hospital-
specific rates, we refer readers to the FY 1984 IPPS interim final rule
(48 FR 39772); the April 20, 1990 final rule with comment period (55 FR
15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS
final rule (65 FR 47082). We also refer readers to section IV.F. of the
preamble of this proposed rule for a complete discussion on empirically
justified Medicare DSH and uncompensated care payments.
b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific
Rate for FY 2015
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase applicable to the hospital-specific rates for SCHs
and MDHs equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all
other hospitals subject to the IPPS). Because the Act sets the update
factor for SCHs and MDHs equal to the update factor for all other IPPS
hospitals, the update to the hospital-specific rates for SCHs and MDHs
is subject to the amendments to section 1886(b)(3)(B) of the Act made
by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, the proposed applicable percentage increases to the
hospital-specific rates applicable to SCHs and MDHs are the following:

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did NOT Hospital did NOT
submitted submitted quality submit quality submit quality
FY 2015 quality data and data and is NOT a data and is a data and is NOT a
is a meaningful meaningful EHR meaningful EHR meaningful EHR
EHR user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket 2.7 2.7 2.7 2.7
Rate[dash]of[dash]Increase..........
Adjustment for Failure to Submit 0.0 0.0 -0.675 -0.675
Quality Data under Section
1886(b)(3)(B)(viii) of the Act......
Adjustment for Failure to be a 0.0 -0.675 0.0 -0.675
Meaningful EHR User under Section
1886(b)(3)(B)(ix) of the Act........
MFP Adjustment under Section -0.4 -0.4 -0.4 -0.4
1886(b)(3)(B)(xi) of the Act........
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act.......
Proposed Applicable Percentage 2.1 1.425 1.425 0.75
Increase Applied to Hospital-
Specific Rate.......................
----------------------------------------------------------------------------------------------------------------

For a complete discussion of the applicable percentage increase
applied to the hospital-specific rates for SCHs and MDHs, we refer
readers to section IV.B. of the preamble of this proposed rule.
In addition, because SCHs and MDHs use the same MS-DRGs as other
hospitals when they are paid based in whole or in part on the hospital-
specific rate, the hospital-specific rate is adjusted by a budget
neutrality factor to ensure that changes to the MS-DRG classifications
and the recalibration of the MS-DRG relative weights are made in a
manner so that aggregate IPPS payments are unaffected. Therefore, a
SCH's and MDH's hospital-specific rate is adjusted by the proposed MS-
DRG reclassification and recalibration budget neutrality factor of
0.992938, as discussed in section III. of this Addendum. The resulting
rate is used in determining the payment rate that an SCH would receive
for its discharges beginning on or after October 1, 2014, and the
payment rate that an MDH would receive for its discharges beginning on
or after October 1, 2014, and before April 1, 2015. We note that, in
this proposed rule, for FY 2015, we are not proposing to make a
documentation and coding adjustment to the hospital-specific rate. We
refer readers to section II.D. of the preamble of this proposed rule
for a complete discussion regarding our proposed policies and
previously finalized policies (including our historical adjustments to
the payment rates) relating to the effect of changes in documentation
and coding that do not reflect real changes in case-mix.

[[Page 28328]]

3. General Formula for Calculation of Prospective Payment Rates for
Hospitals Located in Puerto Rico Beginning On or After October 1, 2014,
and Before October 1, 2015
Section 1886(d)(9)(E)(iv) of the Act provides that, effective for
discharges occurring on or after October 1, 2004, hospitals located in
Puerto Rico are paid based on a blend of 75 percent of the national
prospective payment rate and 25 percent of the Puerto Rico-specific
rate.
a. Puerto Rico-Specific Rate
The Puerto Rico-specific prospective payment rate is determined as
follows:
Step 1--Select the applicable average standardized amount
considering the applicable wage index (obtained from Table 1C published
in section VI. of this Addendum and available via the Internet).
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable Puerto Rico-specific wage index.
Step 3--Add the amount from Step 2 and the nonlabor-related portion
of the standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet).
Step 5--Multiply the result in Step 4 by 25 percent.
b. National Prospective Payment Rate
The national prospective payment rate is determined as follows:
Step 1--Select the applicable national average standardized amount.
Step 2--Multiply the labor-related portion of the national average
standardized amount by the applicable wage index for the geographic
area in which the hospital is located or the area to which the hospital
is reclassified.
Step 3--Add the amount from Step 2 and the nonlabor-related portion
of the national average standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet).
Step 5--Multiply the result in Step 4 by 75 percent.
The sum of the Puerto Rico-specific rate and the national
prospective payment rate computed above equals the prospective payment
rate for a given discharge for a hospital located in Puerto Rico. This
payment rate is then further adjusted if the hospital qualifies for
either the IME or DSH adjustment.
Finally, we add the uncompensated care payment to the total claim
payment amount. We note that, as discussed above, we take uncompensated
care payments into consideration when calculating outlier payments.

III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2015

The PPS for acute care hospital inpatient capital-related costs was
implemented for cost reporting periods beginning on or after October 1,
1991. Effective with that cost reporting period, over a 10-year
transition period (which extended through FY 2001) the payment
methodology for Medicare acute care hospital inpatient capital-related
costs changed from a reasonable cost-based methodology to a prospective
methodology (based fully on the Federal rate).
The basic methodology for determining Federal capital prospective
rates is set forth in the regulations at 42 CFR 412.308 through
412.352. Below we discuss the factors that we used to determine the
proposed capital Federal rate for FY 2015, which would be effective for
discharges occurring on or after October 1, 2014.
The 10-year transition period ended with hospital cost reporting
periods beginning on or after October 1, 2001 (FY 2002). Therefore, for
cost reporting periods beginning in FY 2002, all hospitals (except
``new'' hospitals under Sec. 412.304(c)(2)) are paid based on the
capital Federal rate. For FY 1992, we computed the standard Federal
payment rate for capital-related costs under the IPPS by updating the
FY 1989 Medicare inpatient capital cost per case by an actuarial
estimate of the increase in Medicare inpatient capital costs per case.
Each year after FY 1992, we update the capital standard Federal rate,
as provided at Sec. 412.308(c)(1), to account for capital input price
increases and other factors. The regulations at Sec. 412.308(c)(2)
also provide that the capital Federal rate be adjusted annually by a
factor equal to the estimated proportion of outlier payments under the
capital Federal rate to total capital payments under the capital
Federal rate. In addition, Sec. 412.308(c)(3) requires that the
capital Federal rate be reduced by an adjustment factor equal to the
estimated proportion of payments for exceptions under Sec. 412.348.
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53705), there is generally no longer a need for an exceptions
payment adjustment factor.) However, in limited circumstances, an
additional payment exception for extraordinary circumstances is
provided for under Sec. 412.348(f) for qualifying hospitals.
Therefore, in accordance with Sec. 412.308(c)(3), an exceptions
payment adjustment factor may need to be applied if such payments are
made. Section 412.308(c)(4)(ii) requires that the capital standard
Federal rate be adjusted so that the effects of the annual DRG
reclassification and the recalibration of DRG weights and changes in
the geographic adjustment factor (GAF) are budget neutral.
Section 412.374 provides for blended payments to hospitals located
in Puerto Rico under the IPPS for acute care hospital inpatient
capital-related costs. Accordingly, under the capital PPS, we compute a
separate payment rate specific to hospitals located in Puerto Rico
using the same methodology used to compute the national Federal rate
for capital-related costs. In accordance with section 1886(d)(9)(A) of
the Act, under the IPPS for acute care hospital operating costs,
hospitals located in Puerto Rico are paid for operating costs under a
special payment formula. Effective October 1, 2004, in accordance with
section 504 of Public Law 108-173, the methodology for operating
payments made to hospitals located in Puerto Rico under the IPPS was
revised to make payments based on a blend of 25 percent of the
applicable standardized amount specific to Puerto Rico hospitals and 75
percent of the applicable national average standardized amount. In
conjunction with this change to the operating blend percentage,
effective with discharges occurring on or after October 1, 2004, we
also revised the methodology for computing capital payments made to
hospitals located in Puerto Rico to be based on a blend of 25 percent
of the Puerto Rico capital rate and 75 percent of the national capital
Federal rate (69 FR 49185).

A. Determination of the Proposed Federal Hospital Inpatient Capital-
Related Prospective Payment Rate Update

In the discussion that follows, we explain the factors that we used
to determine the proposed capital Federal rate for FY 2015. In
particular, we explain why the proposed FY 2015 capital Federal rate
increases approximately 0.9 percent, compared to the FY 2014 capital
Federal rate. As discussed in the impact analysis in Appendix A to this
proposed rule, we estimate that capital payments per discharge would
increase 1.2 percent during that same period. Because capital payments
constitute about 10 percent of hospital payments, a percent change in
the capital Federal rate yields only about a 0.1 percent change in
actual payments to hospitals.

[[Page 28329]]

1. Projected Capital Standard Federal Rate Update
a. Description of the Update Framework
Under Sec. 412.308(c)(1), the capital standard Federal rate is
updated on the basis of an analytical framework that takes into account
changes in a capital input price index (CIPI) and several other policy
adjustment factors. Specifically, we adjust the projected CIPI rate-of-
increase as appropriate each year for case-mix index-related changes,
for intensity, and for errors in previous CIPI forecasts. The proposed
update factor for FY 2015 under that framework is 1.5 percent based on
the best data available at this time. The proposed update factor under
that framework is based on a projected 1.5 percent increase in the FY
2010-based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0
percentage point adjustment for case-mix, a 0.0 percentage point
adjustment for the FY 2013 DRG reclassification and recalibration, and
a forecast error correction of 0.0 percentage point. As discussed below
in section III.C. of this Addendum, we continue to believe that the
CIPI is the most appropriate input price index for capital costs to
measure capital price changes in a given year. We also explain the
basis for the FY 2015 CIPI projection in that same section of this
Addendum. Below we describe the policy adjustments that we are
proposing to apply in the update framework for FY 2015.
The case-mix index is the measure of the average DRG weight for
cases paid under the IPPS. Because the DRG weight determines the
prospective payment for each case, any percentage increase in the case-
mix index corresponds to an equal percentage increase in hospital
payments.
The case-mix index can change for any of several reasons:
The average resource use of Medicare patients changes
(``real'' case-mix change);
Changes in hospital documentation and coding of patient
records result in higher-weighted DRG assignments (``coding effects'');
and
The annual DRG reclassification and recalibration changes
may not be budget neutral (``reclassification effect'').
We define real case-mix change as actual changes in the mix (and
resource requirements) of Medicare patients as opposed to changes in
documentation and coding behavior that result in assignment of cases to
higher-weighted DRGs, but do not reflect higher resource requirements.
The capital update framework includes the same case-mix index
adjustment used in the former operating IPPS update framework (as
discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR
28816)). (We no longer use an update framework to make a recommendation
for updating the operating IPPS standardized amounts as discussed in
section II. of Appendix B to the FY 2006 IPPS final rule (70 FR
47707).)
For FY 2015, we are projecting a 0.5 percent total increase in the
case-mix index. We estimated that the real case-mix increase will also
equal 0.5 percent for FY 2015. The proposed net adjustment for change
in case-mix is the difference between the projected real increase in
case-mix and the projected total increase in case-mix. Therefore, the
proposed net adjustment for case-mix change in FY 2015 is 0.0
percentage point.
The capital update framework also contains an adjustment for the
effects of DRG reclassification and recalibration. This adjustment is
intended to remove the effect on total payments of prior year's changes
to the DRG classifications and relative weights, in order to retain
budget neutrality for all case-mix index-related changes other than
those due to patient severity of illness. Due to the lag time in the
availability of data, there is a 2-year lag in data used to determine
the adjustment for the effects of DRG reclassification and
recalibration. For example, we have data available to evaluate the
effects of the FY 2013 DRG reclassification and recalibration as part
of our update for FY 2015. We estimate that FY 2013 DRG
reclassification and recalibration resulted in no change in the case-
mix when compared with the case-mix index that would have resulted if
we had not made the reclassification and recalibration changes to the
DRGs. Therefore, we are proposing to make a 0.0 percentage point
adjustment for reclassification and recalibration in the update
framework for FY 2015.
The capital update framework also contains an adjustment for
forecast error. The input price index forecast is based on historical
trends and relationships ascertainable at the time the update factor is
established for the upcoming year. In any given year, there may be
unanticipated price fluctuations that may result in differences between
the actual increase in prices and the forecast used in calculating the
update factors. In setting a prospective payment rate under the
framework, we make an adjustment for forecast error only if our
estimate of the change in the capital input price index for any year is
off by 0.25 percentage point or more. There is a 2-year lag between the
forecast and the availability of data to develop a measurement of the
forecast error. A forecast error of 0.0 percentage point was calculated
for the proposed FY 2015 update. Historically, when forecast error of
the CIPI is greater than 0.25 percentage point in absolute terms, it is
reflected in the update recommended under this framework. Current
historical data indicate that the forecasted FY 2013 rate-of-increase
of the FY 2006-based CIPI (1.2 percent) used in calculating the FY 2013
update factor slightly understated the actual realized FY 2013 price
increases of the FY 2006-based CIPI (1.3 percent) by 0.1 percentage
point because the prices associated with both the depreciation and
other capital-related cost categories grew more quickly than
anticipated. Because this forecast error does not exceed the 0.25
percentage point threshold, we are proposing to make a 0.0 percentage
point adjustment for forecast error in the update for FY 2015.
Under the capital IPPS update framework, we also make an adjustment
for changes in intensity. Historically, we calculated this adjustment
using the same methodology and data that were used in the past under
the framework for operating IPPS. The intensity factor for the
operating update framework reflected how hospital services are utilized
to produce the final product, that is, the discharge. This component
accounts for changes in the use of quality-enhancing services, for
changes within DRG severity, and for expected modification of practice
patterns to remove noncost-effective services. Our intensity measure is
based on a 5-year average.
We calculate case-mix constant intensity as the change in total
cost per discharge, adjusted for price level changes (the CIPI for
hospital and related services) and changes in real case-mix. Without
reliable estimates of the proportions of the overall annual intensity
increases that are due, respectively, to ineffective practice patterns
and the combination of quality-enhancing new technologies and
complexity within the DRG system, we assume that one-half of the annual
increase is due to each of these factors. The capital update framework
thus provides an add-on to the input price index rate of increase of
one-half of the estimated annual increase in intensity, to allow for
increases within DRG severity and the adoption of quality-enhancing
technology.
In this proposed rule, we are proposing to continue to use a
Medicare-specific intensity measure that is based on a 5-year adjusted
average of cost per discharge for FY 2015 (we refer readers to the FY
2011 IPPS/LTCH PPS

[[Page 28330]]

final rule (75 FR 50436) for a full description of our Medicare-
specific intensity measure). Specifically, for FY 2015, we are
proposing to use an intensity measure that is based on an average of
cost per discharge data from the 5-year period beginning with FY 2007
and extending through FY 2012. Based on these data, we estimated that
case-mix constant intensity declined during FYs 2007 through 2012. In
the past, when we found intensity to be declining, we believed a zero
(rather than a negative) intensity adjustment was appropriate.
Consistent with this approach, because we estimate that intensity
declined during that 5-year period, we believe it is appropriate to
propose to continue to apply a zero intensity adjustment for FY 2015.
Therefore, we are proposing to make a 0.0 percentage point adjustment
for intensity in the update for FY 2015.
Above, we described the basis of the components used to develop the
proposed 1.5 percent capital update factor under the capital update
framework for FY 2015 as shown in the table below.

Proposed CMS FY 2015 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------

------------------------------------------------------------------------
Capital Input Price Index *......................... 1.5
Intensity:.......................................... 0.0
Case-Mix Adjustment Factors:
Real Across DRG Change.......................... -0.5
Projected Case-Mix Change....................... 0.5
-------------------
Subtotal.................................... 1.5
Effect of FY 2013 Reclassification and Recalibration 0.0
Forecast Error Correction........................... 0.0
-------------------
Total Update.................................... 1.5
------------------------------------------------------------------------
* The capital input price index is based on the FY 2010-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation
In its March 2014 Report to Congress, MedPAC did not make a
specific update recommendation for capital IPPS payments for FY 2015.
(We refer readers to MedPAC's Report to the Congress: Medicare Payment
Policy, March 2014, Chapter 3.)
2. Outlier Payment Adjustment Factor
Section 412.312(c) establishes a unified outlier payment
methodology for inpatient operating and inpatient capital-related
costs. A single set of thresholds is used to identify outlier cases for
both inpatient operating and inpatient capital-related payments.
Section 412.308(c)(2) provides that the standard Federal rate for
inpatient capital-related costs be reduced by an adjustment factor
equal to the estimated proportion of capital-related outlier payments
to total inpatient capital-related PPS payments. The outlier thresholds
are set so that operating outlier payments are projected to be 5.1
percent of total operating IPPS DRG payments.
For FY 2014, we estimated that outlier payments for capital will
equal 6.07 percent of inpatient capital-related payments based on the
capital Federal rate in FY 2014. Based on the proposed thresholds as
set forth in section II.A. of this Addendum, we estimate that outlier
payments for capital-related costs would equal 6.26 percent for
inpatient capital-related payments based on the proposed capital
Federal rate in FY 2015. Therefore, we are proposing to apply an
outlier adjustment factor of 0.9374 in determining the proposed capital
Federal rate for FY 2015. Thus, we estimate that the percentage of
capital outlier payments to total capital Federal rate payments for FY
2015 will be slightly higher than the percentage for FY 2014.
The outlier reduction factors are not built permanently into the
capital rates; that is, they are not applied cumulatively in
determining the capital Federal rate. The proposed FY 2015 outlier
adjustment of 0.9374 is a -0.82 percent change from the FY 2014 outlier
adjustment of 0.9393. Therefore, the proposed net change in the outlier
adjustment to the capital Federal rate for FY 2015 is 0.9980 (0.9374/
0.9393). Thus, the outlier adjustment would decrease the proposed FY
2015 capital Federal rate by 0.82 percent compared to the FY 2014
outlier adjustment.
3. Proposed Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF
Section 412.308(c)(4)(ii) requires that the capital Federal rate be
adjusted so that aggregate payments for the fiscal year based on the
capital Federal rate after any changes resulting from the annual DRG
reclassification and recalibration and changes in the GAF are projected
to equal aggregate payments that would have been made on the basis of
the capital Federal rate without such changes. Because we implemented a
separate GAF for Puerto Rico, we apply separate budget neutrality
adjustments for the national GAF and the Puerto Rico GAF. We apply the
same budget neutrality factor for DRG reclassifications and
recalibration nationally and for Puerto Rico. Separate adjustments were
unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was
implemented in FY 1998.
To determine the proposed factors for FY 2015, we compared
(separately for the national capital rate and the Puerto Rico capital
rate) estimated aggregate capital Federal rate payments based on the FY
2014 MS-DRG classifications and relative weights and the FY 2014 GAF to
estimated aggregate capital Federal rate payments based on the FY 2014
MS-DRG classifications and relative weights and the proposed FY 2015
GAFs. To achieve budget neutrality for the changes in the national
GAFs, based on calculations using updated data, we are proposing to
apply an incremental budget neutrality adjustment factor of 1.0000 for
FY 2015 to the previous cumulative FY 2014 adjustment factor of 0.9891,
yielding a proposed adjustment factor of 0.9891 through FY 2015. For
the Puerto Rico GAFs, we are proposing to apply an incremental budget
neutrality adjustment factor of 1.0011 for FY 2015 to the previous
cumulative FY 2014 adjustment factor of 1.0076, yielding a proposed
cumulative adjustment factor of 1.0087 through FY 2015.
We then compared estimated aggregate capital Federal rate payments
based on the FY 2014 MS-DRG relative weights and the proposed FY 2015
GAFs to estimated aggregate capital Federal rate payments based on the
cumulative effects of the proposed FY 2015 MS-DRG classifications and

[[Page 28331]]

relative weights and the proposed FY 2015 GAFs. The proposed
incremental adjustment factor for DRG classifications and changes in
relative weights is 0.9957 both nationally and for Puerto Rico. The
proposed cumulative adjustment factors for MS-DRG classifications and
changes in relative weights and for changes in the GAFs through FY 2015
are 0.9848 nationally and 1.0043 for Puerto Rico. (We note that all the
values are calculated with unrounded numbers.) The GAF/DRG budget
neutrality adjustment factors are built permanently into the capital
rates; that is, they are applied cumulatively in determining the
capital Federal rate. This follows the requirement under Sec.
412.308(c)(4)(ii) that estimated aggregate payments each year be no
more or less than they would have been in the absence of the annual DRG
reclassification and recalibration and changes in the GAFs.
The methodology used to determine the recalibration and geographic
adjustment factor (GAF/DRG) budget neutrality adjustment is similar to
the methodology used in establishing budget neutrality adjustments
under the IPPS for operating costs. One difference is that, under the
operating IPPS, the budget neutrality adjustments for the effect of
geographic reclassifications are determined separately from the effects
of other changes in the hospital wage index and the MS-DRG relative
weights. Under the capital IPPS, there is a single GAF/DRG budget
neutrality adjustment factor (the national capital rate and the Puerto
Rico capital rate are determined separately) for changes in the GAF
(including geographic reclassification) and the MS-DRG relative
weights. In addition, there is no adjustment for the effects that
geographic reclassification has on the other payment parameters, such
as the payments for DSH or IME.
The proposed cumulative adjustment factor accounts for the proposed
MS-DRG reclassifications and recalibration and for proposed changes in
the GAFs. It also incorporates the effects on the proposed GAFs of FY
2015 geographic reclassification decisions made by the MGCRB compared
to FY 2014 decisions. However, it does not account for proposed changes
in payments due to changes in the DSH and IME adjustment factors.
4. Proposed Capital Federal Rate for FY 2015
For FY 2014, we established a capital Federal rate of $429.31 (78
FR 50990). We are proposing to establish an update of 1.5 percent in
determining the FY 2015 capital Federal rate for all hospitals. As a
result of this proposed update and the proposed budget neutrality
factors discussed above, we are proposing to establish a national
capital Federal rate of $433.01 for FY 2015. The proposed national
capital Federal rate for FY 2015 was calculated as follows:
The proposed FY 2015 update factor is 1.015, that is, the
proposed update is 1.5 percent.
The proposed FY 2015 budget neutrality adjustment factor
that is applied to the proposed capital Federal rate for proposed
changes in the MS-DRG classifications and relative weights and changes
in the GAFs is 0.9957.
The proposed FY 2015 outlier adjustment factor is 0.9374.
(We note that, as discussed in section VI.C. of the preamble of
this proposed rule, we are not proposing to make an additional MS-DRG
documentation and coding adjustment to the capital IPPS Federal rates
for FY 2015.)
Because the proposed FY 2015 capital Federal rate has already been
adjusted for differences in case-mix, wages, cost-of-living, indirect
medical education costs, and payments to hospitals serving a
disproportionate share of low-income patients, we are not proposing to
make additional adjustments in the capital Federal rate for these
factors, other than the proposed budget neutrality factor for proposed
changes in the MS-DRG classifications and relative weights and for
proposed changes in the GAFs.
We are providing the following chart that shows how each of the
proposed factors and adjustments for FY 2015 affects the computation of
the proposed FY 2015 national capital Federal rate in comparison to the
FY 2014 national capital Federal rate. The proposed FY 2015 update
factor has the effect of increasing the capital Federal rate by 1.5
percent compared to the FY 2014 capital Federal rate. The proposed GAF/
DRG budget neutrality adjustment factor has the effect of decreasing
the capital Federal rate by 0.43 percent. The proposed FY 2015 outlier
adjustment factor has the effect of decreasing the capital Federal rate
by 0.20 percent compared to the FY 2014 capital Federal rate. The
combined effect of all the proposed changes would increase the proposed
national capital Federal rate by 0.86 percent compared to the FY 2014
national capital Federal rate.

Comparison of Factors and Adjustments: FY 2014 Capital Federal Rate and Proposed FY 2015 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
Proposed FY
FY 2014 2015 Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\............................... 1.0090 1.0150 1.0150 1.50
GAF/DRG Adjustment Factor \1\................... 0.9987 0.9957 0.9957 -0.43
Outlier Adjustment Factor \2\................... 0.9393 0.9374 0.9980 -0.20
Capital Federal Rate............................ 429.31 433.01 1.0086 0.86
----------------------------------------------------------------------------------------------------------------
\1\ The proposed update factor and the proposed GAF/DRG budget neutrality adjustment factors are built
permanently into the capital Federal rates. Thus, for example, the proposed incremental change from FY 2014 to
FY 2015 resulting from the application of the proposed 0.9957 GAF/DRG budget neutrality adjustment factor for
FY 2015 is a proposed net change of 0.9957 (or -0.43 percent).
\2\ The proposed outlier reduction factor is not built permanently into the capital Federal rate; that is, the
factor is not applied cumulatively in determining the proposed capital Federal rate. Thus, for example, the
proposed net change resulting from the application of the proposed FY 2015 outlier adjustment factor is 0.9374/
0.9393, or 0.9918 (or -0.82 percent).

5. Proposed Special Capital Rate for Puerto Rico Hospitals
Section 412.374 provides for the use of a blended payment system
for payments made to hospitals located in Puerto Rico under the PPS for
acute care hospital inpatient capital-related costs. Accordingly, under
the capital PPS, we compute a separate payment rate specific to
hospitals located in Puerto Rico using the same methodology used to
compute the national Federal rate for capital-related costs. Under the
broad authority of section 1886(g) of the Act, beginning with
discharges occurring on or after October 1, 2004, capital payments made
to hospitals located in Puerto Rico are based on a blend of 25 percent
of the Puerto Rico capital rate and 75 percent of the capital Federal
rate. The Puerto Rico capital rate is

[[Page 28332]]

derived from the costs of Puerto Rico hospitals only, while the capital
Federal rate is derived from the costs of all acute care hospitals
participating in the IPPS (including Puerto Rico).
To adjust hospitals' capital payments for geographic variations in
capital costs, we apply a GAF to both portions of the blended capital
rate. The GAF is calculated using the operating IPPS wage index, and
varies depending on the labor market area or rural area in which the
hospital is located. We use the Puerto Rico wage index to determine the
GAF for the Puerto Rico part of the capital-blended rate and the
national wage index to determine the GAF for the national part of the
blended capital rate.
Because we implemented a separate GAF for Puerto Rico in FY 1998,
we also apply separate budget neutrality adjustment factors for the
national GAF and for the Puerto Rico GAF. However, we apply the same
budget neutrality adjustment factor for MS-DRG reclassifications and
recalibration nationally and for Puerto Rico. The proposed budget
neutrality adjustment factors for the national GAF and for the Puerto
Rico GAF and the proposed budget neutrality factor for MS-DRG
reclassifications and recalibration (which is the same nationally and
for Puerto Rico) are discussed in section III.A.3. of this Addendum.
In computing the payment for a particular Puerto Rico hospital, the
Puerto Rico portion of the capital rate (25 percent) is multiplied by
the Puerto Rico-specific GAF for the labor market area in which the
hospital is located, and the national portion of the capital rate (75
percent) is multiplied by the national GAF for the labor market area in
which the hospital is located (which is computed from national data for
all hospitals in the United States and Puerto Rico).
For FY 2014, the special capital rate for hospitals located in
Puerto Rico was $209.82 (78 FR 50991). With the changes we are
proposing to make to the other factors used to determine the proposed
capital Federal rate, the proposed FY 2015 special capital rate for
hospitals in Puerto Rico is $206.82.

B. Calculation of the Proposed Inpatient Capital-Related Prospective
Payments for FY 2015

For purposes of calculating payments for each discharge during FY
2015, the capital Federal rate is adjusted as follows: (Standard
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located in
Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment
Factor, if applicable). The result is the adjusted capital Federal
rate.
Hospitals also may receive outlier payments for those cases that
qualify under the thresholds established for each fiscal year. Section
412.312(c) provides for a single set of thresholds to identify outlier
cases for both inpatient operating and inpatient capital-related
payments. The proposed outlier thresholds for FY 2015 are in section
II.A. of this Addendum. For FY 2015, a case would qualify as a cost
outlier if the cost for the case plus the (operating) IME and DSH
payments (including both the empirically justified Medicare DSH payment
and the estimated uncompensated care payment, as discussed in section
II.A.4.g.(1) of this Addendum) is greater than the prospective payment
rate for the MS-DRG plus the proposed fixed-loss amount of $25,799.
Currently, as provided under Sec. 412.304(c)(2), we pay a new
hospital 85 percent of its reasonable costs during the first 2 years of
operation unless it elects to receive payment based on 100 percent of
the capital Federal rate. Effective with the third year of operation,
we pay the hospital based on 100 percent of the capital Federal rate
(that is, the same methodology used to pay all other hospitals subject
to the capital PPS).

C. Capital Input Price Index

1. Background
Like the operating input price index, the capital input price index
(CIPI) is a fixed-weight price index that measures the price changes
associated with capital costs during a given year. The CIPI differs
from the operating input price index in one important aspect--the CIPI
reflects the vintage nature of capital, which is the acquisition and
use of capital over time. Capital expenses in any given year are
determined by the stock of capital in that year (that is, capital that
remains on hand from all current and prior capital acquisitions). An
index measuring capital price changes needs to reflect this vintage
nature of capital. Therefore, the CIPI was developed to capture the
vintage nature of capital by using a weighted-average of past capital
purchase prices up to and including the current year.
We periodically update the base year for the operating and capital
input price indexes to reflect the changing composition of inputs for
operating and capital expenses. In the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50603 through 50607), we rebased and revised the CIPI to a FY
2010 base year to reflect the more current structure of capital costs
in hospitals. For a complete discussion of this rebasing, we refer
readers to the FY 2014 IPPS/LTCH PPS final rule.
2. Forecast of the CIPI for FY 2015
Based on the latest forecast by IHS Global Insight, Inc. (first
quarter of 2014), we are forecasting the FY 2010-based CIPI to increase
1.5 percent in FY 2015. This reflects a projected 1.9 percent increase
in vintage-weighted depreciation prices (building and fixed equipment,
and movable equipment), and a projected 2.6 percent increase in other
capital expense prices in FY 2015, partially offset by a projected 1.0
percent decline in vintage-weighted interest expenses in FY 2015. The
weighted average of these three factors produces the forecasted 1.5
percent increase for the FY 2010-based CIPI as a whole in FY 2015.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2015

Payments for services furnished in children's hospitals, 11 cancer
hospitals, and hospitals located outside the 50 States, the District of
Columbia and Puerto Rico (that is, short-term acute care hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa) that are excluded from the IPPS are made on the
basis of reasonable costs based on the hospital's own historical cost
experience, subject to a rate-of-increase ceiling. A per discharge
limit (the target amount as defined in Sec. 413.40(a) of the
regulations) is set for each hospital based on the hospital's own cost
experience in its base year, and updated annually by a rate-of-increase
percentage. (We note that, in accordance with Sec. 403.752(a), RNHCIs
are also subject to the rate-of-increase limits established under Sec.
413.40 of the regulations.)
In this FY 2015 IPPS/LTCH PPS proposed rule, we are proposing that
the FY 2015 rate-of-increase percentage for updating the target amounts
for the 11 cancer hospitals, children's hospitals, and the short-term
acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa, as well as RNHCIs would
be the estimated percentage increase in the FY 2015 IPPS operating
market basket, in accordance with applicable regulations at Sec.
413.40. As we did in FY 2014, we would use the percentage increase in
the FY 2010-based IPPS operating market basket to update these target
amounts. Based on IHS Global Insight, Inc.'s 2014 first quarter
forecast, we estimate that the FY

[[Page 28333]]

2010-based IPPS operating market basket update for FY 2015 is 2.7
percent (that is, the estimate of the market basket rate-of-increase).
However, we are proposing that if more recent data become available for
the final rule, we would use them to calculate the IPPS operating
market basket update for FY 2015.
The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We
refer readers to section VII. of the preamble of this proposed rule and
section V. of the Addendum to this proposed rule for the proposed
update changes to the Federal payment rates for LTCHs under the LTCH
PPS for FY 2015. The annual updates for the IRF PPS and the IPF PPS are
issued by the agency in separate Federal Register documents.

V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 2015

A. Proposed LTCH PPS Standard Federal Rate for FY 2015

1. Background
In section VII. of the preamble of this proposed rule, we discuss
our proposed updates to the payment rates, factors, and specific
policies under the LTCH PPS for FY 2015.
Under Sec. 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate
years beginning RY 2004 through RY 2006, we updated the standard
Federal rate annually by a factor to adjust for the most recent
estimate of the increases in prices of an appropriate market basket of
goods and services for LTCHs. We established this policy of annually
updating the standard Federal rate because, at that time, we believed
that was the most appropriate method for updating the LTCH PPS standard
Federal rate for years after the initial implementation of the LTCH PPS
in FY 2003. Therefore, under Sec. 412.523(c)(3)(ii), for RYs 2004
through 2006, the annual update to the LTCH PPS standard Federal rate
was equal to the previous rate year's Federal rate updated by the most
recent estimate of increases in the appropriate market basket of goods
and services included in covered inpatient LTCH services.
In determining the annual update to the standard Federal rate for
RY 2007, based on our ongoing monitoring activity, we believed that,
rather than solely using the most recent estimate of the LTCH PPS
market basket update as the basis of the annual update factor, it was
appropriate to adjust the standard Federal rate to account for the
effect of documentation and coding in a prior period that was unrelated
to patients' severity of illness (71 FR 27818). Accordingly, we
established under Sec. 412.523(c)(3)(iii) that the annual update to
the standard Federal rate for RY 2007 was zero percent based on the
most recent estimate of the LTCH PPS market basket at that time, offset
by an adjustment to account for changes in case-mix in prior periods
due to the effect of documentation and coding that were unrelated to
patients' severity of illness. For RY 2008 through FY 2011, we also
made an adjustment for the effect of documentation and coding that was
unrelated to patients' severity of illness in establishing the annual
update to the standard Federal rate as set forth in the regulations at
Sec. Sec. 412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012, 2013,
and 2014, we updated the standard Federal rate by the most recent
estimate of the LTCH PPS market basket at that time, including
additional statutory adjustments required by section 1886(m)(3)(A) of
the Act as set forth in the regulations at Sec. Sec.
412.523(c)(3)(viii) through (c)(3)(ix).
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year, any annual update to the standard Federal rate
shall be reduced:
For rate year 2010 through 2019, by the other adjustment
specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act (which we refer to as ``the multifactor productivity (MFP)
adjustment'') as discussed in section VII.C.2. of the preamble of this
proposed rule.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year. (As noted in section VII.C.2.a. of the preamble of
this proposed rule, the annual update to the LTCH PPS occurs on October
1 and we have adopted the term ``fiscal year'' (FY) rather than ``rate
year'' (RY) under the LTCH PPS beginning October 1, 2010. Therefore,
for purposes of clarity, when discussing the annual update for the LTCH
PPS, including the provisions of the Affordable Care Act, we use the
term ``fiscal year'' rather than ``rate year'' for 2011 and subsequent
years.)
For FY 2014, consistent with our historical practice, we
established an update to the LTCH PPS standard Federal rate based on
the full estimated LTCH PPS market basket increase of 2.5 percent and
the 0.8 percentage point reductions required by sections
1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the Act.
Accordingly, at Sec. 412.523(c)(3)(x) of the regulations, we
established an annual update of 1.7 percent to the standard Federal
rate for FY 2014 (78 FR 50761 through 50763).
For FY 2015, as discussed in greater detail in section VII.C.2. of
the preamble of this proposed rule, we are proposing to establish an
annual update to the LTCH PPS standard Federal rate based on the full
estimated increase in the LTCH PPS market basket, less the proposed MFP
adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and
less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii)
and (m)(4)(E) of the Act. In addition, as discussed in greater detail
in section VII.C.2. of the preamble of this proposed rule, beginning in
FY 2014, the annual update would be further reduced by 2.0 percentage
points for LTCHs that fail to submit quality reporting data in
accordance with the requirements of the LTCHQR Program under section
1886(m)(5) of the Act.
Specifically, in this proposed rule, based on the best available
data, we are proposing to establish an annual update to the standard
Federal rate of 2.1 percent, which is based on the full estimated
increase in the LTCH PPS market basket of 2.7 percent, less the
proposed MFP adjustment of 0.4 percentage point consistent with section
1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required
by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. As discussed in
greater detail in section VII.C.2.c. of the preamble of this proposed
rule, for LTCHs that fail to submit the required quality reporting data
for FY 2015 in accordance with the LTCHQR Program, the proposed annual
update would be further reduced by 2.0 percentage points as required by
section 1886(m)(5) of the Act. Accordingly, we are proposing to
establish an annual update to the LTCH PPS standard Federal rate of 0.1
percent for LTCHs that fail to submit the required quality reporting
data for FY 2015. This proposed 0.1 percent update is calculated based
on the full estimated increase in the LTCH PPS market basket of 2.7
percent, less a proposed MFP adjustment of 0.4 percentage point, less
an additional adjustment of 0.2 percentage point required by the
statute, and less 2.0 percentage points for failure to submit quality
reporting data as required by section 1886(m)(5) of the Act.

[[Page 28334]]

2. Development of the Proposed FY 2015 LTCH PPS Standard Federal Rate
We continue to believe that the annual update to the LTCH PPS
standard Federal rate should be based on the most recent estimate of
the increase in the LTCH PPS market basket, including any statutory
adjustments. Consistent with our historical practice, for FY 2015, we
are proposing to apply the proposed annual update to the LTCH PPS
standard Federal rate from the previous year. Furthermore, in
determining the proposed standard Federal rate for FY 2015, we also are
proposing to make certain regulatory adjustments. Specifically, we are
proposing to apply an adjustment factor for the final year of the 3-
year phase-in of the one-time prospective adjustment to the standard
Federal rate under Sec. 412.523(d)(3), as discussed in greater detail
in section VII.C.3. of the preamble of this proposed rule. In addition,
in determining the proposed FY 2015 standard Federal rate, we are
proposing to apply a budget neutrality adjustment factor for the
proposed changes related to the area wage adjustment (that is, proposed
changes to the wage data, including the proposal to adopt the new OMB
delineations, and labor-related share) in accordance with Sec.
412.523(d)(4).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50993 and 50993), we
established an annual update to the LTCH PPS standard Federal rate of
1.7 percent for FY 2014 based on the full estimated LTCH PPS market
basket increase of 2.5 percent, less the MFP adjustment of 0.5
percentage point consistent with section 1886(m)(3)(A)(i) of the Act
and less the 0.3 percentage point required by sections
1886(m)(3)(A)(ii) and (m)(4)(C) of the Act. Accordingly, at Sec.
412.523(c)(3)(x), we established an annual update to the standard
Federal rate for FY 2014 of 1.7 percent. That is, we applied an update
factor of 1.017 to the FY 2013 Federal rate of $40,607.31 to determine
the FY 2014 standard Federal rate. We also adjusted the standard
Federal rate for FY 2014 by the one-time prospective adjustment factor
for FY 2014 of 0.98734 under Sec. 412.523(d)(3)(ii). Furthermore, for
FY 2014, we applied an area wage level budget neutrality factor of
1.0010531 to the standard Federal rate to ensure that any changes to
the area wage level adjustment (that is, the annual update of the wage
index values and labor-related share) would not result in any change
(increase or decrease) in estimated aggregate LTCH PPS payments.
Consequently, we established a standard Federal rate for FY 2014 of
$40,607.31 (calculated as $40,397.96 x 1.017 x 0.98734 x 1.0010531).
In this proposed rule, we are proposing to establish an annual
update to the LTCH PPS standard Federal rate of 2.1 percent (that is,
an update factor of 1.021) for FY 2015, based on the full estimated
increase in the LTCH PPS market basket of 2.7 percent, less the
proposed MFP adjustment of 0.4 percentage point, consistent with
section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point
required by sections 1886(m)(3)(A)(ii) and(m)(4)(E) of the Act.
Therefore, under proposed Sec. 412.523(c)(3)(xi), we are proposing to
apply a factor of 1.021 to the FY 2014 standard Federal rate of
$40,607.31 to determine the proposed FY 2015 standard Federal rate.
These proposed factors are based on IGI's first quarter 2014 forecast,
which are the best available data at this time. Consistent with our
historical practice of using the best available data, we also are
proposing that if more recent data become available to determine the
market basket estimate or the MFP adjustment, we would use such data
for the final rule, if appropriate. For LTCHs that fail to submit
quality reporting data for FY 2015 under the LTCHQR Program, under
proposed Sec. 412.523(c)(3)(xi) in conjunction with Sec.
412.523(c)(4), we are proposing to reduce the proposed annual update to
the LTCH PPS standard Federal rate by an additional 2 percentage points
consistent with section 1886(m)(5) of the Act. Therefore, we are
proposing to establish an annual update to the LTCH PPS standard
Federal rate of 0.1 percent (that is, 2.1 percent minus 2.0 percentage
points = 0.1 percent or an update factor of 1.001) for FY 2015 for
LTCHs that fail to submit the required quality reporting data for FY
2015 under the LTCHQR Program. We also are proposing that the standard
Federal rate for FY 2015 would be further adjusted by a proposed
adjustment factor of 0.98734 for FY 2015 under the final year of the 3-
year phase-in of the one-time prospective adjustment at Sec.
412.523(d)(3)(ii). In addition, for FY 2015, we are proposing to apply
an area wage level budget neutrality factor of 1.0002034 to the
standard Federal rate to ensure that any proposed changes to the area
wage level adjustment (that is, the proposed annual update of the wage
index values and labor-related share) would not result in any change
(increase or decrease) in estimated aggregate LTCH PPS payments.
Accordingly, we are proposing to establish a standard Federal rate of
$40,943.51 (calculated as $40,607.31 x 1.021 x 0.98734 x 1.002034) for
FY 2015. The proposed standard Federal rate of $40,943.51 would apply
in determining the payments for FY 2015 discharges from LTCHs that
submit quality reporting data for FY 2015 in accordance with the
requirements of the LTCHQR Program under section 1886(m)(5) of the Act.
For LTCHs that fail to submit quality reporting data for FY 2015 in
accordance with the requirements of the LTCHQR Program under section
1886(m)(5) of the Act, we are proposing to establish a standard Federal
of $40,141.47 (calculated as $40,607.31 x 1.001 x 0.98734 x 1.002034)
for FY 2015.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY
2015

1. Background
Under the authority of section 123 of the BBRA, as amended by
section 307(b) of the BIPA, we established an adjustment to the LTCH
PPS standard Federal rate to account for differences in LTCH area wage
levels under Sec. 412.525(c). The labor-related share of the LTCH PPS
standard Federal rate is adjusted to account for geographic differences
in area wage levels by applying the applicable LTCH PPS wage index. The
applicable LTCH PPS wage index is computed using wage data from
inpatient acute care hospitals without regard to reclassification under
section 1886(d)(8) or section 1886(d)(10) of the Act.
When we implemented the LTCH PPS, we established a 5-year
transition to the full area wage level adjustment. The area wage level
adjustment was completely phased-in for cost reporting periods
beginning in FY 2007. Therefore, for cost reporting periods beginning
on or after October 1, 2006, the applicable LTCH area wage index values
are the full LTCH PPS area wage index values calculated based on acute
care hospital inpatient wage index data without taking into account
geographic reclassification under section 1886(d)(8) and section
1886(d)(10) of the Act. For additional information on the phase-in of
the area wage level adjustment under the LTCH PPS, we refer readers to
the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and
the RY 2008 LTCH PPS final rule (72 FR 26891).
2. Proposed Geographic Classifications (Labor Market Areas) Based on
the New OMB Delineations
In adjusting for the differences in area wage levels under the LTCH
PPS, the labor-related portion of an LTCH's

[[Page 28335]]

Federal prospective payment is adjusted by using an appropriate area
wage index based on the geographic classification (labor market area)
in which the LTCH is located. Specifically, the application of the LTCH
PPS area wage level adjustment under existing Sec. 412.525(c) is made
based on the location of the LTCH--either in an ``urban area,'' or a
``rural area,'' as defined in Sec. 412.503. Under Sec. 412.503, an
``urban area'' is defined as a Metropolitan Statistical Area (MSAs)
(which includes a Metropolitan division, where applicable), as defined
by the Executive OMB and a ``rural area'' is defined as any area
outside of an urban area.
The CBSA-based geographic classification (labor market area)
definitions currently used under the LTCH PPS, effective for discharges
occurring on or after July 1, 2005, are based on the OMB's CBSA
definitions that were developed based on 2000 U.S. Census data. As
discussed in greater detail in section VII.D. of the preamble of this
proposed rule, OMB announced revisions to the statistical boundaries of
its labor market areas for MSAs, Micropolitan Statistical Areas, and
Combined Statistical Areas, and provided guidance on the uses of the
delineations of these areas in OMB Bulletin No. 13-01, issued on
February 28, 2013 (referred hereinafter as the ``new OMB
delineations''). As previously stated, at that time, the FY 2014 IPPS/
LTCH PPS proposed rule was in the advanced stages of development, and
the proposed FY 2014 LTCH PPS area wage indexes had already been
developed based on the previous OMB CBSA-based labor market area
definitions that are currently used to define CBSA-based labor market
areas (referred hereinafter as ``CBSA designations'') under the LTCH
PPS. Therefore, we did not implement changes to the CBSA designations
under the LTCH PPS for FY 2014 based on the new OMB labor market areas
delineations that were developed based on 2010 Decennial Census data.
Rather, to allow for sufficient time to assess the new changes and
their ramifications, we stated that we intended to propose to adopt the
new OMB delineations, and the corresponding changes to the area wage
index values based on those delineations, under the LTCH PPS for FY
2015 through notice and comment rulemaking. This approach was
consistent with the approach used under the IPPS. (We refer readers to
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994 through 50995).)
As discussed in sections III.B. and VII.D. of the preamble of this
proposed rule, under the authority of section 123 of the BBRA, as
amended by section 307(b) of the BIPA, we are proposing to adopt the
new OMB delineations beginning in FY 2015. We believe that these new
OMB delineations are based on the best available data that reflect the
local economies and area wage levels of the hospitals that are
currently located in these geographic areas. We also believe that the
new OMB delineations would ensure that the LTCH PPS area wage level
adjustment most appropriately accounts for and reflects the relative
hospital wage levels in the geographic area of the hospital as compared
to the national average hospital wage level. We note that this proposal
is consistent with the IPPS proposal discussed in section III.B. of the
preamble of this proposed rule. For additional details on our proposal
to adopt the new OMB delineations, we refer readers to section VII.D.
of the preamble of this proposed rule.
3. Proposed LTCH PPS Labor-Related Share
Under the payment adjustment for the differences in area wage
levels under Sec. 412.525(c), the labor-related share of an LTCH's PPS
Federal prospective payment is adjusted by the applicable wage index
for the labor market area in which the LTCH is located. The LTCH PPS
labor-related share currently represents the sum of the labor-related
portion of operating costs (Wages and Salaries; Employee Benefits;
Professional Fees Labor-Related, Administrative and Business Support
Services; and All-Other: Labor-Related Services) and a labor-related
portion of capital costs using the applicable LTCH PPS market basket.
Additional background information on the historical development of the
labor-related share under the LTCH PPS and the development of the RPL
market basket can be found in the RY 2007 LTCH PPS final rule (71 FR
27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51766 through 51769 and 51808).
For FY 2013, we revised and rebased the market basket used under
the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific
market basket. In addition, we determined the labor-related share for
FY 2013 as the sum of the FY 2013 relative importance of each labor-
related cost category of the FY 2009-based LTCH-specific market basket.
For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53477 through 53479).
Consistent with our historical practice, in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50995 through 50996), we determined the LTCH PPS
labor-related share for FY 2014 based on the FY 2014 relative
importance of each labor-related cost category, which reflected the
different rates of price change for these cost categories between the
base year (FY 2009) and FY 2014. Specifically, based on IGI's second
quarter 2013 forecast of the FY 2009-based LTCH-specific market basket,
we established a labor-related share under the LTCH PPS for FY 2014 of
62.537 percent.
For FY 2015, we are proposing to establish a labor-related share
under the LTCH PPS based on IGI's first quarter 2014 forecast of the FY
2009-based LTCH-specific market basket. Consistent with our historical
practice, if more recent data becomes available, we are proposing to
use that data to determine the final FY 2015 labor-related share under
the LTCH PPS.
The table below shows the proposed FY 2015 labor-related share
relative importance using IGI's first quarter 2014 forecast of the FY
2009-based LTCH-specific market basket. The sum of the proposed
relative importance for FY 2015 for operating costs (Wages and
Salaries; Employee Benefits; Professional Fees Labor-Related,
Administrative and Business Support Services; and All Other: Labor-
Related Services) is 58.366 percent. We are proposing that the portion
of capital-related costs that is influenced by the local labor market
continue to be estimated to be 46 percent. Because the relative
importance for capital-related costs would be 9.142 percent of the FY
2009-based LTCH-specific market basket in FY 2015, we are proposing to
take 46 percent of 9.142 percent to determine the proposed labor-
related share of capital-related costs for FY 2015, which would result
in 4.205 percent (0.46 x 9.142). We are proposing to then add that
4.205 percent for the capital-related cost amount to the 58.366 percent
for the operating cost amount to determine the total proposed labor-
related share for FY 2015.
Therefore, under the broad authority of section 123 of the BBRA, as
amended by section 307(b) of BIPA, to determine appropriate payment
adjustments under the LTCH PPS, we are proposing to establish a labor-
related share under the LTCH PPS in FY 2015 of 62.571 percent. This
proposed labor-related share is determined using the same methodology
as used in calculating all previous fiscal years LTCH labor-related
shares.

[[Page 28336]]

Proposed FY 2015 Labor-Related Share Relative Importance Based on the FY
2009-Based LTCH-Specific Market Basket
------------------------------------------------------------------------
Proposed FY 2015
labor-related
share relative
importance
------------------------------------------------------------------------
Wages and Salaries.................................. 45.034
Employee Benefits................................... 8.128
Professional Fees: Labor-Related.................... 2.208
Administrative and Business Support Services........ 0.502
All Other: Labor-Related Services................... 2.494
-------------------
Subtotal........................................ 58.366
Proposed Labor-Related Portion of Capital Costs 4.205
(46%)..............................................
-------------------
Proposed Total Labor-Related Share.......... 62.571
------------------------------------------------------------------------

4. Proposed LTCH PPS Wage Index for FY 2015
Historically, we have established LTCH PPS area wage index values
calculated from acute care IPPS hospital wage data without taking into
account geographic reclassification under sections 1886(d)(8) and
1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment
established under the LTCH PPS is based on an LTCH's actual location
without regard to the ``urban'' or ``rural'' designation of any related
or affiliated provider.
In the FY 2014 LTCH PPS final rule (78 FR 50996 through 50997), we
calculated the FY 2014 LTCH PPS area wage index values using the same
data used for the FY 2014 acute care hospital IPPS (that is, data from
cost reporting periods beginning during FY 2010), without taking into
account geographic reclassification under sections 1886(d)(8) and
1886(d)(10) of the Act, as these were the most recent complete data
available at that time. In that same final rule, we indicated that we
computed the FY 2014 LTCH PPS area wage index values consistent with
the urban and rural geographic classifications (labor market areas)
that were in place at that time, and consistent with the pre-
reclassified IPPS wage index policy (that is, our historical policy of
not taking into account IPPS geographic reclassifications in
determining payments under the LTCH PPS). As with the IPPS wage index,
wage data for multicampus hospitals with campuses located in different
labor market areas (CBSAs) are apportioned to each CBSA where the
campus (or campuses) are located. We also continued to use our existing
policy for determining area wage index values for areas where there are
no IPPS wage data.
Consistent with our historical methodology, to determine the
applicable area wage index values under the LTCH PPS for FY 2015, under
the broad authority of section 123 of the BBRA, as amended by section
307(b) of the BIPA, to determine appropriate payment adjustments under
the LTCH PPS, we are proposing to use wage data collected from cost
reports submitted by IPPS hospitals for cost reporting periods
beginning during FY 2011, without taking into account geographic
reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act.
We are proposing to use FY 2011 wage data because these data are the
most recent complete data available. These are the same data used to
compute the proposed FY 2015 acute care hospital inpatient wage index,
as discussed in section III. of the preamble of this proposed rule.
(For our rationale for using IPPS hospital wage data as a proxy for
determining the area wage index values used under the LTCH PPS, we
refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
44024 through 44025).)
For this proposed rule, the proposed FY 2015 LTCH PPS area wage
index values were computed consistent with the proposed ``urban'' and
``rural'' geographic classifications (that is, using the new OMB labor
market area delineations), as discussed in section VII.D. of the
preamble of this proposed rule, and consistent with the pre-
reclassified IPPS wage index policy (that is, our historical policy of
not taking into account IPPS geographic reclassifications under
sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments
under the LTCH PPS). As with the IPPS wage index, we are proposing to
continue to apportion wage data for multicampus hospitals with campuses
located in different labor market areas to each CBSA where the campus
or campuses are located, as discussed in section III.G. of the preamble
of this proposed rule. Furthermore, in determining the proposed FY 2015
LTCH PPS area wage index values, we are proposing to continue to use
our existing policy for determining area wage index values for areas
where there are no IPPS wage data. We established this methodology for
determining LTCH PPS wage index values for areas that have no IPPS wage
data in the RY 2009 LTCH PPS final rule. For more information about
this methodology, we refer readers to the RY 2009 LTCH PPS final rule
(73 FR 26817 through 26818) for an explanation of and rationale for our
policy for determining LTCH PPS wage index values for areas that have
no IPPS wage data.
There are currently no LTCHs located in labor market areas without
IPPS hospital wage data (or IPPS hospitals). However, should an LTCH
open in one of these labor market areas, LTCH PPS wage index values for
such an area would be calculated using our established methodology.
Under our existing methodology, the LTCH PPS wage index value for urban
CBSAs with no IPPS wage data is determined by using an average of all
of the urban areas within the State, and the LTCH PPS wage index value
for rural areas with no IPPS wage data is determined by using the
unweighted average of the wage indices from all of the CBSAs that are
contiguous to the rural counties of the State.
Based on the FY 2011 IPPS wage data that we are proposing to use to
determine the proposed FY 2015 LTCH PPS area wage index values in this
proposed rule, there are no IPPS wage data for the urban area
Hinesville, GA (CBSA 25980). Consistent with the methodology discussed
above, we calculated the proposed FY 2015 wage index value for CBSA
25980 as the average of the wage index values for all of the other
urban areas within the State of Georgia (that is, CBSAs 10500, 12020,
12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340,
46660 and 47580), as shown in Table

[[Page 28337]]

12A, which is listed in section VI. of the Addendum to this proposed
rule and available via the Internet on the CMS Web site). We note that,
as IPPS wage data are dynamic, it is possible that urban areas without
IPPS wage data will vary in the future.
Based on FY 2011 IPPS wage data that we are proposing to use to
determine the proposed FY 2015 LTCH PPS area wage index values in this
proposed rule, there are no proposed rural areas without IPPS hospital
wage data. Therefore, it is not necessary to use our established
methodology to calculate an LTCH PPS wage index value for proposed
rural areas with no IPPS wage data for FY 2015. We note that, as IPPS
wage data are dynamic, it is possible that rural areas without IPPS
wage data will vary in the future.
For FY 2015, we are proposing to use the new OMB delineations under
the LTCH PPS, as discussed in greater detail in section VII.D. of the
preamble of this proposed rule. Under this proposal, there would be
some changes to the current CBSA compositions as a result of the new
OMB delineations, which would result in the creation of new CBSAs,
``urban'' counties that are now ``rural,'' ``rural'' counties that are
now ``urban,'' and existing CBSAs that are divided into separate
boundaries. Under existing Sec. 412.503, an ``urban area'' is defined
as a Metropolitan Statistical Area as defined by the Executive OMB, and
a ``rural area'' is defined as any area outside of an urban area. We
are not proposing any changes to the current definitions of ``urban
area'' and ``rural area'' because our proposal to use the new OMB
delineations under the LTCH PPS is consistent with the definitions in
existing Sec. 412.503.
As discussed in sections III.B. and VII.D.2.e. of the preamble of
this proposed rule, overall we believe that using the new OMB
delineations would result in LTCH PPS area wage index values being more
representative of the actual costs of labor in a given area. However,
we also recognize that, as a result of our proposal to adopt the new
OMB delineations, some LTCHs would experience decreases in area wage
index values, while other LTCHs would experience increases in area wage
index values. Therefore, to mitigate any short-term instability in LTCH
PPS payments that could result from our proposal to use the new OMB
delineations, we are proposing a transitional wage index policy. Under
our proposed transitional wage index policy, any LTCH that would
experience a decrease in its area wage index solely as a result of the
proposal to adopt the new OMB delineations under the LTCH PPS would
receive a blended area wage index for FY 2015. That is, for purposes of
determining an LTCH's area wage index for FY 2015, we are proposing to
compute LTCH PPS area wage index values using the proposed area wage
data discussed above and in section V.B.4. of the Addendum to this
proposed rule under both the current (FY 2014) CBSA designations and
the proposed new OMB delineations. If the area wage index value under
the proposed new OMB delineations would be lower than the proposed are
wage index value under the FY 2014 CBSA designations, the LTCH would be
paid based on a blended area wage index for FY 2015, which would be
computed as the sum of 50 percent of each wage index value (referred to
as the proposed 50/50 blended wage index), as described below.
Therefore, to determine the applicable area wage index value for
each LTCH under this proposed transitional wage index policy that would
be effective for discharges occurring on or after October 1, 2014,
through September 30, 2015, for this proposed rule, we computed the
following two area wage index values: (1) The wage index values
calculated using the proposed new OMB delineations; and (2) the wage
index values calculated using the current (FY 2014) CBSA designations.
The proposed FY 2015 LTCH area wage index values calculated using the
new OMB delineations are presented in section VI. of the Addendum to
this proposed rule in Table 12A (for urban areas) and Table 12B (for
rural areas), which are available via the Internet on the CMS Web site.
The proposed FY 2015 LTCH area wage index values calculated using the
current (FY 2014) CBSA designations are presented in section VI. of the
Addendum to this proposed rule in Table 12C (for urban areas) and Table
12D (for rural areas), which are available via the Internet on the CMS
Web site. Where applicable, the wage index values in Tables 12C and 12D
would be used to calculate a LTCH's proposed 50/50 blended wage index
value under the proposed transitional wage index policy. As explained
previously, under our proposed transitional wage index policy, an LTCH
would only receive the proposed 50/50 blended area wage index value for
FY 2015 if the LTCH's proposed area wage index value under the new OMB
delineations (shown in Table 12A or 12B) would be lower than the
proposed area wage index value under the FY 2014 CBSA designations
(shown in Tables 12C or 12D). If an LTCH's proposed area wage index
under the new OMB delineations (shown in Tables 12A or 12B) would be
higher than the proposed wage index under the FY 2014 CBSA designations
(shown in Tables 12C or 12D), we are proposing to pay the LTCH based on
100 percent of the proposed area wage index under the new OMB
delineations shown in Tables 12A or 12B (as such the LTCH would not
receive the proposed 50/50 blended area wage index). Furthermore, as
discussed below and in section VII.D.2.e. of the preamble of this
proposed rule, we are proposing to apply this transitional wage index
policy in a budget neutral manner. Each LTCH's proposed labor market
area under the new OMB delineations and the current (FY 2014) CBSA-
based labor market area designation can be found in the LTCH PPS impact
file for this proposed rule, which is available via the Internet on the
CMS Web site.
5. Proposed Budget Neutrality Adjustment for Proposed Changes to the
Area Wage Level Adjustment
Historically, the LTCH PPS wage index and labor-related share are
updated annually based on the latest available data. Under Sec.
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that
estimated aggregate LTCH PPS payments are unaffected; that is, will be
neither greater than nor less than estimated aggregate LTCH PPS
payments without such changes to the area wage level adjustment. Under
this policy, we determine an area wage-level adjustment budget
neutrality factor that will be applied to the standard Federal rate to
ensure that any changes to the area wage-level adjustments are budget
neutral such that any changes to the area wage index values or labor-
related share would not result in any change (increase or decrease) in
estimated aggregate LTCH PPS payments. Accordingly, under Sec.
412.523(d)(4), we apply an area wage-level adjustment budget neutrality
factor in determining the standard Federal rate, and we also
established a methodology for calculating an area wage-level adjustment
budget neutrality factor. (For additional information on the
establishment of our budget neutrality policy for changes to the area
wage-level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51771 through 51773 and 51809).)
For FY 2015, in accordance with Sec. 412.523(d)(4), we are
proposing to apply an area wage-level adjustment budget neutrality
factor to adjust the standard Federal rate to account for the estimated
effect of the proposed adjustments or updates to the area wage-

[[Page 28338]]

level adjustment under Sec. 412.525(c)(1) on estimated aggregate LTCH
PPS payments using a methodology that is consistent with the
methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51773). For this proposed rule, in addition to the proposed updates
for FY 2015 to the area wage index data and labor-related share
discussed above, we are proposing a transitional wage index policy to
mitigate the impacts of implementing changes to the LTCH PPS labor
market areas (CBSAs) based on new OMB delineations, as discussed above
and in section VII.D.2.e. of the preamble of this proposed rule.
Because our proposed transitional wage index policy for LTCHs that
would experience a decrease in the their area wage index solely as a
result of the proposed adoption of the new OMB delineations under the
LTCH PPS would result in an increase in estimated aggregate LTCH PPS
payments without such changes, we are proposing to include the proposed
50/50 blended area wage index when determining the proposed area wage-
level adjustment budget neutrality factor that we would be applied to
the standard Federal rate under Sec. 412.523(d)(4) to ensure that any
changes to the area wage-level adjustments are budget neutral.
For this proposed rule, using the proposed steps in the proposed
methodology described in section VII.D.2.e. of this preamble, we
determined a proposed FY 2015 area wage-level adjustment budget
neutrality factor of 1.0002034. Accordingly, in section V.A.2. of the
Addendum to this proposed rule, to determine the FY 2015 LTCH PPS
standard Federal rate, we are proposing to apply a proposed area wage
level adjustment budget neutrality factor of 1.0002034, in accordance
with Sec. 412.523(d)(4). The proposed FY 2015 LTCH PPS standard
Federal rate shown in Table 1E of the Addendum to this proposed rule
reflects this adjustment factor.

C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii

Under Sec. 412.525(b), a cost-of-living adjustment (COLA) is
provided for LTCHs located in Alaska and Hawaii to account for the
higher costs incurred in those States. Specifically, we apply a COLA to
payments to LTCHs located in Alaska and Hawaii by multiplying the
nonlabor-related portion of the standard Federal payment rate by the
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into
account in the adjustment for area wage levels described above.
Prior to FY 2014, we used the most recent updated COLA factors
obtained from the U.S. Office of Personnel Management (OPM) Web site at
https://www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments
for LTCHs located in Alaska and Hawaii. Statutory changes have
transitioned the Alaska and Hawaii COLAs to locality pay (phased in
over a 3-year period beginning in January 2010, with COLA rates being
frozen as of October 28, 2009, and then proportionately reduced to
reflect the phase-in of locality pay). For FY 2013, we believed that it
was appropriate to use ``frozen'' COLA factors to adjust payments,
while we explored alternatives for updating the COLA factors in the
future, and we continued to use the same ``frozen'' COLA factors used
in FY 2012 to adjust the nonlabor-related portion of the standard
Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under
Sec. 412.525(b). We also established a methodology to update the COLA
factors for Alaska and Hawaii, every 4 years (at the same time as the
update to the labor-related share of the IPPS market basket), beginning
in FY 2014 (77 FR 53712 through 53713). The methodology we established
to update the COLA factors is based on a comparison of the growth in
the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the
growth in the CPI for the average U.S. city as published by the Bureau
of Labor Statistics (BLS). It also incorporates a 25-percent cap on the
CPI-updated COLA factors, which is consistent with a statutorily
mandated 25-percent cap that was applied to OPM's published COLA
factors. We believe that determining updated COLA factors using this
methodology would appropriately adjust the nonlabor-related portion of
the standard Federal rate for LTCHs located in Alaska and Hawaii. (For
additional details on the methodology we established in the FY 2013
IPPS/LTCH PPS final rule to update the COLA factors for Alaska and
Hawaii beginning in FY 2014, we refer readers to section VII.D.3. of
the preamble of that final rule (77 FR 53481 through 53482).)
For FY 2014, we updated the COLA factors published for Alaska and
Hawaii by OPM for 2009 (as these are the last COLA factors OPM
published prior to transitioning from COLAs to locality pay) using the
methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule.
Under our finalized methodology, we used COLA factors for FY 2014 for
the three specified urban areas of Alaska (Anchorage, Fairbanks and
Juneau) of 1.23; for the City and County of Honolulu, the County of
Kauai, the County of Maui, the County of Kalawao, and ``All other''
areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For
additional details on our policy, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50997through 50998).
Under our finalized policy, we update the COLA factors using the
methodology described above every 4 years; the first year began in FY
2014 (77 FR 53482). Accordingly, in this proposed rule, for FY 2015,
under the broad authority conferred upon the Secretary by section 123
of the BBRA, as amended by section 307(b) of the BIPA, to determine
appropriate payment adjustments under the LTCH PPS, we are proposing to
continue to use the COLA factors established in the FY 2014 IPPS/LTCH
PPS final rule, which were based on the 2009 OPM COLA factors updated
through 2012 by the comparison of the growth in the CPIs for Anchorage,
Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the
average U.S. city. (We refer readers to the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50998) for a discussion of the FY 2014 COLA factors.)
Consistent with our historical practice, we are proposing that the
proposed COLA factors shown in the table below would adjust the
nonlabor-related portion of the proposed standard Federal rate for
LTCHs located in Alaska and Hawaii under Sec. 412.525(b).

Proposed Cost-of-Living Adjustment Factors for Alaska and Hawaii
Hospitals Under the LTCH PPS for FY 2015
------------------------------------------------------------------------

------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50[dash]mile) radius by 1.23
road......................................................
City of Fairbanks and 80-kilometer (50[dash]mile) radius by 1.23
road......................................................
City of Juneau and 80-kilometer (50[dash]mile) radius by 1.23
road......................................................
All other areas of Alaska................................ 1.25
Hawaii:
City and County of Honolulu................................ 1.25
County of Hawaii........................................... 1.19
County of Kauai............................................ 1.25
County of Maui and County of Kalawao....................... 1.25
------------------------------------------------------------------------

D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. Background
Under the broad authority conferred upon the Secretary by section
123 of the BBRA as amended by section 307(b) of the BIPA, in the
regulations at

[[Page 28339]]

Sec. 412.525(a), we established an adjustment for additional payments
for outlier cases that have extraordinarily high costs relative to the
costs of most discharges. We refer to these cases as high cost outliers
(HCOs). Providing additional payments for outliers strongly improves
the accuracy of the LTCH PPS in determining resource costs at the
patient and hospital level. These additional payments reduce the
financial losses that would otherwise be incurred when treating
patients who require more costly care and, therefore, reduce the
incentives to underserve these patients. We set the outlier threshold
before the beginning of the applicable rate year so that total
estimated outlier payments are projected to equal 8 percent of total
estimated payments under the LTCH PPS.
Under Sec. 412.525(a) in the regulations (in conjunction with
Sec. 412.503), we make outlier payments for any discharges if the
estimated cost of a case exceeds the adjusted LTCH PPS payment for the
MS-LTC-DRG plus a fixed-loss amount. Specifically, in accordance with
Sec. 412.525(a)(3) (in conjunction with Sec. 412.503), we make an
additional payment for an HCO case that is equal to 80 percent of the
difference between the estimated cost of the patient case and the
outlier threshold, which is the sum of the adjusted Federal prospective
payment for the MS-LTC-DRG and the fixed-loss amount. The fixed-loss
amount is the amount used to limit the loss that a hospital will incur
under the outlier policy for a case with unusually high costs. This
results in Medicare and the LTCH sharing financial risk in the
treatment of extraordinarily costly cases. Under the LTCH PPS HCO
policy, the LTCH's loss is limited to the fixed-loss amount and a fixed
percentage of costs above the outlier threshold (adjusted MS-LTC-DRG
payment plus the fixed-loss amount). The fixed percentage of costs is
called the marginal cost factor. We calculate the estimated cost of a
case by multiplying the Medicare allowable covered charge by the
hospital's overall hospital cost-to-charge ratio (CCR).
Under the LTCH PPS HCO policy at Sec. 412.525(a), we determine a
fixed-loss amount, that is, the maximum loss that an LTCH can incur
under the LTCH PPS for a case with unusually high costs before the LTCH
will receive any additional payments. We calculate the fixed-loss
amount by estimating aggregate payments with and without an outlier
policy. The fixed-loss amount results in estimated total outlier
payments being projected to be equal to 8 percent of projected total
LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data
from the most recent Provider-Specific File (PSF) (or from the
applicable statewide average CCR if an LTCH's CCR data are faulty or
unavailable) are used to establish a fixed-loss threshold amount under
the LTCH PPS.
2. Determining LTCH CCRs Under the LTCH PPS
a. Background
The following is a discussion of CCRs that are used in determining
payments for HCO and SSO cases under the LTCH PPS, at Sec. 412.525(a)
and Sec. 412.529, respectively. Although this section is specific to
HCO cases, because CCRs and the policies and methodologies pertaining
to them are used in determining payments for both HCO and SSO cases (to
determine the estimated cost of the case at Sec. 412.529(d)(2)), we
are discussing the determination of CCRs under the LTCH PPS for both of
these types of cases simultaneously.
In determining both HCO payments (at Sec. 412.525(a)) and SSO
payments (at Sec. 412.529), we calculate the estimated cost of the
case by multiplying the LTCH's overall CCR by the Medicare allowable
charges for the case. In general, we use the LTCH's overall CCR, which
is computed based on either the most recently settled cost report or
the most recent tentatively settled cost report, whichever is from the
latest cost reporting period, in accordance with Sec.
412.525(a)(4)(iv)(B) and Sec. 412.529(f)(4)(ii) for HCOs and SSOs,
respectively. (We note that, in some instances, we use an alternative
CCR, such as the statewide average CCR in accordance with the
regulations at Sec. 412.525(a)(4)(iv)(C) and Sec. 412.529(f)(4)(iii),
or a CCR that is specified by CMS or that is requested by the hospital
under the provisions of the regulations at Sec. 412.525(a)(4)(iv)(A)
and Sec. 412.529(f)(4)(i).) Under the LTCH PPS, a single prospective
payment per discharge is made for both inpatient operating and capital-
related costs. Therefore, we compute a single ``overall'' or ``total''
LTCH-specific CCR based on the sum of LTCH operating and capital costs
(as described in Section 150.24, Chapter 3, of the Medicare Claims
Processing Manual (Pub. 100-4)) as compared to total charges.
Specifically, an LTCH's CCR is calculated by dividing an LTCH's total
Medicare costs (that is, the sum of its operating and capital inpatient
routine and ancillary costs) by its total Medicare charges (that is,
the sum of its operating and capital inpatient routine and ancillary
charges).
b. LTCH Total CCR Ceiling
Generally, an LTCH is assigned the applicable statewide average CCR
if, among other things, an LTCH's CCR is found to be in excess of the
applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This
is because CCRs above this threshold are most likely due to faulty data
reporting or entry, and CCRs based on erroneous data should not be used
to identify and make payments for outlier cases. Therefore, under our
established policy, generally, if an LTCH's calculated CCR is above the
applicable ceiling, the applicable LTCH PPS statewide average CCR is
assigned to the LTCH instead of the CCR computed from its most recent
(settled or tentatively settled) cost report data.
In this proposed rule, using our established methodology for
determining the LTCH total CCR ceiling (described above), based on IPPS
total CCR data from the December 2013 update of the PSF, we are
proposing to establish a total CCR ceiling of 1.341under the LTCH PPS
for FY 2015 in accordance with Sec. 412.525(a)(4)(iv)(C)(2) for HCOs
and Sec. 412.529(f)(4)(iii)(B) for SSOs. Consistent with our
historical policy of using the best available data, we also are
proposing that if more recent data become available, we would use such
data to establish a total CCR ceiling for FY 2015 in the final rule.
c. LTCH Statewide Average CCRs
Our general methodology established for determining the statewide
average CCRs used under the LTCH PPS is similar to our established
methodology for determining the LTCH total CCR ceiling (described
above) because it is based on ``total'' IPPS CCR data. Under the LTCH
PPS HCO policy at Sec. 412.525(a)(4)(iv)(C) and the SSO policy at
Sec. 412.529(f)(4)(iii), the MAC may use a statewide average CCR,
which is established annually by CMS, if it is unable to determine an
accurate CCR for an LTCH in one of the following circumstances: (1) New
LTCHs that have not yet submitted their first Medicare cost report (for
this purpose, consistent with current policy, a new LTCH is defined as
an entity that has not accepted assignment of an existing hospital's
provider agreement in accordance with Sec. 489.18); (2) LTCHs whose
CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom
data with which to calculate a CCR are not available (for example,
missing or faulty data). (Other sources of

[[Page 28340]]

data that the MAC may consider in determining an LTCH's CCR include
data from a different cost reporting period for the LTCH, data from the
cost reporting period preceding the period in which the hospital began
to be paid as an LTCH (that is, the period of at least 6 months that it
was paid as a short-term, acute care hospital), or data from other
comparable LTCHs, such as LTCHs in the same chain or in the same
region.)
Consistent with our historical practice of using the best available
data, in this proposed rule, using our established methodology for
determining the LTCH statewide average CCRs, based on the most recent
complete IPPS ``total CCR'' data from the December 2013 update of the
PSF, we are proposing to establish LTCH PPS statewide average total
CCRs for urban and rural hospitals that would be effective for
discharges occurring on or after October 1, 2014 through September 20,
2015, in Table 8C listed in section VI. of the Addendum to this
proposed rule (and available via the Internet). Consistent with our
historical policy of using the best available data, we also are
proposing that if more recent data become available, we would use such
data to establish statewide average total CCRs for urban and rural
LTCHs for FY 2015 in the final rule.
Under the proposed changes to the LTCH PPS labor market areas based
on the new OMB delineations, all areas in Delaware, the District of
Columbia, New Jersey, and Rhode Island would be classified as urban.
Therefore, there are no proposed rural statewide average total CCRs
listed for those jurisdictions in Table 8C. This policy is consistent
with the policy that we established when we revised our methodology for
determining the applicable LTCH statewide average CCRs in the FY 2007
IPPS final rule (71 FR 48119 through 48121) and is the same as the
policy applied under the IPPS. In addition, although Connecticut and
Massachusetts have areas that are designated as rural, there are no
short-term, acute care IPPS hospitals or LTCHs located in those areas
as of December 2013. Therefore, consistent with our existing
methodology, we are proposing to use the national average total CCR for
rural IPPS hospitals for rural Connecticut and Massachusetts in Table
8C listed in section VI. of the Addendum to this proposed rule (and
available via the Internet).
In addition, consistent with our existing methodology, in
determining the urban and rural statewide average total CCRs for
Maryland LTCHs paid under the LTCH PPS, we are proposing to continue to
use, as a proxy, the national average total CCR for urban IPPS
hospitals and the national average total CCR for rural IPPS hospitals,
respectively. We are proposing to use this proxy because we believe
that the CCR data in the PSF for Maryland hospitals may not be entirely
accurate (as discussed in greater detail in the FY 2007 IPPS final rule
(71 FR 48120)).
d. Reconciliation of LTCH HCO and SSO Payments
We note that under the LTCH PPS HCO policy at Sec.
412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at Sec.
412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively,
are subject to reconciliation. Specifically, any reconciliation of
outlier payments is based on the CCR that is calculated based on a
ratio of cost-to-charge data computed from the relevant cost report
determined at the time the cost report coinciding with the discharge is
settled. For additional information, we refer readers to sections
150.26 through 150.28 of the Medicare Claims Processing Manual (Pub.
100-4) as added by Change Request 7192 (Transmittal 2111; December 3,
2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821).
3. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for FY 2015
When we implemented the LTCH PPS, as discussed in the August 30,
2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad
authority of section 123 of the BBRA as amended by section 307(b) of
BIPA, we established a fixed-loss amount so that total estimated
outlier payments are projected to equal 8 percent of total estimated
payments under the LTCH PPS. To determine the fixed-loss amount, we
estimate outlier payments and total LTCH PPS payments for each case
using claims data from the MedPAR files. Specifically, to determine the
outlier payment for each case, we estimate the cost of the case by
multiplying the Medicare covered charges from the claim by the LTCH's
CCR. Under Sec. 412.525(a)(3) (in conjunction with Sec. 412.503), if
the estimated cost of the case exceeds the outlier threshold, we make
an outlier payment equal to 80 percent of the difference between the
estimated cost of the case and the outlier threshold (that is, the sum
of the adjusted Federal prospective payment for the MS-LTC-DRG and the
fixed-loss amount).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 53715), we presented
our policies regarding the methodology and data we used to establish
the fixed-loss amount of $13,314 for FY 2014, which was calculated
using our existing methodology to calculate the fixed-loss amount for
FY 2014 (based on the data and the rates and policies presented in that
final rule) in order to maintain estimated HCO payments at the
projected 8 percent of total estimated LTCH PPS payments. Consistent
with our historical practice of using the best data available, in
determining the fixed-loss amount for FY 2014, we used the most recent
available LTCH claims data and CCR data, that is, LTCH claims data from
the March 2013 update of the FY 2012 MedPAR file and CCRs from the
March 2013 update of the PSF, as these data were the most recent
complete LTCH data available at that time.
In this proposed rule, for FY 2015, in general, we are proposing to
continue to use our existing methodology to calculate a fixed-loss
amount for FY 2015 using the best available data that would maintain
estimated HCO payments at the projected 8 percent of total estimated
LTCH PPS payments (based on the rates and policies presented in this
proposed rule). Specifically, for this proposed rule, we are proposing
to use LTCH claims data from the December 2013 update of the FY 2013
MedPAR file and CCRs from the December 2013 update of the PSF to
determine a fixed-loss amount that would result in estimated outlier
payments projected to be equal to 8 percent of total estimated payments
in FY 2015 because these data are the most recent complete LTCH data
available at this time. We also are proposing that if more recent data
become available, we would use such data to determine a fixed-loss
amount for FY 2015 in the final rule. (For additional detail on the
rationale for setting the HCO payment ``target'' at 8 percent of total
estimated LTCH PPS payments, we refer readers to the FY 2003 LTCH PPS
final rule (67 FR 56022 through 56024).)
Under the broad authority of section 123(a)(1) of the BBRA and
section 307(b)(1) of BIPA, we are proposing to establish a fixed-loss
amount of $15,730 for FY 2015. Therefore, we are proposing to make an
additional payment for an HCO case that is equal to 80 percent of the
difference between the estimated cost of the case and the outlier
threshold (the sum of the adjusted Federal LTCH payment for the MS-LTC-
DRG and the proposed fixed-loss amount of $15,730). We also note that
the proposed fixed-loss amount of $15,730 for FY 2015 is slightly
higher than the FY 2014 fixed-loss amount of $13,314. Based on our
payment simulations using the most recent available data at this time,
the proposed increase in the fixed-loss amount for FY

[[Page 28341]]

2015 is necessary to maintain the existing requirement that estimated
outlier payments equal 8 percent of estimated total LTCH PPS payments.
(As noted above, for further information on the existing 8 percent HCO
``target'' requirement, we refer readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56022 through 56024).) Maintaining the fixed-loss
amount at the current level would result in HCO payments that are more
than the current regulatory 8-percent requirement because a lower
fixed-loss amount would result in more cases qualifying as outlier
cases, as well as higher outlier payments for qualifying HCO cases
because the maximum loss that an LTCH must incur before receiving an
HCO payment (that is, the fixed-loss amount) would be smaller. For
these reasons, we believe that proposing to raise the fixed-loss amount
is appropriate and necessary to maintain that estimated outlier
payments would equal 8 percent of estimated total LTCH PPS payments as
required under Sec. 412.525(a).
4. Application of the Outlier Policy to SSO Cases
As we discussed in the August 30, 2002 final rule (67 FR 56026),
under some rare circumstances, an LTCH discharge could qualify as an
SSO case (as defined in the regulations at Sec. 412.529 in conjunction
with Sec. 412.503) and also as an HCO case. In this scenario, a
patient could be hospitalized for less than five-sixths of the
geometric average length of stay for the specific MS-LTC-DRG, and yet
incur extraordinarily high treatment costs. If the estimated costs
exceeded the HCO threshold (that is, the SSO payment plus the fixed-
loss amount), the discharge is eligible for payment as an HCO.
Therefore, for an SSO case in FY 2015, the HCO payment would be 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the proposed fixed-loss amount of
$15,730 and the amount paid under the SSO policy as specified in Sec.
412.529).

E. Proposed Update to the IPPS Comparable/Equivalent Amounts To Reflect
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology

In the FY 2014 IPPS/LTCH PPS final rule, we established a policy
for reflecting the changes to the Medicare IPPS DSH payment adjustment
methodology provided for by section 3133 of the Affordable Care Act in
the calculation of the ``IPPS comparable amount'' under the SSO policy
at Sec. 412.529 and the ``IPPS equivalent amount'' under the 25-
percent threshold payment adjustment policy at Sec. 412.534 and Sec.
412.536. Historically, the determination of both the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' include an amount for
inpatient operating costs ``for the costs of serving a disproportionate
share of low-income patients.'' Under the statutory changes to the
Medicare DSH payment adjustment methodology that began in FY 2014, in
general, eligible IPPS hospitals receive an empirically justified
Medicare DSH payment equal to 25 percent of the amount they otherwise
would have received under the statutory formula for Medicare DSH
payments prior to the amendments made by the Affordable Care Act. The
remaining amount, equal to an estimate of 75 percent of the amount that
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals under the age of 65
who are uninsured, is made available to make additional payments to
each hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The additional uncompensated care payments are
based on the hospital's amount of uncompensated care for a given time
period relative to the total amount of uncompensated care for that same
time period reported by all IPPS hospitals that receive Medicare DSH
payments.
To reflect the statutory changes to the Medicare DSH payment
adjustment methodology in the calculation of the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we
stated that we will include a reduced Medicare DSH payment amount that
reflects the projected percentage of the payment amount calculated
based on the statutory Medicare DSH payment formula prior to the
amendments made by the Affordable Care Act that will be paid to
eligible IPPS hospitals as empirically justified Medicare DSH payments
and uncompensated care payments in that year (that is, a percentage of
the operating DSH payment amount that has historically been reflected
in the LTCH PPS payments that is based on IPPS rates). We also stated
that the projected percentage will be updated annually, consistent with
the annual determination of the amount of uncompensated care payments
that will be made to eligible IPPS hospitals. As explained in the FY
2014 IPPS/LTCH PPS final rule (79 FR 50766 through 50767), we believe
that this approach results in appropriate payments under the LTCH PPS
and is consistent with our intention that the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS closely
resemble what an IPPS payment would have been for the same episode of
care, while recognizing that some features of the IPPS cannot be
translated directly into the LTCH PPS.
For FY 2014, aggregate Medicare IPPS operating DSH payments are
projected to be reduced to 95.7 percent of the amount that would
otherwise have been paid under the statutory Medicare DSH payment
formula prior to the amendments made by the Affordable Care Act.
Accordingly, for FY 2014, the calculation of the ``IPPS comparable
amount'' under Sec. 412.529 and the ``IPPS equivalent amount'' under
Sec. 412.534 and Sec. 412.536 includes an applicable operating
Medicare DSH payment amount that is equal to 95.7 percent of the
operating Medicare DSH payment amount based the current statutory
Medicare DSH payment formula (that is, the operating Medicare DSH
payment amount historically included in those calculations) (76 FR
50766). As discussed in greater detail in section IV.F.3.d.(2) of the
preamble of this proposed rule, our estimate of 75 percent of the
amount that would otherwise have been paid as Medicare DSH payments
(under the methodology outlined in section 1886(r)(2) of the Act) would
be adjusted to 80.35 percent of that amount to reflect the change in
the percentage of individuals that are uninsured. The resulting amount
is then used to determine the amount of proposed uncompensated care
payments that would be made to eligible IPPS hospitals in FY 2015. In
other words, Medicare DSH payments prior to the amendments made by the
Affordable Care Act are adjusted to 60.26 percent (the product of 75
percent and 80.35 percent) and the resulting amount is used to
calculate the proposed uncompensated care payments to eligible
hospitals. As a result, for FY 2015, we project that the reduction in
the amount of Medicare DSH payments pursuant to section 1886(r)(1) of
the Act, along with the proposed payments for uncompensated care under
section 1886(r)(2) of the Act, would result in overall Medicare DSH
payments of 85.26 percent of the amount of Medicare DSH payments that
would otherwise have been made in the absence of amendments made by the
Affordable Care Act (that is, 25 percent + 60.26 percent = 85.26
percent). Therefore, in this proposed rule, for FY 2015, we are
proposing that the calculation of the

[[Page 28342]]

``IPPS comparable amount'' under Sec. 412.529 and the ``IPPS
equivalent amount'' under Sec. 412.534 and Sec. 412.536 would include
an applicable operating Medicare DSH payment amount that would be equal
to 85.26 percent of the operating Medicare DSH payment amount based on
the statutory Medicare DSH payment formula prior to the amendments made
by the Affordable Care Act. Consistent with our historical practice of
using the best available data, if more recent data become available,
for the final rule, we would use such data to determine the percentage
of the operating Medicare DSH payment amount based on the statutory
Medicare DSH payment formula prior to the amendments made by the
Affordable Care Act used in the calculation of the ``IPPS comparable
amount'' under Sec. 412.529 and the ``IPPS equivalent amount'' under
Sec. 412.534 and Sec. 412.536 for FY 2015.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for FY 2015

Section 412.525 sets forth the adjustments to the LTCH PPS standard
Federal rate. Under Sec. 412.525(c), the standard Federal rate is
adjusted to account for differences in area wages by multiplying the
labor-related share of the standard Federal rate by the applicable LTCH
PPS wage index (proposed FY 2015 values are shown in Tables 12A through
12D listed in section VI. of the Addendum of this proposed rule and are
available via the Internet). The proposed standard Federal rate is also
adjusted to account for the higher costs of LTCHs located in Alaska and
Hawaii by the applicable COLA factors (the proposed FY 2015 factors are
shown in the chart in section V.C. of this Addendum) in accordance with
Sec. 412.525(b). In this proposed rule, we are proposing to establish
a standard Federal rate for FY 2015 of $40,943.51 (applicable to
discharges from LTCHs that submit the required quality reporting data
for FY 2015 in accordance with the LTCHQR Program under section
1886(m)(5) of the Act), as discussed above in section V.A.2. of the
Addendum to this proposed rule. We illustrate the methodology to adjust
the proposed LTCH PPS Federal standard rate for FY 2015 in the
following example:

Example: During FY 2015, a Medicare patient is in an LTCH
located in Chicago, Illinois (CBSA 16974). The proposed FY 2015 LTCH
PPS wage index value for CBSA 16974 is 1.0369 (obtained from Table
12A listed in section VI. of the Addendum of this proposed rule and
available via the Internet on the CMS Web site). The Medicare
patient is classified into MS-LTC-DRG 198 (Pulmonary Edema &
Respiratory Failure), which has a proposed relative weight for FY
2015 of 0.9122 (obtained from Table 11 listed in section VI. of the
Addendum of this proposed rule and available via the Internet on the
CMS Web site). The LTCH submitted quality reporting data for FY 2015
in accordance with the LTCHQR Program under section 1886(m)(5) of
the Act.
To calculate the LTCH's total adjusted proposed Federal
prospective payment for this Medicare patient in FY 2015, we compute
the wage-adjusted proposed Federal prospective payment amount by
multiplying the unadjusted proposed FY 2015 standard Federal rate
($40,943.51, for LTCHs that submit quality reporting data for FY
2015 in accordance with the LTCHQR Program under section 1886(m)(5)
of the Act) by the proposed labor-related share (62.571 percent) and
the proposed wage index value (1.0369). This wage-adjusted amount is
then added to the proposed nonlabor-related portion of the
unadjusted proposed standard Federal rate (37.429 percent; adjusted
for cost of living, if applicable) to determine the adjusted
proposed Federal rate, which is then multiplied by the proposed MS-
LTC-DRG relative weight (0.9122) to calculate the total adjusted
proposed Federal LTCH PPS prospective payment for FY 2015
($38,211.00). The table below illustrates the components of the
calculations in this example.

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

------------------------------------------------------------------------
Unadjusted Proposed Standard Federal Prospective $40,943.51
Payment Rate (applicable to discharges from LTCHs
that submit the required quality data in accordance
with the LTCHQR Program under section 1886(m)(5) of
the Act)...........................................
Proposed Labor-Related Share........................ x 0.62571
-------------------
Proposed Labor-Related Portion of the Federal Rate.. = $25,618.76
Proposed Wage Index (CBSA 16974).................... x 1.0369
-------------------
Proposed Wage-Adjusted Labor Share of Federal Rate.. = $26,564.09
Proposed Nonlabor-Related Portion of the Federal + $15,324.75
Rate ($40,943.51 x 0.37429)........................
-------------------
Adjusted Proposed Federal Rate Amount............... = $41,888.84
Proposed MS-LTC-DRG 198 Relative Weight............. x 0.9122
-------------------
Total Adjusted Proposed Federal Prospective = $38,211.00
Payment........................................
------------------------------------------------------------------------

VI. Tables Referenced in This Proposed Rule and Available Only Through
the Internet on the CMS Web Site

This section lists the tables referred to throughout the preamble
of this proposed rule and in this Addendum. In the past, a majority of
these tables were published in the Federal Register as part of the
annual proposed and final rules. However, similar to FYs 2012 through
2014, for the FY 2015 rulemaking cycle, the IPPS and LTCH tables will
not be published as part of the annual IPPS/LTCH PPS proposed and final
rulemakings and will be available only through the Internet.
Specifically, all IPPS Tables listed below with the exception of IPPS
Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E will be available only
through the Internet. IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS
Table 1E are displayed at the end of this section and will continue to
be published in the Federal Register as part of the annual proposed and
final rules.
As discussed in section II.G.11. and 13. of the preamble of this
proposed rule, Tables 6A through 6F will not be issued with this FY
2015 proposed rule because there are no proposed new, revised, or
deleted diagnosis or procedure codes for FY 2015. As discussed in
section IV.D. of this proposed rule, section 106 of the Protecting
Access to Medicare Act of 2014 (Pub. L. 113-93), enacted on April 1,
2014, extended, through the first half of FY 2015 (that is, for
discharges occurring before April 1, 2015), the temporary changes in
the low-volume hospital definition and methodology for determining the
payment adjustment originally made by the Affordable Care Act (and
extended by subsequent legislation through March 31, 2014). We refer
the reader to section IV.D. for complete details on the low-volume
hospital payment adjustment. Therefore, Table 14 associated with this
proposed rule lists the proposed low-volume payment adjustments. In
addition, under section 3008 of the Affordable Care Act, a hospital's
total payment may be reduced by 1 percent if it is in the lowest HAC
performance quartile. We

[[Page 28343]]

refer the reader to section IV.J. for complete details on this
adjustment. Therefore, Table 17 contains the FY 2015 proposed proxy
list of providers subject to the HAC Reduction Program. Finally, a
hospital's proposed Factor 3 is the proposed proportion of the
uncompensated care amount that a DSH will receive under section 3133 of
the Affordable Care Act. Factor 3 is the hospital's estimated number of
Medicaid days and Medicare SSI days relative to the estimate of all
DSHs' Medicaid days and Medicare SSI days. Therefore, Table 18 contains
the proposed FY 2015 Medicare DSH uncompensated care payment Factor 3
for all hospitals and identifies whether or not a hospital is projected
to receive DSH and, therefore, eligible to receive the additional
payment for uncompensated care for FY 2015.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified below should contact
Michael Treitel at (410) 786-4552.
The following IPPS tables for this FY 2015 proposed rule are
available only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Click on the link on the left side of the
screen titled, ``FY 2015 IPPS Proposed Rule Home Page'' or ``Acute
Inpatient--Files for Download''.

Table 2-1.--Hospital Average Hourly Wages for Federal Fiscal Years
2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage
Data); and Proposed 3-Year Average of Hospital Average Hourly Wages;
Based on CBSA Delineations Used in FY 2014
Table 2-2.--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2012; Proposed Hospital Wage
Indexes for Federal Fiscal Year 2015; Hospital Average Hourly Wages
for Federal Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage
Data), and 2015 (2011 Wage Data; Based on Proposed FY 2015 CBSA
Delineations); and 3-Year Average of Hospital Average Hourly Wages
Table 3A-1.--Proposed FY 2015 and 3-Year * Average Hourly Wage for
Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA
Delineations Used in FY 2014
Table 3A-2.--Proposed FY 2015 and 3-Year * Average Hourly Wage for
Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA
Delineations Used in FY 2015
Table 3B-1.--Proposed FY 2015 and 3-Year * Average Hourly Wage for
Acute Care Hospitals in Rural Areas by CBSA; Based on CBSA
Delineations Used in FY 2014
Table 3B-2.--Proposed FY 2015 and 3-Year * Average Hourly Wage for
Acute Care Hospitals in Rural Areas by CBSA; Based on CBSA
Delineations Used in FY 2015
Table 4A-1.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2014
Table 4A-2.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2015
Table 4B-1.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2014
Table 4B-2.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2015
Table 4C-1.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA
and by State--FY 2015; Based on CBSA Delineations Used in FY 2014
Table 4C-2.--Proposed Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA
and by State--FY 2015; Based on CBSA Delineations Used in FY 2015
Table 4D-1.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage
Index; Urban Areas with Acute Care Hospitals Receiving the Proposed
Statewide Rural Floor or Imputed Floor Wage Index--FY 2015; Based on
CBSA Delineations Used in FY 2014
Table 4D-2.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage
Index; Urban Areas with Acute Care Hospitals Receiving the Proposed
Statewide Rural Floor or Imputed Floor Wage Index--FY 2015; Based on
CBSA Delineations Used in FY 2015
Table 4E-1.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2015; Based on CBSA Delineations Used in FY 2014
Table 4E-2.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2015; Based on CBSA Delineations Used in FY 2015
Table 4F-1.--Proposed Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2015;
Based on CBSA Delineations Used in FY 2014
Table 4F-2.--Proposed Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2015;
Based on CBSA Delineations Used in FY 2015
Table 4J.--Proposed Out-Migration Adjustment for Acute Care
Hospitals--FY 2015
Table 5.--List of Proposed Medicare Severity Diagnosis-Related
Groups (MS-DRGs), Relative Weighting Factors, and Geometric and
Arithmetic Mean Length of Stay--FY 2015
Table 6I.--Proposed Major CC List--FY 2015
Table 6J.--Proposed Complete CC List--FY 2015
Table 6K.--Proposed Complete List of CC Exclusions--FY 2015
Table 7A.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2013 MedPAR Update--December 2013 GROUPER V31.0
MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2013 MedPAR Update--December 2013 GROUPER V32.0
MS-DRGs
Table 8A.--Proposed FY 2015 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2015 Statewide Average Capital Cost-to-Charge
Ratios (CCRs) for Acute Care Hospitals
Table 9A-1.--Hospital Reclassifications and Redesignations--FY 2015;
Based on CBSA Delineations Used in FY 2014
Table 9A-2.--Hospital Reclassifications and Redesignations--FY 2015;
Based on CBSA Delineations Used in FY 2015
Table 9C-1.--Hospitals Redesignated as Rural Under Section
1886(d)(8)(E) of the Act--FY 2015; Based on CBSA Delineations Used
in FY 2014
Table 9C-2.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2015; Based on CBSA Delineations Used
in FY 2015
Table 10.--Proposed New Technology Add-On Payment Thresholds
^{1 2} for Applications for FY 2016
Table 12C.--Proposed LTCH PPS Wage Index for Urban Areas under the
Current CBSA Designations for Discharges Occurring From October 1,
2014 through September 30, 2105
Table 12D.--Proposed LTCH PPS Wage Index for Rural Areas Under the
Current CBSA Designations for Discharges Occurring From October 1,
2014 Through September 30, 2015
Table 14.--List of Hospitals With Fewer Than 1,600 Medicare
Discharges Based on the December 2013 Update of the FY 2013 MedPAR
file and Potentially Eligible Hospitals' FY 2015 Low-Volume Payment
Adjustment for Discharges Occurring Before April 1, 2015
(Eligibility for the low-volume payment adjustment is also dependent
upon meeting the mileage criteria specified at Sec.
412.101(b)(2)(ii) of the regulations.)
Table 15.--Proposed FY 2015 Readmissions Adjustment Factors
Table 16.--Proposed Updated Proxy Hospital Inpatient Value-Based
Purchasing (VBP) Program Adjustment Factors for FY 2015
Table 17.--FY 2015 Preliminary Analysis of the Hospital-Acquired
Conditions Reduction Program
Table 18.--Proposed FY 2015 Medicare DSH Uncompensated Care Payment
Factor 3

The following LTCH PPS tables for this FY 2015 proposed rule are
available only through the Internet on the CMS

[[Page 28344]]

Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item for
Regulation Number CMS-1607-P.

Table 8C.--Proposed FY 2015 Statewide Average Total Cost-to-Charge
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, Short-Stay Outlier (SSO) Threshold, and ``IPPS
Comparable Threshold'' for Discharges Occurring From October 1, 2014
Through September 30, 2015 Under the LTCH PPS
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas Under the
New OMB CBSA Delineations for Discharges Occurring From October 1,
2014 Through September 30, 2015
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas Under the
New OMB CBSA Delineations for Discharges Occurring From October 1,
2014 Through September 30, 2015
Table 13A.--Proposed Composition of Low-Volume Quintiles for MS-LTC-
DRGs--FY 2015
Table 13B.--Proposed No-Volume MS-LTC-DRG Crosswalk for FY 2015

Table 1A--Proposed National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.6 Percent Labor Share/
30.4 Percent Nonlabor Share if Wage Index Is Greater Than 1)--FY 2015
----------------------------------------------------------------------------------------------------------------
Hospital submitted quality Hospital did not submit Hospital submitted quality Hospital did not submit
data and is a meaningful quality data and is a data and is NOT a quality data and is NOT a
EHR user (Update = 2.1 meaningful EHR user meaningful EHR user meaningful EHR user (Update
percent) (Update = 1.425 percent) (Update = 1.425 percent) = 0.75 percent)
----------------------------------------------------------------------------------------------------------------
Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor
----------------------------------------------------------------------------------------------------------------
$3,759.46 $1,642.06 $3,734.61 $1,631.20 $3,734.61 $1,631.20 $3,709.75 $1,620.35
----------------------------------------------------------------------------------------------------------------

Table 1B--Proposed National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38
Percent Nonlabor Share if Wage Index Is Less Than or Equal to 1)--FY 2015
----------------------------------------------------------------------------------------------------------------
Hospital submitted quality Hospital did NOT submit Hospital submitted quality Hospital did NOT submit
data and is a meaningful quality data and is a data and is NOT a quality data and is NOT a
EHR user (Update = 2.1 meaningful EHR user meaningful EHR user meaningful EHR user (Update
percent) (Update = 1.425 percent) (Update = 1.425 percent) = 0.75 percent)
----------------------------------------------------------------------------------------------------------------
Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor
----------------------------------------------------------------------------------------------------------------
$3,348.94 $2,052.58 $3,326.80 $2,039.01 $3,326.80 $2,039.01 $3,304.66 $2,025.44
----------------------------------------------------------------------------------------------------------------

Table 1C--Proposed Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor (National: 62 Percent
Labor Share/38 Percent Nonlabor Share Because Wage Index Is Less Than or Equal to 1; Puerto Rico: 63.2 Percent
Labor Share/36.8 Percent Nonlabor Share if Wage Index Is Greater Than 1 or 62 Percent Labor Share/38 Percent
Nonlabor Share if Wage Index Is Less Than or Equal to 1--FY 2015
----------------------------------------------------------------------------------------------------------------
Rates if wage index is Rates if wage index is
----------------------------------------------------------------- greater than 1 less than or equal to
------------------------ 1
Standardized amount -----------------------
Labor Nonlabor Labor Nonlabor
----------------------------------------------------------------------------------------------------------------
National \1\.................................................... \(2)\ \(2)\ $3,348.94 $2,052.58
Puerto Rico..................................................... $1,605.07 $934.59 1,574.59 965.07
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2015, there are no CBSAs in Puerto Rico with a national wage index greater than 1.
\2\ Not applicable.

Table 1D--Proposed Capital Standard Federal Payment Rate--FY 2015
------------------------------------------------------------------------
Rate
------------------------------------------------------------------------
National..................................................... $433.01
Puerto Rico.................................................. 206.82
------------------------------------------------------------------------

Table 1E--Proposed LTCH Standard Federal Prospective Payment Rate--FY
2015
------------------------------------------------------------------------
Full update Reduced update
(2.1 percent) * (0.1 percent)
------------------------------------------------------------------------
Standard Federal Rate................. $40,943.51 $40,141.47
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2015 in
accordance with the LTCH Quality Reporting (LTCHQR) Program, the
annual update is reduced by 2.0 percentage points as required by
section 1886(m)(5) of the Act.

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

We have examined the impacts of this proposed rule as required
by Executive Order 12866 on Regulatory Planning and Review
(September 30, 1993), Executive Order 13563 on Improving Regulation
and Regulatory Review (February 2, 2011) the Regulatory Flexibility
Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of
the Social Security Act, section 202 of the Unfunded Mandates Reform
Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132
on Federalism (August 4, 1999), and the Congressional Review Act (5
U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory

[[Page 28345]]

approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive
impacts, and equity). Executive Order 13563 emphasizes the
importance of quantifying both costs and benefits, of reducing
costs, of harmonizing rules, and of promoting flexibility. A
regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year).
We have determined that this proposed rule is a major rule as
defined in 5 U.S.C. 804(2). We estimate that the proposed changes
for FY 2015 acute care hospital operating and capital payments will
redistribute amounts in excess of $100 million to acute care
hospitals. The applicable percentage increase to the IPPS rates
required by the statute, in conjunction with other proposed payment
changes in this proposed rule, would result in an estimated $864
million decrease in FY 2015 operating payments (or -0.8 percent
change) and an estimated $126 million increase in FY 2015 capital
payments (or 1.2 percent change). These changes are relative to
payments made in FY 2014. The impact analysis of the capital
payments can be found in section I.J. of this Appendix. In addition,
as described in section I.K. of this Appendix, LTCHs are expected to
experience an increase in payments by $44 million in FY 2015
relative to FY 2014.
Our operating impact estimate includes the proposed -0.8 percent
documentation and coding adjustment applied to the IPPS standardized
amount, which represents part of the recoupment required under
section 631 of the ATRA. In addition, our operating payment impact
estimate includes the proposed 2.1 percent hospital update to the
standardized amount (which includes the estimated 2.7 percent market
basket update less 0.4 percentage point for the proposed multifactor
productivity adjustment and less 0.2 percentage point required under
the Affordable Care Act). The estimates of proposed IPPS operating
payments to acute care hospitals do not reflect any changes in
hospital admissions or real case-mix intensity, which will also
affect overall payment changes.
The analysis in this Appendix, in conjunction with the remainder
of this document, demonstrates that this proposed rule is consistent
with the regulatory philosophy and principles identified in
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of
the Act. This proposed rule would affect payments to a substantial
number of small rural hospitals, as well as other classes of
hospitals, and the effects on some hospitals may be significant.
Finally, in accordance with the provisions of Executive Order 12866,
the Executive Office of Management and Budget has reviewed this
proposed rule.

B. Statement of Need

This proposed rule is necessary in order to make payment and
policy changes under the Medicare IPPS for Medicare acute care
hospital inpatient services for operating and capital-related costs
as well as for certain hospitals and hospital units excluded from
the IPPS. This proposed rule also is necessary to make payment and
policy changes for Medicare hospitals under the LTCH PPS payment
system.

C. Objectives of the IPPS

The primary objective of the IPPS is to create incentives for
hospitals to operate efficiently and minimize unnecessary costs
while at the same time ensuring that payments are sufficient to
adequately compensate hospitals for their legitimate costs in
delivering necessary care to Medicare beneficiaries. In addition, we
share national goals of preserving the Medicare Hospital Insurance
Trust Fund.
We believe that the proposed changes in this proposed rule would
further each of these goals while maintaining the financial
viability of the hospital industry and ensuring access to high
quality health care for Medicare beneficiaries. We expect that these
proposed changes will ensure that the outcomes of the prospective
payment systems are reasonable and equitable while avoiding or
minimizing unintended adverse consequences.

D. Limitations of Our Analysis

The following quantitative analysis presents the projected
effects of our proposed policy changes, as well as statutory changes
effective for FY 2014, on various hospital groups. We estimate the
effects of individual proposed policy changes by estimating payments
per case while holding all other payment policies constant. We use
the best data available, but, generally, we do not attempt to make
adjustments for future changes in such variables as admissions,
lengths of stay, or case-mix.

E. Hospitals Included in and Excluded From the IPPS

The prospective payment systems for hospital inpatient operating
and capital-related costs of acute care hospitals encompass most
general short-term, acute care hospitals that participate in the
Medicare program. There were 32 Indian Health Service hospitals in
our database, which we excluded from the analysis due to the special
characteristics of the prospective payment methodology for these
hospitals. Among other short-term, acute care hospitals, hospitals
in Maryland are paid in accordance with the Maryland All-Payer
Model, and hospitals located outside the 50 States, the District of
Columbia, and Puerto Rico (that is, 5 short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa) that receive payment for
inpatient hospital services they furnish on the basis of reasonable
costs, subject to a rate-of-increase ceiling.
As of December 2013, there were 3,468 IPPS acute care hospitals
included in our analysis. This represents approximately 57 percent
of all Medicare-participating hospitals. The majority of this impact
analysis focuses on this set of hospitals. There also are
approximately 1,332 CAHs. These small, limited service hospitals are
paid on the basis of reasonable costs rather than under the IPPS.
IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs,
children's hospitals, 11 cancer hospitals, and 5 short-term acute
care hospitals located in the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa, which are paid under separate
payment systems. Changes in the prospective payment systems for IPFs
and IRFs are made through separate rulemaking. Payment impacts for
these IPPS-excluded hospitals and units are not included in this
proposed rule. The impact of the proposed update and proposed policy
changes to the LTCH PPS for FY 2015 is discussed in section I.L. of
this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

As of March 2014, there were 97 children's hospitals, 11 cancer
hospitals, 5 short-term acute care hospitals located in the Virgin
Islands, Guam, the Northern Mariana Islands and American Samoa, and
18 RNHCIs being paid on a reasonable cost basis subject to the rate-
of-increase ceiling under Sec. 413.40. (In accordance with Sec.
403.752(a) of the regulation, RNHCIs are paid under Sec. 413.40.)
Among the remaining providers, 244 rehabilitation hospitals and 896
rehabilitation units, and 432 LTCHs, are paid the Federal
prospective per discharge rate under the IRF PPS and the LTCH PPS,
respectively, and 487 psychiatric hospitals and 1,139 psychiatric
units are paid the Federal per diem amount under the IPF PPS. As
stated above, IRFs and IPFs are not affected by the rate updates
discussed in this proposed rule. The impacts of the proposed changes
on LTCHs are discussed in section I.K. of this Appendix.
For children's hospitals, the 11 cancer hospitals, the 5 short-
term acute care hospitals located in the Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa, and RNHCIs, the
proposed update of the rate-of-increase limit (or target amount) is
the estimated FY 2015 percentage increase in the IPPS operating
market basket, consistent with section 1886(b)(3)(B)(ii) of the Act,
and Sec. Sec. 403.752(a) and 413.40 of the regulations. As
discussed in section IV. of the preamble of the FY 2014 IPPS/LTCH
PPS final rule, we rebased the IPPS operating market basket to a FY
2010 base year. Therefore, we are proposing to use the percentage
increase in the FY 2010-based IPPS operating market basket to update
the target amounts for FY 2015 and subsequent fiscal years for
children's hospitals, the 11 cancer hospitals, the 5 short-term
acute care hospitals located in the Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa, and RNHCIs that are
paid based on reasonable costs subject to the rate-of-increase
limits. Consistent with current law, based on IHS Global Insight,
Inc.'s 2014 first quarter forecast of the FY 2010-based market
basket increase, we are estimating that the proposed FY 2015 update
based on the IPPS operating market basket is 2.7 percent (that is,
the current estimate of the market basket rate-of-increase).
However, the Affordable Care Act requires an adjustment for
multifactor productivity (currently estimated to be 0.4 percentage
point for FY 2015) and a 0.2 percentage point reduction to the
market

[[Page 28346]]

basket update resulting in a proposed 2.1 percent applicable
percentage increase for IPPS hospitals that submit quality data and
are meaningful EHR users, as discussed in section IV.B. of the
preamble of this proposed rule. Children's hospitals, the 11 cancer
hospitals, the 5 short-term acute care hospitals located in the
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa, and RNCHIs that continue to be paid based on reasonable costs
subject to rate-of-increase limits under Sec. 413.40 of the
regulations are not subject to the reductions in the applicable
percentage increase required under the Affordable Care Act.
Therefore, for those hospitals paid under Sec. 413.40 of the
regulations, the proposed update would be the percentage increase in
the FY 2015 IPPS operating market basket, estimated at 2.7 percent,
without the reductions required under the Affordable Care Act.
The impact of the proposed update in the rate-of-increase limit
on those excluded hospitals depends on the cumulative cost increases
experienced by each excluded hospital since its applicable base
period. For excluded hospitals that have maintained their cost
increases at a level below the rate-of-increase limits since their
base period, the major effect is on the level of incentive payments
these excluded hospitals receive. Conversely, for excluded hospitals
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that
will not be paid.
We note that, under Sec. 413.40(d)(3), an excluded hospital
that continues to be paid under the TEFRA system and whose costs
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its
reasonable costs in excess of 110 percent of the limit, or (2) 10
percent of its limit. In addition, under the various provisions set
forth in Sec. 413.40, hospitals can obtain payment adjustments for
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Proposed Policy Changes Under the
IPPS for Operating Costs

1. Basis and Methodology of Estimates

In this proposed rule, we are announcing proposed policy changes
and payment rate updates for the IPPS for FY 2015 for operating
costs of acute care hospitals. The proposed FY 2015 updates to the
capital payments to acute care hospitals are discussed in section
I.J. of this Appendix.
Based on the overall percentage change in payments per case
estimated using our payment simulation model, we estimate that total
FY 2015 operating payments will decrease by 0.8 percent compared to
FY 2014. In addition to the applicable percentage increase, this
amount reflects the proposed FY 2015 recoupment adjustment for
documentation and coding described in section II.D. of the preamble
of this proposed rule of -0.8 percent to the IPPS national
standardized amounts. The impacts do not reflect changes in the
number of hospital admissions or real case-mix intensity, which will
also affect overall payment changes.
We have prepared separate impact analyses of the proposed
changes to each system. This section deals with the proposed changes
to the operating inpatient prospective payment system for acute care
hospitals. Our payment simulation model relies on the most recent
available data to enable us to estimate the impacts on payments per
case of certain changes in this proposed rule. However, there are
other proposed changes for which we do not have data available that
will allow us to estimate the payment impacts using this model. For
those proposed changes, we have attempted to predict the payment
impacts based upon our experience and other more limited data.
The data used in developing the quantitative analyses of changes
in payments per case presented below are taken from the FY 2013
MedPAR file and the most current Provider-Specific File (PSF) that
is used for payment purposes. Although the analyses of the proposed
changes to the operating PPS do not incorporate cost data, data from
the most recently available hospital cost reports were used to
categorize hospitals. Our analysis has several qualifications.
First, in this analysis, we do not make adjustments for future
changes in such variables as admissions, lengths of stay, or
underlying growth in real case-mix. Second, due to the
interdependent nature of the IPPS payment components, it is very
difficult to precisely quantify the impact associated with each
change. Third, we use various data sources to categorize hospitals
in the tables. In some cases, particularly the number of beds, there
is a fair degree of variation in the data from the different
sources. We have attempted to construct these variables with the
best available source overall. However, for individual hospitals,
some miscategorizations are possible.
Using cases from the FY 2013 MedPAR file, we simulated proposed
payments under the operating IPPS given various combinations of
payment parameters. As described above, Indian Health Service
hospitals and hospitals in Maryland were excluded from the
simulations. The proposed impact of payments under the capital IPPS,
or the impact of payments for costs other than inpatient operating
costs, are not analyzed in this section. Proposed estimated payment
impacts of the capital IPPS for FY 2015 are discussed in section
I.J. of this Appendix.
We discuss the following proposed changes below:
The effects of the proposed application of the
documentation and coding adjustment and the proposed applicable
percentage increase (including the market basket update, the
multifactor productivity adjustment and the applicable percentage
reduction in accordance with the Affordable Care Act) to the
standardized amount and hospital-specific rates.
The effects of the proposed changes to the relative
weights and MS-DRG grouper.
The effects of the proposed changes in hospitals' wage
index values reflecting updated wage data from hospitals' cost
reporting periods beginning during FY 2011, compared to the FY 2010
wage data, and the proposed adoption of new OMB labor market area
delineations to calculate the FY 2015 wage index.
The combined effects of the proposed recalibration of
the MS-DRG relative weights as required by section 1886(d)(4)(C) of
the Act and the proposed wage index (including the updated wage data
and the proposed adoption of new OMB labor market area
delineations), including the proposed wage and recalibration budget
neutrality factors.
The effects of the geographic reclassifications by the
MGCRB (as of publication of this proposed rule) and the effects of
the proposed adoption of new OMB labor market area delineations on
these reclassifications, that would be effective for FY 2015.
The effects of the proposed rural floor and imputed
floor with the application of the national budget neutrality factor
applied to the wage index where the rural floor and imputed floor
wage index are calculated based on the proposed adoption of the new
OMB labor market area delineations.
The effects of the proposed adoption of the new labor
market area delineations announced by OMB in February 2013 on
hospital redesignations.
The effects of the proposed 3-year transition for urban
hospitals redesignated as rural and the transitional blended wage
index for hospitals whose FY 2015 wage indexes will decrease solely
as a result of adopting the new OMB delineations.
The effects of the proposed frontier State wage index
adjustment under the statutory provision that requires that
hospitals located in States that qualify as frontier States to not
have a wage index less than 1.0. This provision is not budget
neutral.
The effects of the proposed implementation of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a
threshold percentage of residents of the county where the hospital
is located commute to work at hospitals in counties with higher wage
indexes.
The effects of the proposed policies for implementation
of the Hospital Readmissions Reduction Program under section 1886(q)
of the Act, as added by section 3025 of the Affordable Care Act,
that adjusts a hospital's base operating DRG amount by an adjustment
factor to account for a hospital's excess readmissions.
The effects of the proposed policies for continued
implementation of section 3133 of the Affordable Care Act that
reduces Medicare DSH payments to 25 percent of what hospitals had
been previously paid under section 1886(d)(5)(F) of the Act and
establishes an additional payment to be made to hospitals that
receive DSH payments for their relative share of the total amount of
uncompensated care.
The effects of the proposed FY 2015 implementation of
section 1886(o) of the Act, as added by section 3008 of the
Affordable Care Act, which establishes payment reductions under the
HAC Reduction Program. Hospitals ranked in the lowest 25 percent of
performance on HACs are subject to a 1-percent reduction in total
IPPS payments.
The total estimated change in payments based on the
proposed FY 2015 policies relative to payments based on FY 2014
policies that include the applicable

[[Page 28347]]

percentage increase of 2.1 percent (or 2.7 percent market basket
update with a proposed reduction of 0.4 percentage point for the
multifactor productivity adjustment, and a 0.2 percentage point
reduction, as required under the Affordable Care Act). The total
estimated change in payments for FY 2015 reflects the extension of
MDH payment status for the first 6 months of FY 2015, in accordance
with the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
enacted on April l, 2014.
To illustrate the impact of the proposed FY 2015 changes, our
analysis begins with a FY 2014 baseline simulation model using: The
proposed FY 2015 applicable percentage increase of 2.1 percent and
the proposed documentation and coding recoupment adjustment of 0.8
percent to the Federal standardized amount; the FY 2014 MS-DRG
GROUPER (Version 31.0); the current FY 2014 CBSA designations for
hospitals based on the OMB delineations; the FY 2014 wage index; and
no MGCRB reclassifications. Outlier payments are set at 5.1 percent
of total operating MS-DRG and outlier payments for modeling
purposes.
Section 1886(b)(3)(B)(viii) of the Act, as added by section
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A)
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007
and each subsequent year through FY 2014, the update factor will
include a reduction of 2.0 percentage points for any subsection (d)
hospital that does not submit data on measures in a form and manner
and at a time specified by the Secretary. Beginning in FY 2015, the
reduction is one-quarter of such applicable percentage increase
determined without regard to section 1886(b)(3)(B)(ix), (xi), or
(xii) of the Act, or one-quarter of the market basket update.
Therefore, for FY 2015, we are proposing that hospitals that do not
submit quality information under rules established by the Secretary
and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of
the Act will receive an applicable percentage increase of 1.425
percent. At the time that this impact was prepared, 64 hospitals did
not receive the full market basket rate-of-increase for FY 2014
because they failed the quality data submission process or did not
choose to participate. For purposes of the simulations shown below,
we modeled the payment changes for FY 2015 using a reduced update
for these 64 hospitals. However, we do not have enough information
at this time to determine which hospitals will not receive the full
update factor for FY 2015.
Beginning in FY 2015, in accordance with section
1886(b)(3)(B)(ix) of the Act, a hospital that has been identifies as
not an EHR meaningful user will be subject to a reduction of one-
quarter of such applicable percentage increase determined without
regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or
one-quarter of the market basket update. Therefore, for FY 2015, we
are proposing that hospitals that are identified as not EHR
meaningful users and do submit quality information under section
1886(b)(3)(B)(viii) of the Act will receive an applicable percentage
increase of 1.425 percent. Hospitals that are identified as not EHR
meaningful users under section 1886(b)(3)(B)(ix) of the Act and also
do not submit quality data under section 1886(b)(3)(B)(viii) of the
Act will receive an applicable percentage increase of 0.75 percent,
which reflects a one-quarter reduction of the market basket update
for failure to submit quality data and a one-quarter reduction of
the market basket update for being identified as not an EHR
meaningful user. For FY 2015, we have yet to finalize a list of
hospitals that are not meaningful EHR users under section
1886(b)(3)(B)(ix) of the Act. Therefore, we are proposing not to
include this adjustment to the standardized amount (for those
hospitals that are not meaningful EHR users) in our modeling of
aggregate payments for FY 2015. We intend to release a final list of
hospitals that are not meaningful EHR user in September 2014.
Hospitals identified on this list will be paid based on the
applicable proposed standardized amount in Table 1A for discharges
occurring in FY 2015.
Each proposed policy change, statutory or otherwise, is then
added incrementally to this baseline, finally arriving at an FY 2015
model incorporating all of the proposed changes. This simulation
allows us to isolate the effects of each proposed change.
Our final comparison illustrates the proposed percent change in
payments per case from FY 2014 to FY 2015. Three factors not
discussed separately have significant impacts here. The first factor
is the update to the standardized amount. In accordance with section
1886(b)(3)(B)(i) of the Act, we are updating the standardized
amounts for FY 2015 using a proposed applicable percentage increase
of 2.1 percent. This includes our forecasted IPPS operating hospital
market basket increase of 2.7 percent with a proposed reduction of
0.4 percentage point for the multifactor productivity adjustment and
a 0.2 percentage point reduction as required under the Affordable
Care Act. (Hospitals that fail to comply with the quality data
submission requirements and are meaningful EHR users would receive a
proposed update of 1.425 percent. This update includes a reduction
of one-quarter of the market basket update for failure to submit
these data). We note that hospitals that do comply with the quality
data submission requirements but are not meaningful EHR users would
receive a proposed update of 1.425 percent, which includes a
reduction of one-quarter of the market basket update. Furthermore,
hospitals that do not comply with the quality data submission
requirements and also are not meaningful EHR users would receive a
proposed update of 0.75 percent. However, as discussed earlier, we
do not have a list of hospitals that are not meaningful EHR users
and have not included this adjustment to the standardized amount
(for those hospitals that are not meaningful EHR users) in our
modeling of aggregate payments for FY 2015. Under section
1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific
amounts for SCHs also are equal to the applicable percentage
increase, or 2.1 percent. In addition, we are proposing to update
the Puerto Rico-specific amount by an applicable percentage increase
of 2.1 percent, if the hospital submits quality data and is a
meaningful EHR user.
A second significant factor that affects the changes in
hospitals' payments per case from FY 2014 to FY 2015 is the change
in hospitals' geographic reclassification status from one year to
the next. That is, payments may be reduced for hospitals
reclassified in FY 2014 that are no longer reclassified in FY 2015.
Conversely, payments may increase for hospitals not reclassified in
FY 2014 that are reclassified in FY 2015.
A third significant factor is that we currently estimate that
actual outlier payments during FY 2014 will be 5.79 percent of total
MS-DRG payments. When the FY 2014 IPS/LTCH PPS final rule was
published, we projected FY 2014 outlier payments would be 5.1
percent of total MS-DRG plus outlier payments; the average
standardized amounts were offset correspondingly. The effects of the
higher than expected outlier payments during FY 2014 (as discussed
in the Addendum to this proposed rule) are reflected in the analyses
below comparing our current estimates of FY 2014 payments per case
to estimated FY 2015 payments per case (with outlier payments
projected to equal 5.1 percent of total MS-DRG payments).

2. Analysis of Table I

Table I displays the results of our analysis of the proposed
changes for FY 2015. The table categorizes hospitals by various
geographic and special payment consideration groups to illustrate
the varying impacts on different types of hospitals. The top row of
the table shows the overall impact on the 3,388 acute care hospitals
included in the analysis.
The next four rows of Table I contain hospitals categorized
according to their geographic location: All urban, which is further
divided into large urban and other urban; and rural. There are 2,542
hospitals located in urban areas included in our analysis. Among
these, there are 1,395 hospitals located in large urban areas
(populations over 1 million), and 1,147 hospitals in other urban
areas (populations of 1 million or fewer). In addition, there are
846 hospitals in rural areas. The next two groupings are by bed-size
categories, shown separately for urban and rural hospitals. The
final groupings by geographic location are by census divisions, also
shown separately for urban and rural hospitals.
The second part of Table I shows hospital groups based on
hospitals' proposed FY 2015 payment classifications, including any
reclassifications under section 1886(d)(10) of the Act. For example,
the rows labeled urban, large urban, other urban, and rural show
that the numbers of hospitals paid based on these categorizations
after consideration of geographic reclassifications (including
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of
the Act that have implications for capital payments) are 2,558;
1,408; 1,150; and 830, respectively.
The next three groupings examine the impacts of the proposed
changes on hospitals grouped by whether or not they have GME
residency programs (teaching hospitals that receive an IME
adjustment) or receive

[[Page 28348]]

Medicare DSH payments, or some combination of these two adjustments.
There are 2,352 nonteaching hospitals in our analysis, 792 teaching
hospitals with fewer than 100 residents, and 244 teaching hospitals
with 100 or more residents.
In the DSH categories, hospitals are grouped according to their
DSH payment status, and whether they are considered urban or rural
for DSH purposes. The next category groups together hospitals
considered urban or rural, in terms of whether they receive the IME
adjustment, the DSH adjustment, both, or neither.
The next five rows examine the impacts of the proposed changes
on rural hospitals by special payment groups (SCHs, RRCs, and MDHs).
There were 208 RRCs, 324 SCHs, and 154 MDHs (MDH status is extended
through March 31, 2015 only under Pub. L. 113-93), 124 hospitals
that are both SCHs and RRCs, and 11 hospitals that are MDHs and RRCs
(MDH status is through March 31, 2015 only under Pub. L. 113-93).
The next series of groupings are based on the type of ownership
and the hospital's Medicare utilization expressed as a percent of
total patient days. These data were taken from the FY 2012 or FY
2011 Medicare cost reports.
The next two groupings concern the geographic reclassification
status of hospitals. The first grouping displays all urban hospitals
that were reclassified by the MGCRB for FY 2015. The second grouping
shows the MGCRB rural reclassifications. The final category shows
the impact of the proposed policy changes on the 15 cardiac
hospitals.

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a. Effects of the Proposed Hospital Update and Proposed Documentation
and Coding Adjustment (Column 2)

As discussed in section II.D. of the preamble of this proposed
rule, this column includes the proposed hospital update, including
the proposed 2.7 percent market basket update, the proposed
reduction of 0.4 percentage point for the multifactor productivity
adjustment, and the 0.2 percentage point reduction in accordance
with the Affordable Care Act. In addition, this column includes the
proposed FY 2015 documentation and coding recoupment adjustment of -
0.8 percent on the national standardized amount as part of the
recoupment required by section 631 of the ATRA. As a result, we are
proposing to make a 1.3 percent update to the national standardized
amount. This column also includes the proposed 2.1 percent update to
the hospital-specific rates which also includes the proposed 2.7
percent market basket update, the proposed reduction of 0.4
percentage point for the multifactor productivity adjustment, and
the 0.2 percentage point reduction in accordance with the Affordable
Care Act.
Overall, hospitals would experience a 1.3 percent increase in
payments primarily due to the effects of the hospital update and
documentation and coding adjustment on the national standardized
amount. Hospitals that are paid under the hospital-specific rate,
namely SCHs, would experience a 2.1 percent increase in payments;
therefore, hospital categories with SCHs paid under the hospital-
specific rate would experience increases in payments of more than
1.3 percent.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and
Relative Cost-Based Weights With Recalibration Budget Neutrality
(Column 3)

Column 3 shows the effects of the proposed changes to the MS-
DRGs and relative weights with the application of the proposed
recalibration budget neutrality factor to the standardized amounts.
Section 1886(d)(4)(C)(i) of the Act requires us annually to make
appropriate classification changes in order to reflect changes in
treatment patterns, technology, and any other factors that may
change the relative use of hospital resources. Consistent with
section 1886(d)(4)(C)(iii) of the Act, we are proposing to calculate
a recalibration budget neutrality factor to account for the proposed
changes in MS-DRGs and relative weights to ensure that the overall
payment impact is budget neutral.
As discussed in section II.E. of the preamble of this proposed
rule, the FY 2015 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2015, the MS-DRGs are
calculated using the FY 2013 MedPAR data grouped to the Version 32.0
(FY 2015) MS-DRGs. The proposed methodology to calculate the
relative weights and the proposed reclassification changes to the
GROUPER are described in more detail in section II.H. of the
preamble of this proposed rule.
The ``All Hospitals'' line in Column 3 indicates that changes
due to the MS-DRGs and relative weights would result in a 0.0
percent change in payments with the application of the proposed
recalibration budget neutrality factor of 0.992938 on to the
standardized amount. Hospital categories that generally treat more
surgical cases than medical cases would experience increases in
their payments due to the changes to the relative weight
methodology. Rural hospitals would experience a 0.6 percent decrease
in payments because rural hospitals tend to treat fewer surgical
cases than medical cases, while teaching hospitals with more than
100 residents would experience an increase in payments by 0.3
percent as those hospitals treat more surgical cases than medical
cases.

c. Effects of the Proposed Wage Index Changes (Column 4)

Column 4 shows the impact of updated wage data using FY 2011
cost report data and the proposed new OMB labor market area
delineations, with the application of the proposed wage budget
neutrality factor. The wage index is calculated and assigned to
hospitals on the basis of the labor market area in which the
hospital is located. Under section 1886(d)(3)(E) of the Act,
beginning with FY 2005, we delineate hospital labor market areas
based on the Core Based Statistical Areas (CBSAs) established by
OMB. The current statistical areas used in FY 2014 were based on OMB
standards published on December 27, 2000 (65 FR 82228) and Census
2000 data and Census Bureau population estimates for 2007 and 2008
(OMB Bulletin No. 10-02).
As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27552) and final rule (78 FR 50586), on February 28, 2013, OMB
issued OMB Bulletin No. 13-01, which established revised
delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas.
In order to implement these changes for the IPPS, it is necessary to
identify the new labor market area delineation for each county and
hospital in the country. However, because the bulletin was not
issued until February 28, 2013, with supporting data not available
until later, and because the changes made by the bulletin and their
ramifications needed to be extensively reviewed and verified, we
were unable to undertake such a lengthy process before publication
of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not
implement changes to the wage index for FY 2014 based on these new
OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR
50586), we stated that we intended to propose changes to the wage
index based on the new OMB delineations in this FY 2015 proposed
rule. As discussed below, in this proposed rule, we are proposing to
implement the new OMB delineations as described in the February 28,
2013 OMB Bulletin No. 13-01, effective beginning with the FY 2015
IPPS wage index.
Section 1886(d)(3)(E) of the Act requires that, beginning
October 1, 1993, we annually update the wage data used to calculate
the wage index. In accordance with this requirement, the proposed
wage index for acute care hospitals for FY 2015 is based on data
submitted for hospital cost reporting periods beginning on or after
October 1, 2010 and before October 1, 2011. The estimated impact of
the updated wage data using the FY 2011 cost report data and the
proposed new OMB labor market area delineations on hospital payments
is isolated in Column 4 by holding the other payment parameters
constant in this simulation. That is, Column 4 shows the proposed
percentage change in payments when going from a model using the FY
2014 wage index, based on FY 2010 wage data, the labor-related share
of 69.6 percent, under the new OMB delineations and having a 100-
percent occupational mix adjustment applied, to a model using the
proposed FY 2015 pre-reclassification wage index based on FY 2011
wage data with the proposed labor-related share of 69.6 percent,
under the new OMB delineations, also having a 100-percent
occupational mix adjustment applied, while holding other payment
parameters such as use of the Version 32.0 MS-DRG GROUPER constant).
The FY 2015 occupational mix adjustment is based on the CY 2010
occupational mix survey.
In addition, the column shows the impact of the application of
the proposed wage budget neutrality to the proposed national
standardized amount. In FY 2010, we began calculating separate wage
budget neutrality and recalibration budget neutrality factors, in
accordance with section 1886(d)(3)(E) of the Act, which specifies
that budget neutrality to account for wage index changes or updates
made under that subparagraph must be made without regard to the 62
percent labor-related share guaranteed under section
1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2015, we are
proposing to calculate the wage budget neutrality factor to ensure
that payments under updated wage data and the proposed labor-related
share of 69.6 percent are budget neutral without regard to the lower
labor-related share of 62 percent applied to hospitals with a wage
index less than or equal to 1.0. In other words, the wage budget
neutrality is calculated under the assumption that all hospitals
receive the higher labor-related share of the standardized amount.
The proposed wage budget neutrality factor is 1.000578, and the
overall payment change is zero percent.
Column 4 shows the impacts of updating the wage data using FY
2011 cost reports. Overall, the new wage data and the proposed
labor-related share, combined with the proposed wage budget
neutrality adjustment, would lead to a 0.0 percent change for all
hospitals as shown in Column 4.
In looking at the wage data itself, the national average hourly
wage increased 1.9 percent compared to FY 2014. Therefore, the only
manner in which to maintain or exceed the previous year's wage index
was to match or exceed the national 1.9 percent increase in average
hourly wage. Of the 3,373 hospitals with wage data for both FYs 2014
and 2015, 1,644 or 48.7 percent would experience an average hourly
wage increase of 1.9 percent or more.
The following chart compares the shifts in proposed wage index
values for hospitals due to changes in the average hourly wage data
for FY 2015 relative to FY 2014. Among urban hospitals, 11 would
experience a decrease of more than 10 percent, with no urban
hospital experiencing an increase of

[[Page 28356]]

more than 10 percent. One hundred twenty-one urban hospitals would
experience an increase or decrease of at least 5 percent or more but
less than or equal to 10 percent. Among rural hospitals, none would
experience a decrease of more than 5 percent, but 5 rural hospitals
would experience an increase of greater than 5 percent but less than
or equal to10 percent. However, 803 rural hospitals would experience
increases or decreases of less than or equal to 5 percent, while
2,325 urban hospitals would experience increases or decreases of
less than or equal to 5 percent. One hundred eight urban and rural
hospitals would not experience a change in their wage index. These
figures reflect proposed changes in the ``pre-reclassified,
occupational mix-adjusted wage index,'' that is, the proposed wage
index before the proposed application of geographic
reclassification, the proposed rural and imputed floors, the
proposed out-migration adjustment, and other proposed wage index
exceptions and adjustments. We note that this analysis was performed
by applying the new OMB labor market area delineations to the FY
2015 proposed wage data and also by recomputing the FY 2014 final
wage data to reflect the new OMB delineations. (We refer readers to
sections III.G.2. through III.I. of the preamble of this proposed
rule for a complete discussion of the exceptions and adjustments to
the wage index.) We note that the proposed ``post-reclassified wage
index'' or ``payment wage index,'' the proposed wage index that
includes all such exceptions and adjustments (as reflected in Tables
2, 4A, 4B, 4C, and 4F of the Addendum to this proposed rule, which
are available via the Internet on the CMS Web site) is used to
adjust the proposed labor-related share of a hospital's standardized
amount, either 69.6 percent or 62 percent, depending upon whether a
hospital's wage index is greater than 1.0 or less than or equal to
1.0. Therefore, the proposed pre-reclassified wage index figures in
the chart below may illustrate a somewhat larger or smaller change
than would occur in a hospital's payment wage index and total
payment.
The following chart shows the projected impact of changes in the
average hourly wage data for urban and rural hospitals.

------------------------------------------------------------------------
Number of
hospitals
Percentage change in proposed area wage index values -----------------
Urban Rural
------------------------------------------------------------------------
Increase more than 10 percent......................... 0 0
Increase more than 5 percent and less than or equal to 29 5
10 percent...........................................
Increase or decrease less than or equal to 5 percent.. 2,325 803
Decrease more than 5 percent and less than or equal to 92 0
10 percent...........................................
Decrease more than 10 percent......................... 11 0
Unchanged............................................. 76 32
------------------------------------------------------------------------

d. Combined Effects of the Proposed MS-DRG and Wage Index Changes
(Column 5)

Section 1886(d)(4)(C)(iii) of the Act requires that changes to
MS-DRG reclassifications and the relative weights cannot increase or
decrease aggregate payments. In addition, section 1886(d)(3)(E) of
the Act specifies that any updates or adjustments to the wage index
are to be budget neutral. We computed a proposed wage budget
neutrality factor of 1.000578 and a proposed recalibration budget
neutrality factor of 0.992938 (which is applied to the Puerto Rico-
specific standardized amount and the hospital-specific rates). The
product of the two proposed budget neutrality factors is the
proposed cumulative wage and recalibration budget neutrality factor.
The proposed cumulative wage and recalibration budget neutrality
adjustment is 0.993512, or approximately 0.65 percent, which is
applied to the national standardized amounts. Because the wage
budget neutrality and the recalibration budget neutrality are
calculated under different methodologies according to the statute,
when the two budget neutralities are combined and applied to the
standardized amount, the overall payment impact is not necessarily
budget neutral. However, in this proposed rule, we are estimating
that the proposed changes in the MS-DRG relative weights and updated
wage data with wage and budget neutrality applied would result in a
0.0 percent change in payments.

e. Effects of Proposed MGCRB Reclassifications (Column 6)

Our impact analysis to this point has assumed acute care
hospitals are paid on the basis of their actual geographic location
(with the exception of ongoing policies that provide that certain
hospitals receive payments on other bases than where they are
geographically located). The changes in Column 6 reflect the per
case payment impact of moving from this baseline to a simulation
incorporating the proposed MGCRB decisions for FY 2015 and the
effects of the proposed adoption of the new OMB labor market area
delineations on these reclassifications which affect hospitals' wage
index area assignments.
By spring of each year, the MGCRB makes reclassification
determinations that will be effective for the next fiscal year,
which begins on October 1. The MGCRB may approve a hospital's
reclassification request for the purpose of using another area's
wage index value. Hospitals may appeal denials of MGCRB decisions to
the CMS Administrator. Further, hospitals have 45 days from
publication of the IPPS proposed rule in the Federal Register to
decide whether to withdraw or terminate an approved geographic
reclassification for the following year.
The overall effect of geographic reclassification is required by
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore,
for purposes of this impact analysis, we are proposing to apply an
adjustment of 0.991412 to ensure that the effects of the
reclassifications under section 1886(d)(10) of the Act are budget
neutral (section II.A. of the Addendum to this proposed rule).
Geographic reclassification generally benefits hospitals in rural
areas. We estimate that the geographic reclassification would
increase payments to rural hospitals by an average of 1.8 percent.
By region, all the rural hospital categories would experience
increases in payments due to MGCRB reclassifications.
Table 9A listed in section VI. of the Addendum to this proposed
rule and available via the Internet on the CMS Web site reflects the
reclassifications for FY 2015.

f. Effects of the Proposed Rural and Imputed Floor, Including
Application of Proposed National Budget Neutrality (Column 7)

As discussed in section III.B. of the preamble of the FY 2009
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the
FYs 2011, 2012, 2013 and 2014 IPPS/LTCH PPS final rules, and this
proposed rule, section 4410 of Public Law 105-33 established the
rural floor by requiring that the wage index for a hospital in any
urban area cannot be less than the wage index received by rural
hospitals in the same State. We apply a uniform budget neutrality
adjustment to the wage index. The imputed floor, which is also
included in the calculation of the budget neutrality adjustment to
the wage index, was extended in FY 2012 for 2 additional years. In
the past, only urban hospitals in New Jersey received the imputed
floor. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53369), we established an alternative temporary methodology for the
imputed floor, which resulted in an imputed floor for Rhode Island
for FY 2013. For FY 2014, we extended the imputed rural floor, as
calculated under the original methodology and the alternative
methodology. For FY 2015, we are proposing to extend the imputed
rural floor, as calculated under the original methodology and the
alternative methodology. As a result, under this proposal, New
Jersey, Rhode Island, and Delaware would receive an imputed floor,
with 12 out of 64 hospitals in New Jersey receiving the imputed
floor, 1 out of 6 hospitals in Delaware receiving the imputed floor
and 4 out of 11 hospitals in Rhode Island receiving the imputed
floor.
The Affordable Care Act requires that we apply one rural floor
budget neutrality factor to the wage index nationally, and the
imputed floor is part of the rural floor budget neutrality factor
applied to the wage index nationally. We have calculated a proposed
FY 2015 rural floor budget neutrality factor to be applied to the
wage index of 0.989455, which would reduce wage indexes by 1.1
percent.
Column 7 shows the projected impact of the proposed rural floor
and imputed floor with the proposed national rural floor budget
neutrality factor applied to the wage index based on the proposed
new OMB labor market area delineations. The column compares the
proposed post-reclassification FY 2015 wage index of providers
before the rural floor and imputed floor adjustment and the proposed
post-reclassification FY 2015 wage index of providers with the
proposed rural floor and imputed floor adjustment based on the
proposed new OMB labor market area delineations. Only urban

[[Page 28357]]

hospitals can benefit from the rural and imputed floors. Because the
provision is budget neutral, all other hospitals (that is, all rural
hospitals and those urban hospitals to which the adjustment is not
made) would experience a decrease in payments due to the proposed
budget neutrality adjustment that is applied nationally to their
wage index.
We estimate that 441 hospitals benefit from the proposed rural
and imputed floors while the remaining 2,947 IPPS hospitals in our
model have their wage index reduced by the proposed rural floor
budget neutrality adjustment of 0.989455 (or 1.1 percent). We
project that, in aggregate, rural hospitals would experience a 0.3
percent decrease in payments as a result of the application of the
proposed rural floor budget neutrality because the rural hospitals
do not benefit from the rural floor, but have their wage indexes
downwardly adjusted to ensure that the application of the rural
floor is budget neutral overall. We project hospitals located in
urban areas would experience no change in payments because increases
in payments by hospitals benefitting from the rural floor offset
decreases in payments by nonrural floor urban hospitals whose wage
index is downwardly adjusted by the proposed rural floor budget
neutrality factor. Urban hospitals in the New England region can
expect a 2.7 percent increase in payments primarily due to the
application of the proposed rural floor in Massachusetts and
Connecticut. Fifty-one urban providers in Massachusetts are expected
to receive the proposed rural floor wage index value, including
proposed rural floor budget neutrality, of 1.3383, increasing
payments overall to Massachusetts by an estimated $158 million.
During most past years, there have been no IPPS hospitals located in
rural areas in Massachusetts. There was one urban IPPS hospital that
was reclassified to rural Massachusetts (under section 1886(d)(8)(E)
of the Act) which established the Massachusetts rural floor, but the
wage index resulting from that hospital's data was not high enough
for any urban hospital to benefit from the rural floor policy.
However, for the FY 2012 wage index, the rural floor for
Massachusetts was established by the conversion of a CAH to an IPPS
hospital that is geographically located in rural Massachusetts. The
rural floor in Massachusetts continues to be set by the wage index
of the hospital in rural Massachusetts that converted from CAH to
IPPS status. We estimate that Massachusetts hospitals would receive
approximately a 4.9 percent increase in IPPS payments due to the
application of the rural floor in FY 2015.
Urban Puerto Rico hospitals are expected to experience a 0.0
percent change in payments as a result of the application of a
proposed Puerto Rico rural floor with the application of the
proposed Puerto Rico rural floor budget neutrality adjustment. We
are proposing to apply a rural floor budget neutrality factor to the
Puerto Rico-specific wage index of 0.991359 or -0.86 percent. The
Puerto Rico-specific wage index adjusts the Puerto Rico-specific
standardized amount, which represents 25 percent of payments to
Puerto Rico hospitals. The increases in payments experienced by the
urban Puerto Rico hospitals that benefit from a rural floor are
offset by the decreases in payments by the nonrural floor urban
Puerto Rico hospitals that have their wage indexes downwardly
adjusted by the proposed rural floor budget neutrality adjustment.
As a result, overall, urban Puerto Rico hospitals would experience a
0.0 percent change in payments due to the application of the
proposed rural floor with rural floor budget neutrality.
There are 12 hospitals out of the 64 hospitals in New Jersey
that benefit from the extension of the proposed imputed floor and
would receive the proposed imputed floor wage index value under the
new OMB labor market area delineations, including the proposed rural
floor budget neutrality, of 1.0986 which we estimate would increase
payments to those imputed floor hospitals by $17 million (the State,
overall, would see a decrease in payments of approximately $5
million due the other hospitals in the State experiencing decreases
in payments due to the rural floor budget neutrality adjustment).
Four Rhode Island hospitals would benefit from the proposed imputed
rural floor calculated under the alternative methodology and receive
an additional $3.5 million (the State, overall, would receive an
additional $1.6 million). One hospital in Delaware would benefit
from the extension of the proposed imputed floor and would receive
the proposed imputed floor wage index value under the new OMB labor
market area delineations, and would receive an additional $25,000
(the State, overall, would experience a decrease in payments of $2.3
million).
In response to a public comment addressed in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51593), we are providing the payment
impact of the proposed rural floor and imputed floor with budget
neutrality at the State level. Column 1 of the table below displays
the number of IPPS hospitals located in each State. Column 2
displays the number of hospitals in each State that would receive
the proposed rural floor or imputed floor wage index for FY 2015
based on the proposed new OMB labor market area delineations. Column
3 displays the percentage of total payments each State would receive
or contribute to fund the proposed rural floor and imputed floor
with national budget neutrality based on the proposed new OMB labor
market area delineations. The column compares the proposed post-
reclassification FY 2015 wage index of providers before the proposed
rural floor and imputed floor adjustment and the proposed post-
reclassification FY 2015 wage index of providers with the proposed
rural floor and imputed floor adjustment with the wage indexes
calculated based on the proposed new OMB labor market area
delineations. Column 4 displays the estimated payment amount that
each State would gain or lose due to the application of the proposed
rural floor and imputed floor with national budget neutrality. We
will update our State-by-State rural floor budget neutrality impact
analysis for the FY 2015 IPPS/LTCH PPS final rule.

FY 2015 IPPS Proposed Estimated Payments Due to Proposed Rural Floor and Imputed Floor With National Budget
Neutrality
----------------------------------------------------------------------------------------------------------------
Percent change
Number of in payments due
hospitals that to application
Number of would receive of proposed Difference (in
State hospitals the proposed rural floor and millions)
rural floor or imputed floor
imputed floor with budget
neutrality
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
Alabama....................................... 91 2 -0.5 -$8.5
Alaska........................................ 6 4 1.8 2.6
Arizona....................................... 56 8 -0.1 -2.3
Arkansas...................................... 45 0 -0.5 -5.4
California.................................... 308 184 2 196.3
Colorado...................................... 46 5 -0.1 -1.0
Connecticut................................... 31 8 -0.3 -4.6
Delaware...................................... 6 1 -0.5 -2.3
Washington, DC................................ 7 0 -0.6 -2.7
Florida....................................... 168 25 -0.3 -19.9
Georgia....................................... 106 0 -0.5 -13.1
Hawaii........................................ 12 1 -0.4 -1.2
Idaho......................................... 14 0 -0.4 -1.3

[[Page 28358]]

Illinois...................................... 127 0 -0.6 -28.5
Indiana....................................... 91 5 -0.6 -13.1
Iowa.......................................... 34 0 -0.3 -3.2
Kansas........................................ 53 0 -0.4 -4.1
Kentucky...................................... 65 1 -0.5 -7.9
Louisiana..................................... 100 3 -0.5 -7.0
Maine......................................... 20 0 -0.5 -2.5
Massachusetts................................. 61 51 4.9 157.8
Michigan...................................... 95 0 -0.6 -24.1
Minnesota..................................... 51 0 -0.6 -10.4
Mississippi................................... 64 0 -0.5 -5.5
Missouri...................................... 78 0 -0.5 -11.7
Montana....................................... 12 4 -0.3 -0.9
Nebraska...................................... 23 0 -0.5 -2.8
Nevada........................................ 24 19 1.6 10.9
New Hampshire................................. 13 9 0.4 1.8
New Jersey.................................... 64 12 -0.1 -5.0
New Mexico.................................... 25 0 -0.4 -1.7
New York...................................... 163 0 -0.6 -48.9
North Carolina................................ 87 0 -0.5 -16.7
North Dakota.................................. 6 1 -0.3 -0.8
Ohio.......................................... 134 11 -0.5 -17.6
Oklahoma...................................... 86 2 -0.5 -5.8
Oregon........................................ 33 0 -0.6 -5.0
Pennsylvania.................................. 154 10 -0.5 -22.2
Puerto Rico................................... 52 11 0 -0.1
Rhode Island.................................. 11 4 0.4 1.6
South Carolina................................ 55 12 -0.1 -0.9
South Dakota.................................. 19 0 -0.4 -1.2
Tennessee..................................... 98 21 -0.3 -6.0
Texas......................................... 322 13 -0.5 -31.9
Utah.......................................... 32 2 -0.5 -2.3
Vermont....................................... 6 0 -0.4 -0.8
Virginia...................................... 79 1 -0.5 -12.4
Washington.................................... 49 8 -0.2 -3.0
West Virginia................................. 30 2 -0.4 -3.3
Wisconsin..................................... 65 1 -0.5 -8.8
Wyoming....................................... 11 0 -0.3 -0.4
----------------------------------------------------------------------------------------------------------------

g. Proposed Impact of the New OMB Delineations (Column 8)

Column 8 shows the effects of the proposed new OMB labor market
area delineations. This column compares the payments under the
proposed rural and imputed floor wage index with rural floor budget
neutrality calculated under the new OMB delineations and the
payments under the proposed rural and imputed floor wage index with
budget neutrality calculated under the current OMB delineations. It
does not reflect the proposed 3-year transition for hospitals that
are currently located in urban counties that would become rural
under the new OMB delineations and the 1-year transition to the new
OMB delineations where the wage indexes are blended such that
hospitals receive 50 percent of their wage index based on the new
OMB delineations, and 50 percent of their wage index based on their
current labor market area. Rather, it shows the proposed impact if
the new OMB delineations were to be fully implemented for FY 2015.
Approximately 666 hospitals have their wage index impacted due to
the new OMB delineations. Urban and rural Middle Atlantic hospitals
would experience the largest decreases in payments if the new OMB
delineations were fully implemented for FY 2015, with payment
decreases of 0.4 and 0.3 percent, respectively. Rural New England
hospitals and Lugar hospitals would experience the largest increases
in payments if the new OMB delineations were fully implemented for
FY 2015 with payment increases of 0.4 percent and 0.6 percent,
respectively.

h. Proposed Application of the CBSA Transition Wage Index With Budget
Neutrality (Column 9)

As discussed earlier in this proposed rule, for FY 2015, we are
proposing to use the most recent labor market area delineations
issued by OMB but are proposing a transition period in certain
circumstances. Specifically, we are proposing a 3-year transition
for hospitals that are currently located in an urban county that
would become rural under the new OMB labor market area delineations
under which such hospitals would be assigned the urban wage index
value of the CBSA in which they are physically located for FY 2014
for a period of 3 fiscal years (that is, for FYs 2015, 2016, and
2017). We also are proposing a 1-year blended wage index for all
hospitals that would experience any decrease in their actual payment
wage index (that is, a hospital's actual wage index used for
payment, which accounts for all applicable effects of
reclassification and redesignation) exclusively due to the proposed
implementation of the new OMB labor market area delineations. We are
proposing that a post-reclassified wage index with the rural and
imputed floor applied would be

[[Page 28359]]

computed based on the hospital's FY 2014 CBSA (that is, using all of
its FY 2014 constituent county/ies), and another post-reclassified
wage index with the rural and imputed floor applied would be
computed based on the hospital's new FY 2015 CBSA (that is, the FY
2015 constituent county/ies). We are proposing to compare these two
wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs
would be lower than the proposed FY 2015 wage index with FY 2014
CBSAs, we are proposing that a blended wage index would be computed,
consisting of 50 percent of each of the two wage indexes added
together. We are proposing that this blended wage index would be the
hospital's wage index for FY 2015. This proposed adjustment would
only apply to hospitals that would experience a drop in their actual
payment wage index exclusively due to the proposed implementation of
the new OMB labor market area delineations. Hospitals that benefit
from the new OMB labor market area delineations would receive their
new wage index based on the new OMB labor market area delineations.
We refer readers to section III.B. of the preamble to this proposed
rule for a complete discussion on the transition wage indexes.
Lastly, we are proposing to apply both the 3-year transition and 50/
50 blended wage index adjustments in a budget neutral manner. We are
proposing to make an adjustment to the standardized amount to ensure
that the total payments, including the effect of the transition
provisions, would equal what payments would have been if we would
not be providing for these transitional wage indexes.
Column 9 shows the effects of the proposed adoption of the new
OMB labor market area delineations, including the 3-year hold
harmless provision for hospitals that are currently located in an
urban county that would become rural under the new OMB delineations
and the proposed 1-year transition to the new OMB delineations where
the wage indexes are blended such that hospitals receive 50 percent
of their wage index based on the new OMB delineations and 50 percent
of their wage index based on their current labor market area. For FY
2015, we are proposing to apply both the 3-year transition and 50/50
blended wage index adjustments in a budget neutral manner, with a
proposed budget neutrality factor of 0.998856 (or -0.1 percent)
applied to the standardized amount to ensure that the total
payments, including the effect of the transition provisions, would
equal what payments would have been if we would not be providing for
these transitional wage indexes. This column shows the payment
impact of the proposed transitional wage index. For columns 1
through 8, the payment impacts and budget neutrality factors have
been calculated under the new OMB labor market area delineations.
Under the proposed 1-year transition to the new OMB delineations,
hospitals that would have experienced a decrease in payments if the
new OMB delineations had been fully implemented this year now would
have those decreases alleviated due to the transition. Urban Middle
Atlantic hospitals would experience a 0.4 percent increase in
payments due to the proposed application of the transitional wage
index with budget neutrality, while urban New England, South
Atlantic, East North Central, West North Central, West South
Central, Mountain and Pacific hospitals would experience a -0.1
percent change in payments due to the proposed transitional budget
neutrality adjustment of -0.1 percent applied to the standard
Federal rate.

i. Effects of the Application of the Proposed Frontier State Wage Index
and Out-Migration Adjustment (Column 8)

This column shows the combined effects of the application of
section 10324(a) of Affordable Care Act which requires that we
establish a minimum post-reclassified wage-index of 1.00 for all
hospitals located in ``frontier States,'' and the effects of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals
located in certain counties that have a relatively high percentage
of hospital employees who reside in the county, but work in a
different area with a higher wage index. These two wage index
provisions are not budget neutral and increase payments overall by
0.1 percent compared to the provisions not being in effect.
The term ``frontier States'' is defined in the statute as States
in which at least 50 percent of counties have a population density
less than 6 persons per square mile. Based on these criteria, four
States (Montana, North Dakota, South Dakota, and Wyoming) are
considered frontier States and 46 hospitals located in those States
will receive a frontier wage index of 1.0000. Nevada is also, by
definition, a frontier State and was assigned a frontier floor value
of 1.0000 for FY 2012, but since then and including in this proposed
rule, its rural floor value has been greater than 1.0000 so it has
not been subject to the frontier wage index. Overall, this provision
is not budget neutral and is estimated to increase IPPS operating
payments by approximately $65 million or approximately 0.1 percent.
Rural hospitals located in the Mountain region and urban hospitals
located in the West North Central region would experience an
increase in payments by 0.9 and 0.8 percent, respectively, because
many of the hospitals located in this region are frontier State
hospitals.
In addition, section 1886(d)(13) of the Act, as added by section
505 of Public Law 108-173, provides for an increase in the wage
index for hospitals located in certain counties that have a
relatively high percentage of hospital employees who reside in the
county, but work in a different area with a higher wage index.
Hospitals located in counties that qualify for the payment
adjustment are to receive an increase in the wage index that is
equal to a weighted average of the difference between the wage index
of the resident county, post-reclassification and the higher wage
index work area(s), weighted by the overall percentage of workers
who are employed in an area with a higher wage index. There are an
estimated 244 providers that would receive the proposed out-
migration wage adjustment in FY 2015. Rural hospitals generally
qualify for the adjustment, resulting in a 0.2 percent increase in
payments. This provision appears to benefit rural Middle Atlantic
hospitals most in that they would experience a 0.2 percent increase
in payments. This out-migration wage adjustment is also not budget
neutral, and we estimate the impact of these providers receiving the
out-migration increase to be approximately $47 million.

j. Effects of the Proposed Reductions Under the Hospital Readmissions
Reduction Program (Column 11)

Column 11 shows our estimates of the effects of the proposed
policies for reductions in payments under the Hospital Readmissions
Reduction Program, which was established under section 3025 of the
Affordable Care Act. The Hospital Readmissions Reduction Program
requires a reduction to a hospital's base operating DRG payments to
account for excess readmissions, which for FY 2015, is based on a
hospital's risk-adjusted readmission rate during a 3-year period for
five applicable conditions: acute myocardial infarction, heart
failure, pneumonia, total hip and total knee arthroplasty and
chronic obstructive pulmonary disease. This provision is not budget
neutral. A hospital's readmission adjustment is the higher of a
ratio of the hospital's aggregate payments for excess readmissions
to their aggregate payments for all discharges, or a floor, which
has been defined in the statute as 0.97 (or a 3.0 percent reduction)
for FY 2015. A hospital's base operating DRG payment (that is, wage-
adjusted DRG payment amount, as discussed in section IV.G. of the
preamble of this proposed rule) is the portion of the IPPS payment
subject to the readmissions payment adjustment (DSH, IME, outliers
and low-volume add-on payments are not subject to the readmissions
adjustment). In this proposed rule, we estimate that 2,623 hospitals
would have their base operating DRG payments reduced by their
hospital-specific readmissions adjustment, an increase from FY 2014,
due to the proposed addition of new readmissions measures in the
program. As a result, we estimate that the Hospital Readmissions
Reduction Program would result in a 0.4 percent decrease, or
approximately $422 million, in payments to hospitals overall for FY
2015 relative to no provision. We estimate that the Hospital
Readmissions Reduction Program would result in a 0.2 percent
decrease in payments relative to FY 2014.
Rural West South Central hospitals and hospitals with high
Medicare utilization would experience the highest decreases of 0.8
and 0.7 percent, respectively. Puerto Rico hospitals would show a 0
percent change in payments because they are exempt from the
provision.

k. Effects of the Proposed Changes to Medicare DSH Payments (Column 12)

Column 12 shows the effects of the proposed adjustments to
Medicare DSH payments made under section 3133 of the Affordable Care
Act. Under section 3133, hospitals that are eligible to receive
Medicare DSH payments will receive 25 percent of the amount they
previously would have received under the former statutory formula
for Medicare DSH payments. The remainder,

[[Page 28360]]

equal to an estimate of 75 percent of what otherwise formerly would
have been paid as Medicare DSH payments, reduced to reflect changes
in the percentage of individuals under age 65 who are uninsured and
additional statutory adjustments, is available to make additional
payments to each hospital that qualifies for Medicare DSH payments.
Each Medicare DSH hospital will receive an additional payment based
on its estimated share of the total amount of uncompensated care for
all Medicare DSH hospitals. The reduction to Medicare DSH payments
is not budget neutral.
For FY 2015, we are proposing that the amount to be distributed
on the basis of uncompensated care, which is 75 percent of our
estimate of what otherwise would have been paid in Medicare DSH
payments (that is, Factor 1), be adjusted to 80.36 percent of that
amount to reflect changes in the percentage of individuals under age
65 who are uninsured and additional statutory adjustments (that is,
Factor 1 multiplied by Factor 2). For FY 2014, the uncompensated
care payment was 75 percent of what otherwise would have been paid
for Medicare DSH payment adjustments adjusted by a Factor 2 of 94.3
percent. Assuming DSH payments are constant, the proposed FY 2015
uncompensated care amount is approximately 10 percentage points less
than the uncompensated care amount that we distributed for FY 2014.
As a result, we project that compared to the empirically justified
DSH payments and the uncompensated care payments made last year
payments for FY 2015 would be reduced overall by 1.0 percent as
compared to Medicare DSH payments made last year under the first
year of the implementation of section 3133 of the Affordable Care
Act. The proposed uncompensated care payment methodology has
redistributive effects based on a Medicare DSH hospital's low income
insured patient days (sum of Medicaid patient days and Medicare SSI
patient days) relative to the Medicaid patient days and Medicare SSI
patient days for Medicare DSH hospitals, and the payment amount is
not tied to a hospital's discharges.
Urban Pacific hospitals would experience no change in DSH and
uncompensated care payments relative to last year. Hospitals with
low Medicare utilization (Medicare days are less than 25 percent of
total inpatient day) would experience the largest decreases in
payments compared to last year of -2.3 percent.

l. Effects of the Proposed Reductions Under the HAC Reduction Program
(Column 13)

Column 13 shows the estimated effects of the proposed policies
for reductions in payments under the HAC Reduction Program,
established under section 3008 of the Affordable Care Act. Section
1886(p) of the Act, as added under section 3008(a) of the Affordable
Care Act, establishes an adjustment to hospital payments for HACs
effective for discharges beginning on October 1, 2014, and for
subsequent program years. Beginning in FY 2015, hospitals scoring in
the top quartile for the rate of HAC rate as compared to the
national average will have their IPPS payments reduced by 1 percent
for all discharges in that Federal fiscal year. We estimate that,
under this proposal, 753 hospitals would be subject to the 1-percent
reduction, and that overall payments would decrease approximately
0.3 percent or $330 million.
Government hospitals and teaching hospitals with more than 100
residents would experience the biggest decrease in payments under
the HAC Reduction Program of -0.5 percent. Twenty-six percent of the
government hospitals are estimated to be subject to the HAC
reduction, while 53 percent of teaching hospitals with more than 100
residents are estimated to be subject to the HAC reduction for FY
2015. Puerto Rico hospitals are not included in the HAC Reduction
Program; therefore, those hospitals would not experience a change in
payments.

m. Effects of All Proposed FY 2015 Changes (Column 14)

Column 14 shows our estimate of the changes in payments per
discharge from FY 2014 and FY 2015, resulting from all proposed
changes reflected in this proposed rule for FY 2015. It includes
combined effects of the previous columns in the table.
The proposed average decrease in payments under the IPPS for all
hospitals is approximately 0.8 percent for FY 2015 relative to FY
2014. As discussed in section II.D. of the preamble of this proposed
rule, this column includes the proposed FY 2015 documentation and
coding recoupment adjustment of -0.8 percent on the national
standardized amount as part of the recoupment required under section
631 of the ATRA. In addition, this column includes the proposed
annual hospital update of 2.1 percent to the national standardized
amount. This proposed annual hospital update includes the proposed
2.7 percent market basket update, the proposed reduction of 0.4
percentage point for the multifactor productivity adjustment, and
the 0.2 percentage point reduction under section 3401 of the
Affordable Care Act. As described in Column 2, the proposed annual
hospital update combined with the proposed documentation and coding
recoupment adjustment would result in a 1.3 percent increase in
payments in FY 2015 relative to FY 2014. Column 11 shows the
estimated 0.4 percent decrease in payments due to the proposed
reductions in payments under the Hospital Readmissions Reduction
Program, which reduces a hospital's base operating DRG payments by a
readmission adjustment factor based on a hospital's performance on
readmissions for specified conditions, which is an additional 0.2
percent decrease in payments under the Hospital Readmissions
Reduction Program relative to FY 2014. Column 12 shows the estimated
1.0 percent decrease in Medicare DSH payments due to the changes
made under section 3133 of the Affordable Care Act, which reduces
Medicare DSH payments by 75 percent and redistributes the remainder,
equal to an estimate of 75 percent of what otherwise would have been
paid as Medicare DSH payments, reduced to reflect changes in the
percentage of individuals under age 65 who are uninsured, to each
hospital that qualifies for Medicare DSH payments as an
uncompensated care payment based on the hospital's relative share of
the total amount of uncompensated care. Column 13 shows the impact
of the implementation of the HAC Reduction Program which would
reduce payments by 0.3 percent overall. The impact of moving from
our estimate of FY 2014 outlier payments, 5.79 percent, to the
estimate of FY 2015 outlier payments, 5.1 percent, would result in a
decrease of 0.7 percent in FY 2015 payments relative to FY 2014.
Lastly, this column reflects the extension of MDH payment status for
the first half of FY 2015, under Public Law 113-93, enacted on April
1, 2014. There also might be interactive effects among the various
factors comprising the payment system that we are not able to
isolate. For these reasons, the values in Column 14 may not equal
the sum of the estimated percentage changes described above.
Overall payments to hospitals paid under the IPPS are estimated
to decrease by 0.8 percent for FY 2015. Much of the payment changes
among the hospital categories is attributed to the proposed
reduction in Medicare DSH payments and the redistribution of a
portion of the Medicare DSH payments as an additional payment for
hospitals' relative uncompensated care amounts. Hospitals in urban
areas would experience a 0.9 percent decrease in payments per
discharge in FY 2015 compared to FY 2014. Hospital payments per
discharge in rural areas are estimated to decrease by 0.2 percent in
FY 2015 due to lesser reductions in Medicare DSH and estimated
outlier payments.

3. Impact Analysis of Table II

Table II presents the projected impact of the proposed changes
for FY 2015 for urban and rural hospitals and for the different
categories of hospitals shown in Table I. It compares the estimated
average payments per discharge for FY 2014 with the average payments
per discharge for FY 2015, as calculated under our models.
Therefore, this table presents, in terms of the average dollar
amounts paid per discharge, the combined effects of the proposed
changes presented in Table I. The estimated percentage changes shown
in the last column of Table II equal the estimated percentage
changes in average payments per discharge from Column 14 of Table I.

[[Page 28361]]

Table II--Impact Analysis of Proposed Changes for FY 2015 Acute Care Hospital Operating Prospective Payment
System
[Payments per discharge]
----------------------------------------------------------------------------------------------------------------
Proposed
Estimated estimated All proposed
Number of average FY average FY FY 2015
hospitals 2014 payment 2015 payment changes
per discharge per discharge
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals................................... 3,388 11,237 11,146 -0.8
By Geographic Location:
Urban hospitals............................. 2,542 11,629 11,529 -0.9
Large urban areas........................... 1,395 12,398 12,285 -0.9
Other urban areas........................... 1,147 10,696 10,611 -0.8
Rural hospitals............................. 846 8,089 8,073 -0.2
Bed Size (Urban):
0-99 beds................................... 655 9,026 8,980 -0.5
100-199 beds................................ 788 9,728 9,654 -0.8
200-299 beds................................ 469 10,517 10,466 -0.5
300-499 beds................................ 417 11,998 11,896 -0.9
500 or more beds............................ 213 14,330 14,157 -1.2
Bed Size (Rural):
0-49 beds................................... 325 6,614 6,562 -0.8
50-99 beds.................................. 298 7,599 7,523 -1
100-149 beds................................ 136 7,951 7,976 0.3
150-199 beds................................ 50 8,898 8,891 -0.1
200 or more beds............................ 37 9,850 9,913 0.6
Urban by Region:
New England................................. 120 12,805 12,699 -0.8
Middle Atlantic............................. 324 12,927 12,855 -0.6
South Atlantic.............................. 406 10,454 10,339 -1.1
East North Central.......................... 397 10,856 10,748 -1
East South Central.......................... 153 10,086 9,935 -1.5
West North Central.......................... 162 11,373 11,321 -0.5
West South Central.......................... 385 10,670 10,522 -1.4
Mountain.................................... 159 11,891 11,797 -0.8
Pacific..................................... 384 14,704 14,673 -0.2
Puerto Rico................................. 52 8,194 7,606 -7.2
Rural by Region:
New England................................. 22 11,024 11,000 -0.2
Middle Atlantic............................. 57 8,118 8,070 -0.6
South Atlantic.............................. 132 7,714 7,666 -0.6
East North Central.......................... 115 8,263 8,315 0.6
East South Central.......................... 165 7,483 7,397 -1.1
West North Central.......................... 102 8,626 8,729 1.2
West South Central.......................... 168 7,064 6,931 -1.9
Mountain.................................... 61 9,111 9,245 1.5
Pacific..................................... 24 10,697 10,952 2.4
By Payment Classification:
Urban hospitals............................. 2,558 11,615 11,513 -0.9
Large urban areas........................... 1,408 12,387 12,273 -0.9
Other urban areas........................... 1,150 10,669 10,582 -0.8
Rural areas................................. 830 8,270 8,270 0
Teaching Status:
Nonteaching................................. 2,352 9,312 9,262 -0.5
Fewer than 100 residents.................... 792 10,966 10,891 -0.7
100 or more residents....................... 244 16,538 16,317 -1.3
Urban DSH:
Non-DSH..................................... 682 9,870 9,899 0.3
100 or more beds............................ 1,591 12,067 11,939 -1.1
Less than 100 beds.......................... 366 8,354 8,247 -1.3
Rural DSH:
SCH......................................... 388 7,587 7,597 0.1
RRC......................................... 212 9,035 9,057 0.2
100 or more beds............................ 24 7,422 7,323 -1.3
Less than 100 beds.......................... 125 6,339 6,261 -1.2
Urban teaching and DSH:
Both teaching and DSH....................... 842 13,293 13,137 -1.2
Teaching and no DSH......................... 133 11,107 11,166 0.5
No teaching and DSH......................... 1,115 9,774 9,692 -0.8
No teaching and no DSH...................... 468 9,287 9,308 0.2
Special Hospital Types:

[[Page 28362]]

RRC......................................... 208 9,507 9,413 -1
SCH......................................... 324 8,856 9,035 2
MDH......................................... 154 6,800 6,485 -4.6
SCH and RRC................................. 124 9,933 10,149 2.2
MDH and RRC................................. 11 8,122 7,641 -5.9
Type of Ownership:
Voluntary................................... 1,925 11,370 11,296 -0.7
Proprietary................................. 883 10,009 9,930 -0.8
Government.................................. 540 12,259 12,058 -1.6
Medicare Utilization as a Percent of Inpatient
Days:
0-25........................................ 445 15,819 15,431 -2.5
25-50....................................... 2,004 11,358 11,281 -0.7
50-65....................................... 718 9,019 9,005 -0.1
Over 65..................................... 131 7,424 7,317 -1.4
FY 2015 Reclassifications by the Medicare
Geographic Classification Review Board:
All Reclassified Hospitals.................. 804 10,955 10,894 -0.6
Non-Reclassified Hospitals.................. 2,584 11,344 11,242 -0.9
Urban Hospitals Reclassified................ 533 11,600 11,518 -0.7
Urban Nonreclassified Hospitals, FY 2015........ 1,965 11,664 11,557 -0.9
All Rural Hospitals Reclassified FY 2015........ 271 8,572 8,589 0.2
Rural Nonreclassified Hospitals FY 2015......... 511 7,511 7,483 -0.4
All Section 401 Reclassified Hospitals.......... 48 9,810 9,825 0.2
Other Reclassified Hospitals (Section 66 7,724 7,543 -2.3
1886(d)(8)(B)).............................
Specialty Hospitals:
Cardiac Specialty Hospitals................. 15 12,351 12,561 1.7
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Proposed Policy Changes

In addition to those proposed policy changes discussed above
that we are able to model using our IPPS payment simulation model,
we are proposing to make various other changes in this proposed
rule. Generally, we have limited or no specific data available with
which to estimate the impacts of these proposed changes. Our
estimates of the likely impacts associated with these other proposed
changes are discussed below.

1. Effects of Proposed Policy on MS-DRGs for Preventable HACs,
Including Infections

In section II.F. of the preamble of this proposed rule, we
discuss our implementation of section 1886(d)(4)(D) of the Act,
which requires the Secretary to identify conditions that are: (1)
High cost, high volume, or both; (2) result in the assignment of a
case to an MS-DRG that has a higher payment when present as a
secondary diagnosis; and (3) could reasonably have been prevented
through application of evidence-based guidelines. For discharges
occurring on or after October 1, 2008, hospitals will not receive
additional payment for cases in which one of the selected conditions
was not present on admission, unless, based on data and clinical
judgment, it cannot be determined at the time of admission whether a
condition is present. That is, the case will be paid as though the
secondary diagnosis were not present. However, the statute also
requires the Secretary to continue counting the condition as a
secondary diagnosis that results in a higher IPPS payment when doing
the budget neutrality calculations for MS-DRG reclassifications and
recalibration. Therefore, we will perform our budget neutrality
calculations as though the payment provision did not apply, but
Medicare will make a lower payment to the hospital for the specific
case that includes the secondary diagnosis. Thus, the provision
results in cost savings to the Medicare program.
We note that the provision will only apply when one or more of
the selected conditions are the only secondary diagnosis or
diagnoses present on the claim that will lead to higher payment.
Medicare beneficiaries will generally have multiple secondary
diagnoses during a hospital stay, such that beneficiaries having one
MCC or CC will frequently have additional conditions that also will
generate higher payment. Only a small percentage of the cases will
have only one secondary diagnosis that would lead to a higher
payment. Therefore, if at least one nonselected secondary diagnosis
that leads to higher payment is on the claim, the case will continue
to be assigned to the higher paying MS-DRG and there will be no
Medicare savings from that case. In addition, as discussed in
section II.F.3. of the preamble of this proposed rule, it is
possible to have two severity levels where the HAC does not affect
the MS-DRG assignment or for an MS-DRG not to have severity levels.
In either of these circumstances, the case will continue to be
assigned to the higher paying MS-DRG and there will be no Medicare
savings from that case.
The HAC payment provision went into effect on October 1, 2008.
Our savings estimates for the next 5 fiscal years are shown below:

------------------------------------------------------------------------
Savings (in
Year millions)
------------------------------------------------------------------------
FY 2015............................................... $28
FY 2016............................................... 30
FY 2017............................................... 33
FY 2018............................................... 36
FY 2019............................................... 38
------------------------------------------------------------------------

In section IV.J. of the preamble of this proposed rule, we are
proposing changes to the HAC Reduction Program for FY 2015. We refer
readers to section I.H.6. of this Appendix A for a discussion of the
impact of these proposed changes.

2. Effects of Proposed Policy Relating to New Medical Service and
Technology Add-On Payments

In section II.I. of the preamble to this proposed rule, we
discuss the six applications for add-on payments for new

[[Page 28363]]

medical services and technologies for FY 2015, as well as the status
of the new technologies that were approved to receive new technology
add-on payments in FY 2014. As explained in the preamble to this
proposed rule, add-on payments for new medical services and
technologies under section 1886(d)(5)(K) of the Act are not required
to be budget neutral. As discussed in section II.I.4. of the
preamble of this proposed rule, we have not yet determined whether
any of the six applications we received for consideration for new
technology add-on payments for FY 2015 will meet the specified
criteria. Consequently, it is premature to estimate the potential
payment impact of these six applications for any potential new
technology add-on payments for FY 2015. We note that if any of the
six applications are found to be eligible for new technology add-on
payments for FY 2015, in the FY 2015 IPPS/LTCH PPS final rule, we
would discuss the estimated payment impact for FY 2015.
In the preamble of this proposed rule, we are proposing to
discontinue new technology add-on payments for DIFICID^TM
for FY 2015 because the technology will have been on the U.S. market
for 3 years. We also are proposing to continue making new technology
add-on payments for Voraxaze[supreg], the Zenith[supreg] F.Graft,
Kcentra^TM, the Argus[supreg] II Retinal Prosthesis
System, and Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
in FY 2015 because these technologies are still considered new. We
note that new technology add-on payments per case are limited to the
lesser of (1) 50 percent of the costs of the new technology or (2)
50 percent of the amount by which the costs of the case exceed the
standard MS-DRG payment for the case. Because it is difficult to
predict the actual new technology add-on payment for each case, our
estimates below are based on the increase in add-on payments for FY
2015 as if every claim that would qualify for a new technology add-
on payment would receive the maximum add-on payment. For
Voraxaze[supreg], based on the applicant's estimate from FY 2013, we
currently estimate that new technology add-on payments for
Voraxaze[supreg] will increase overall FY 2015 payments by
$6,300,000. For the Zenith[supreg] F. Graft, based on the
applicant's estimate from FY 2013, we currently estimate that new
technology add-on payments for the Zenith[supreg] F. Graft will
increase overall FY 2014 payments by $4,085,750. For
Kcentra^TM, based on the applicant's estimate from FY
2014, we currently estimate that new technology add-on payments for
Kcentra^TM will increase overall FY 2015 payments by
$5,449,888. For the Argus[supreg] II Retinal Prosthesis System,
based on the applicant's estimate from FY 2014, we currently
estimate that new technology add-on payments for the Argus[supreg]
II Retinal Prosthesis System will increase overall FY 2015 payments
by $3,601,437. For the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent, based on the applicant's estimate from FY 2014, we
currently estimate that new technology add-on payments for the
Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent will
increase overall FY 2015 payments by $20,463,000.

3. Effects of Proposed Changes to List of MS-DRGs Subject to Postacute
Care Transfer and DRG Special Pay Policy

In section IV.A. of the preamble of this proposed rule, we
discuss proposed changes to the list of MS-DRGs subject to the
postacute care transfer and DRG special payment policies. As
reflected in Table 5 listed in section VI. of the Addendum to this
proposed rule and available via the Internet on the CMS Web site,
using criteria set forth in regulation at Sec. 412.4, we evaluated
MS-DRG charge, discharge, and transfer data to determine which MS-
DRGs qualify for the postacute care transfer and DRG special pay
policies. We note that we are making no proposal to change these
payment policies in this FY 2015 proposed rule. We are proposing to
change the status of certain MS-DRGs as a result of proposals to
revise the MS-DRGs for FY 2015. We are proposing to change the
status of five MS-DRGs to qualify for the postacute care transfer
policy in FY 2015. One additional MS-DRG that qualified under the
policy in FY 2014 does not qualify in FY 2015, and we are proposing
to change the status accordingly. Finally, five MS-DRGs now qualify
for the MS-DRG special pay policy in FY 2015 after not qualifying in
FY 2014, and we are proposing to add them to the list of qualifying
MS-DRGs. Column 4 of Table I in this Appendix A shows the effects of
the proposed changes to the MS-DRGs and relative payment weights
with the application of the recalibration budget neutrality factor
to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act
requires us annually to make appropriate classification changes in
order to reflect changes in treatment patterns, technology, and any
other factors that may change the relative use of hospital
resources. The analysis and methods determining the proposed changes
due to the MS-DRGs and relative payment weights accounts for and
includes changes in MS-DRG postacute care transfer and special pay
policy statuses. We refer readers to section I.G. of this Appendix
for a more detailed discussion of payment impacts due to MS-DRG
reclassification policies.

4. Effects of the Proposed Payment Adjustment for Low-Volume Hospitals
for FY 2015

In section V.D. of the preamble to this proposed rule, we
discuss the provisions of the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93) that extends for an additional year, through
March 31, 2015, the temporary changes to the low-volume hospital
definition and the methodology for determining the payment
adjustment made by the Affordable Care Act for FYs 2011 and 2012,
and extended through FY 2013 by the ATRA, and the first half of FY
2014 by the Pathway for SGR Reform Act (Pub. L. 113-67). Therefore,
to qualify for the low-volume hospital payment adjustment for FY
2015 discharges occurring before April 1, 2015 under section
1886(d)(12) of the Act, a hospital must have less than 1,600
Medicare discharges and be located more than 15 miles from other
IPPS hospitals. The payment adjustment for eligible low-volume
hospital FY 2015 discharges occurring before April 1, 2015 is a
continuous, linear sliding scale adjustment ranging from an
additional 25 percent payment adjustment to qualifying hospitals
with 200 or fewer Medicare discharges to no additional payment to
hospitals with 1,600 or more Medicare discharges.
Beginning with FY 2015 discharges occurring on or after April 1,
2015, in accordance with section 1886(d)(12) of the Act, the low-
volume hospital definition and payment adjustment methodology revert
back to the statutory requirements that were in effect prior to the
amendments made by the Affordable Care Act as amended by subsequent
legislation. Therefore, effective for FY 2015 discharges occurring
on or after April 1, 2015 and subsequent years, in order to qualify
as a low-volume hospital, a subsection (d) hospital must be more
than 25 road miles from another subsection (d) hospital and have
less than 200 discharges (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges) during the
fiscal year.
Based on FY 2013 claims data (December 2013 update of the MedPAR
file), we estimate that approximately 600 hospitals will qualify as
a low-volume hospital in FY 2014 and in FY 2015 for discharges
occurring before April 1, 2015. With the statutory changes to the
low-volume hospital payment adjustment, for FY 2015 discharges
occurring on or after April 1, 2015, we estimate only approximately
six hospitals will continue to qualify as a low-volume hospital. We
project that the expiration of the temporary changes to the low-
volume hospital definition and the payment adjustment methodology
originally made by the Affordable Care Act and extended by
subsequent legislation will result in a decrease in payments of
approximately $343 million in FY 2015 as compared to the low-volume
hospital payments in FY 2014. This estimate accounts for our
projection of the six IPPS low-volume hospitals in FY 2014 that are
expected to continue to receive a low-volume hospital payment
adjustment of an additional 25 percent for FY 2015 discharges
occurring on or after April 1, 2015.

5. Effects of Proposal Related to IME Medicare Part C Add-On Payments
to SCHs Paid According to Their Hospital-Specific Rates

In section IV.E.2. of the preamble of this proposed rule, we
discuss our proposal related to IME Medicare Part C add-on payments
to SCHs that are paid according to their hospital-specific rates.
Payments based on the Federal rate are based on the IPPS
standardized amount and include all applicable IPPS add-on payments,
such as outliers, DSH, and IME, while payments based on the
hospital-specific rate include no add-on payments. The hospital-
specific rate generally reflects the additional costs incurred by a
teaching hospital for its Medicare Part A patients. However, the
hospital-specific rate does not reflect the costs associated with
Medicare Part C patients and there is no payment mechanism for SCHs
paid based on their hospital-specific rate to receive the IME add-on
payment for Medicare Part C patients. Accordingly, we are proposing
to provide all SCHs that are subsection (d) teaching

[[Page 28364]]

hospitals, IME add-on payments for applicable discharges of Medicare
Part C patients in accordance with section 1886(d)(11) of the Act,
regardless of whether the SCH is paid based on the Federal rate or
its hospital-specific rate; and that, for purposes of the comparison
of payments based on the Federal rate and payments based on the
hospital-specific rate under section 1886(d)(5)(D) of the Act, IME
payments under section 1886(d)(11) of the Act for Medicare Part C
patients will no longer be included as part of the Federal rate
payment.
We estimate that the proposals at section IV.E.2. of the
preamble of this proposed rule will result in an increase in
payments to approximately 50 hospitals that are both SCHs or SCH/
RRCs and teaching hospitals of approximately $5 million in FY 2015.

6. Effects of the Extension of the MDH Program for the First Half of FY
2015

In section V.G. of the preamble of this proposed rule, we
briefly discuss the statutory extension of the MDH program through
March 31, 2015, that is, through the first half of FY 2015, by
section 106 of the Protecting Access to Medicare Act of 2014 (Pub.
L. 113-93). Hospitals that qualify as MDHs receive the higher of
operating IPPS payments made under the Federal standardized amount
or the payments made under the Federal standardized amount plus 75
percent of the amount by which the hospital-specific rate (a
hospital-specific cost-based rate) exceeds the Federal standardized
amount. Based on the latest available data we have for 165 MDHs, we
project that 98 MDHs will receive the blended payment (that is, the
Federal standardized amount plus 75 percent of the amount by which
the hospital-specific rate exceeds the Federal standardized amount)
for the first half of FY 2015 (that is, for discharges occurring
through March 31, 2015). We estimate that those hospitals will
experience an overall increase in payments of approximately $56
million as compared to our previous estimates of payments to these
hospitals for FY 2015 prior to the extension of the MDH program
through March 31, 2015, by section 106 of Public Law 113-93.

7. Effects of Proposed Changes Under the FY 2015 Hospital Value-Based
Purchasing (VBP) Program

Section 1886(o)(1)(B) of the Act directs the Secretary to make
value-based incentive payments under the Hospital VBP Program to
hospitals that meet performance standards during the performance
period for discharges occurring on or after October 1, 2012. These
incentive payments will be funded for FY 2015 through a reduction to
the FY 2015 base operating DRG payment for each discharge of 1.50
percent, as required by section 1886(o)(7)(B) of the Act. The
applicable percentage for FY 2016 is 1.75 percent and for FY 2017
and subsequent years, it is 2 percent. We are required to ensure
that the total amount available for value-based incentive payments
is equal to the total amount of reduced payments for all hospitals
for the fiscal year, as estimated by the Secretary.
We refer readers to the Hospital Inpatient VBP Program final
rule (76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74527 through 74547), the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53567 through 53614), the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50677 through 50707), and the CY 2014
OPPS/ASC final rule with comment period (78 FR 75120 through 75121)
for further explanation of the details of the Hospital VBP Program.
We specifically refer readers to the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53582 through 53592) and the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50678 through 50679), for discussions of the measures
and other policies that we adopted for the FY 2015 and FY 2016
Hospital VBP Programs.
In section IV.I. of the preamble of this proposed rule, we
estimate the available pool of funds for value-based incentive
payments in the FY 2015 Hospital VBP Program, which, in accordance
with section 1886(o)(7)(C)(iii) of the Act, will be 1.50 percent of
base operating DRG payments, or a total of approximately $1.4
billion. This estimated available pool for FY 2015 is based on the
historical pool of hospitals that were eligible to participate in
the FY 2014 Hospital VBP Program and the payment information from
the December 2013 update to the FY 2013 MedPAR file. We intend to
provide an update to this estimate, which will be based on the March
2014 update to the FY 2013 MedPAR file, in the FY 2015 IPPS/LTCH PPS
final rule.
The estimated impacts of the FY 2015 Hospital VBP Program by
hospital characteristic, found in the table below, are based on
historical TPSs. We used the FY 2014 Hospital VBP Program TPSs to
calculate the proxy adjustment factors used for this impact
analysis. These are the most recently available scores that
hospitals were given an opportunity to review and correct. The proxy
adjustment factors use estimated annual base operating DRG payment
amounts derived from the December 2013 update to the FY 2013 MedPAR
file. The proxy adjustment factors can be found in Table 16
associated with this proposed rule (available via the Internet on
the CMS Web site).
The impact analysis shows that, for the FY 2015 Hospital VBP
Program, the number of hospitals that would receive an increase in
base operating DRG payment amount is slightly lower than the number
of hospitals that would receive a decrease. Approximately 42 percent
of hospitals would have a change in base operating DRG payment
amount that is between -0.2 percent and + 0.2 percent. Among urban
hospitals, those in the New England, South Atlantic, East North
Central, West North Central, and West South Central regions would
have an increase, on average, in base operating DRG payment amount,
and among rural hospitals, those in the New England and East North
Central regions will have an increase, on average in base operating
DRG payment amounts.
Both urban and rural hospitals in the Middle Atlantic, East
South Central, Mountain, and Pacific regions and rural hospitals in
the South Atlantic region would receive an average decrease in base
operating DRG payment amount. As the percent of DSH payments
increases, we see a decrease in base operating DRG payment amount,
while as the Medicare utilization (MCR) percent increases, we see an
increase in base operating DRG payment amount.
Nonteaching and teaching hospitals would have an average
decrease in base operating DRG payment amount.

Impact Analysis of Base Operating DRG Payment Amount Changes Resulting
From the FY 2015 Hospital VBP Program
------------------------------------------------------------------------
Number of
hospitals Average (%)
------------------------------------------------------------------------
By Geographic Location:
All Hospitals....................... 2,728 -0.038
Large Urban..................... 1,113 -0.021
Other Urban..................... 910 -0.030
Rural Area...................... 705 -0.074
Urban hospitals..................... 2,023 -0.025
0-99 beds....................... 307 0.025
100-199 beds.................... 677 -0.043
200-299 beds.................... 431 -0.032
300-499 beds.................... 401 -0.033
500 or more beds................ 207 -0.010
Rural hospitals..................... 705 -0.074
0-49 beds....................... 161 -0.041
50-99 beds...................... 296 -0.088
100-149 beds.................... 148 -0.074

[[Page 28365]]

150-199 beds.................... 55 -0.106
200 or more beds................ 45 -0.067
By Region:
Urban By Region..................... 2,023 -0.025
New England..................... 112 0.059
Middle Atlantic................. 279 -0.076
South Atlantic.................. 346 0.002
East North Central.............. 350 0.052
East South Central.............. 121 -0.043
West North Central.............. 134 0.055
West South Central.............. 248 0.003
Mountain........................ 130 -0.085
Pacific......................... 303 -0.154
Rural By Region..................... 705 -0.074
New England..................... 21 0.044
Middle Atlantic................. 64 -0.150
South Atlantic.................. 136 -0.024
East North Central.............. 114 0.036
East South Central.............. 114 -0.018
West North Central.............. 82 -0.052
West South Central.............. 101 -0.177
Mountain........................ 45 -0.299
Pacific......................... 28 -0.247
By MCR Percent:
0-25................................ 260 -0.118
25-50............................... 1,788 -0.033
50-65............................... 605 -0.016
Over 65............................. 46 0.003
BY DSH Percent:
0-25................................ 1,253 0.013
25-50............................... 1,220 -0.063
50-65............................... 141 -0.121
Over 65............................. 114 -0.222
BY TEACHING STATUS:
Teaching............................ 933 -0.041
Non-Teaching........................ 1,795 -0.036
------------------------------------------------------------------------

As stated above, we intend to provide an updated impact analysis
in the FY 2015 IPPS/LTCH PPS final rule. However, actual FY 2015
Hospital VBP Program TPSs would not be reviewed and corrected by
hospitals until after the FY 2015 IPPS/LTCH PPS final rule has been
published. Therefore, the same historical universe of eligible
hospitals and corresponding TPSs from the FY 2014 Hospital VBP
Program will be used for the updated impact analysis. As noted
above, the updated impact analysis for the final rule will reflect
estimated annual base operating DRG payment amount changes based on
the March 2014 update to the FY 2013 MedPAR file.

8. Effects of Proposed Changes to the HAC Reduction Program for FY 2015

In section IV.J. of the preamble of this proposed rule, we are
establishing measures, scoring, and a risk adjustment methodology to
implement the FY 2015 payment reduction under the HAC Reduction
Program. Section 1886(p) of the Act, as added under section 3008(a)
of the Affordable Care Act, establishes an adjustment to hospital
payments for HACs, or a HAC Reduction program, under which payments
to applicable hospitals are adjusted to provide an incentive to
reduce HACs, effective for discharges occurring on October 1, 2014
and for subsequent program years.
We note that hospitals will have a payment impact for the first
time in FY 2015. For FY 2015, we are presenting the overall impact
of the HAC Reduction Program provision along with other IPPS payment
provision impacts in section I.G. of this Appendix A. The table and
analyses that we are presenting below show the distributional effect
of the measures and scoring system for the HAC Reduction Program
included in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707
through 50729).
For FY 2015, we note that we finalized a Total HAC Score
methodology in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707
through 50729) that assigns weights for Domain 1 and Domain 2 at 35
percent and 65 percent, respectively. Based on this methodology, the
table below presents data on the proportion of hospitals, by
structural characteristic, in the worst performing quartile based on
the 35/65 weighting scheme.
The data for this simulation are derived from the AHRQ PSI
results based on Medicare FFS discharges from July 2011 through June
2013, using version 4.5 of the AHRQ software, and CDC measure
results were used based on Standard Infection Ratios (SIRs)
calculated with data reported to the National Healthcare Safety
Network for infections occurring between July 2012 and June 2013. To
analyze the results by hospital characteristic, the FY 2014 impact
file were used. Of the 3,337 hospitals included in this analysis,
3,298 hospitals were included for geographic location, region, DSH
percent, and teaching status; 3,278 for ownership; and 3,205 for MCR
percent. These differences in denominator are due to the source of
the hospital characteristic data. This analysis does not include
Maryland hospitals as Maryland hospitals are exempt by waiver from
the HAC Reduction Program in FY 2015.
The percentage of hospitals for each characteristic (column 3)
indicates the percent of hospitals in each level of characteristic.
For example, with regard to geographic region, 39.4 percent of
hospitals (or 1,301 hospitals) are characterized as large urban;
32.7 percent of hospitals (or 1,080 hospitals) are characterized as
other urban; and 27.8 percent of hospitals (or 917 hospitals) are
characterized as rural. The percentage of hospitals in the worst
performing quartile (column 5) indicates the proportion of hospitals
for each characteristic that would be penalized. For example, in
regards to geographic location, 26.6 percent of hospitals (or 346
hospitals) characterized

[[Page 28366]]

as large urban would be subject to a payment adjustment; 22.8
percent of hospitals (or 246 hospitals) characterized as other urban
would be subject to a payment adjustment; and 17.6 percent of
hospitals (or 161 hospitals) characterized as rural would be subject
to a payment adjustment.
With regard to geographic location of urban hospitals by bed
size, 17.3 percent of hospitals (or 101 hospitals) characterized as
urban hospitals with bed size of 0-99 beds would be subject to a
payment adjustment; 21.1 percent of hospitals (or 152 hospitals)
characterized as urban hospitals with bed size of 100-199 beds would
be subject to a payment adjustment; 27.1 percent of hospitals (or
122 hospitals) characterized as urban hospitals with bed size of
200-299 beds would be subject to a payment adjustment; 27.1 percent
of hospitals (or 71 hospitals) characterized as urban hospitals with
bed size of 300-399 beds would be subject to a payment adjustment;
37.7 percent of hospitals (or 58 hospitals) characterized as urban
hospitals with bed size of 400-499 beds would be subject to a
payment adjustment; and 41.7 percent of hospitals (or 88 hospitals)
characterized as urban hospitals with bed size of 500 or more beds
would be subject to a payment adjustment.
With regard to geographical location of rural hospitals by bed
size, 15.5 percent of hospitals (or 53 hospitals) characterized as
rural hospitals with bed size of 0-49 beds would be subject to a
payment adjustment; 20.6 percent of hospitals (or 66 hospitals)
characterized as rural hospitals with bed size of 50-99 beds would
be subject to a payment adjustment; 13.9 percent of hospitals (or 21
hospitals) characterized as rural hospitals with bed size of 100-149
beds would be subject to a payment adjustment; 15.3 percent of
hospitals (or 9 hospitals) characterized as rural hospitals with bed
size of 150-199 beds would be subject to a payment adjustment; and
26.7 percent of hospitals (or 12 hospitals) characterized as rural
hospitals with bed size of 200 or more beds would be subject to a
payment adjustment.
With regard to region of urban hospitals, 26.1 percent of
hospitals (or 31 hospitals) characterized as urban in the New
England region would be subject to a payment adjustment; 28.2
percent of hospitals (or 87 hospitals) characterized as urban in the
Mid-Atlantic region would be subject to a payment adjustment; 24.0
percent of hospitals (or 89 hospitals) characterized as urban in the
South Atlantic region would be subject to a payment adjustment; 23.4
percent of hospitals (or 90 hospitals) characterized as urban in the
East North Central region would be subject to a payment adjustment;
22.4 percent of hospitals (or 32 hospitals) characterized as urban
in the West South Central region would be subject to a payment
adjustment; 20.5 percent of hospitals (or 33 hospitals)
characterized as urban in the East North Central region would be
subject to a payment adjustment; 19.6 percent of hospitals (or 71
hospitals) characterized as urban in the West South Central region
would be subject to a payment adjustment; 35.8 percent of hospitals
(or 57 hospitals) characterized as urban in the Mountain region
would be subject to a payment adjustment; and 27.4 percent of
hospitals (or 102 hospitals) characterized as urban in the Pacific
region would be subject to a payment adjustment.
With regard to region of rural hospitals, 13.0 percent of
hospitals (or 3 hospitals) characterized as rural in the New England
region would be subject to a payment adjustment; 25.8 percent of
hospitals (or 17 hospitals) characterized as rural in the Mid-
Atlantic region would be subject to a payment adjustment; 15.1
percent of hospitals (or 24 hospitals) characterized as rural in the
South Atlantic region would be subject to a payment adjustment; 21.2
percent of hospitals (or 25 hospitals) characterized as rural in the
East North Central region would be subject to a payment adjustment;
13.9 percent of hospitals (or 23 hospitals) characterized as rural
in the West South Central region would be subject to a payment
adjustment; 19.2 percent of hospitals (or 20 hospitals) in the East
North Central region would be subject to a payment adjustment; 14.7
percent of hospitals (or 26 hospitals) in the West South Central
region would be subject to a payment adjustment; 24.7 percent of
hospitals (or 18 hospitals) in the Mountain region would be subject
to a payment adjustment; and 16.1 percent of hospitals (or 5
hospitals) in the Pacific region would be subject to a payment
adjustment.
With regard to the DSH percent characteristic, 19.6 percent of
hospitals (or 311 hospitals) characterized in the 0-24 DSH percent
would be subject to a payment adjustment; 24.1 percent of hospitals
(or 331 hospitals) characterized in the 25-49 DSH percent would be
subject to a payment adjustment; 37.6 percent of hospitals (or 68
hospitals) characterized in the 50-64 DSH percent would be subject
to a payment adjustment; and 27.2 percent of hospitals (or 43
hospitals) characterized in the 65 and over DSH percent would be
subject to a payment adjustment.
With regard to the teaching status characteristic, 19.0 percent
of hospitals (or 437 hospitals) characterized as nonteaching would
be subject to a payment adjustment; 25.0 percent of hospitals (or
191 hospitals) characterized as fewer than 100 residents would be
subject to a payment adjustment; and 52.7 percent of hospitals (or
125 hospitals) characterized as 100 or more residents would be
subject to a payment adjustment.
With regard to the urban teaching and DSH characteristic, 34.2
percent of hospitals (or 277 hospitals) characterized as teaching
and DSH would be subject to a payment adjustment; 22.1 percent of
hospitals (or 29 hospitals) characterized as teaching and no DSH
would be subject to a payment adjustment; 20.4 percent of hospitals
(or 206 hospitals) characterized as no teaching and DSH would be
subject to a payment adjustment; 18.6 percent of hospitals (or 80
hospitals) characterized as no teaching and no DSH would be subject
to a payment adjustment; and 17.6 percent of hospitals (or 161
hospitals) characterized as nonurban would be subject to a payment
adjustment.
With regard to the type of ownership characteristic, 23.3
percent of hospitals (or 441 hospitals) characterized as voluntary
would be subject to a payment adjustment; 19.5 percent of hospitals
(or 167 hospitals) characterized as proprietary would be subject to
a payment adjustment; and 26.8 percent of hospitals (or 141
hospitals) characterized as government would be subject to a payment
adjustment.
With regard to the MCR percent characteristic, 37.7 percent of
hospitals (or 147 hospitals) characterized in the 0-24 MCR percent
would be subject to a payment adjustment; 23.2 percent of hospitals
(or 458 hospitals) characterized in the 25-49 MCR percent would be
subject to a payment adjustment; 15.9 percent of hospitals (or 113
hospitals) characterized in the 50-64 MCR percent would be subject
to a payment adjustment; and 10.8 percent of hospitals (or 14
hospitals) characterized in the 65 and over MCR percent would be
subject to a payment adjustment.

Proportion of Hospitals in the Worst Performing Quartile (>75 Percentile) of the Total HAC Score by Hospital
Characteristic
----------------------------------------------------------------------------------------------------------------
Hospital characteristic Hospitals in the worst
--------------------------------------------------------------------------------- performing quartile
-------------------------------
Characteristic Number of Percent * Number of
hospitals hospitals Percent
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
All Hospitals:
Large Urban **.......................... 1,301 39.4 346 26.6
Other Urban............................. 1,080 32.7 246 22.8
Rural................................... 917 27.8 161 17.6
Urban Hospitals: .............. .............. .............. ..............
0-99 beds............................... 584 24.5 101 17.3

[[Page 28367]]

100-199 beds............................ 720 30.2 152 21.1
200-299 beds............................ 450 18.9 122 27.1
300-399 beds............................ 262 11.0 71 27.1
400-499................................. 154 6.5 58 37.7
500 or more beds........................ 211 8.9 88 41.7
Rural Hospitals:
0-49 beds............................... 341 37.2 53 15.5
50-99 beds.............................. 321 35.0 66 20.6
100-149 beds............................ 151 16.5 21 13.9
150-199 beds............................ 59 6.4 9 15.3
200 or more beds........................ 45 4.9 12 26.7
By Region:
Urban by Region:
New England............................. 119 3.6 31 26.1
Mid-Atlantic............................ 308 9.3 87 28.2
South Atlantic.......................... 371 11.2 89 24.0
East North Central...................... 385 11.7 90 23.4
West South Central...................... 143 4.3 32 22.4
East North Central...................... 161 4.9 33 20.5
West South Central...................... 363 11.0 71 19.6
Mountain................................ 159 4.8 57 35.8
Pacific................................. 372 11.3 102 27.4
Rural by Region:
New England............................. 23 0.7 3 13.0
Mid-Atlantic............................ 66 2.0 17 25.8
South Atlantic.......................... 159 4.8 24 15.1
East North Central...................... 118 3.6 25 21.2
West South Central...................... 166 5.0 23 13.9
East North Central...................... 104 3.2 20 19.2
West South Central...................... 177 5.4 26 14.7
Mountain................................ 73 2.2 18 24.7
Pacific................................. 31 0.9 5 16.1
By DSH Percent:
0-24........................................ 1,588 48.2 311 19.6
25-49....................................... 1,371 41.6 331 24.1
50-64....................................... 181 5.5 68 37.6
65 and over................................. 158 4.8 43 27.2
By Teaching Status:
Non-teaching................................ 2,297 69.6 437 19.0
Fewer than 100 residents.................... 764 23.2 191 25.0
100 or more residents....................... 237 7.2 125 52.7
By Urban Teaching and DSH:
Teaching and DSH............................ 811 24.6 277 34.2
Teaching and no DSH......................... 131 4.0 29 22.1
No teaching and DSH......................... 1,010 30.6 206 20.4
No teaching and no DSH...................... 429 13.0 80 18.6
Non-urban................................... 917 27.8 161 17.6
By Type of Ownership:
Voluntary................................... 1,893 57.7 441 23.3
Proprietary................................. 858 26.2 167 19.5
Government.................................. 527 16.1 141 26.8
By MCR Percent:
0-24........................................ 390 12.2 147 37.7
25-49....................................... 1,976 61.7 458 23.2
50-64....................................... 709 22.1 113 15.9
65 and over................................. 130 4.1 14 10.8
----------------------------------------------------------------------------------------------------------------
* Percents may not sum to 100 due to rounding.
** Large urban hospitals are hospitals located in large urban areas (populations over 1 million).

9. Effects of Proposed Policy Changes Relating to Payments for Direct
GME and IME

Under section IV.K.2. of the preamble of this proposed rule, we
discuss our proposal to simplify and streamline the timing of CMS's
policies related to when the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap would become effective for new
teaching hospitals, by stating that the FTE resident caps, rolling
average, and IRB ratio cap would be effective simultaneously,
beginning with the applicable hospital's cost reporting period that
precedes the start of the 6th program year of the first new program
started. We are proposing that this policy regarding the effective
dates of the FTE residency caps, rolling average, and IRB ratio cap
for FTE residents in new programs would

[[Page 28368]]

be consistent with the methodology for calculation of the FTE
resident caps as described in the FY 2013 IPPS/LTCH PPS final rule,
and implemented at 42 CFR 413.79(e)(1) and (3). That is, this
proposal is effective for urban hospitals that have not yet had FTE
resident caps established under Sec. 413.79(e)(1), and for rural
hospitals, on or after October 1, 2012. This proposal would reduce
the amount of time that the new programs would be exempt from the
FTE resident caps by several months, depending on the cost reporting
period of the new teaching hospital. However, depending on the
length of new programs started and the point during the 5-year
growth period in which new programs are started, there may also be
some gain and loss for hospitals in terms of the amount of time that
the FTEs in the new programs would be exempt from the rolling
average and the IRB ratio cap. In either case, the estimate of
possible savings or cost of this proposal is less than $5 million a
year and therefore, is negligible.
In section IV.K.3.a. of the preamble of this proposed rule, we
discuss our proposals related to the effect of new OMB labor market
area delineations on certain teaching hospitals training residents
in rural areas. Under existing regulations a new teaching hospital
has 5 years from when it first begins training residents in its
first new program to grow its cap. If the teaching hospital is a
rural teaching hospital, it can continue to receive permanent cap
adjustments even after the initial 5-year cap-building period ends
if it trains residents in a new program. As a result of OMB
redesignations, some teaching hospitals may be redesignated from
being located in a rural area to an urban area, thereby losing their
ability to increase their caps again after their initial 5-year cap-
building period. If a rural hospital had started training residents
in the new program while it was rural and was redesignated as urban
before the end of the 5-year cap-building period, we are proposing
that effective for cost reporting periods beginning on or after
October 1, 2014, it can continue growing that program(s) for the
remainder of the cap-building period and receive a permanent cap
adjustment for that new program(s). Once the cap-building period for
the new program(s) that was started while the hospital was still
rural expires, the teaching hospital that has been redesignated as
urban will no longer be able to receive any additional permanent cap
adjustments.
In section IV.K.3.b. of the preamble of this proposed rule, we
discuss our proposal related to a redesignated hospital's
participation in a rural track program. Under existing regulations,
if an urban hospital rotates residents to a separately accredited
rural track program at a rural site(s) for more than one-half of the
duration of the program, the urban hospital may receive an
adjustment to its cap for training those FTE residents, referred to
as the rural track FTE limitation. We are proposing that any time a
rural hospital participating in a rural track is in an area
redesignated by OMB as urban after residents started training in the
rural track and during the period that is used to calculate the
urban hospital's rural track FTE limitation, the urban hospital may
still receive a cap adjustment for that rural track. We also are
proposing that if the rural hospital participating in the rural
track is in an area redesignated as urban, the redesignated urban
hospital can continue to be considered a rural hospital for purposes
of the rural track for up to 2 years. However, within those 2 years,
either the rural hospital that has been redesignated as urban must
reclassify as rural under Sec. 412.103 for purposes of IME payment
only, or the urban hospital must find a new geographically rural
site to participate as the rural site for purposes of the rural
track and must be training FTE residents at that new site, in order
for the urban hospital to receive payment under Sec. 413.79(k)(1)
or (k)(2) for the rural track program after the 2-year period ends.
We estimate that the proposals discussed under IV.K.3.a. and b.
of the preamble of this proposed rule would have a very minimal, if
any, impact on Medicare expenditures. These proposals would only be
applied to, at the most, very few hospitals (if any at all) and
would only apply once every 10 years as a result of OMB changes in
labor market area delineations due to a recent Census.
In sections IV.K.5.a. and b. of the preamble of this proposed
rule, we are proposing some changes to the current application
process for and awarding of cap slots from closed hospitals under
section 5506 of the Affordable Care Act that would be effective for
hospital closures announced on or after October 1, 2014. We are
proposing an alternative interpretation of the statutory provision
at section 5506(d) of the Affordable Care Act, which provides that
the Secretary give consideration to the effect of the permanent
awarding of slots under section 5506 of the Affordable Care Act to
any temporary cap adjustments to a hospital received under Sec.
413.79(h) of the regulations to ensure that there be no duplication
of FTE cap slots. Currently, when applying this statutory provision
for no duplication of FTE slots, we look at all of the hospitals
that are receiving temporary cap adjustments to train displaced
residents and all of the hospitals that are applying for a permanent
increase in caps under section 5506 when determining the effective
date for slots permanently awarded to hospitals under Ranking
Criterion One and Ranking Criteria Three through Eight. In this
proposed rule, we are proposing to interpret the statutory language
at section 5506(d) in a manner that would permit us to apply the
concept of ensuring no duplication of FTE resident slots on a
hospital-by-hospital basis, such that if a hospital is both
receiving a temporary cap adjustment under Sec. 413.79(h) and is
applying under section 5506 for permanent cap slots, it will not be
able to receive a permanent cap adjustment until the displaced
residents graduate. However, if a hospital is applying under section
5506 for permanent cap slots and did not receive a temporary cap
adjustment under Sec. 413.79(h), that hospital will not have to
wait until displaced residents that are training at another hospital
graduate to be awarded any permanent cap slots under section 5506.
We estimate that this proposal could result in a slight increase in
Medicare expenditures in a rare event a section 5506 cap adjustment
may be provided to one hospital before a temporary cap adjustment
expires at another hospital. However, we are unable to estimate
whether this will occur with any future hospital closures where
section 5506 is applied because we do not know how many, if any,
residents will be displaced. Furthermore, we believe that any
temporary duplicate payment would be a rare occurrence as most
hospitals that are receiving a temporary cap adjustment under Sec.
413.79(h) will also receive a permanent cap adjustment under section
5506. In this instance the hospital would only be able to receive
the permanent cap adjustment once the temporary cap adjustment
expires in which case there would be no duplication of FTE resident
slots.
In addition, under section IV.K.5.c. of the preamble of this
proposed rule, we are proposing to revise the ranking criteria used
to award slots under section 5506. First, we are proposing to no
longer allow hospitals to apply for cap relief, which is included
under current Ranking Criterion Eight. This proposed change would
mean that hospitals would be awarded slots under section 5506 for
taking over a closed hospital's residency training program, having
participated with a closed hospital in a Medicare GME affiliated
group, taking over part of a closed hospital's program, expanding or
starting a new geriatrics program, expanding or starting a new
primary care or general surgery program, and expanding or starting a
new nonprimary care or nongeneral surgery program. Second, Ranking
Criterion One currently applies to hospitals that are assuming (or
have assumed) an entire program from the hospital that closed. We
are proposing to revise this Ranking Criterion to provide priority
to a hospital whose FTE resident caps were erroneously reduced by
CMS under section 5503 of the Affordable Care Act, contrary to the
specific statutory exception at section 1886(h)(8)(A)(i)(I) of the
Act, and the CMS Central Office is made aware of the error prior to
the posting of this proposed rule. We do not believe there is any
cost associated with these proposals because we would be assigning
all of the closed hospital's slots, only the specific hospital
awarded the slots may change.

10. Effects of Implementation of Rural Community Hospital Demonstration
Program

In section IV.L. of the preamble of this proposed rule, we
discuss our implementation of section 410A of Public Law 108-173, as
amended, which requires the Secretary to conduct a demonstration
that would modify reimbursement for inpatient services for up to 30
rural community hospitals. Section 410A(c)(2) requires that ``[i]n
conducting the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration program under this section was not
implemented.'' As discussed in section IV.L. of the preamble of this
proposed rule, in the IPPS final rules for each of the previous 10
fiscal years, we have estimated the additional payments made by the
program for each of the participating hospitals as a result of the
demonstration. In

[[Page 28369]]

order to achieve budget neutrality, we are proposing to adjust the
national IPPS rates by an amount sufficient to account for the added
costs of this demonstration. In other words, we are proposing to
apply budget neutrality across the payment system as a whole rather
than across the participants of this demonstration. The language of
the statutory budget neutrality requirement permits the agency to
implement the budget neutrality provision in this manner. The
statutory language requires that ``aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration . . . was not implemented'' but does not
identify the range across which aggregate payments must be held
equal.
We are proposing to adjust the national IPPS rates according to
the methodology set forth elsewhere in this proposed rule. The
proposed adjustment to the national IPPS rates to account for
estimated demonstration cost for FY 2014 for the 7 ``pre-expansion''
participating hospitals that are currently participating in the
demonstration and the 15 additional hospitals participating as a
result of the expansion of the demonstration under the Affordable
Care Act is $53,673,008. In addition, in this proposed rule, we are
proposing to add to the adjustment of the national IPPS rates the
amount by which the actual costs of the demonstration for FY 2008
(as shown in the finalized cost reports for cost reporting periods
beginning in FY 2008 for the hospitals that participated in the
demonstration during FY 2008) exceed the budget neutrality offset
amount that was finalized in the FY 2008 IPPS final rule
($10,389,771). Thus, we are proposing that the resulting total
($64,062,779) would be the amount for which an adjustment to
inpatient rates for FY 2015 would be calculated. We also are
proposing that if settled cost reports for all of the demonstration
hospitals that participated in the applicable fiscal year (FY 2009,
2010, or 2011), are made available prior to the FY 2015 IPPS/LTCH
PPS final rule, we would incorporate into the FY 2015 budget
neutrality offset amount any additional amounts by which the final
settled costs of the demonstration for the year (FY 2009, 2010, or
2011) exceeded the budget neutrality offset amount applicable to
such year as finalized in the respective year's IPPS final rule.

11. Effects of Proposed Changes Related to Reclassification as Rural
for CAHs

In section VI.C.2. of the preamble of this proposed rule, we
discuss our proposals relating to reclassifications of CAHs as a
result of the proposed adoption of the new OMB labor market area
delineations. A facility is eligible for designation as a CAH only
if it is either physically located in a rural area or has been
reclassified as rural under 42 CFR 412.103. CAHs can be affected by
the recent OMB labor market area delineations because facilities
that are currently participating as CAHs that were previously
located in rural areas may now be located in urban areas as a result
of the new delineations. Previously, in both in the FY 2005 IPPS
final rule and the FY 2010 IPPS/LTCH PPS final rule, we revised the
regulations to give currently participating CAHs 2 years, from the
effective date of the earlier OMB designations, to reclassify as
rural facilities. However, these regulation changes were specific to
a particular timeframe. As we are proposing implementation of the
latest OMB labor market area delineations in this proposed rule, we
are proposing that, effective October 1, 2014, currently
participating CAHs that are located in an area that has been
redesignated from rural to urban under the new delineations will
again be treated as rural for 2 years from the date the new OMB
delineations are implemented. An affected CAH would have 2 years
from the date the redesignation becomes effective to reclassify as
rural and thereby retain its CAH status. If a CAH fails to
reclassify within those 2 years, it can no longer participate in
Medicare as a CAH. However, unlike in previous years when the
regulation changes were specific to a particular timeframe, the
change that we are proposing to the regulations is not specific to a
particular timeframe but would also apply to future OMB labor market
area delineations. We estimate that this proposal will have little
or no impact on Medicare expenditures because we expect that
virtually all of the affected CAHs will be granted rural status by
the State in which they are located and, therefore, will be able to
apply for reclassification as rural under Sec. 412.103 in order to
retain their CAH status.

12. Effects of Proposed Revision of the Requirements for Physician
Certification of CAH Inpatient Services

In section VI.C.3. of the preamble of this proposed rule, we
discuss the statutory requirement for physician certification of CAH
inpatient services. For inpatient CAH services to be payable under
Medicare Part A, section 1814(a)(8) of the Act requires that a
physician certify that the individual may reasonably be expected to
be discharged or transferred to a hospital within 96 hours after
admission to the CAH. These statutory requirements are addressed in
the regulations at 42 CFR 424.15. In order to provide CAHs with
greater flexibility in meeting this certification requirement, we
are proposing to amend the regulations governing the timing of the
96-hour certification requirement at Sec. 424.15(b) such that
physician certification is required no later than 1 day before the
date on which the claim for payment for the inpatient CAH service is
submitted. We also are proposing to revise Sec. 424.11(d)(5) to
remove the phrase ``or critical access hospital inpatient''. We do
not believe there is any significant impact on Medicare expenditures
associated with these proposed changes because we are simply
proposing to provide CAHs with additional flexibility in meeting the
statutory requirement. The underlying statutory requirement itself
is unchanged.

13. Effects of Proposed Changes Relating to Administrative Appeals by
Providers and Judicial Review for Appropriate Claims in Provider Cost
Reports

In section VIII. of the preamble to this proposed rule, we
discuss our proposal to require a provider to include an appropriate
claim for an item in its Medicare cost report with the penalty for
the failure to do so being the preclusion of payment for the item in
the notice of program reimbursement (NPR) issued by the fiscal
intermediary and in any decision or order issued by a reviewing
entity in an administrative appeal filed by the provider. The
proposal also would revise the Medicare provider appeals regulations
by eliminating the requirement that a provider must include an
appropriate claim for an item in its Medicare cost report in order
to meet the dissatisfaction requirement for Provider Reimbursement
Review Board jurisdiction and would make technical corrections to
the provider reimbursement appeals regulations to conform the
regulations to the statute. There is no impact to the provider
resulting from these proposed provisions.

I. Effects of Proposed Update to the Reasonable Compensation
Equivalent (RCE) Limits for Compensation for Physician Services
Provided in Providers

In section VI.B. of the preamble of this proposed rule, we
discuss our proposal to update and revise the methodology used to
calculate the reasonable compensation equivalent (RCE) limits for
compensation for physician services provided in providers, in
accordance with our regulations at 42 CFR 415.70(f)(2). For CY 2015,
we estimate that 59 cancer and children's hospitals and 46 IPPS
teaching hospitals would be subject to the RCE limits. We estimate
the costs associated with the updated RCE limits for CY 2015 to be
approximately $40 million. We do not expect this proposed RCE limit
update to impact a significant number of small, rural entities;
therefore, a full impact analysis is not required.

J. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

For the impact analysis presented below, we used data from the
December 2013 update of the FY 2013 MedPAR file and the December
2013 update of the Provider-Specific File (PSF) that is used for
payment purposes. Although the analyses of the proposed changes to
the capital prospective payment system do not incorporate cost data,
we used the December 2013 update of the most recently available
hospital cost report data (FYs 2011 and 2012) to categorize
hospitals. Our analysis has several qualifications. We use the best
data available and make assumptions about case-mix and beneficiary
enrollment as described below.
Due to the interdependent nature of the IPPS, it is very
difficult to precisely quantify the impact associated with each
proposed change. In addition, we draw upon various sources for the
data used to categorize hospitals in the tables. In some cases (for
instance, the number of beds), there is a fair degree of variation
in the data from different sources. We have attempted to construct
these variables with the best available sources overall. However, it
is possible that some individual hospitals are placed in the wrong
category.
Using cases from the December 2013 update of the FY 2013 MedPAR
file, we simulated payments under the capital IPPS for FY 2014 and
FY 2015 for a comparison

[[Page 28370]]

of total payments per case. Any short-term, acute care hospitals not
paid under the general IPPS (for example, Indian Health Service
hospitals and hospitals in Maryland) are excluded from the
simulations.
The methodology for determining a capital IPPS payment is set
forth at Sec. 412.312. The basic methodology for calculating
capital IPPS payments in FY 2015 is as follows:

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

In addition to the other adjustments, hospitals may also receive
outlier payments for those cases that qualify under the threshold
established for each fiscal year. We modeled payments for each
hospital by multiplying the capital Federal rate by the GAF and the
hospital's case-mix. We then added estimated payments for indirect
medical education, disproportionate share, and outliers, if
applicable. For purposes of this impact analysis, the model includes
the following assumptions:
We estimate that the Medicare case-mix index will
increase by 0.5 percent in both FYs 2014 and 2015.
We estimate that Medicare discharges will be
approximately 12.2 million in FY 2014 and 12.6 million in FY 2015.
The capital Federal rate was updated beginning in FY
1996 by an analytical framework that considers changes in the prices
associated with capital-related costs and adjustments to account for
forecast error, changes in the case-mix index, allowable changes in
intensity, and other factors. As discussed in section III.A.1.a. of
the Addendum to this proposed rule, the proposed update is 1.5
percent for FY 2015.
In addition to the proposed FY 2015 update factor, the
proposed FY 2015 capital Federal rate was calculated based on a
proposed GAF/DRG budget neutrality adjustment factor of 0.9957 and a
proposed outlier adjustment factor of 0.9374. As discussed in
section VI.C. of the preamble of this proposed rule, we are not
proposing to make an additional MS-DRG documentation and coding
adjustment to the capital IPPS Federal rates for FY 2015.

2. Results

We used the actuarial model described above to estimate the
potential impact of our proposed changes for FY 2015 on total
capital payments per case, using a universe of 3,388 hospitals. As
described above, the individual hospital payment parameters are
taken from the best available data, including the December 2013
update of the FY 2013 MedPAR file, the December 2013 update to the
PSF, and the most recent cost report data from the December 2013
update of HCRIS. In Table III, we present a comparison of estimated
total payments per case for FY 2014 and estimated total payments per
case for FY 2015 based on the proposed FY 2015 payment policies.
Column 2 shows estimates of payments per case under our model for FY
2014. Column 3 shows estimates of payments per case under our model
for FY 2015. Column 4 shows the total percentage change in payments
from FY 2014 to FY 2015. The change represented in Column 4 includes
the proposed 1.5 percent update to the capital Federal rate and
other proposed changes in the adjustments to the capital Federal
rate. The comparisons are provided by: (1) Geographic location; (2)
region; and (3) payment classification.
The simulation results show that, on average, capital payments
per case in FY 2015 are expected to increase as compared to capital
payments per case in FY 2014. This expected increase is due
primarily to the approximately 0.9 percent increase in the proposed
capital Federal rate for FY 2015 as compared to the FY 2014 capital
Federal rate. Overall, across all hospitals, the proposed changes to
the GAFs are expected to have no net effect on capital payments.
However, regionally, the effects of the proposed changes to the GAFs
on capital payments are consistent with the projected changes in
payments due to proposed changes in the wage index (and proposed
policies affecting the wage index) as shown in Table I in section
I.G. of this Appendix.
Overall, there is an increase in capital payments per case due
to the effects of proposed changes to the MS-DRG reclassifications
and recalibrations, with more of this increase expected for urban
hospitals. However, this increase is offset by projected changes in
outlier payments, with rural areas expected to experience more of
this offset.
The net impact of these proposed changes is an estimated 1.2
percent change in capital payments per case from FY 2014 to FY 2015
for all hospitals (as shown below in Table III).
The geographic comparison shows that, on average, with the
exception of hospitals in the Rural Mountain area, most hospitals
are expected to experience an increase in capital IPPS payments per
case in FY 2015 as compared to FY 2014. As we stated above, these
expected increases are primarily due to the proposed increase in the
capital Federal rate. Capital IPPS payments per case for hospitals
in ``large urban areas'' are expected to have an estimated increase
of 1.4 percent, while hospitals in rural areas, on average, are
expected to experience a 0.7 percent increase in capital payments
per case from FY 2014 to FY 2015. Capital IPPS payments per case for
``other urban hospitals'' are estimated to increase 1.2 percent. The
primary factor contributing to the difference in the proposed
projected increase in capital IPPS payments per case for urban
hospitals as compared to rural hospitals is the proposed increase in
capital payments to urban hospitals due to proposed changes to the
MS-DRG relative weights. This projected increase is slightly lower
for rural hospitals.
The comparisons by region show that the estimated increases in
capital payments per case from FY 2014 to FY 2015 in urban areas
range from a 2.0 percent increase for the Pacific urban region to a
0.8 percent increase for the East South Central urban region, and a
0.6 percent increase for the Puerto Rico urban region. For rural
regions, the Pacific rural region is expected to experience the
largest increase in capital IPPS payments per case of 1.9 percent,
while the Mountain rural region is the only region projected to have
a decrease in capital payments per case, 0.1 percent, compared to FY
2014 payments per case. Unlike most other urban and rural regions
where proposed changes in the GAFs contribute to a projected
decrease in capital payments, the proposed changes in the GAFs
contribute to an expected increase in capital IPPS payments per case
for the Pacific urban and rural regions. A larger than average
decrease in capital payments per case for the Mountain rural area
due to the proposed change in outliers offset the projected
increases to that area's capital payments per case in FY 2015
compared to FY 2014.
Hospitals of all types of ownership (that is, voluntary
hospitals, government hospitals, and proprietary hospitals) are
estimated to experience an increase in capital payments per case
from FY 2014 to FY 2015. The proposed increase in capital payments
for proprietary hospitals is estimated at 1.2 percent; for voluntary
hospitals, at 1.3 percent. Government hospitals are estimated to
experience a 1.1 percent increase in capital payments per case from
FY 2014 to FY 2015.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals
may apply for reclassification for purposes of the wage index for FY
2015. Reclassification for wage index purposes also affects the GAFs
because that factor is constructed from the hospital wage index. To
present the effects of the hospitals being reclassified as of the
publication of this proposed rule for FY 2015, we show the average
capital payments per case for reclassified hospitals for FY 2015.
Urban reclassified hospitals are expected to experience an increase
in capital payments of 1.5 percent, whereas for urban
nonreclassified hospitals, the expected increase is 1.2 percent. The
estimated percentage increase for rural reclassified hospitals is
0.7 percent, and for rural nonreclassified hospitals, the estimated
percentage increase is 0.3 percent. Other reclassified hospitals
(that is, hospitals reclassified under section 1886(d)(8)(B) of the
Act) are expected to experience the largest increase (2.2 percent)
in capital payments from FY 2014 to FY 2015.

[[Page 28371]]

Table III--Comparison of Total Payments per Case
[FY 2014 payments compared to FY 2015 payments]
----------------------------------------------------------------------------------------------------------------
Number of Average FY 2014 Average FY 2015
hospitals payments/case payments/case Change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
All hospitals................... 3,388 848 859 1.2
Large urban areas 1,395 936 948 1.4
(populations over 1
million)...................
Other urban areas 1,147 817 827 1.2
(populations of 1 million
or fewer)..................
Rural areas................. 846 577 581 0.7
Urban hospitals................. 2,542 882 893 1.3
0-99 beds................... 655 728 732 0.5
100-199 beds................ 788 761 770 1.2
200-299 beds................ 469 810 821 1.4
300-499 beds................ 417 902 915 1.4
500 or more beds............ 213 1,056 1,070 1.3
Rural hospitals................. 846 577 581 0.7
0-49 beds................... 325 470 473 0.6
50-99 beds.................. 298 534 537 0.5
100-149 beds................ 136 575 579 0.7
150-199 beds................ 50 640 645 0.8
200 or more beds............ 37 704 711 0.9
By Region:
Urban by Region................. 2,542 882 893 1.3
New England................. 120 974 985 1.2
Middle Atlantic............. 324 946 963 1.7
South Atlantic.............. 406 796 805 1.1
East North Central.......... 397 848 856 0.9
East South Central.......... 153 758 764 0.8
West North Central.......... 162 876 887 1.3
West South Central.......... 385 816 824 0.9
Mountain.................... 159 906 916 1.1
Pacific..................... 384 1,111 1,133 2.0
Puerto Rico................. 52 406 408 0.6
Rural by Region................. 846 577 581 0.7
New England................. 22 802 812 1.2
Middle Atlantic............. 57 562 569 1.3
South Atlantic.............. 132 550 551 0.2
East North Central.......... 115 601 606 0.8
East South Central.......... 165 530 534 0.7
West North Central.......... 102 613 617 0.6
West South Central.......... 168 511 513 0.5
Mountain.................... 61 651 650 -0.1
Pacific..................... 24 742 756 1.9
Puerto Rico................. 0 0 0 0.0
By Payment Classification:
All hospitals................... 3,388 848 859 1.2
Large urban areas (populations 794 879 889 1.1
over 1 million)................
Other urban areas (populations 1,764 882 894 1.4
of 1 million or fewer).........
Rural areas..................... 830 588 591 0.5
Teaching Status:
Non-teaching.................... 2,352 722 730 1.1
Fewer than 100 Residents........ 792 831 841 1.3
100 or more Residents........... 244 1,196 1,213 1.4
Urban DSH:
100 or more beds................ 1,591 902 914 1.3
Less than 100 beds.............. 366 635 639 0.8
Rural DSH:
Sole Community (SCH/EACH)....... 388 521 524 0.6
Referral Center (RRC/EACH)...... 212 649 653 0.6
Other Rural:
100 or more beds................ 24 548 546 -0.3
Less than 100 beds.............. 125 459 461 0.4
Urban teaching and DSH:
Both teaching and DSH........... 842 980 993 1.3
Teaching and no DSH............. 133 884 897 1.6
No teaching and DSH............. 1,115 754 763 1.3
No teaching and no DSH.......... 468 791 798 0.9
Rural Hospital Types:
Non special status hospitals.... 2,576 882 893 1.2
RRC/EACH........................ 197 717 730 1.8
SCH/EACH........................ 325 619 624 0.8
SCH, RRC and EACH............... 125 704 710 0.9

[[Page 28372]]

Hospitals Reclassified by the
Medicare Geographic Classification
Review Board:
FY2015 Reclassifications:
All Urban Reclassified.......... 533 883 896 1.5
All Urban Non-Reclassified...... 1,858 890 901 1.2
All Rural Reclassified.......... 271 615 620 0.7
All Rural Non-Reclassified...... 379 541 543 0.3
Other Reclassified Hospitals 60 574 587 2.2
(Section 1886(d)(8)(B))........
Type of Ownership:
Voluntary....................... 1,925 861 872 1.3
Proprietary..................... 883 770 779 1.2
Government...................... 540 886 895 1.1
Medicare Utilization as a Percent of
Inpatient Days:
0-25............................ 445 1,069 1,082 1.3
25-50........................... 2,004 865 876 1.3
50-65........................... 718 704 713 1.2
Over 65......................... 131 560 565 0.9
----------------------------------------------------------------------------------------------------------------

K. Effects of Proposed Payment Rate Changes and Policy Changes
Under the LTCH PPS

1. Introduction and General Considerations

In section VII. of the preamble of this proposed rule and
section V. of the Addendum to this proposed rule, we set forth the
proposed annual update to the payment rates for the LTCH PPS for FY
2015. In the preamble of this proposed rule, we specify the
statutory authority for the proposed provisions that are presented,
identify those proposed policies, and present rationales for our
proposed decisions as well as alternatives that were considered. In
this section of Appendix A to this proposed rule, we discuss the
impact of the proposed changes to the payment rate, factors, and
other payment rate policies related to the LTCH PPS that are
presented in the preamble of this proposed rule in terms of their
estimated fiscal impact on the Medicare budget and on LTCHs.
Currently, there are 422 LTCHs included in this impacts
analysis, which includes data for 91 nonprofit (voluntary ownership
control) LTCHs, 288 proprietary LTCHs, and 43 LTCHs that are
government-owned and operated. (We note that although there are
currently approximately 435 LTCHs, for purposes of this impact
analysis, we excluded the data of all inclusive rate providers and
the LTCHs that are paid in accordance with demonstration projects,
consistent with the development of the proposed FY 2015 MS-LTC-DRG
relative weights (discussed in section VII.B.3.c. of the preamble of
this proposed rule)). In the impact analysis, we used the proposed
payment rate, factors, and policies presented in this proposed rule,
including the proposed 2.1 percent annual update for LTCHs that
submit quality data in accordance with section 1886(m)(5)(C) of the
Act, which is based on the full estimated increase of the LTCH PPS
market basket and the reductions required by sections 1886(m)(3) and
(m)(4) of the Act, the proposed final year of the phase-in of a one-
time prospective adjustment factor of 0.98734 (approximately -1.3
percent), the proposed update to the MS-LTC-DRG classifications and
relative weights, the proposed update to the wage index values,
including the proposed implementation of the new OMB delineations,
and labor-related share, and the best available claims and CCR data
to estimate the change in payments for FY 2015. (As discussed in
section VII.C. of the preamble of this proposed rule, in accordance
with section 1886(m)(5)(C) of the Act, for LTCHs that fail to submit
quality data, the proposed annual update to the LTCH PPS standard
Federal rate is reduced by 2.0 percentage points in FY 2015.)
The standard Federal rate for FY 2014 is $40,607.31 for LTCHs
that submit quality data in accordance with the requirements of
section 1886(m)(5)(C) of the Act. For FY 2015, we are proposing to
establish a standard Federal rate of $40,943.51 for LTCHs that
submit quality data in accordance with the requirements of section
1886(m)(5)(C) of the Act, which reflects the proposed 2.1 percent
annual update to the standard Federal rate, and the proposed area
wage budget neutrality factor of 1.0002034 to ensure that the
proposed changes in the wage index, including the proposed
implementation of the new OMB delineations, and labor-related share
do not influence aggregate payments, and the proposed final year of
the phase-in of a one-time prospective adjustment factor of 0.98734.
For LTCHs that fail to submit data for the LTCHQR Program, in
accordance with section 1886(m)(5)(C) of the Act, we are proposing
to establish a standard Federal rate of $40,141.47. This reduced
standard Federal rate reflects the proposed updates described above
in addition to a 2.0 percentage point to the annual update for
failure to submit data to the LTCHQR Program. We note that the
proposed factors described above to determine the proposed FY 2015
standard Federal rate are applied to the FY 2014 Federal standard
rate set forth under Sec. 412.523(c)(3)(ix)(A) (that is,
$40,607.31).
Based on the best available data for the 422 LTCHs in our
database, we estimate that the proposed annual update to the
standard Federal rate for FY 2015, including the reduced updated for
LTCHs that fail to submit quality data in accordance with the
requirements of the LTCHQR Program (discussed in section V.A.2. of
the Addendum to this proposed rule) and the proposed changes to the
area wage adjustment for FY 2015 (discussed in section V.B. of the
Addendum to this proposed rule), in addition to an estimated
decrease in HCO payments would result in an increase in estimated
payments from FY 2014 of approximately $44 million. Based on the 422
LTCHs in our database, we estimate that the FY 2015 LTCH PPS
payments would be approximately $5.594 billion, as compared to
estimated FY 2014 LTCH PPS payments of approximately $5.550 billion.
Because the combined distributional effects and estimated changes to
the Medicare program payments are over approximately $100 million,
this proposed rule is considered a major economic rule, as defined
in this section. We note that the approximate $44 million for the
projected increase in estimated aggregate proposed LTCH PPS payments
from FY 2014 to FY 2015 does not reflect changes in LTCH admissions
or case-mix intensity in estimated LTCH PPS payments, which also
will affect overall payment changes.
The projected 0.8 percent increase in estimated proposed
payments per discharge from FY 2014 to FY 2015 is attributable to
several factors, including the proposed 2.1 percent annual update to
the standard Federal rate (or 0.1 percent annual update for LTCHs
that failed to submit data under the requirements of the LTCHQR
Program), a proposed one-time prospective adjustment factor for FY
2015 of 0.98734 (approximately -1.3 percent), and projected
decreases in estimated HCO payments. Although the net effect of the
proposed 2.1 percent annual update and the approximate -1.3 percent
proposed one-time prospective adjustment factor is approximately 0.8
percent (that is, 2.1 percent -1.3 percent = 0.8 percent), Table IV
(column 6) shows the estimated change attributable solely to the
proposed

[[Page 28373]]

annual update to the standard Federal rate (2.1 percent for LTCHs
that submit quality data under the requirements of the LTCHQR
Program and 0.1 percent for LTCHs that failed submit quality data
under the requirements of the LTCHQR Program), including a proposed
one-time prospective adjustment factor for FY 2015 under the final
year of the phase-in (approximately 1.3 percent), is projected to
result in an increase of 0.7 percent in payments per discharge from
FY 2014 to FY 2015, on average, for all LTCHs. In addition to the
proposed 2.1 percent annual update for FY 2015 (or 0.1 percent
annual update for LTCHs that failed to submit data under the LTCHQR
Program), and a proposed -1.3 percent one-time prospective
adjustment factor for FY 2015, this estimated increase in aggregate
LTCH PPS payments of 0.7 percent shown in column 6 of Table IV also
includes estimated payments for SSO cases that are paid using
special methodologies that are not affected by the annual update to
the standard Federal rate. Therefore, for some hospital categories,
the projected increase in payments based on the proposed standard
Federal rate is slightly less than the net effect of the proposed
2.1 percent annual update and the approximate -1.3 percent proposed
one-time prospective adjustment factor (or 0.8 percent) for FY 2015.
Because we are proposing to apply an area wage level budget
neutrality factor to the standard Federal rate, the proposed annual
update to the wage data, including the proposed implementation of
the new OMB delineations, and labor-related share does not impact
the increase in aggregate payments.
As discussed in section V.B. of the Addendum to this proposed
rule, we are proposing to update the wage index values for FY 2015
based on the most recent available data and the proposed adoption of
the new OMB labor market area delineations. Under our proposal to
adopt the new OMB delineations, we are proposing a transitional
blended wage index for FY 2015 for LTCH's that would have a lower
wage index value under those delineations, as discussed in section
VII.D.2. of the preamble of this proposed rule. Therefore, this
column reflects the proposed blended wage index that is calculated
as a 50/50 blend of the wage index under the current CBSA
designations and the wage index under the new OMB delineations under
our proposed transitional wage index policy. In addition, we are
proposing a slight increase to the labor-related share from 62.537
percent to 62.571 percent under the LTCH PPS for FY 2015, based on
the most recent available data on the relative importance of the
labor-related share of operating and capital costs based on the FY
2009-based LTCH-specific market basket. We also are proposing to
apply an area wage level budget neutrality factor of 1.0002034,
which increases the proposed standard Federal rate by approximately
0.02 percent. Therefore, the proposed changes to the wage data,
including the proposed adoption of the new OMB delineations, and
labor-related share do not result in a change in estimated aggregate
LTCH PPS payments.
Table IV below shows the impact of the proposed payment rate and
the proposed policy changes on LTCH PPS payments for FY 2015
presented in this proposed rule by comparing estimated FY 2014
payments to estimated FY 2015 payments. The projected increase in
payments from FY 2014 to FY 2015 of 0.8 percent is attributable to
the impacts of the proposed change to the standard Federal rate (0.7
percent in Column 6) and the effect of the estimated slight decrease
in proposed payments for HCO cases (0.1 percent) and an estimated
increase in payments for SSO cases (0.2 percent). We currently
estimate total HCO payments are projected to decrease slightly from
FY 2014 to FY 2015 in order to ensure that the estimated HCO
payments would be 8 percent of the total estimated LTCH PPS payments
in FY 2015. An analysis of the most recent available LTCH PPS claims
data (that is, FY 2013 claims data from the December 2013 update of
the MedPAR file) indicates that the FY 2014 HCO threshold of $13,314
(as established in the FY 2014 IPPS/LTCH PPS final rule) may result
in HCO payments in FY 2015 that are slightly above the estimated 8
percent. Specifically, we currently estimate that HCO payments would
be approximately 8.1 percent of the estimated total LTCH PPS
payments in FY 2014. We estimate that the impact of the slight
decrease in HCO payments would result in approximately a 0.1 percent
decrease in estimated payments from FY 2014 to FY 2015, on average,
for all LTCHs. Furthermore, in calculating the estimated HCO
payments for FYs 2014 and 2015, we increased estimated costs by the
applicable market basket percentage increase as projected by our
actuaries. This increase in estimated costs also results in a
projected increase in SSO payments of approximately 0.2 percent
relative to last year. The net result of these projected changes in
HCO and SSO payments in FY 2015 is an estimated change in aggregate
payments of 0.1 percent. We note that estimated payments for all SSO
cases comprise approximately 12 percent of the estimated total LTCH
PPS payments, and estimated payments for HCO cases comprise
approximately 8 percent of the estimated total FY 2015 LTCH PPS
payments. Payments for HCO cases are based on 80 percent of the
estimated cost of the case above the HCO threshold, while the
majority of the payments for SSO cases (approximately 60 percent)
are based on the estimated cost of the case.
In addition to the projected increase in LTCH PPS payments per
discharge of approximately $44 million (0.8 percent) from FY 2014 to
FY 2015, as shown in Table IV below, we also estimate that the net
effect of the projected impact of certain other proposed LTCH PPS
policy changes (that is, the reinstatement of the moratorium on the
full implementation of the ``25-percent policy'' payment adjustment;
the reinstatement of the moratorium on the development of new LTCHs
and LTCH satellite facilities and additional LTCH beds; the proposed
revision of the ``greater than 3-day interruption of stay'' policy;
the proposed revocation of on-site discharges and readmissions
policy; and the proposed payment adjustment for ``subclause (II)''
LTCHs) would result in a $14 million decrease in aggregate LTCH PPS
payments in FY 2015. The individual impact of these proposed policy
changes are discussed in greater detail below in section I.K.3.b. of
this Appendix.
As we discuss in detail throughout this proposed rule, based on
the most recent available data, we believe that the provisions of
this proposed rule relating to the LTCH PPS would result in an
increase in estimated aggregate LTCH PPS payments and that the
resulting LTCH PPS payment amounts would result in appropriate
Medicare payments.

2. Impact on Rural Hospitals

For purposes of section 1102(b) of the Act, we define a small
rural hospital as a hospital that is located outside of an urban
area and has fewer than 100 beds. As shown in Table IV, we are
projecting a 0.7 percent increase in estimated payments per
discharge for FY 2015 as compared to FY 2014 for rural LTCHs that
would result from the proposed changes presented in this proposed
rule, as well as the effect of estimated changes to HCO and SSO
payments. This estimated impact is based on the data for the 22
rural LTCHs in our database (out of 422 LTCHs) for which complete
data were available.
The estimated increase in LTCH PPS payments from FY 2014 to FY
2015 for rural LTCHs (0.7 percent) is slightly less than the
national average increase (0.8 percent). The estimated increase in
LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs is
primarily due to the proposed increase to the standard Federal rate.
However, rural LTCHs are experiencing slightly lower increases than
the national average due to decreases in their wage index for FY
2015 compared to FY 2014.

3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes and
Policy Changes

a. Budgetary Impact

Section 123(a)(1) of the BBRA requires that the PPS developed
for LTCHs ``maintain budget neutrality.'' We believe that the
statute's mandate for budget neutrality applies only to the first
year of the implementation of the LTCH PPS (that is, FY 2003).
Therefore, in calculating the FY 2003 standard Federal rate under
Sec. 412.523(d)(2), we set total estimated payments for FY 2003
under the LTCH PPS so that estimated aggregate payments under the
LTCH PPS were estimated to equal the amount that would have been
paid if the LTCH PPS had not been implemented.
As discussed above in section I.K.1. of this Appendix, we
project an increase in aggregate LTCH PPS payments per discharge in
FY 2015 relative to FY 2014 of approximately $44 million based on
the 422 LTCHs in our database. In addition, as discussed below in
section I.K.3.b. of this Appendix, we also estimate that the net
effect of the projected impact of certain other proposed LTCH PPS
policy changes would result in a $14 million decrease in aggregate
LTCH PPS payments in FY 2015.

b. Impact of Certain Proposed LTCH PPS Policy Changes

(1) Proposed Reinstatement of the Moratorium on the Full
Implementation of the ``25-Percent Policy'' Payment Adjustment
(Sec. 412.534 and Sec. 412.536) and Proposed Reinstatement of the
Moratorium on the

[[Page 28374]]

Development of New LTCHs and LTCH Satellites and Additional LTCH
beds (Sec. 412.23(e) and Sec. Sec. 412.23(e)(6) and (7))
Section 1206(b) of Public Law 113-67 provides for the
retroactive reinstatement and extension, for an additional 4 years,
of the moratorium on the full implementation of the 25-percent
threshold payment adjustment (referred to as the ``25-percent
policy'' payment adjustment) established under section 114(c) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections
3106(c) and 10312(a) of the Affordable Care Act. As discussed in
section VII.E. of the preamble of this proposed rule, we are
proposing to reinstate this payment adjustment retroactively for
LTCH cost reporting periods beginning on or after July 1, 2013 or
October 1, 2013, as applicable under the regulations at Sec.
412.534 and Sec. 412.536.
Section 1206(b)(2) of Public Law 113-67, as amended by section
112(b) of the Protecting Access to Medicare Act of 2-14 (Pub. L.
113-93), provides for moratoria on the establishment of new LTCHs
and LTCH satellite facilities and on bed increases in LTCHs
effective for the period beginning April 1, 2014, and ending
September 30, 2017. This statutory provision also provides specific
exceptions to the moratorium on the establishment of new LTCHs and
LTCH satellites. We are proposing to implement this policy under the
regulations at Sec. 412.23(e) and Sec. Sec. 412.23(e)(6) and (7),
respectively. For additional details, refer to section VII.G. of the
preamble of this proposed rule.
Our Office of the Actuary projects that the reinstatement of
``25-percent policy'' adjustment policy would result in
approximately a $120 million increase in aggregate LTCH PPS payments
in FY 2015. In addition, our Office of the Actuary projects that the
portion of the moratoria on the establishment of new LTCHs and LTCH
satellite facilities and additional LTCH beds that would occur
during FY 2015 is estimated to result in approximately a $30 million
reduction in aggregate LTCH PPS payments in FY 2015. Therefore, we
project our proposed implementation of both of these statutory
provisions would result in approximately a $90 million increase in
aggregate LTCH PPS payments in FY 2015.

(2) Proposed Revision of the ``Greater than 3-Day Interruption of
Stay'' Policy (Sec. 412.531) and Proposed Revocation of On-Site
Discharges and Readmissions Policy (Sec. 412.532)

The LTCH greater than 3-day interruption of stay policy under
Sec. 412.531 is a payment adjustment that is applied when during
the course of an LTCH hospitalization, a patient is discharged to an
inpatient acute care hospital, an IRF, or a SNF for treatment or
services not available at the LTCH for a specified period followed
by readmittance to the same LTCH. Specifically, under this policy,
we established specific fixed-day thresholds, which apply to the
days away from the LTCH, depending upon the intervening provider. If
the stay is an ``interrupted stay,'' that is, the patient returned
to the LTCH within the threshold number of days, payment for both
``halves'' of the LTCH discharge is ``bundled,'' and Medicare makes
one payment based on the second date of discharge. As discussed in
section VII.F. of the preamble of this proposed rule, we are
proposing to revise the fixed-day thresholds under the ``greater
than 3-day interruption of stay policy'' to apply a uniform 30-day
threshold as an ``acceptable standard'' for determining a linkage
between an index discharge and a readmission.
As also discussed in section VII.F. of the preamble of this
proposed rule, we also are proposing to remove the discharge and
readmission requirement specified in the regulations under Sec.
412.532 (referred to as the ``5-percent payment threshold''). Under
the ``5-percent payment threshold'' policy, if an LTCH (or a LTCH
satellite facility) directly readmits more than 5 percent of its
total Medicare inpatients discharged from an ``on-site facility''
(for example, a co-located acute care hospital, an IRF, or a SNF, or
a in the case of a LTCH satellite facility, that is co-located with
an LTCH), all such discharges to the co-located ``on-site facility''
and the readmissions to the LTCH are treated as one discharge for
that cost reporting period, and, as such, one LTCH PPS payment is
made on the basis of each patient's initial principal diagnosis.
We estimate that the proposed revision to the greater than 3-day
interruption of stay policy under Sec. 412.531 would result in a
reduction in aggregate LTCH PPS payments of approximately $130
million for FY 2015, if the proposal to apply a uniform 30-day
threshold is finalized. We also estimate that the proposed
discontinuation of the ``5-percent payment threshold'' policy would
result in an increase of approximately $20 million in aggregate LTCH
PPS payments in FY 2015. Accordingly, our Office of the Actuary
projects that, together, these proposed policy revisions are
estimated to decrease aggregate LTCH PPS payments in FY 2015 by
approximately $110 million.

(3) Proposed Payment Adjustment for ``Subclause (II)'' LTCHs (proposed
Sec. 412.526)

Section 1206(d) of Public Law 113-67 requires the Secretary to
evaluate payments and regulations governing ``hospitals which are
classified under subclause (II) of subsection (d)(1)(B)(iv)''. In
addition, based on the result of such evaluations, the statute
authorizes the Secretary to adjust the payment rates for this type
of hospital and to adjust regulations governing a subclause (II)
LTCH that otherwise apply to subclause (I) LTCHs. As discussed in
section VII.H. of the preamble of this proposed rule, under new
Sec. 412.526, we are proposing to apply a payment adjustment under
the LTCH PPS to a subclause (II) LTCH beginning in FY 2015 that
would result in payments to this type of LTCH resembling those under
the reasonable cost TEFRA payment system model. Our Office of the
Actuary projects that, if the proposed payment adjustment for
``subclause (II)'' LTCHs is finalized, it would increase aggregate
LTCH PPS payments in FY 2015 by approximately $6 million.

c. Impact on Providers

The basic methodology for determining a per discharge LTCH PPS
payment is set forth under Sec. 412.515 through Sec. 412.536. In
addition to the basic MS-LTC-DRG payment (the standard Federal rate
multiplied by the MS-LTC-DRG relative weight), we make adjustments
for differences in area wage levels, a COLA for LTCHs located in
Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO
payments for those cases that qualify based on the threshold
established each year.
To understand the impact of the proposed changes to the LTCH PPS
payments presented in this proposed rule on different categories of
LTCHs for FY 2015, it is necessary to estimate payments per
discharge for FY 2014 using the rates, factors (including the FY
2014 GROUPER (Version 31.0), and relative weights and the policies
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50753
through 50760 and 51002). It is also necessary to estimate the
payments per discharge that would be made under the proposed LTCH
PPS rates and factors, and GROUPER (proposed Version 32.0) for FY
2015 (as discussed in section VII. of the preamble of this proposed
rule and section V. of the Addendum to this proposed rule). These
estimates of FY 2014 and FY 2015 LTCH PPS payments are based on the
best available LTCH claims data and other factors, such as the
application of inflation factors to estimate costs for SSO and HCO
cases in each year. We also evaluated the proposed change in
estimated FY 2014 payments to estimated FY 2015 payments (on a per
discharge basis) for each category of LTCHs. We are proposing to
establish a standard Federal rate for FY 2015 of $40,943.51 (for
LTCHs that submit quality data under the requirements of the LTCHQR
Program), which includes the proposed 2.1 percent annual update, the
proposed area wage budget neutrality factor of 1.0002304, and a
proposed one-time prospective adjustment to the standard Federal
rate for FY 2015 of 0.98734 (approximately -1.3 percent). For LTCHs
that fail to submit data to the LTCH Quality Reporting Program, we
are proposing to establish a standard Federal rate for FY 2015 of
$40,141.47 that includes a 2.0 percentage point reduction applied to
the proposed annual update under the requirements of section
1886(m)(5)(C) of the Act in addition to the other proposed
adjustments noted above.
Hospital groups were based on characteristics provided in the
OSCAR data, FY 2010 through FY 2012 cost report data in HCRIS, and
PSF data. Hospital groups included the following:
Location: large urban/other urban/rural.
Participation date.
Ownership control.
Census region.
Bed size.
To estimate the impacts of the proposed payment rates and policy
changes among the various categories of existing providers, we used
LTCH cases from the FY 2013 MedPAR file to estimate payments for FY
2014 and to estimate payments for FY 2015 for 422 LTCHs. We believe
that the discharges based on the FY 2013 MedPAR data for the 422
LTCHs in our database, which includes 288 proprietary LTCHs, provide
sufficient representation in the MS-LTC-DRGs containing discharges
for patients who

[[Page 28375]]

received LTCH care for the most commonly treated LTCH patients'
diagnoses.

d. Calculation of Prospective Payments

For purposes of this impact analysis, to estimate per discharge
payments under the LTCH PPS, we simulated payments on a case-by-case
basis using LTCH claims from the FY 2013 MedPAR files. For modeling
estimated LTCH PPS payments for FY 2014, we used the FY 2014
standard Federal rate (that is, $40,607.31 for LTCHs that submit
quality data under the requirements of the LTCHQR Program and
$39,808.74 for LTCHs that failed to submit quality data under the
requirements of the LTCHQR Program) used to make payments for LTCH
discharges occurring on or after October 1, 2013 through September
30, 2014).
For modeling estimated proposed LTCH PPS payments for FY 2015,
we used the proposed FY 2015 standard Federal rate of $40,943.51
(for LTCHs that submit quality data under the requirements of the
LTCHQR Program), which includes a proposed one-time prospective
adjustment of 0.98734 for FY 2015 for the final year of the 3-year
phase-in. For LTCHs that we project to have failed to submit the
requisite quality data for FY 2015 under the LTCH Quality Reporting
Program, we used the proposed FY 2015 standard Federal rate of
$40,141.47, which reflects the 2.0 percentage points reduction
required by section 1886(m)(5)(C)of the Act. The proposed FY 2015
standard Federal rates also include the proposed application of an
area wage level budget neutrality factor of 1.0002034 (as discussed
in section V.B.5. of the Addendum to this proposed rule).
Furthermore, in modeling estimated LTCH PPS payments for both FY
2014 and FY 2015 in this impact analysis, we applied the FY 2014 and
the proposed FY 2015 adjustments for area wage levels and the
proposed COLA for LTCHs located in Alaska and Hawaii. Specifically,
we adjusted for differences in area wage levels in determining
estimated FY 2014 payments using the current LTCH PPS labor-related
share of 62.537 percent (78 FR 50995 through 50996) and the wage
index values established in the Tables 12A and 12B listed in the
Addendum to the FY 2014 IPPS/LTCH PPS final rule (which are
available via the Internet on the CMS Web site. We also applied the
FY 2014 COLA factors shown in the table in section V.C. of the
Addendum to that final rule (78 FR 50997 through 50998) to adjust
the FY 2014 nonlabor-related share (37.463 percent) for LTCHs
located in Alaska and Hawaii. Similarly, we adjusted for differences
in area wage levels in determining the estimated FY 2015 payments
using the proposed FY 2015 LTCH PPS labor-related share of 62.571
percent and the proposed FY 2015 wage index values, including the
proposed 50/50 blended wage index, determined from the proposed wage
index values presented in Tables 12A through 12D listed in section
VI. of the Addendum to this proposed rule (and available via the
Internet). We also applied the proposed FY 2015 COLA factors shown
in the table in section V.C. of the Addendum to this proposed rule
to the proposed FY 2015 nonlabor-related share (37.429 percent) for
LTCHs located in Alaska and Hawaii.
As discussed above, our impact analysis reflects an estimated
change in payments for SSO cases, as well as an estimated increase
in payments for HCO cases (as described in section V.D. of the
Addendum to this proposed rule). In modeling proposed payments for
SSO and HCO cases in FY 2015, we applied an inflation factor of 4.7
percent (determined by OACT) to estimate the costs of each case
using the charges reported on the claims in the FY 2013 MedPAR files
and the best available CCRs from the December 2013 update of the
PSF. Furthermore, in modeling estimated LTCH PPS payments for FY
2015 in this impact analysis, we used the proposed FY 2015 fixed-
loss amount of $15,730 (as discussed in section V.D. of the Addendum
to this proposed rule).
These impacts reflect the estimated ``losses'' or ``gains''
among the various classifications of LTCHs from FY 2014 to FY 2015
based on the proposed payment rates and policy changes presented in
this proposed rule. Table IV illustrates the estimated aggregate
impact of the LTCH PPS among various classifications of LTCHs.
The first column, LTCH Classification, identifies the
type of LTCH.
The second column lists the number of LTCHs of each
classification type.
The third column identifies the number of LTCH cases.
The fourth column shows the estimated payment per
discharge for FY 2014 (as described above).
The fifth column shows the estimated payment per
discharge for FY 2015 (as described above).
The sixth column shows the percentage change in
estimated payments per discharge from FY 2014 to FY 2015 due to the
proposed annual update to the standard Federal rate (as discussed in
section V.A.2. of the Addendum to this proposed rule), including the
proposed 2.0 percentage point reduction to the update to the
standard Federal rate for LTCHs that fail to submit data to the
LTCHQR Program and the final year of the phase-in of a one-time
prospective adjustment factor for FY 2015.
The seventh column shows the percentage change in
estimated payments per discharge from FY 2014 to FY 2015 for
proposed changes to the area wage level adjustment (that is, the
proposed wage indexes, including the proposed implementation of the
new OMB delineations, and proposed labor-related share), including
the proposed application of an area wage level budget neutrality
factor, (as discussed in section V.B. of the Addendum to this
proposed rule. This column includes the proposed wage index
calculated as a 50/50 blend of the wage index under the current CBSA
designations and the wage index under the new OMB delineations under
our proposed transitional wage index policy for the proposed
implementation of the new OMB delineations.
The eighth column shows the percentage change in
estimated payments per discharge from FY 2014 (Column 4) to FY 2015
(Column 5) for all proposed changes (and includes the effect of
estimated proposed changes to HCO and SSO payments).

Table IV--Impact of Proposed Payment Rate and Policy Changes to LTCH PPS Payments for FY 2015
[Estimated FY 2014 Payments Compared to Estimated FY 2015 Payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent change
in estimated
Percent change payments per
in estimated discharge from Percent
payments per FY 2014 to FY change in
Average FY Average FY discharge from 2015 for payments per
Number of Number of LTCH 2014 LTCH PPS 2015 LTCH PPS FY 2014 to FY proposed discharge from
LTCH classification LTCHs PPS cases payment per payment per 2015 for the changes to the FY 2014 to FY
case case \1\ proposed area wage 2015 for all
annual update level proposed
to the federal adjustment changes \4\
rate \2\ with proposed
budget
neutrality \3\
(1) (2) (3) (4) (5) (6) (7) (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS........................... 422 137,897 $40,247.74 $40,567.74 0.7 0 0.8
BY LOCATION:
RURAL............................... 22 5,691 35,633.63 35,893.55 0.8 -0.2 0.7
URBAN............................... 400 132,206 40,446.36 40,768.95 0.7 0 0.8
LARGE............................... 200 76,347 42,694 43,082 0.7 0.1 0.9
OTHER............................... 200 55,859 37,375 37,608 0.7 -0.2 0.6

[[Page 28376]]

BY PARTICIPATION DATE:
BEFORE OCT. 1983.................... 16 5,200 37,560.33 38,297.27 0.7 0.8 2
OCT. 1983-SEPT. 1993................ 44 16,796 43,706.56 44,005.21 0.7 -0.2 0.7
OCT. 1993-SEPT. 2002................ 181 62,686 39,413.76 39,694.92 0.7 -0.1 0.7
OCTOBER 2002 and AFTER.............. 181 53,215 40,401.05 40,732.81 0.7 0.1 0.8
BY OWNERSHIP TYPE:
VOLUNTARY........................... 91 21,887 41,091.65 41,428.06 0.7 0.1 0.8
PROPRIETARY......................... 288 104,450 39,975.38 40,291.47 0.7 0 0.8
GOVERNMENT.......................... 43 11,560 41,110.80 41,435.10 0.7 0.1 0.8
BY REGION:
NEW ENGLAND......................... 14 6,948 36,681.66 37,478.17 0.7 1.1 2.2
MIDDLE ATLANTIC..................... 29 8,522 42,608.78 43,311.85 0.7 1.1 1.7
SOUTH ATLANTIC...................... 61 18,561 42,577.65 42,756.02 0.7 -0.3 0.4
EAST NORTH CENTRAL.................. 70 20,072 42,055.63 42,256.47 0.7 -0.1 0.5
EAST SOUTH CENTRAL.................. 31 8,940 39,632.87 39,809.48 0.7 -0.5 0.4
WEST NORTH CENTRAL.................. 26 6,446 39,279.06 39,620.34 0.7 0.1 0.9
WEST SOUTH CENTRAL.................. 134 48,191 35,731.94 36,001.75 0.7 -0.2 0.8
MOUNTAIN............................ 32 6,775 43,403.32 43,675.91 0.7 -0.1 0.6
PACIFIC............................. 25 13,442 50,149.94 50,643.35 0.7 0.1 1
BY BED SIZE:
BEDS: 0-24.......................... 24 2,593 35,165.11 35,370.96 0.8 -0.2 0.6
BEDS: 25-49......................... 200 47,183 39,176.76 39,479.06 0.7 0 0.8
BEDS: 50-74......................... 117 37,486 40,905.58 41,253.12 0.7 0.1 0.8
BEDS: 75-124........................ 45 22,044 42,299.43 42,677.61 0.7 0.2 0.9
BEDS: 125-199....................... 22 15,353 39,223.11 39,498.04 0.7 -0.1 0.7
BEDS: 200 +......................... 14 13,238 40,969.52 41,252.44 0.7 -0.2 0.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2015 LTCH PPS payments based on the proposed payment rate and factor changes presented in the preamble of and the Addendum to this
proposed rule.
\2\ Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the proposed annual update to the standard Federal rate and the
proposed one-time prospective adjustment factor for FY 2015 as discussed in section V.A.2. of the Addendum to this proposed rule.
\3\ Percent change in estimated payments per discharge from FY 2014 to FY 2015 for proposed changes to the area wage level adjustment under Sec.
412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule).
\4\ Percent change in estimated payments per discharge from FY 2014 LTCH PPS (shown in Column 4) to FY 2015 LTCH PPS (shown in Column 5), including all
of the proposed changes to the rates and factors presented in the preamble of and the Addendum to this proposed rule. Note, this column, which shows
the percent change in estimated payments per discharge for all proposed changes, does not equal the sum of the percent changes in estimated payments
per discharge for the proposed annual update to the standard Federal rate (column 6) and the proposed changes to the area wage level adjustment with
budget neutrality (Column 7) due to the effect of estimated proposed changes in both estimated payments to SSO cases that are paid based on estimated
costs and aggregate HCO payments (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated.

e. Results

Based on the most recent available data for 422 LTCHs, we have
prepared the following summary of the impact (as shown above in
Table IV) of the proposed LTCH PPS payment rate and policy changes
presented in this proposed rule. The impact analysis in Table IV
shows that estimated payments per discharge are expected to increase
0.8 percent, on average, for all LTCHs from FY 2014 to FY 2015 as a
result of the proposed payment rate and policy changes presented in
this proposed rule, including an estimated slight decrease in HCO
payments. This estimated 0.8 percent increase in LTCH PPS payments
per discharge from the FY 2014 to FY 2015 for all LTCHs (as shown in
Table IV) was determined by comparing estimated FY 2015 LTCH PPS
payments (using the proposed payment rates and factors discussed in
this proposed rule) to estimated FY 2014 LTCH PPS payments (as
described above in section I.L.1. of this Appendix).

[[Page 28377]]

We are proposing to establish a standard Federal rate of
$40,943.51 (or a standard Federal rate of $40,141.47 for LTCHs that
failed to submit data under the requirements of the LTCHQR Program)
for FY 2015. Specifically, we are proposing to update the standard
Federal rate for FY 2015 by 2.1 percent, which is based on the
latest estimate of the proposed LTCH PPS market basket increase (2.7
percent), the proposed reduction of 0.4 percentage point for the MFP
adjustment, and the 0.2 percentage point reduction consistent with
sections 1886(m)(3) and (m)(4) of the Act. For LTCHs that fail to
submit quality data under the requirements of the LTCHQR Program, as
required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point
reduction is applied to the proposed annual update to the standard
Federal rate. In addition, we are proposing to apply a one-time
prospective adjustment factor for FY 2015 of 0.98734 (approximately
-1.3 percent) to the standard Federal rate for the final year of the
3-year phase-in.
We noted earlier in this section that, for most categories of
LTCHs, as shown in Table IV (Column 6), the payment increase due to
the proposed 2.1 percent annual update to the standard Federal rate
and the proposed application of a one-time prospective adjustment
for FY 2015 of approximately -1.3 percent for the final year of the
3-year phase-in is projected to result in approximately a 0.7
percent decrease in estimated payments per discharge for all LTCHs
from FY 2014 to FY 2015.
In addition, our estimate of the proposed changes in payments
due to the proposed update to the standard Federal rate also
reflects estimated payments for SSO cases that are paid using
special methodologies that are not affected by the update to the
standard Federal rate. For these reasons, we estimate that payments
may increase by less than 0.8 percent for certain hospital
categories due to the proposed annual update to the standard Federal
rate and the proposed application of the final phase of the one-time
prospective adjustment for FY 2015.

(1) Location

Based on the most recent available data, the vast majority of
LTCHs are located in urban areas. Only approximately 5 percent of
the LTCHs are identified as being located in a rural area, and
approximately 4 percent of all LTCH cases are treated in these rural
hospitals. The impact analysis presented in Table IV shows that the
average percent increase in estimated payments per discharge from FY
2014 to FY 2015 for all hospitals is 0.8 percent for all proposed
changes. For rural LTCHs, the percent change for all proposed
changes is estimated to be a 0.7 percent increase, while for urban
LTCHs, we estimate the increase would be 0.8 percent. Large urban
LTCHs are projected to experience an increase of 0.9 percent in
estimated payments per discharge from FY 2014 to FY 2015, while
other urban LTCHs are projected to experience an increase of 0.6
percent in estimated payments per discharge from FY 2014 to FY 2015,
as shown in Table IV.

(2) Participation Date

LTCHs are grouped by participation date into four categories:
(1) Before October 1983; (2) between October 1983 and September
1993; (3) between October 1993 and September 2002; and (4) October
2002 and after. Based on the most recent available data, the
categories of LTCHs with the largest percentage of LTCH cases
(approximately 45 percent) are in hospitals that began participating
in the Medicare program between October 1993 and September 2002, and
they are projected to experience a 0.7 percent increase in estimated
payments per discharge from FY 2014 to FY 2015, as shown in Table
IV.
Approximately 4 percent of LTCHs began participating in the
Medicare program before October 1983, and these LTCHs are projected
to experience a higher than average percent increase (2.0 percent)
in estimated payments per discharge from FY 2014 to FY 2015, as
shown in Table IV. Approximately 10 percent of LTCHs began
participating in the Medicare program between October 1983 and
September 1993. These LTCHs are projected to experience a 0.7
percent increase in estimated payments from FY 2014 to FY 2015.
LTCHs that began participating in the Medicare program after October
1, 2002, which treat approximately 39 percent of all LTCH cases, are
projected to experience a 0.8 percent increase in estimated payments
from FY 2014 to FY 2015.

(3) Ownership Control

LTCHs are grouped into three categories based on ownership
control type: Voluntary, proprietary, and government. Based on the
most recent available data, approximately 22 percent of LTCHs are
identified as voluntary (Table IV). The majority (nearly 68 percent)
of LTCHs are identified as proprietary while government-owned and
operated LTCHs represent about 10 percent of LTCHs. Based on
ownership type, each category of LTCHs is expected to experience the
average increase in payments of 0.8 percent in estimated payments
per discharge from FY 2014 to FY 2015.

(4) Census Region

Estimated payments per discharge for FY 2015 are projected to
increase for LTCHs located in all regions in comparison to FY 2014.
Of the 9 census regions, we project that the increase in estimated
payments per discharge would have the largest positive impact on
LTCHs in the New England and Middle Atlantic regions (2.2 percent
and 1.7 percent, respectively as shown in Table IV). The estimated
percent increase in payments per discharge from FY 2014 to FY 2015
for those regions is largely attributable to the proposed changes in
the area wage level adjustment.
In contrast, LTCHs located in the South Atlantic and East South
Central regions are projected to experience the smallest increase in
estimated payments per discharge from FY 2014 to FY 2015. The lower
than national average estimated increase in payments of 0.4 percent
is primarily due to estimated decreases in payments associated with
the proposed changes to the area wage level adjustment.

(5) Bed Size

LTCHs are grouped into six categories based on bed size: 0-24
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater
than 200 beds. Most bed size categories are projected to receive
either a slightly higher or slightly lower than average increase in
estimated payments per discharge from FY 2014 to FY 2015. We project
that small LTCHs (0-24 beds) would experience a 0.6 percent increase
in payments, mostly due to decreases in the area wage level
adjustment, while large LTCHs (200+ beds) would experience a 0.7
percent increase in payments. LTCHs with between 75 and 124 beds are
expected to experience an above average increase in payments per
discharge from FY 2014 to FY 2015 (0.9 percent).

4. Effect on the Medicare Program

As noted previously, we project that the provisions of this
proposed rule would result in an increase in estimated aggregate
LTCH PPS payments in FY 2015 relative to FY 2014 of approximately
$44 million (or approximately 0.8 percent) for the 422 LTCHs in our
database.

5. Effect on Medicare Beneficiaries

Under the LTCH PPS, hospitals receive payment based on the
average resources consumed by patients for each diagnosis. We do not
expect any changes in the quality of care or access to services for
Medicare beneficiaries under the LTCH PPS, but we continue to expect
that paying prospectively for LTCH services will enhance the
efficiency of the Medicare program.

L. Effects of Proposed Requirements for Hospital Inpatient Quality
Reporting (IQR) Program

In section IX.A. of the preamble of this proposed rule, we
discuss our proposed requirements for hospitals to report quality
data under the Hospital IQR Program in order to receive the full
annual percentage increase for the FY 2017 payment determination. We
are proposing to remove a total of 20 measures from the Hospital IQR
Program for the FY 2016 payment determination and subsequent years,
which begins in the CY 2015 reporting period. The first five
measures are: (1) AMI-1 Aspirin at arrival (NQF 0132); (2)
AMI-3 ACEI/ARB for left ventricular systolic dysfunction (NQF
0137); (3) AMI-5 Beta-blocker prescribed at discharge (NQF
0160); (4) SCIP INF-6 Appropriate Hair Removal; and (5)
Participation in a systematic database for cardiac surgery (NQF
0113). Of those, the first four measures are currently
suspended. The fifth measure was recommended by the MAP for removal
because it is ``topped-out.'' We believe that an additional 15
chart-abstracted measures are ``topped out,'' based on the
previously adopted criteria, and we are proposing to remove them
from the FY 2017 payment determination and subsequent years measure
set. However, we are proposing to retain the electronic clinical
quality measure version of 10 of these chart-abstracted measures for
Hospital IQR Program reporting as discussed in section IX.A.7.f. of
the preamble of this proposed rule.
We also are proposing to add one chart-abstracted measure in
this proposed rule: Severe sepsis and septic shock: management
bundle (NQF 0500).

[[Page 28378]]

We are proposing to incorporate refinements for several measures
for the FY 2017 payment determination and subsequent years that were
previously adopted in the Hospital IQR Program. These refinements
have either arisen out of the NQF endorsement maintenance process,
or during our internal efforts to harmonize measure approaches. The
measure refinements include the following: (1) Refining the planned
readmission algorithm for all seven readmission measures included in
the Hospital IQR Program; (2) modifying the hip/knee readmission and
complication measure cohorts to exclude index admissions with a
secondary fracture diagnosis; and (3) modifying the hip/knee
complication measure to not count as complications coded as
``present on admission'' (POA) during the index admission. We do not
anticipate any hospital burden associated with these revisions, as
each is based on claims submitted by hospitals for payment purposes.
Information is not available to determine the precise number of
hospitals that would not meet the requirements to receive the full
annual percentage increase for the FY 2017 payment determination.
Historically, an average of 100 hospitals that participate in the
Hospital IQR Program do not receive the full annual percentage
increase in any fiscal year. We anticipate that because of the new
requirements we are proposing for reporting for the FY 2017 payment
determination, the number of hospitals not receiving the full annual
percentage increase may be higher than average. The highest number
of hospitals failing to meet program requirements was approximately
200 after the introduction of new NHSN reporting requirements. If
the number of hospitals failing does increase because of proposed
new requirements, we anticipate that over the long run, this number
will decline as hospitals gain more experience with these
requirements.
As discussed in section XIII.B.6. of the preamble of this
proposed rule, we estimate that our proposals for the adoption and
removal of measures will result in an overall decrease of 5.86
million hours or 1,775 hours per hospital. The table below describes
the hospital burden associated with the Hospital IQR Program
requirements.

Burden Impact of Proposed Hospital IQR Program Requirements for FY 2017
----------------------------------------------------------------------------------------------------------------
Burden per
Burden per hospital for all
Number of hospital for requirements as Net change in burden
Hospital IQR program requirement hospitals previously proposed per hospital
impacted finalized (continuing,
requirements removed, added)
----------------------------------------------------------------------------------------------------------------
Chart-abstracted and structural 3,300............ 1,291 hours...... 963 hours........ -328 hours.
measures, forms.
Review reports for claims-based 3,300............ 4 hours.......... 4 hours.......... 0.
measures.
Reporting of voluntary electronic Unknown.......... -570 hours....... -554 hours....... 16 hours.
clinical quality measures (E-
CQM) in place of chart-
abstracted measures.
Validation templates............. Up to 600........ 144 hours........ 144 hours........ 0.
E-CQM validation test............ Up to 100........ 0................ 16 hours......... 16 hours.
Validation charts photocopying... Up to 600........ $8,640........... $8,496........... $-144.
----------------------------------------------------------------------------------------------------------------

We estimate that the total burden associated with the proposed
voluntary electronic clinical quality measure reporting option will
be similar to the burden outlined for hospitals in the Medicare EHR
Incentive Program Stage 2 final rule (77 FR 53968 through 54162).
However, by allowing hospitals to submit data for a maximum of 16
measures that could be used to satisfy partial requirements for both
programs, each hospital that participates in the voluntary
electronic quality measure reporting option could realize a
reduction in burden of up to approximately 554 hours. To achieve a
savings of 554 hours, we made the following assumptions. We assumed
an average annual collection burden for 164 chart-abstracted
measures (in Stroke, VTE, ED, and PC-01 topic areas) to be a
combined 582 hours annually per hospital over 4 quarters. We
estimate that each quarter, each hospital will need approximately 2
hours and 40 minutes (10 minutes per measure) to process and submit
measures results electronically per quarter. This equates to 10
hours and 40 minutes annually. Because the remaining 12 electronic
clinical quality measures submitted to the Hospital IQR Program
would not replace any chart-abstracted reporting requirements, there
would be an extra 2 hours per quarter per hospital in burden (8
hours total), with no commensurate savings.
In the FY 2014 IPPS/LTCH PPS final rule, hospitals were
permitted to meet Hospital IQR program requirements for these 16
measures by submitting data electronically for a single quarter (78
FR 50811 through 50819) for the FY 2016 payment determination.
Moreover, there were no options for submitting 12 additional
measures. Therefore, we estimate that savings for hospitals choosing
to submit all optional measures electronically for the FY 2016
payment determination would have been about 579 hours (582 hours
minus 2 hours and 40 minutes). The net burden of the proposal for
the FY 2017 payment determination compared with the policy finalized
for the FY 2016 payment determination is an additional 16 hours for
a hospital choosing to submit all possible required and optional
measures electronically.

M. Effects of Proposed Requirements for the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program for FY 2017

In section IX.B. of the preamble of this proposed rule, we
discuss our proposed policies for the quality data reporting program
for PPS-exempt cancer hospitals (PCHs), which we refer to as the
PCHQR Program. The PCHQR Program is authorized under section 1866(k)
of the Act, which was added by section 3005 of the Affordable Care
Act.
In this proposed rule, we are proposing that PCHs submit data on
one additional measure beginning with the FY 2017 program which, if
finalized, would increase the total number of measures in the FY
2017 PCHQR measure set to 19 measures. We also are proposing to
update the specifications for the five previously finalized clinical
process/oncology care measures to require PCHs to report all-patient
data for each of these measures, and to adopt a new sampling
methodology that PCHs can use to report these measures. Furthermore,
we are proposing to require PCHs to submit population and sample
size counts for these measures. We also are proposing to give PCHs a
choice of one of two reporting options to report the clinical
process/oncology care, SCIP, and clinical process/cancer specific
treatment measures.
The impact of the proposed requirements for the PCHQR program is
expected to be minimal overall because some PCHs are already
submitting previously adopted quality measure data to CMS. As a
result, these PCHs are familiar with our IT infrastructure and
programmatic operations. In addition to fostering transparency and
facilitating public reporting, we believe our proposed requirements
introduce minimal burden while increasing quality of care. We
further believe that these requirements outweigh any burden.
One expected effect of the PCHQR Program is to keep the public
informed of the quality of care provided by PCHs. We will publicly
display quality measure data collected under the PCHQR Program as
required under the Act. These data will be displayed on the Hospital
Compare Web site. The goals of making these data available to the
public in a user-friendly and relevant format, include, but are not
limited to: (1) Allowing the public to compare PCHs in order to make
informed health care decisions regarding care setting; and (2)
providing information about current trends in health care.
Furthermore, PCHs can use their own health care quality data for
many purposes such as in risk management programs, health care
acquired infection prevention programs, and research and development
activities, among others.

[[Page 28379]]

N. Effects of Proposed Requirements for the Long-Term Care Hospital
Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2018

In section IX.C. of the preamble of this proposed rule, we
discuss the implementation of section 1886(m)(5) of the Act, which
was added by section 3004(a) of the Affordable Care Act. Section
1886(m)(5) of the Act provides that, for rate year 2014 and each
subsequent year, any LTCH that does not submit data to the Secretary
in accordance with section 1886(m)(5)(C) of the Act shall receive a
2-percentage point reduction to the annual update to the standard
Federal rate for discharges for the hospital during the applicable
fiscal year. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51839
through 51840), we estimated that only a few LTCHs would not receive
the full annual percentage increase in any fiscal year as a result
of failure to submit data under the LTCHQR Program. Information is
not available to determine the precise number of LTCHs that would
not meet the requirements to receive the full annual percentage
increase for the FY 2016 payment determination. At the time that
this analysis was prepared, 8 of the 442 active Medicare-certified
LTCHs did not receive the full annual percentage increase for the FY
2014 payment determination. We believe that a majority of LTCHs will
continue to collect and submit data for the FY 2015 payment
determination and subsequent years because they will continue to
view the LTCHQR Program as an important step in improving the
quality of care patients receive in the LTCHs. We believe that the
burden associated with the LTCHQR Program is the time and effort
associated with data collection. There are approximately 442 LTCHs
currently reporting quality data to CMS.
In this proposed rule, we are retaining seven previously
finalized measures, proposing revisions to two previously finalized
measures, and are proposing three additional quality measures for
inclusion in the LTCHQR Program. In section IX.C.7. of the preamble
of this proposed rule, we are proposing three new quality measures
for inclusion in the LTCHQR Program affecting the FY 2018 payment
determination and subsequent years: (1) Percent of Long-Term Care
Hospital Patients with an Admission and Discharge Functional
Assessment and a Care Plan That Addresses Function; (2) Functional
Outcome Measure: Change in Mobility among Long-Term Care Hospital
Patients Requiring Ventilator Support; and (3) National Healthcare
Safety Network (NHSN) Ventilator-Associate Event (VAE) Outcome
Measure.
Six of the previously adopted and newly proposed measures either
will or would be collected via the NHSN. In section IX.C.7.b. of the
preamble of this proposed rule, we are proposing to collect the NHSN
VAE Outcome Measure. Normally, we would only discuss the burden
associated with those measures that are being proposed in any given
rule. Because we have access to information that now indicates our
previous calculations for the CAUTI, CLABSI, MRSA, and CDI were
incorrect (we estimated in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50959 through 50964) that LTCHs would submit six infection events
per month for each of these measures), we offer below the
recalculation of the associated burden. Based on submissions to the
NHSN, we now estimate that each LTCH will execute approximately 7
NHSN submissions per month; 1 MRSA event; 1 CDI event; 2 CLABSI
events; 3 CAUTI events (84 events per LTCH annually). This equates
to a total of approximately 37,128 submissions of events to the NHSN
from all LTCHs per year (includes CAUTI, CLABSI, MRSA, and CDI). The
CDC estimated the public reporting burden of the collection of
information for each measure to include the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. MRSA and CDI events are estimated to
require an average of 15 minutes per response (10 minutes of
clinical (RN) time, and 5 minutes of clerical (Medical Record or
Healthcare Information Technician). CAUTI is estimated to require an
average of 29 minutes per response, and CLABSI events are estimated
to require an average of 32 minutes per response. In addition, each
LTCH must also complete a Patient Safety Monthly Reporting Plan
estimated at 35 minutes per Plan and a Denominator for Specialty
Care Area, which is estimated at 5 hours per month. Based on this
estimate, we expect each LTCH would expend 8.6 hours per month for
each LTCH, 103.2 hours annually for each LTCH, or 45,614.4 annually
for all LTCHs reporting to the NHSN.
In addition, each LTCH must submit the Influenza Vaccination
Coverage among Healthcare Personnel (NQF 0431), which the
CDC estimates will take 10 minutes annually per LTCH, or an
additional 73.66 hours for all LTCH annually. In total, the burden
we have recalculated for all previously finalized measures
(including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly
Reporting plan, and Denominator for Specialty Care Area) will equal
103.4 hours annually per LTCH or 45,072.8 hours for all LTCHs
annually.
For the newly proposed VAE measure, which will also be reported
by LTCHs through the CDC's NHSN, the CDC estimates that each LTCH
will submit 1 VAE per month, which will require approximately 22
minutes of clinical time per response. This equates to 22 minutes
per LTCH monthly, 4.4 hours per LTCH annually, and 1,944.8 hours for
all LTCHs annually. According to the US Bureau of Labor and
Statistics, the mean hourly wage for a registered nurse (RN) is
$33.1 \191\; the mean hourly wage for a medical records and health
information technician is $16.81. However, in order to account for
overhead and fringe benefits, we have double the mean hourly wage,
making it $66.26 for an RN, and $33.62 for a Medical Record or
Health Information Technician. We estimate that the annual cost per
each LTCH for the previously finalized measures, for which we have
recalculated burden (including CAUTI, CLABSI, MRSA, CDI, HCP,
Patient Safety Monthly Reporting plan, and Denominator for Specialty
Care Area) to be $6,770.10 and that the total yearly cost to all
LTCHs for the submission of data to NHSN would be $2,992,384.20. We
estimate that the total cost for the newly proposed VAE measure
would be $291.54 per LTCH annually, or $128,860.68 for all LTCHs
annually.
---------------------------------------------------------------------------

\191\ According to the U.S. Bureau of Labor Statistics, the mean
hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/healthcare/registered-nurses.htm. Fringe benefits
are calculated at a rate of 36.25 percent in accordance with OMB
Circular A-76, Attachment C, Table C.1. After adding the fringe
benefits, the total hourly cost for an RN is $42.89.
---------------------------------------------------------------------------

The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Long-Term Care Hospitals is a Medicare claims-based
measure; because claims-based measures can be calculated based on
data that are already reported to the Medicare program for payment
purposes, we believe there will be no additional impact.
The remaining five measures will be collected utilizing the LTCH
CARE Data Set. The burden estimates associated with OMB control
number 0938-1163 estimate that each LTCH has an impact data
collection burden of 243.24 hours or $6,755.84 associated with
collection of the LTCH CARE Data Set, which includes the following
three measures: Percent of Residents or Patients with Pressure
Ulcers That Are New or Worsened (NQF 0678); Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (NQF 0680), and the Application
of Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674).
We also are proposing to use the LTCH CARE Data Set to report
the two additional proposed measures, Functional Outcome Measure:
Change in Mobility among Long-Term Care Hospital Patients Requiring
Ventilator Support; and Percent of Long-Term Care Hospital Patients
with an Admission and Discharge Functional Assessment and a Care
Plan That Addresses Function for the FY 2018 payment determination
and subsequent years. In addition, the LTCH CARE Data Set will be
used to report the previously finalized measure. We estimate the
additional elements for two newly proposed measures will take 13.5
minutes of nursing/clinical staff time to report data for Admission
assessment and 13 minutes of nursing/clinical staff time to report
data for Discharge assessment, for a total of 26.5 minutes. In
accordance with OMB control number 0920-0666, we estimate 202,050
discharges from all LTCHs annually, with an additional burden of
26.5 minutes. This would equate to 89,238.75 total hours or 201.9
hours per LTCH. We believe this work will be completed by RN staff.
As previously noted, per the US Bureau of Labor and Statistics, the
mean hourly wage for a registered nurse (RN) is $33.13.\192\
However, in order to account for

[[Page 28380]]

overhead and fringe benefits, we have double the mean hourly wage,
making it $66.26 for an RN. The total cost related to the two newly
proposed functional status measures referenced above is estimated at
$13,377.89 per LTCH annually, or $5,913,027.38 for all LTCHs
annually.
---------------------------------------------------------------------------

\192\ According to the U.S. Bureau of Labor Statistics, the mean
hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/healthcare/registered-nurses.htm. Fringe benefits
are calculated at a rate of 36.25 percent in accordance with OMB
Circular A-76, Attachment C, Table C.1. After adding the fringe
benefits, the total hourly cost for an RN is $42.89.
---------------------------------------------------------------------------

Lastly, we are proposing to validate data submitted on the LTCH
CARE Data Set by requesting portions of 1,300 patient charts from
260 LTCHs submitted during CY 2015 be copied and mailed to a CMS
validation contractor. We estimate the total submission for each
chart to be no more than 270 pages in length. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53269), we estimated the appropriate cost
for sending charts under the Hospital IQR Program to be 12 cents per
page in accordance with our photocopying payment methodology (68 FR
67955). We believe that the costs would be the same under the LTCHQR
Program because we would use the same photocopying payment
methodology. Each chart also will require approximately $4.00
shipping. Two hundred seventy pages at a rate of $0.12 per page with
a $4.00 shipping cost would be $36.40 per chart. We estimate the
total cost of sending charts selected for validation to be $36.40
multiplied by 1,300 charts for a total of $47,320.
In summary, the total cost for all previously finalized HAI and
vaccination measures (CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety
Monthly Reporting plan, and Denominator for Specialty Care Area)
reported through the CDC's NHSN, that we have recalculated based on
new information regarding the number of infection events reported by
LTCHs per month, is $6,770.10 per LTCH annually, or $2,992,384.20
for all LTCHs annually. The total cost per LTCH for the three newly
proposed measures in this proposed rule (Functional Outcome Measure:
Change in Mobility among Inpatients requiring Ventilator Support,
Percent of LTCH Inpatients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function, and
Ventilator-Associated Events) is $13,669.43 per LTCH annually, or
$6,041,886.06 for all LTCHs annually. The total cost for the 260
LTCHs selected under our newly proposed data accuracy validation
policy is $47,320, which would be paid by CMS.

O. Effects of Proposals Regarding Electronic Health Record (EHR)
Incentive Program and Hospital IQR Program

In sections IX.D. of the preamble of this proposed rule, we
discuss proposed requirements for the EHR Incentive Program. We are
proposing to align the Medicare EHR Incentive Program reporting and
submission timelines for clinical quality measures for eligible
hospitals and CAHs with the Hospital IQR Program's reporting and
submission timelines.
We have determined that the electronic submission of aggregate-
level data using QRDA-III will not be feasible in 2015 for eligible
hospitals and CAHs under the Medicare EHR Incentive Program. We are
proposing to continue, for FY 2015, the policy we adopted for FY
2014 for eligible hospitals and CAHs submitting CQMs under the
Medicare EHR Incentive Program. For FY 2015, eligible hospitals and
CAHs would be able to electronically submit using a method similar
to the 2012 and 2013 EHR Incentive Program electronic reporting
pilot for eligible hospitals and CAHs, which used QRDA-I (patient-
level data). Eligible hospitals and CAHs that are beyond their first
year of meaningful use may continue to report aggregate CQM results
through attestation. We also are clarifying our policy on zero
denominators and the case threshold exemption for clinical quality
measures.
We do not believe that our proposals to align the Medicare EHR
Incentive program reporting and submission timelines for clinical
quality measures with the Hospital IQR Program's reporting and
submission timelines and to allow the electronic submission of QRDA-
I (patient-level data) for eligible hospitals and CAHs to electronic
submit CQMs under the Medicare EHR Incentive Program will have a
significant impact.

P. Effects of Proposed Revision of Regulations Governing Use and
Release of Medicare Advantage Risk Adjustment Data

Under section X. of the preamble of this proposed rule, we are
proposing to revise the existing regulations at Sec. 422.310(f) to
broaden the specified uses of risk adjustment data in order to
strengthen program management and increase transparency in the MA
program and to specify the conditions for release of risk adjustment
data to entities outside of CMS. We are proposing to revise the
regulations to specify four additional purposes for which CMS may
use or release risk adjustment data submitted by MA organizations:
(1) To conduct evaluations and other analysis to support the
Medicare program (including demonstrations) and to support public
health initiatives and other health care-related research; (2) for
activities to support the administration of the Medicare program;
(3) for activities conducted to support program integrity; and (4)
for purposes explicitly permitted by other laws. In addition, the
existing regulations do not specify conditions for release by CMS of
risk adjustment data submitted by MA organizations. Therefore, we
are proposing to add regulatory language to address CMS' release of
such data to non-CMS entities.
We have determined that the proposed regulatory amendments do
not impose any mandatory costs on entities that may choose, under
this proposal, to request data files from CMS for their research
analyses or other purposes listed in the proposal. Requesting data
from CMS is at the discretion of the requester. Therefore, we have
determined that there are not any economically significant effects
of the proposed provisions. We also have determined that the
proposed regulatory amendments would not impose a burden on the
entity requesting data files.

Q. Effects of Proposed Changes to Enforcement Provisions for Organ
Transplant Centers

Under section XI. of the preamble of this proposed rule, we
discuss our proposals to expand and clarify the current organ
transplant regulation as it relates to a transplant program's
ability to request approval for participation in Medicare based on
mitigating factors, the timelines for such review, and potential
System Improvement Agreements that may allow a transplant program to
improve outcomes and avert Medicare termination when outcomes have
not met CMS requirements. Our proposals also would allow for
consideration of factors such as innovative practice in the field of
organ transplantation, and for potential mitigating factors
consideration of a transplant program's outcomes using Bayesian
methodology for calculating outcomes for patient death and graft
failure.
These proposals will not have a significant effect on Medicare
and Medicaid programs as it will allow organ transplant programs to
continue to participate in Medicare if approved based on mitigating
factors or during the time established in the Systems Improvement
Agreement. There is an added benefit to patients who receive
transplants, and to the Medicare program, when a transplant program
improves patient and graft survival through completion of a system
Improvement Agreement. However, sufficient data are not currently
available to quantify the added benefit of System Improvement
Agreements or innovative practices. Therefore, we project only that
the cost impact of the proposals to the Medicare and Medicaid
programs would be negligible.
Historical data reflect that between the date the transplant
regulation was codified in 2007 and August 2013, CMS rendered a
final determination for 129 organ transplant programs that applied
for Medicare approval based on mitigating factors. Of the 129
transplant programs, 20 terminated Medicare participation. An
additional 33 transplant programs averted Medicare termination by
successful completion of a Systems Improvement Agreement and
resulting substantial improvement in patient and graft survival. The
remaining programs were approved for mitigating factors based on
improved outcomes (without needing a System Improvement Agreement),
special circumstances, or came into compliance with CMS requirements
during the mitigating factors review period. We estimate the cost
associated with the application for mitigating factors at $10,000.
This is based on the salary for the transplant administrator to
prepare the documents for the application during the 30-day
timeframe allotted. The cost does not represent any increase from
what is anticipated in the existing transplant regulation related to
mitigating factors. For transplant programs that enter into a
Systems Improvement Agreement, the estimated cost to the transplant
program is $200,000 to $250,000 based on reports from programs that
have completed such Agreements in the past. Both a mitigating
factors review and completion of a System Improvement Agreement are
voluntary acts on the part of a hospital that maintains a transplant
program. Since the 2007 effective date of the CMS regulation, only
one hospital has elected not to file a mitigating factors review
after being cited by CMS for a condition-level deficiency for
patient outcomes or clinical experience, and few hospitals have
declined a CMS offer to complete a System

[[Page 28381]]

Improvement Agreement. Therefore, we conclude that the costs
involved in these activities are much lower for the hospital
compared with other alternatives, such as filing an appeal and
incurring the legal costs of that appeal.
Our proposals would not have a significant impact on a
substantial number of small businesses or other small entities. Nor
would they have a significant impact on small rural hospitals.

II. Alternatives Considered

This proposed rule contains a range of proposed policies. It
also provides descriptions of the statutory provisions that are
addressed, identifies the proposed policies, and presents rationales
for our decisions and, where relevant, alternatives that were
considered.

III. Overall Conclusion

1. Acute Care Hospitals

Table I of section I.G. of this Appendix demonstrates the
estimated distributional impact of the IPPS budget neutrality
requirements for the proposed MS-DRG and wage index changes, and for
the wage index reclassifications under the MGCRB. Table I also shows
an overall decrease of 0.8 percent in operating payments. As
discussed in section I.G. of this Appendix, we estimate that
proposed operating payments will decrease by approximately $864
million in FY 2015 relative to FY 2014. However, when we account for
the impact of the changes in Medicare DSH payments and the impact of
the new additional payments based on uncompensated care in
accordance with section 3133 of the Affordable Care Act, based on
estimates provided by the CMS Office of the Actuary, consistent with
our policy discussed in section IV.F. of the preamble of this
proposed rule, we estimate that operating payments would decrease by
approximately $30 million relative to FY 2014. In addition, we
estimate a savings of $28 million associated with the proposed HACs
policies in FY 2015, which is an additional $2 million in savings as
compared to FY 2014. We estimate that the expiration of the
expansion of low-volume hospital payments for discharges beginning
on April 1, 2015, under the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93) will result in a decrease in payments of
approximately $343 million relative to FY 2014. We estimate that the
continuation of certain new technology add-on payments for FY 2015
will increase spending by approximately $7 million. Finally, we
estimate that the proposed policies related to validation, including
submission of and payment for secure electronic versions of medical
information for validation for the FY 2017 payment determination and
subsequent years, as described in the ICRs for the Hospital IQR
Program in section XII.B.6. of the preamble of this proposed rule,
will result in a cost savings to CMS of approximately $0.5 million.
These estimates, combined with our estimated decrease in FY 2015
operating payment of -$30 million, result in an estimated decrease
of approximately $367 million for FY 2015. We estimate that
hospitals will experience a 1.2 percent increase in capital payments
per case, as shown in Table III of section I.I. of this Appendix. We
project that there will be a $126 million increase in capital
payments in FY 2015 compared to FY 2014. The proposed cumulative
operating and capital payments would result in a net decrease of
approximately $241 million to IPPS providers. The discussions
presented in the previous pages, in combination with the rest of
this proposed rule, constitute a regulatory impact analysis.

2. LTCHs

Overall, LTCHs are projected to experience an increase in
estimated payments per discharge in FY 2015. In the impact analysis,
we are using the proposed rates, factors, and policies presented in
this proposed rule, including proposed updated wage index values and
relative weights, and the best available claims and CCR data to
estimate the change in payments under the LTCH PPS for FY 2015.
Accordingly, based on the best available data for the 423 LTCHs in
our database, we estimate that FY 2015 LTCH PPS payments will
increase approximately $44 million relative to FY 2014 as a result
of the proposed payment rates and factors presented in this proposed
rule. In addition, we estimate that net effect of the projected
impact of certain other proposed LTCH PPS policy changes (that is,
the reinstatement of the moratorium on the full implementation of
the ``25 percent threshold'' payment adjustment as discussed in
section VII.E. of the preamble of this proposed rule; the
reinstatement of the moratorium on the development of new LTCHs and
LTCH satellite facilities and additional LTCH beds as discussed in
section VII.G. of the preamble of this proposed rule; the proposed
revision of the ``greater than 3-day interruption of stay'' policy
as discussed in section VII.F. of the preamble of this proposed
rule; the proposed revocation of onsite discharges and readmissions
policy as discussed in section VII.H. of the preamble of this
proposed rule; and the proposed payment adjustment for ``subclause
(II)'' LTCHs as discussed in section VII.I. of the preamble of this
proposed rule) is estimated to result in a reduction in LTCH PPS
payments of approximately $14 million. The impact analysis of the
proposed payment rates and factors presented in this proposed rule
under the LTCH PPS, in conjunction with the estimated payment
impacts of certain other proposed LTCH PPS policy changes would
result in a net increase of $30 million to LTCH providers.
Additionally, we present the costs to LTCHs associated with the
completion of the proposed data for the LTCHQR Program at $6.08
million or approximately $3.11 million more than FY 2014.

IV. Accounting Statements and Tables

A. Acute Care Hospitals

As required by OMB Circular A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table V below, we
have prepared an accounting statement showing the classification of
the expenditures associated with the provisions of this proposed
rule as they relate to acute care hospitals. This table provides our
best estimate of the change in Medicare payments to providers as a
result of the proposed changes to the IPPS presented in this
proposed rule. All expenditures are classified as transfers to
Medicare providers.
The savings to the Federal Government associated with the
policies in this proposed rule are estimated at $241 million.

Table V--Accounting Statement: Classification of Proposed Estimated Expenditures Under the IPPS From FY 2014 to
FY 2015
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers....... -$241 million.
From Whom to Whom.................... Federal Government to IPPS Medicare Providers.
----------------------------------------------------------------------------------------------------------------

B. LTCHs

As discussed in section I.L. of this Appendix, the impact
analysis of the proposed payment rates and factors presented in this
proposed rule under the LTCH PPS, As discussed in section I.L. of
this Appendix, the impact analysis of the proposed payment rates and
factors presented in this proposed rule under the LTCH PPS, in
conjunction with the estimated payment impacts of certain other
proposed LTCH PPS policy changes (that is, the reinstatement of the
moratorium on the full implementation of the ``25-percent
threshold'' payment adjustment; the reinstatement of the moratorium
on the development of new LTCHs and LTCH satellite facilities and
increase in the number of LTCH beds; the proposed revision of the
``greater than 3-day interruption of stay'' policy; the proposed
revocation of onsite discharges and readmissions policy; and the
proposed payment adjustment for ``subclause (II)'' LTCHs), is
projected to result in an increase in estimated aggregate LTCH PPS
payments in FY 2015 relative to FY 2014 of approximately $30 million
based on the data for 423 LTCHs in our database that are subject to
payment under the LTCH PPS. Therefore, as required by OMB Circular
A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table VI below, we have prepared an accounting

[[Page 28382]]

statement showing the classification of the expenditures associated
with the provisions of this proposed rule as they relate to the
proposed changes to the LTCH PPS. Table VI provides our best
estimate of the estimated increase in Medicare payments under the
LTCH PPS as a result of the proposed payment rates and factors and
other provisions presented in this proposed rule based on the data
for the 423 LTCHs in our database. All expenditures are classified
as transfers to Medicare providers (that is, LTCHs). Lastly, we
present the costs to LTCHs associated with the completion of the
proposed data for the LTCHQR Program at $6.08 million or
approximately $3.11 million more than FY 2014.
The cost to the Federal Government associated with the proposed
policies for LTCHs in this proposed rule is estimated at $30
million.

TABLE VI--Accounting Statement: Classification of Proposed Estimated
Expenditures From the FY 2014 LTCH PPS to the FY 2015 LTCH PPS
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... $30 million.
From Whom to Whom...................... Federal Government to LTCH
Medicare Providers.
------------------------------------------------------------------------
Category Costs
------------------------------------------------------------------------
Annualized Monetized Costs for LTCHs to $3.11 million.
Submit Quality Data.
------------------------------------------------------------------------

V. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory
relief of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
government jurisdictions. We estimate that most hospitals and most
other providers and suppliers are small entities as that term is
used in the RFA. The great majority of hospitals and most other
health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $7.0 million to $35.5
million in any 1 year). (For details on the latest standards for
health care providers, we refer readers to page 36 of the Table of
Small Business Size Standards for NAIC 622 found on the SBA Web site
at: https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
For purposes of the RFA, all hospitals and other providers and
suppliers are considered to be small entities. Individuals and
States are not included in the definition of a small entity. We
believe that the provisions of this proposed rule relating to acute
care hospitals would have a significant impact on small entities as
explained in this Appendix. Because we lack data on individual
hospital receipts, we cannot determine the number of small
proprietary LTCHs. Therefore, we are assuming that all LTCHs are
considered small entities for the purpose of the analysis in section
I.L. of this Appendix. MACs are not considered to be small entities.
Because we acknowledge that many of the affected entities are small
entities, the analysis discussed throughout the preamble of this
proposed rule constitutes our regulatory flexibility analysis. In
this proposed rule, we are soliciting public comments on our
estimates and analysis of the impact of our proposals on those small
entities. Any public comments that we receive and our responses will
be presented in the final rule.

VI. Impact on Small Rural Hospitals

Section 1102(b) of the Social Security Act requires us to
prepare a regulatory impact analysis for any proposed or final rule
that may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must
conform to the provisions of section 603 of the RFA. With the
exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of an urban area and
has fewer than 100 beds. Section 601(g) of the Social Security
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain
New England counties as belonging to the adjacent urban area. Thus,
for purposes of the IPPS and the LTCH PPS, we continue to classify
these hospitals as urban hospitals. (We refer readers to Table I in
section I.G. of this Appendix for the quantitative effects of the
proposed policy changes under the IPPS for operating costs.)

VII. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule whose mandates require spending in
any 1 year of $100 million in 1995 dollars, updated annually for
inflation. In 2014, that threshold level is approximately $141
million. This proposed rule will not mandate any requirements for
State, local, or tribal governments, nor will it affect private
sector costs.

VIII. Executive Order 12866

In accordance with the provisions of Executive Order 12866, the
Executive Office of Management and Budget reviewed this proposed
rule.

Appendix B: Recommendation of Update Factors for Operating Cost Rates
of Payment for Inpatient Hospital Services

I. Background

Section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Under section 1886(e)(5) of the Act, we are required
to publish update factors recommended by the Secretary in the
proposed and final IPPS rules, respectively. Accordingly, this
Appendix provides the recommendations for the update factors for the
IPPS national standardized amount, the Puerto Rico-specific
standardized amount, the hospital-specific rate for SCHs and MDHs,
and the rate-of-increase limits for certain hospitals excluded from
the IPPS, as well as LTCHs. In prior years, we have made a
recommendation in the IPPS proposed rule and final rule for the
update factors for the payment rates for IRFs and IPFs. However, for
FY 2015, we plan to include the Secretary's recommendation for the
update factors for IRFs and IPFs in separate Federal Register
documents at the time that we announce the annual updates for IRFs
and IPFs. We also discuss our response to MedPAC's recommended
update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2015

A. Proposed FY 2015 Inpatient Hospital Update

As discussed in section IV.B of the preamble to this proposed
rule, for FY 2015, consistent with section 1886(b)(3)(B) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care
Act, we are setting the applicable percentage increase by applying
the following adjustments in the following sequence. Specifically,
the applicable percentage increase under the IPPS is equal to the
rate-of-increase in the hospital market basket for IPPS hospitals in
all areas, subject to a reduction of one-quarter of the applicable
percentage increase (prior to the application of other statutory
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act and a 33\1/3\
percent reduction to three-fourths of the applicable percentage
increase (prior to the application of other statutory adjustments;
also referred to as the market basket update or rate-of-increase
(with no adjustments)) for hospitals not considered to be meaningful
electronic health record (EHR) users in accordance with section
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment

[[Page 28383]]

based on changes in economy-wide productivity (the multifactor
productivity (MFP) adjustment), and an additional reduction of 0.2
percentage point as required by section 1886(b)(3)(B)(xii) of the
Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as
added by section 3401(a) of the Affordable Care Act, state that
application of the MFP adjustment and the additional FY 2015
adjustment of 0.2 percentage point may result in the applicable
percentage increase being less than zero.
Based on the most recent data available for this FY 2015
proposed rule, in accordance with section 1886(b)(3)(B) of the Act,
we are proposing to base the proposed FY 2015 market basket update
used to determine the applicable percentage increase for the IPPS on
IHS Global Insight, Inc.'s (IGI's) first quarter 2014 forecast of
the FY 2010-based IPPS market basket rate-of-increase with
historical data through fourth quarter 2013, which is estimated to
be 2.7 percent. In accordance with section 1886(b)(3)(B) of the Act,
as amended by section 3401(a) of the Affordable Care Act, in section
IV.B.1. of the preamble of this FY 2015 IPPS/LTCH PPS proposed rule,
we are proposing a multifactor productivity (MFP) adjustment (the
10-year moving average of MFP for the period ending FY 2015) of 0.4
percent. Therefore, based on IGI's first quarter 2014 forecast of
the FY 2010-based IPPS market basket, depending on whether a
hospital submits quality data under the rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter
referred to as a hospital that submits quality data) and is a
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
there are four possible applicable percentage increases that can be
applied to the standardized amount. Below we provide a table
summarizing the four proposed applicable percentage increases.

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2015 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate-of-Increase.......... 2.7 2.7 2.7 2.7
Adjustment for Failure to Submit Quality 0.0 0.0 -0.675 -0.675
Data under Section 1886(b)(3)(B)(viii)
of the Act.............................
Adjustment for Failure to be a 0.0 -0.675 0.0 -0.675
Meaningful EHR User under Section
1886(b)(3)(B)(ix) of the Act...........
MFP Adjustment under Section -0.4 -0.4 -0.4 -0.4
1886(b)(3)(B)(xi) of the Act...........
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act..........
-----------------------------------------------------------------------
Proposed Applicable Percentage 2.1 1.425 1.425 0.75
Increase Applied to
Standardized Amount............
----------------------------------------------------------------------------------------------------------------

B. Proposed Update for SCHs and MDHs for FY 2015

Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2015
applicable percentage increase in the hospital-specific rate for
SCHs and MDHs equals the applicable percentage increase set forth in
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor
as for all other hospitals subject to the IPPS).
As discussed in section IV.G. of the preamble of this proposed
rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub.
L. 113-67), enacted on December 26, 2013, extended the MDH program
from the end of FY 2013 through the first half of FY 2014 (that is,
for discharges occurring before April 1, 2014). Subsequently,
section 106 of the Protecting Access to Medicare Act of 2014 (Pub.
L. 113-93), enacted on April 1, 2014, further extended the MDH
program through the first half of FY 2015 (that is, for discharges
occurring before April 1, 2015). Prior to the enactment of Public
Law 113-67, the MDH program was to be in effect through the end of
FY 2013 only. The MDH program expires for discharges beginning on
April 1, 2015, under current law. Accordingly, the proposed update
of the hospital-specific rates for FY 2015 for MDHs will apply in
determining payments for FY 2015 discharges occurring before April
1, 2015.
As mentioned above, the update to the hospital specific rate for
SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as
amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, depending on whether a hospital submits quality data
and is a meaningful EHR user, we are proposing the same four
possible applicable percentage increases in the table above to the
hospital-specific rate applicable to SCHs and MDHs.

C. Proposed FY 2015 Puerto Rico Hospital Update

Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located
in any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for FY 2003 for hospitals in a
large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount is subject to the applicable percentage increase
set forth in section 1886(b)(3)(B)(i) of the Act as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act (that is,
the same update factor as for all other hospitals subject to the
IPPS). Accordingly, we are proposing an applicable percentage
increase to the Puerto Rico-specific standardized amount of 2.1
percent.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2015

Section 1886(b)(3)(B)(ii) of the Act is used for purposes of
determining the percentage increase in the rate-of-increase limits
for children's hospitals, cancer hospitals, and hospitals located
outside the 50 States, the District of Columbia, and Puerto Rico
(that is, short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and America Samoa).
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in
the rate-of-increase limits equal to the market basket percentage
increase. In accordance with Sec. 403.752(a) of the regulations,
RNHCIs are paid under the provisions of Sec. 413.40, which also use
section 1886(b)(3)(B)(ii) of the Act to update the percentage
increase in the rate-of-increase limits.
Currently, children's hospitals, PPS-excluded cancer hospitals,
RNHCIs, and short-term acute care hospitals located in the U.S.
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa are among the remaining types of hospitals still paid under
the reasonable cost methodology, subject to the rate-of-increase
limits. We are proposing that the FY 2015 rate-of-increase
percentage to be applied to the target amount for children's
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term
acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa would be the percentage
increase in the IPPS operating market basket. For this proposed
rule, the current estimate of the FY 2015 IPPS operating market
basket percentage increase is 2.7 percent.

E. Proposed Update for LTCHs for FY 2015

Section 123 of Public Law 106-113, as amended by section 307(b)
of Public Law 106-554 (and codified at section 1886(m)(1) of the
Act), provides the statutory authority for updating payment rates
under the LTCH PPS.
As discussed in section V.A. of the Addendum to this proposed
rule, we are proposing to establish an update to the LTCH

[[Page 28384]]

PPS standard Federal rate for FY 2015 based on the full LTCH PPS
market basket increase estimate (for this proposed rule, estimated
to be 2.7 percent), subject to an adjustment based on changes in
economy-wide productivity and an additional reduction required by
sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In accordance
with the LTCHQR Program under section 1886(m)(5) of the Act, we are
proposing to reduce the annual update to the LTCH PPS standard
Federal rate by 2.0 percentage points for failure of a LTCH to
submit the required quality data. The MFP adjustment described in
section 1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to
be 0.4 percent for FY 2015. In addition, section 1886(m)(3)(A)(ii)
of the Act requires that any annual update for FY 2015 be reduced by
the ``other adjustment'' at section 1886(m)(4)(E) of the Act, which
is 0.2 percentage point. Therefore, based on IGI's first quarter
2014 forecast of the FY 2015 LTCH PPS market basket increase, we are
proposing an annual update to the LTCH PPS standard Federal rate of
2.1 percent (that is, the current proposed FY 2015 estimate of the
market basket rate-of-increase of 2.7 percent less an adjustment of
0.4 percentage point for MFP and less 0.2 percentage point).
Accordingly, we are proposing to apply an update factor of 1.021 in
determining the LTCH PPS standard Federal rate for FY 2015. For
LTCHs that fail to submit quality data for FY 2015, we are proposing
an annual update to the LTCH PPS standard Federal rate of 0.1
percent (that is, the proposed annual update for FY 2015 of 2.1
percent less 2.0 percentage points for failure to submit the
required quality data in accordance with section 1886(m)(5)(C) of
the Act and our rules) by applying an update factor of 1.001 in
determining the LTCH PPS standard Federal rate for FY 2015.
Furthermore, we are proposing an adjustment for the final year of
the 3-year phase-in of the one-time prospective adjustment to the
standard Federal rate under Sec. 412.523(d)(3) by applying a factor
of 0.98734 (or approximately -1.3 percent) in FY 2015, consistent
with current law.

III. Secretary's Recommendations

MedPAC is recommending an inpatient hospital update equal to
3.25 percent for FY 2015. MedPAC's rationale for this update
recommendation is described in more detail below. As mentioned
above, section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Consistent with current law, depending on whether a
hospital submits quality data and is a meaningful EHR user, we are
recommending the four possible applicable percentage increases to
the standardized amount listed in the table under section II. of
this Appendix B. We are recommending that the same applicable
percentage increases apply to SCHs and MDHs. For the Puerto Rico-
specific standardized amount, we are recommending an update of 2.1
percent.
In addition to making a recommendation for IPPS hospitals, in
accordance with section 1886(e)(4)(A) of the Act, we are
recommending update factors for certain other types of hospitals
excluded from the IPPS. Consistent with our policies for these
facilities, we are recommending an update to the target amounts for
children's hospitals, cancer hospitals, RNHCIs, and short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa of 2.7 percent.
For FY 2015, consistent with policy set forth in section VII. of
the preamble of this proposed rule, we are recommending an update of
2.1 percent (that is, the current FY 2015 estimate of the LTCH PPS
market basket rate-of-increase of 2.7 percent less a proposed
adjustment of 0.4 percentage point for MFP and less 0.2 percentage
point) to the LTCH PPS standard Federal rate.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating
Payments in Traditional Medicare

In its March 2014 Report to Congress, MedPAC assessed the
adequacy of current payments and costs, and the relationship between
payments and an appropriate cost base. MedPAC recommended an update
to the hospital inpatient rates equal to 3.25 percent concurrent
with changes to the outpatient prospective payment system and with
initiating change to the LTCH PPS. We refer the reader to the March
2014 MedPAC report, which is available for download at
www.medpac.gov for a complete discussion on this recommendation.
MedPAC expects Medicare margins to remain low in 2014. At the same
time, MedPAC's analysis finds that efficient hospitals have been
able to maintain positive Medicare margins while maintaining a
relatively high quality of care.
Response: With regard to MedPAC's recommendation of an update to
the hospital inpatient rates equal to 3.25 percent, for FY 2015, as
discussed above, sections 3401(a) and 10319(a) of the Affordable
Care Act amended section 1886(b)(3)(B) of the Act. Section
1886(b)(3)(B) of the Act, as amended by these sections, sets the
requirements for the FY 2015 applicable percentage increase.
Therefore, we are proposing an applicable percentage increase for FY
2015 of 2.1 percent, provided the hospital submits quality data and
is a meaningful EHR user, consistent with these statutory
requirements.
We note that, because the operating and capital prospective
payment systems remain separate, we are continuing to use separate
updates for operating and capital payments. The proposed update to
the capital rate is discussed in section III. of the Addendum to
this proposed rule.

[FR Doc. 2014-10067 Filed 4-30-14; 4:15 pm]
BILLING CODE 4120-01-P

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